Week in Review April 30, 2015

 Week in Review April 30, 2015

  • Economy no grow in February
  • Underground economy stable
  • GM to cut 1,000 jobs in Oshawa
  • Rising household debt shows generational divide
  • Never stop working?
  • One is too many workplace deaths
  • Business investment in R&D to drop
  • AG critical of expansion of Tory tax credits
  • Privatizing snow removal made roads less safe
  • Hydro payouts
  • Canadian business money in tax havens rises again
  • Average earnings up 2.7%
  • Pay equity pays off

  • Economy no grow in February. Canada’s economy was flat in February following a -0.2% decline in January. Output from goods sector industries such as manufacturing, construction, oil and gas and mining all declined while the services, including retail trade, increased. Statistics Canada also released estimates of GDP growth by province for 2014, which show Alberta at the head of the pack, but Newfoundland’s economy already in decline.
  • Underground economy stable. Canada’s “underground” (hidden, illegal or informal) economic activity was estimated at $42 billion or 2.3% of the total economy in 2012, similar to the last decade. Much of this unreported economic activity—usually to escape tax—takes place in residential construction, finance, insurance and real estate, and retail trade.
  • Rising household debt shows generational divide. The average household debt held by Canadian households increased by 64 per cent between 1999 and 2012. While this increase in debt was counterbalanced by rising value of assets for many households headed by older individuals, for couple families with children under 18 and those in the 35-44 age range, the average rise in debt was much higher than the rise in the value of their assets. Household debt rose to a new record of over 163% of household disposable income at the end of 2014.
  • Never stop working? A survey by HSBC bank found that 15 per cent of working age Canadians never expect to retire, while another 45 per cent plan to semi-retire. Only 17 per cent of current retirees report semi-retiring. Rising debt levels, the erosion of workplace pension plans, lack of federal support for an expanded Canada Pension Plan and the federal government’s delay of retirement to age 67 have no doubt reduced expectations for working Canadians.
  • Business investment in R&D to drop. Canadian businesses plan to spend just $15.5 billion on research and development in 2015, down by 2.6% from what they spent in 2014. Despite generous tax incentives and federal subsidies, Canadian businesses already spend half the average of OECD countries as a share of the economy. The drop this year will reduce that share even further.
  • AG critical of expansion of Tory tax credits. Canada’s auditor general is highly critical of the way the Conservative government has handed out tens of billions in dozens of different tax credits without analyzing their impact, who benefits or their long-term cost. The Conservative government has introduced numerous “boutique” tax credits at the expense of direct program spending. These have also made the tax system much more complicated and more expensive and time consuming to comply with. The auditor general joins many others from across the political spectrum also been critical of this.
  • Privatizing snow removal made roads less safe. Ontario’s Auditor General found that since Ontario privatized winter road maintenance and snow clearing it has taken much longer to remove snow, oversight is lacking, and roads are less safe, with a rising number of deaths on highways where snow, slush or ice was a factor.
  • Hydro payouts. Ontario’s Liberal government spent $7 million on consultants, many with Liberal party connections, to advise on its plan to sell off 60% of the province’s public electrical utility Hydro One and supermarket beer sales—but won’t reveal exactly what they provided. The sell-off would lead to hundreds of millions of dollars in lower revenues for the province.
  • Canadian business money in tax havens rises again. The assets Canadian businesses reported they have in overseas tax havens rose to almost $200 billion in 2014, analysis of Statistics Canada’s foreign direct investment figures This amounts to almost a quarter of all Canadian direct foreign investment overseas, double the share of the early 1990s. Canada’s banks and finance industry are responsible for almost half of Canada’s total FDI abroad. These figures just include the reported figures: the real amounts held in tax havens, many of which are highly secretive, is undoubtedly much more.   What’s also disturbing is Canada is now increasingly considered a tax havens for large corporations.
  • Average earnings up 2.7%. Average weekly earnings increased by 2.7% from a year earlier to $951 in February, payroll data The increase was highest in wholesale trade, up by 8.5%, while average weekly earnings declined by 1.2% in retail trade, with other sectors between. Labour Canada also reported that the base wage rate increases negotiated in large collective agreements in the first quarter of 2015 averaged 1.9%, with a 1.8% increase in public sector agreements, slightly lower than the 2.1% in private sector agreements.

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