Brar and Raise the Rates managed to attract a fantastic amount of media attention, and sparked a much-needed and long-overdue public conversation about the inadequacy of welfare benefit rates. Simply put, the MLA on Welfare initiative was a huge success and fantastic public awareness exercise.

Such public awareness matters. Opinion polling we at CCPA commissioned a few years ago found, for example, that British Columbians, when asked cold, are generally split evenly on the question of whether welfare rates should be increased. But if the question is prefaced by simply telling people what rates are, support for an increase jumps to three-quarters. Meaning, when people move past the myths and learn the reality of how low benefit rates are, and how hard life on welfare actually is, they don’t like it. That’s good.

While most of the coverage of Brar’s month was sympathetic, a few negative voices were heard. In particular, the Minister responsible (Stephanie Cadieux) and the Fraser Institute made a number of media interventions in defense of BC’s abysmally low welfare benefit rates. Their comments indicate they truly need to get out of the office more — they simply have no understanding of what life on welfare is actually like.

Among the key points made by the Minister and Fraser economists was that we needn’t worry about the $610 basic rate, because a majority of welfare recipients receive more (either because they have children or a recognized disability), an amount they deem “adequate.” It’s true that most welfare recipients get more than the basic rate, but calling those rates “adequate” is way off the mark.

As the National Council of Welfare notes, those on welfare with children and those with a disability still live thousands of dollars below the poverty line. And extensive research conducted by the CCPA (a study I co-authored called Living on Welfare in BC, which followed real people on welfare over a two year period, rather than just pondering numbers as the Fraser folks have) found that even those in receipt of the higher (supposedly “adequate”) rates were still frequently reliant on food banks and other charities to meet basic needs.

Indeed, we found low rates often force people to make destructive choices – such as remaining in abusive relationships – that are harmful, and for which we are all paying.

Adequate? The family welfare incomes don’t even reach the Fraser Institute’s own thin-gruel poverty line – a line that is itself significantly lower than every other low-income measure produced in the country.

The government and Fraser Institute maintain they don’t want welfare to be “attractive.” Well, we are a long way from that. The reality is that life on welfare is a day-to-day struggle in which all one’s time and effort is spent merely meeting basic needs for food and shelter, which ironically makes it harder to find work.

If Brar’s month-long experiment teaches us anything, it is that rates need to be substantially higher, and that we need a better – more rational as well as compassionate – way to set welfare benefit rates. That’s just what Steve Kerstetter proposed in his 2006 CCPA-BC policy paper A Better Way to Set Welfare Rates. It is unconscionable that governments are content to hold welfare rates frozen year after year, as inflation eats away at the real value of a welfare cheque. And currently no clear rationale guides the setting of rates. Instead, rates should be tied to the actual costs of basic needs (ensuring that shelter, nutritious food, clothing, transportation, and other core needs are affordable) – something that is clearly not the case today. And then benefit rates should increase annually in line with inflation.

Compared to other provinces, BC ranked dead last in 2009, with the largest gap between the top 20% and the bottom 20% of income earners.

The report starts by looking at how Canada ranks in international comparisons (badly) and then goes on to look at British Columbia.  It points out that BC does much worse at using its tax and social programs to mitigate inequality than other provinces.  BC ranks 5^th on income inequality just looking at market income (excluding government transfers and before taxes) but last after transfers and taxes. As BC Stats notes, this indicates that other provinces:

have had more success in terms of redistributing income through tax and benefit systems than have British Columbia and Alberta.

The report concludes:

In a free market society like Canada there will always be some that are better off than others, but the challenge is figuring out how large a gap between the highest and lowest earners should be considered acceptable. Given the size and vehemence of the Occupy protests, one would suspect that the current income gap is too large.

And one would hope the government itself would begin to acknowledge the problem. BC remains one of the few provinces without a poverty reduction strategy.

Well then, I humbly submit the following Top 10 list of reasons for upper-income tax increases (in descending order).

#10: Ridiculous real estate.

Check out Vancouver’s 40 most expensive listings. West Vancouver currently has a property listed for just under $40 million. Indeed, the top six properties all list for over $20 million. The top property includes
a main house featuring “6 bedrooms, negative edge pool, hot tub, indoor and outdoor ponds, 3 waterfalls, billiards room, movie theatre, wine cellar, gym, massage room, and 15-car garage.” And then there is the “7,000 square feet guest house and 2,580 square feet combination maids’ quarters and office.”

#9: Canada’s top 100 CEOs pocketed an average $8.38 million in 2010.

That was a 27 percent increase over 2009, and 189 times more than Canadians earning the average wage. For more, see the CCPA report here.

#8: A “Super-Yacht” with a functioning volcano.

I kid you not. See here.

#7: A $2 million diamond handbag.

Really? Yup. See here

#6: Out-of-control weddings.

Weddings have always been big business. But clearly, some people need to be saved from themselves.

#5: Oh, just look at this.

LXRY Magazine (Luxury) is a Canadian online magazine focusing on comfort and extravagant living. Got 30,000 bucks for a pair of gold earrings or $200,000 for a car?

