Corak: What will COVID Mean for the Future of Fiscal and Social Policy? Temporary Foreign Workers aspects

From a recent presentation by Corak:

The federal government was very attentive to a whole host of concerns that can only be charitably described as poor public policy. These include repeated extensions of the CEWS, intergenerational transfers of capital gains, and most recently campaigns for extensions and forgiveness of loans taken through the Canada Emergency Business Account (CEBA).

There is an important discussion to be had about the moral hazards associated with these changes, and their consequences for a dynamic and efficient small business sector. Indeed, all of this is piled onto a corporate tax structure that is increasingly making small businesses a tax haven and putting a break on productivity growth.

But the coup de grace in this unfortunate policy evolution is the government’s acquiesce to the demand for an expanded Temporary Foreign Worker program. Employers now have the opportunity to hire up to one-fifth, and in some cases 30 percent, of their low-wage workforce through the Temporary Foreign Worker program.

This represents a major wage subsidy, even if it is not recorded as an expenditure in the government’s books. It is just the opposite of what policy directed to an inclusive labour market should be doing. Low wage workers, those who have a tenuous foothold in the labour market either because they themselves are recent immigrants, have a disability, or are young, will likely see more limited wage growth and job opportunities as a result of this policy change.

This change may also potentially shut off the possibility of upgrading employment and human resource practices in the care economy, particularly in Long-Term Care facilities and in early childhood care. The pandemic illustrated that the use of contingent and itinerant work arrangements in long-term care homes had devastating and shameful consequences. The challenge for a policy maker wishing to promote an inclusive labour market is to transform this sector into a “craft” based economy, with upskilling of workers who offer community and family based care and support.

An unfortunate legacy of COVID on public policy directed to employers is the threat of growing inefficiencies and inequities as a result of subsidies that cannot be rationalized by any sort of market failure.

Post COVID policy incoherence threatens an inclusive labour market

Public policy may continue to make determined and important changes in a progressive and inclusive direction, and even take steps toward a tighter social safety net that some will appreciate as a basic income.

But other choices bring the very goal of a “strong and inclusive labour market” into question and in the long term threaten the sustainability of more generous transfers to individuals. The labour market will be more inefficient and inequitable because of sustained subsidies to small business and increased reliance on temporary foreign workers. 

And more polarization and inequality of jobs, wages, and market incomes will in turn make the maco-economy more unstable and more challenging to manage.

What will COVID mean for the future of fiscal and social policy? The future is unclear not because of inherent uncertainty, but rather because of explicit choice and the incoherence that it has engendered.

Source: What will COVID Mean for the Future of Fiscal and Social Policy?