#4: The maximum RRSP deduction for 2011 is a whopping $22,450. 

That’s the ceiling for an annual contribution (for which people receive an extremely generous tax deduction — comes right off one’s taxable income) and does not include any unused room from previous years. Who the hell has $22K in extra income to tuck into this highly publicly-subsidized savings plan? A minimum-wage earner working full-time all year would have an entire annual income of only $19,798. The RRSP is one of the most expensive and inequitable social programs in Canada. The program costs the public treasury about $10 billion a year in foregone revenues. Yet, according to the CCPA’s Alternative Federal Budget, while more than two-thirds of those making over $100,000 a year contribute to RRSPs, less than a quarter of those making less than $50,000 find themselves able to contribute.

#3: The ultra rich are growing, according to Canada’s banks, so the 99% of us should follow the money. See here.

#2: Am I the only one who finds the “driving” section of almost any newspaper really annoying?

And the #1 reason for tax increases…

Weddings for dogs! Yes, it’s true.

“You can spend anything from $400 to $10,000,” says Doggie wedding planner Scott Rinehart. Doggie I Do’s, a Canadian company that coordinates “puptials” “for mutts in love,” offers basic wedding packages for 25 guests starting around $4000.

For more see here.

And you wanted proof that the free market rationally allocates scarce resources?

Clearly some people are under-taxed.  Couldn’t and shouldn’t some of that disposable income be put to better use?

Having a little of fun at the expense of the very rich is, well, fun. But on a more serious note, extensive research in a variety of fields (most comprehensively documented by epidemiologists Richard Wilkinson and Kate Pickett in their book, The Spirit Level) shows that out-of-control wealth and extreme inequality are actually bad for everyone — for our communities, our health, our democracy, our environment, and our personal wellbeing. Taxes are one of the ways we can reduce inequality, and create a more fair society for everyone. And that’s the real #1 reason we need tax increases for the wealthy.

A few year-end reading recommendations: Victoria Times-Colonist editorial writer Paul Willcocks wrote a terrific piece on the subject (you can find it here); and similarly, a group of UBC economists (including CCPA research associate David Green) authored a series on inequality for the Vancouver Sun (which you can find here).

Now we need to have a serious conversation about what to do to reduce the gap. Tackling inequality means focusing on a poverty action plan for those with low incomes, strengthening the economic security of those with middle incomes, and redistributing more of the income of the wealthy.

For lower-income individuals and families, we need our governments to adopt comprehensive poverty reduction plans (provincially and federally). The BC Poverty Reduction Coalition has been actively promoting the former, while nationally a similar call has been spearheaded by Make Poverty History, Canada Without Poverty, Citizens for Public Justice, and Campaign 2000. For how to enhance economic security across the low and middle-income spectrum, look no further than the CCPA’s Alternative Federal Budget.

But rising inequality hasn’t been driven by low incomes. Rather, as the Occupy movement rightly highlighted, the growing gap has been driven by the runaway-rich; the wealthiest 10% of households, and especially the wealthiest 1%, have been breaking away from the rest of us (as outlined in this CCPA report a year ago).

So if we are going to reduce inequality, we need to revisit our top tax brackets.

Here in British Columbia, thus far, Premier Clark seems resistant to doing so. But in a year-end interview with the Globe’s Gary Mason (available here), BC NDP leader Adrian Dix indicates that he is prepared to look at the tax rate of BC’s highest income earners:

“I don’t think there is a massive amount of room on the income tax side to get more money,” Mr. Dix said. “I haven’t really landed on the high-income stuff. But I don’t think there is any room under $100,000 or even $150,000 for that matter.”

“So, in the short term in B.C., the rich are not going to have to pay more,” I say.

“I haven’t said that,” Mr. Dix replied. “These are the issues we have to review.”

Currently, BC has five income tax brackets, and the top rate kicks in at about $100K of income. So it would seem from the above that Mr. Dix is open to considering an upward adjustment to that top rate and/or a new tax bracket that kicks in at $150K or higher. That’s good – much needed and long overdue.

Most British Columbians would be unaffected by such changes. Only about 4% of British Columbians make over $100K a year, and only a little more than 1% make over $150K. A new bracket at $250K of income would impact only about 0.5% of BC taxpayers. Yet such increases could yield some much needed income to the public treasury (the amount would depend on the new rates, but, for example, a new 20% tax rate on incomes over $150K could generate about $400 million in new revenues – enough to build about 2,000 new units of social housing per year, to give but one comparison).

As we noted in a CCPA report last summer, BC’s wealthiest 1% have been doing extremely well in recent years. Most would be willing to pay somewhat more in taxes, particularly if we could demonstrate that such revenues would help to reduce poverty and homelessness.

I’d argue that the BC government should not restrict itself to adjustments to the top rate alone. I think there is room to modestly increase the 3^rd and 4^th brackets as well (which kick in at incomes of about $73K and $84K respectively; again only impacting a small minority of taxpayers). As I noted in a blog post a couple years ago, I find my personal income tax rate to be remarkably low, given what we receive in public services, and the scope of unmet social and environmental needs.

If you too think that our upper tax brackets should be increased, may I recommend that you let our political leaders know. Too often our leaders are overly cautious, and presume we will not abide such increases. If we really want action on inequality, we need to tell them otherwise.

Many of us found the explosion of the Occupy movement onto the local and North American scene particularly exciting. Notwithstanding some misgivings about some tactics, I feel immense gratitude towards what these mainly young activists have accomplished. We at the CCPA have been struggling to put the issues of inequality and corporate power into the spotlight for years. We first noted the phenomenon of the run-away rich in a report called The Rich and the Rest of Us a few years ago, and have been systematically highlighting the growing gap ever since. But the Occupy movement brought those issues to the forefront of public consciousness in just a few short weeks.

Occupy hit a nerve, and invigorated people. It broke through people’s isolation, and told us we are not alone in our distress about these trends. Creatively and peacefully, Occupy has fundamentally shifted the political discourse.

Now we need to regroup and build on that was accomplished last fall. We need to show people that there are known policy solutions to reduce inequality, restore economic security, rise to the challenge of climate change, and reign in the power of the corporate sector in our democracy. No clear demands? Nonsense. The alternatives abound. And we at the CCPA have been assembling them for years. Now the task of us all is to popularize and promote them, and to push our political parties to give these bold ideas political expression. Together, we need to Occupy the media, Occupy the public debate, creatively Occupy real sites that highlight solutions, on the one hand, and the untenable influence of corporations on the other. And Occupy the ballot box. And we should have fun doing so.

And consider this hopeful prediction (with a hat tip to US activist Van Jones): a remarkable demographic transition is underway, as the “Millennials” (the largest demographic group in history) come of age. This is a largely progressive cohort, managing more diversity with less strife than any before it. Many are non-plussed by the prevailing system. And many many have a strong environmental orientation. The point is this –– arguably the days of right-wing governments who refuse to act on climate change and inequality may well be numbered. Will this younger demographic (who we saw starting to flex their mussel in the Orange Wave during last spring’s federal election) really abide these guys? Or, over the next 10 years, will they come into their own politically just as the reality of climate change is unavoidable (a powerful alignment), and be ready for the new ideas groups like the CCPA must have at hand.

Our task is to prepare for those tipping points. To create political-cultural space. To lay the groundwork. To seed the public discourse with bold ideas, in anticipation of those moments – and they are coming – when the seemingly impossible is suddenly inescapable.

Best,

Seth Klein, CCPA-BC Director

The report shows progress, but often in the wrong direction. You can find the whole report here but it will take patience. It weighs in at a hefty 20 MB in PDF format.

The report shows a decline in BC’s standing in Canada in many important areas in the last 10 years. We have gone from 4^th to 5^th place in the economy, from 3^rd to 4^th in personal income and from 5^th to 7^th in jobs.

In terms of social conditions BC sits in 9^th place among the 10 provinces. BC sits in last place in terms of people in poverty (below the low income cut-offs). We are second worst in terms of long term unemployment.

Some of the information is an eye opener given 10 years of very business friendly government. Business productivity grew by 6.3% between 1997 and 2000 and by about 3% in the next ten years. More surprising was that BC ranks 25^th out of 34 OECD jurisdictions when it comes to exports per capita. We ranked 4^th in Canada on per capita spending on research and development.

We did better on items like the environment, university completion and business investment.

In its final press release the Board says:

The provincial government demonstrated great vision and courage when it established the BC Progress Board in 2001 to monitor British Columbia’s performance and advise on ways to improve it. What was remarkable, and what remains unmatched, was the board’s dedication to transparency and independence.

As well as great “vision and courage” the government showed great caution. The Board was made up entirely of captains of industry supported by a few academics and consultants. This may explain why it took the Board several years to publish its first report on social conditions in the province. A more representative group might have noticed people were hurting earlier.

Despite that, over the years the Board has produced reports that shone a critical spotlight on many issues, particularly social issues, in BC.

The Vancouver Sun’s Craig McInnes was moved to tweet:

No wonder Clark’s shutting down Progress Board, no progress to report.

The business dominated Board will now be replaced by the new Jobs and Investment Board.

According to a government press release:

The BC Jobs and Investment Board will provide advice and direction to government on policies and programs to help attract sustainable investment, foster economic development and support job creation. It will focus on the eight key sectors in the BC Jobs Plan – forestry, mining, natural gas, agri-foods, technology, tourism, transportation (ports, marine and aerospace) and international education.

Presumably the awkward issues of poverty and unemployment will no longer be considered.

The government has promised the new board will be more broadly representative. The first two appointments this month have included as co-chairs a business boss and a First Nations Chief.  I guess we will just have to wait and see if the other appointed members are more than the usual suspects.

First, over just over 100 candidates have responded to the Open Letter issued by the Living Wage for Families campaign, covering almost every Lower Mainland municipality. Almost all have expressed support for this proposal or at least indicated interest in exploring the implications for their city.

In Vancouver, COPE has said it is supportive of undertaking a city study to investigate the feasibility of passing a living wage policy. Vision Vancouver and the NPA are a little more cautious, saying they are interested, but want to find out more before deciding how to proceed.

In Burnaby, both main parties have expressed a clear interest in exploring the possibilities of a living wage policy. Both Richmond and Surrey have a number of candidates running on a living wage platform, while the City of North Vancouver has already unanimously agreed to study this issue.

In the outer suburbs of Maple Ridge, Pitt Meadows and Coquitlam a large number of candidates have expressed an interest in pursuing this issue.

You can see all the candidate responses here.

Second, today our friends at the Columbia Institute Centre for Civic Governance released some very interesting poll results related to the municipal elections. Among the results: 67.1% of respondents asked about a Living Wage said they would favour their municipality adopting a bylaw. You can read more results here.

Hopefully we will see new activity on this front after Saturday.

The Living Wage for Families Campaign, along with 54 organizations representing over 300,000 British Columbians, recently issued an Open Letter calling on all municipal election candidates to help low-income families in their cities by passing a Living Wage policy if they are elected (available here).

Many families are struggling to get by; they are working hard but just can’t keep up with ever rising living expenses. Despite the recent increase in the minimum wage, it is estimated that at least 25% of families with children in the Lower Mainland still earn less than a living wage income, that is, a wage that allows them to cover their basic living expenses (calculated at $18.81/hour in Metro Vancouver). Fifty percent of single parents with children don’t earn a living wage. This is especially true of the ‘hidden workers’ who support the work of our cities; the people who clean our buildings, who provide our security services, or who serve us our food.

Why should municipal governments care about this? Because it is municipal governments themselves that end up paying a large price for these low wages.   Families earning low wages mean there is less money circulating in the local economy, and parents (forced to take on more hours or a second job to make ends meet) have less time to spend with their children. Municipal governments and school boards consequently end up filling the gaps by paying for additional services and policing costs.

Some business leaders are concerned about the living wage. They claim that it will negatively affect the private sector. Yet leading businesses around the world are voluntarily agreeing to become living wage employers. Businesses like KPMG and LUSH in the UK, and now Vancity credit union here at home. These employers commit to pay the living wage, not only to their direct staff, but also to contracted staff in traditionally low-paying sectors. And here’s the big surprise – they have all determined that doing so is good business practice.

The call for a living wage has also been falsely labeled as a “union” demand. In fact, most people earning less than the living wage are not unionized. Moreover, the call for a living wage has come from a broad cross-section of organizations – faith groups, parents groups, immigrant groups and community organizations such as the United Way of the Lower Mainland and the Health Officers Council of BC. They understand that a living wage is key to ensuring healthy childhood development and community cohesion.

Opponents of the living wage have claimed that small businesses will go bankrupt, that cities will face huge cost increases, and that even your granny will be negatively affected. Yet these attacks conveniently forget to mention that countless studies have shown that the cost to cities of living wage policies are minimal – New Westminster’s Living Wage Policy is costing less than a quarter of one percent of their budget – or that families who earn living wages have more money in their pockets to spend in local businesses.

Wherever you stand on the political spectrum, nobody can deny the fact that many families are struggling to get by. The data indicates that child poverty in BC is mainly a low-wage story; the vast majority of the 100,000 children living in poverty have at least one parent in a low wage job, with a third working full time in the paid labour force.

This is an area where municipal governments can and should lead. In doing so, BC cities will be joining 140 US cities who already have living wage ordinances of some form.

Will living wage policies result in a slight increase in costs for municipal taxpayers. The short answer is “Yes, but only slightly.” But the real question is this: do we as municipal taxpayers want people employed –– on our dime –– at a wage rate that cannot ensure healthy childhood development or allow parents the time to be with their children and participate in the social and civic lives of our communities?

- 30 -

Michael McCarthy Flynn is an organizer with Metro Vancouver Living Wage for Families campaign. Seth Klein is BC Director of the Canadian Centre for Policy Alternatives and a co-author of Working for a Living Wage.

One recent example from CBC Television came in the form of a personal attack on author Chris Hedges. A well-known American writer, Hedges had agreed to appear as a guest on the Lang O’Leary Exchange to discuss the Occupy movement. He was in the process of calmly and lucidly explaining that movement’s rationale when interviewer Kevin O’Leary interrupted to dismiss Hedges as “a leftwing nutbar.”

A second example, also from CBC TV, came from the October 13 edition of The National’s “At Issue” panel. Along with two journalists, the At Issue panel consists of a senior advisor with a Canadian partner of the global public relations giant Burson-Marsteller, and the economically conservative commentator Andrew Coyne.

Asked whether the rallies currently sweeping the globe could bring about real change in Canada, Coyne could barely contain himself:

“Even in the U.S. where people have far more problems to actually worry about, it’s not clear that these people represent anybody other than themselves,” he frothed. “There’s always a constituency that doesn’t like capitalism (or) rich people… They just decided to get together and shout about it some more.”

Evidently Mr. Coyne can’t bring himself to read opinion polls showing many middle-class Americans share the demonstrators’ worries about growing economic inequality and unemployment. Concern about corporate greed and corruption is certainly not confined to those currently in the streets.

So Coyne’s glib dismissal is itself easily dismissed. But the pundits (and some journalists) also make a more plausible point. The protesters, they say, are a motley bunch. They don’t have a single message, or specific solutions.

It is true that the movement hasn’t answered the question posed by AdBusters, the Vancouver-based magazine that originally inspired the rallies: “What is our one demand?” But that’s not surprising. And it’s certainly no reason to dismiss the movement.

Social movements have often started out with a shared grievance, not a particular solution. Think of the flagship of today’s global movements, environmentalism. It ranges from conservationists who want to preserve wilderness, to more politically-oriented groups advocating policies to counter global warming, to radicals who see civilization itself as the problem. A smorgasbord of approaches. But united by a concern that the ecosystems on which humans depend are threatened, and need our conscious protection.

So too with Occupy Canada. The people involved share one belief: that the currently dominant “neoliberal” or “free market” version of capitalism is not working for the vast majority of people. While it creates wealth for some, it is also the destructive global engine behind massive and growing inequality, the current fiscal and economic crisis, and climate change and environmental collapse.

An economic system that is rumbling along out of democratic control creates so many types of perceived injustices, affecting so many different constituencies, that it is hardly surprising that there is no “one size fits all” solution.

It’s also hard to nurture citizen-based political campaigns in a society that teaches people that rebellion is a matter of buying edgy fashion accessories. That so many people have come out into the streets demanding change – political change – is an impressive achievement in and of itself.

That doesn’t stop some journalists from complaining that they don’t know what Occupy Wall Street is about. Perhaps they don’t know how to deal with a movement that doesn’t provide blue-suited leaders, glossy handouts, and a narrow message box test-marketed in focus groups. Today’s generation of activists values participatory and consensus-based processes, more than programmatic statements.

To observers like me, schooled in the movements of the 1960s and 70s, that can be frustrating. I’m told that the first ninety minutes of the Occupy Vancouver rally on October 15 were taken up deciding how to make decisions. But in a networked, “social mediatized” society, maybe that’s the way to build the trust and buy-in needed to launch a new and sustainable movement.

Eventually, protest must eventually be turned into policy, if there is to be change in how the world allocates resources. And there is no shortage of ideas about policy alternatives. AdBusters itself has touted a tax on financial transactions (originally proposed by conservative economist James Tobin) to reduce the volatility of global money markets, and to raise funds for international development. Amongst the folks I met at Occupy Vancouver, there would likely be common ground in policies like a more progressive tax system, and public investment to reduce youth unemployment and develop sustainable energy and technology.

Last May (have the pundits forgotten?), 30 percent of voters elected the NDP as Canada’s official opposition – a party with progressive policies on a range of issues. Maybe the Occupy movement should add another demand:  that media pundits on our public airwaves reflect the realities and diversity of our society, rather than rehash hackneyed “free market” dogma.

]]> http://www.policynote.ca/occupy-canada-media-pundits-vs-reality/feed/ 13 http://www.policynote.ca/bcs-top-1-doing-fabulous-thank-you/ http://www.policynote.ca/bcs-top-1-doing-fabulous-thank-you/#comments Tue, 11 Oct 2011 18:10:09 +0000 Seth Klein http://www.policynote.ca/?p=4570 Occupy Wall Street has shone new light on the growing gap between the richest 1% and the rest of us (the 99 percenters).

But that’s the U.S. right? Surely, our reality is different, eh? As the occupy movement comes to Canada in the coming week, we don’t really have reason to copy these American trouble-makers, do we?

Think again.

While inequality in Canada is not as great as in the U.S., in recent years it has been growing faster here (as noted in a recent report from the Conference Board of Canada).

As the CCPA documented in a report earlier this year on The Rise of Canada’s Richest 1%, “the 246,000 privileged few who rank among the country’s richest 1% took almost a third (32%) of all growth in incomes between 1997 and 2007.”

And here in British Columbia, the richest 1% have been doing remarkably well.

Last June, the CCPA-BC released a report on the erosion of tax fairness in BC. We found that BC’s personal tax system (including income tax, sales taxes, property taxes, carbon taxes and MSP premiums) has become out-and-out regressive –– amazingly, the richest 1% of BC households pay a lower overall tax rate than others. Meaning, in today’s BC, as a share of one’s income, the richer you are the lower your overall tax rate.

In fact, provincial income tax cuts introduced since 2001 delivered, on average, a whopping $41,000 to the top 1% of BC households.

How could the value of ten years of tax cuts be so great for the richest 1%? The answer: tax cuts are worth so much because the richest 1% have been making out so fantastically well. As of 2010, the average income of the richest 1% of BC households had reached a staggering $820,000 (that’s in one year!).

And the top 1% saw huge gains over ten years. Back in 2000, their average household income was $602,000. So in ten years, their income rose by a fantastic 36% (double the inflation rate of 18% during that time). With the market producing so much gains for the wealthiest among us, why on earth did the government feel compelled to pile on with tax cuts for those who need it least?

Quite a contrast with the rest of us: real median incomes were flat during that period.

If we are serious about addressing rising inequality, we need to increase taxes on the wealthiest British Columbians. BC’s upper income tax brackets need to be increased, and we should bring in a new high income tax bracket or two (hey, if even Warren Buffet can advocate for that in the US, we can and should be pursuing it here). Longer term, we need a Fair Tax Commission – a chance to have a full public conversation about how much money we need to pay for what we want to provide collectively, and how to raise that money in a fair and equitable manner.

This has been one of the more challenging research projects I’ve engaged in to date. It is the first attempt I have seen anywhere to bring together research in different fields – home energy efficiency, climate change and energy poverty – towards a coherent action plan. In particular, we look at BC Hydro’s pricing policies and model distributional impacts, and we take a closer look at energy efficiency retrofit programs. We then outline a series of next steps for BC that strive for win-win outcomes that reduce energy poverty and create green jobs (about 12,000 direct jobs per year) in the context of aggressive climate action.

I have an oped in today’s Vancouver Sun:

Power policy should protect low-income households

By Marc Lee

If BC is going to meet its climate action targets, the province needs to shift away from natural gas and rely instead on clean electricity. Coupled with aggressive conservation and energy efficiency investments, this transition could be the source of new green jobs, particularly in the residential housing sector.

The challenge is this: while upper-income households tend to consume (and waste) more energy, it is low-income households who spend a larger share of their incomes on energy, and are the most constrained in terms of changing their behaviour.

This means that across-the-board price increases can worsen energy poverty, a condition where a household spends a disproportionate share of their income on energy. Living in energy poverty poses a range of health risks, including respiratory, cardiovascular, and other health problems, as well as preventable winter deaths.

BC Hydro’s proposal earlier this year to dramatically increase electricity rates is a case in point. While a recent review of BC Hydro led to compromise that would slow rate increases for the next couple of years, higher prices are to some extent inevitable due to the higher costs of new electricity supplies, the installation of smart meters, and new capital projects.

More than three-quarters of energy in the home is used for temperature control and hot water. For low-income households – especially ones with electric baseboard heaters – the real issue is keeping the heat on.

Lower-income households already spend a greater share of their income on energy. The bottom 20% of households spent 5% of their total income on energy in 2009, and 3% of income just on electricity. Households in the top 20% spent only 1.5% of their total income on energy, and less than 1% on electricity.

But BC Hydro also shows us what a fairer path could look like. The shift to two-tier pricing in 2008 has moved modestly in this direction, with modest savings for low-income households and increases for higher-income households. The greediest 20% of electricity consumers use up 44% of the residential power, and they should indeed pay more.

If electricity price increases are needed, they should be concentrated on the second tier of rates. Increasing refundable tax credits for low- to middle-income households could also offset price increases. Assessing the impacts of pricing policies across income levels needs to be part of the BC Utilities Commission’s rate approval process.

The BC government can also help by delivering targeted energy efficiency programs for low-income households and multi-unit buildings, including rental units. Low-income households are typically renters. This means they are less likely to have capacity to invest in energy efficiency upgrades.

Currently, the vast majority of public subsidies for retofits (for example, BC’s LiveSmart program) goes to affluent homeowners in single-family dwellings. Existing programs have been criticized for two common problems: free rider effects (public subsidies going to households who would have made investments anyway) and rebound effects (where savings are offset by increased energy use).

In contrast, well-designed programs for energy efficiency for low-income households are “low-hanging fruit” that would dramatically reduce these effects, target some of the province’s least efficient housing stock, and make better use of public dollars.

A danger is that electricity price hikes will create a perverse incentive for people to switch to natural gas for their home heating. In the Lower Mainland, the delivered cost of natural gas is about half the cost of the lower tier electricity rate and 39% of the tier two rate.

But this would add to BC’s greenhouse gas inventory at a time when the province needs to reduce and eventually eliminate those emissions. This should be a key component of a next generation LiveSmart program for BC, and it should also be linked to green job creation and skills development.

We estimate a budget of $220 million per year in support of a decade-long retrofit of BC’s housing stock would lead to substantial reductions in GHG emissions and energy poverty in BC homes. Carbon tax revenues are an ideal source of public subsidies for such a program.

This investment would lead to 12,000 direct green jobs per year (and a total increase in employment of 20,000 jobs if we include indirect and induced job creation).

The challenge of the next generation is to enable a smooth transition to zero-emissions housing, while paying attention to impacts on low-income households and other vulnerable populations, as well as the housing stock where they live.

Rather than trying to sell more polluting fossil fuels to Asia, the BC government should be leading the charge on climate action. A coherent housing strategy could provide win-win opportunities for the province, and is the type of jobs program BC needs.

Was the vote was split along income lines?

Here’s what I found when I plotted the referendum results (% voting to scrap the HST) by average after-tax income in the electoral district from BC Stats. The latest income data by electoral district is somewhat dated – it’s based on the 2006 Census – but the results are pretty clear. The poorer the electoral district, the higher the voters’ opposition to HST. And vice versa, in richer electoral districts more people voted to keep the HST.

I doubt this is a coincidence. Income disparities have grown over the last decade and as our incomes diverge, so do the opportunities we have and our experiences. Social cohesion is threatened when it becomes harder and harder to think of ourselves as British Columbians, voting for the benefit of our province, and start identifying more closely with a particular social class.

A recent article by Pete McMartin in the Vancouver Sun illustrates these diverging experiences all too well:

… the efficiencies the HST promises are real…But I also think that the retention of the HST is a question of class, that business people and economists and the well-salaried members of the media can afford to view the HST as a concept rather than a real financial burden.

Is it going to stop a family earning six figures from eating out more often? No. Will that family quail at repairing a leaky roof, and the added thousands an HST will add to that repair? Again, no. That well-off family cannot only afford the more immediate costs of a leaky roof, it can afford to entertain the long-range promises the pro-HST position makes -that down the road, the efficiencies the HST provide will deliver more jobs to the economy and lower costs to the consumer.

Call me a skeptic: That promise I find hard to take on faith, given our record of growing income disparities in this country. As for those future benefits, even the independent panel’s review on the HST characterized its benefits as “modest”.

What do you make of the referendum results?

The best part about having the results is that now we can move on from the narrow issue of what type of sales tax is better and focus our energies on some of the bigger issues affecting British Columbia.

Since the HST was first announced in the summer of 2009, it has dominated the policy debates in BC despite the fact that either way, the tax was going to have only marginal effects on the economy.

Yes, the HST is slightly more economically efficient than the PST. But the difference has been vastly exaggerated by HST proponents, who also refused to acknowledge that the tax is unfair to modest and middle-income families.

This is hardly surprising to readers of this blog who may recall me making this point before:

The HST is certainly an improvement on the PST from an economic efficiency point, but it’s a relatively small improvement. I am convinced that the economic benefits touted by the BC government and over exaggerated and the significant job growth, in particular, will not materialize.

The reason why HST only has a marginal impact is that taxes play only a marginal role in investment decisions. The main determinant of investment is expectations for future sales, driven in part by the general economic environment. Proximity to markets, the availability of appropriate infrastructure, access to cheap energy, access to a skilled labour force, and political stability are all much more important considerations when a firm is choosing where to set up shop.

The independent panel report, commissioned by the BC government, estimated that the actual economic impact we can expect from HST falls far short of the “giant leap” touted by U of Calgary’s Prof. Jack Mintz. For example, while Prof Mintz estimated 113,000 new jobs and 8% increase in capital investment by 2020, the independent panel found that we could realistically expect about 24,400 more jobs and 4% increase in business investment over the same period.

While I personally would have preferred to keep a reformed version of the HST, I think it’s counterproductive to fret over marginal efficiency differences after the people have spoken.

I’m also glad to see a return to somewhat improved tax fairness. We have witnessed a very large increase in income inequality in BC over the past 20 years, and we need to be very careful not to pursue policies that will make this problem worse — like the HST.

Recent research we’ve done at the CCPA shows that the HST is only one piece of an inequitable provincial tax system, a system in which the richest 20% of British Columbians pay a lower overall/total effective tax rate than the rest of us. Much more needs to be done to make sure everyone contributes a fair share to fund the the services and infrastructure BC needs in.

Now that the HST debate is over, it would be great to see some of the energy and focus many academics, business and community leaders dedicated to debating the HST be redirected to designing and debating solution to the real challenges facing BC.

Our unemployment rate remains high and slightly above the Canadian average at 7.3%. The economic outlook has worsened considerably over the last 6 months, with or without HST. There’s a serious risk of our main trade partner, the US, going into a second recession, which may push us back into a recession as well. Canadian corporations are not investing, even in the HST provinces. That’s because it’s not about taxes!

In the meantime, BC hasn’t had a budget and significant policy changes since Feb 2010. The Feb 2011 budget, tabled in the midst of a party leadership race, was prepared as a “placeholder” budget, padded with unusually large contingencies and forecast allowances to leave the new Premier room to implement their own policy priorities. Premier Clark has not tabled a budget yet, deferring the decision until after the HST referendum.

Now we know what we’re dealing with, I look forward to debating Premier Clark’s policy priorities for moving forward.

British Columbia families will remain vulnerable, burdened with unprecedented levels of household debt — 160% of income — the highest in Canada. More and more people are retiring with debt. Our housing market is weakening and bank economists are expecting a “correction” (aka, decline). Unemployment rate remains high, and is projected to stay over 7% for the next few years. Wages for those who are employed are barely keeping up with inflation.

The reality is that without a robust labour market recovery and real increases in household incomes, consumer spending will no longer be able to drive the type of strong economic growth BC experienced in the mid-2000s.

We’re still struggling with low business investment after years of corporate tax cuts that were supposed to stimulate investment and productivity. It’s not for lack of money: private non-financial corporations held $471 billion of cash in the first quarter of 2011. It’s also not for lack of competitiveness, or these corporations would have invested abroad instead of keeping the cash.

The problems that climate change poses continue to grow. We need an economic strategy what would invest in people and take bold steps to support a greener economy for our province.

On top of these, persistent poverty and rising income inequality threaten our economic wellbeing. We spend too much paying for the consequences of poverty instead of addressing the root causes of the problem. We are not fully using the skills and productive potential of those in poverty or those whose lower incomes limit the kind of opportunities available to them. Even the Conference Board of Canada has acknowledged that not just poverty but income inequality “can diminish economic growth and undermines social cohesion.

These are the types of issues that should be at the center of the economic debate in BC, not the best type of sales tax.

Hochstein is president of the Independent Contractors and Business Association of BC – representing non union construction corporations. He is the public face of the hard right in British Columbia and has a long history attacking unions. He opposed raising the minimum wage and supports, through the HST, shifting taxes off corporations and on to working people.

While the views in his op-ed come as no surprise it is worth having a look at their validity and perhaps speculating on the makeup of the growing chorus supporting his views.

Hochstein complains that local government taxes have been rising faster than the cost of living. He is not the first to make this complaint. The Canadian Federation of Independent Business makes this complaint so regularly that last May the Union of BC Municipalities (UBCM) was finally moved to respond.

The UBCM acknowledged that local taxes had gone up faster than the Consumer Price Index. They then showed the reasons why. The fastest areas of growth were protective services, parks and recreation. These are areas where the public has demanded more services from local governments. Whether you agree with it or not, the demand from the public for more police on the streets is almost unlimited. As a percentage of total costs, general government expenditures – the cost of running local governments – has actually declined.

 Downloading of costs from the federal and provincial governments to municipalities had also raised the cost of delivering local services. New environmental mandates have been a big part of this. As well in many provinces municipalities get more in provincial grants than BC municipalities do.

One other thing is worth noting here. Based on the most recent Stats Can figures available, local taxation in BC is significantly lower than the national average.

Hochstein’s next complaint is twofold. First, public workers are paid better than private sector work, and second, municipal wages went up during the recession.

Both accusations are correct. How does this come to be? One of the most important reasons why average wages are higher in the public sector is that there is less discrimination in wages.

CLC Economist Andrew Jackson has published some excellent work on this.  He quotes one report saying:

While now somewhat dated, the best independent Canadian empirical studies show that a modest public sector pay advantage is mainly the product of higher pay for women in lower paid occupations, offset by lower pay for mainly male workers in managerial jobs.

He cites another study finding:

Based on the 2006 census data, this study shows that visible minorities and Whites receive similar pay for similar jobs in the public sector. By contrast, in the private sector visible minority men earn significantly less than observationally comparable Whites.

Discrimination against women and minorities does not appear to rank highly in Hochstein’s priorities.

And yes, because of long term contracts signed prior to the Olympics, wages for government workers did go up faster than inflation during the recession. But over the last ten years they have gone up more slowly than those for unionized private sector workers.

Now Hochstein is no fool. He is aware of all these things yet he continues to make arguments that do not stand up to scrutiny.

In this he is not alone. These are the same arguments made by the Canadian Federation of Independent Business, the Fraser Institute and the many Fraser Institute clones such as the Frontier Centre.

And these are exactly the same arguments we are hearing by the Tea Party Republicans in the United States and the billionaires who back them. Their goal is not just the reduction of taxes; it is the undermining of progressive forces that oppose their view of the world. For them attacking unions is not just about driving wages down, though that is important to them, it is about undermining one of the only forces left today pushing a progressive agenda.

Make no mistake, Philip Hochstein and the people like him look admiringly to Governor Scott Walker and his agenda for Wisconsin. Their policy agenda is low wages and high taxes for workers and a monopoly on power for corporations.

That seems to be the question the BC government is posing with its announcement Monday that it has “expanded its orthotics supplement for income assistance clients to ensure basic mobility needs are addressed.”

Minister Harry Bloy said:

It’s important that people on income assistance are supported so they can maximize their involvement in community life and perform the day-to-day tasks of living.

This all sounds very high minded and is quite a contrast to a different announcement in March 2010. Back then the government cut millions of dollars in social assistance spending. The government cut spending on medical equipment and supplies. They said they would no longer cover items like orthotics, contraceptives, glucometers, some diabetic supplies and manual breast pumps. They also planned to save $3 million in cuts to dental benefits. The cuts went on and on.

At the time Housing and Social Development Minister Rich Coleman said he thought “we struck a balance,” given the tight budget. The balance apparently was to cut benefits for the poorest and continue to cut taxes for corporations and the most well off.

Community agencies complained at the time that the cuts would be very damaging, including the cuts in support for orthotics.

Now the government press release quotes a podiatrist as saying about the change in direction by the Ministry that:

Orthotics and orthopaedic footwear can significantly increase a patient’s quality of life by releaving pain, increasing mobility and preventing potential foot complications, including amputation.

Restored funding on orthotics is nice to see, but it would be nice to see the other cuts restored as well. Orthotics are not the only “cost effective” way of making lives livable for people.

And of course, the the question that needs to be asked is just how many people faced pain and even amputations because of the loss of orthotics for a year. 

The other question that needs to be asked is this. Is this really all about making lives better for people on social assistance or is it one more sign of a possible fall election?