Opinion

Opinion: A trend that should keep Freeland up at night

With a raft of fresh economic forecasts and a promised $100 billion in stimulus spending tucked under her arm, Finance Minister Chrystia Freeland has embarked on a final round of consultations before launching her recovery budget in a few weeks’ time.

The forecasts contain some good news. In tandem with the rollout of vaccines, the Canadian economy will reopen somewhat throughout the spring and summer, and snap back in the fall as the virus fades away.

But lurking in the details is a worrisome trend that may bedevil the finance minister and lead to political discomfort: the lingering effects of the pandemic on young people and low-wage workers.

To be sure, the headline numbers are encouraging. While the pandemic restraints mean things are bad right now, “much like pulling on a rubber band a bit further, there’s reason to believe that it will be made up with a faster bounce back later in 2021,” writes CIBC economist Royce Mendes.

He sees the economy contracting in the first quarter of the year but picking up quickly to a nine-per-cent annual pace by the fall. For the year, CIBC projects a four per cent expansion, followed by 5.1 per cent next year. Scotiabank sees 4.3 per cent both this year and next. Capital Economics is even more optimistic, with a 4.6 per cent forecast for 2021 and 5.8 per cent next year.

Generally, economists and epidemiologists alike see a rough time this winter. But as soon as the vaccine takes hold, we can open our doors and our wallets again.

There’s no doubt Canada desperately needs to see some growth, and Freeland has committed to doing what she can with her fiscal levers to amplify the rebound and using stimulus funding of up to $100 billion to rebuild the economy.

The quest for growth is not just something Freeland needs for the sake of what it means for profits and jobs. She needs it because of the revenues it brings the federal government to get the debt and deficit under control.

The other way of raising revenue – hiking taxes – isn’t really on the table.

Prime Minister Justin Trudeau and Freeland have said they won’t do that, at least not in a broad way. In his mandate letter to Freeland finally published Friday five months after she was named to the position, he tasks her with raising taxes on extreme wealth –but that’s it on the personal tax side of things.

So if Freeland wants to keep the Conservatives off her back, make investors and business groups happy and fulfil her job description to put the country’s finances on a solid and sustainable path, strong growth is the way to do it.

But her mandate letter also emphasizes a long list of other objectives. She is responsible for embracing clean technology, cutting emissions, creating one million jobs, investing in the social sector, infrastructure and training, beefing up pandemic supports for workers and businesses, helping personal-support workers and enhancing homebuyers’ incentives. Oh, and setting the deficit on a path to decline.

But also, the PM writes, “it is clear that this pandemic has disproportionately affected different communities throughout our country. Therefore, we must ensure our recovery includes all Canadians, with an emphasis on supporting those most affected.”

Some of these tasks fit well together. Pandemic support is not permanent spending. Clean technology can create jobs. Investing in skills and infrastructure can boost growth.

But helping those hurt the most by the pandemic is trickier, because helping those demographics doesn’t immediately lead to the kind of spectacular growth Freeland needs to whittle down the deficit.

On the labour front, job losses have hurt young people, visible minorities, single parents and low-wage workers the most, mainly because they so often find work in the accommodation, food, entertainment and tourism industries that have been pummelled.

While economists expect a rapid rebound in the job market overall, it will be a long haul for people who rely on those sectors and probably more than a year before we see unemployment rates as low as before the pandemic. Meanwhile, long-term unemployment is running at very high levels, and that’s hard to fix because workers’ skills atrophy as they sit on the sidelines, says economist Trevor Tombe from the University of Calgary.

Plus, the pandemic has probably changed those industries for good. E-commerce and a massive shift to online services mean fewer of those public-facing jobs that young people and low-skilled workers rely on. Companies in those sectors are faltering.

There’s plenty of goodwill among policy-makers to find solutions and bolster the chances of these fragile workers. But there’s a competing drive to find the fast-growing segments of the economy, fire them up with stimulus money and hope strong growth rescues us from a fiscal dilemma. Freeland’s first budget needs to do it all.

Heather Scoffield is a National Affairs writer.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Health Minister Tyler Shandro announced updated health measures Monday which are now in place for retail, hotels and community halls, performance groups, and youth sports as part of Step 2 of Alberta’s reopening plan. (File photo by Government of Alberta)
COVID restrictions for retail, sports and performers further eased

Occupancy in stores and malls boosted to 25 per cent from 15 per cent

The City of Red Deer sits at 249 active cases of the virus, after hitting a peak of 565 active cases on Feb. 22. (Black Press file image)
Active COVID cases in Red Deer continue to decline

249 cases in Red Deer, down from 565 peak on Feb. 22

(File photo)
Five Olds College students semi-finalists in marketing pitch competition

Winner of Second Annual UFA Student Pitch Competition to be announced April 13

Nordegg residents, including retired fisheries biologist Vance Buchwald, are concerned this kind of coal mining could start up in the wilderness area. (THE CANADIAN PRESS/AP/Mead Gruver, File).
Biologist urges Clearwater County to take a stand against Nordegg coal mining

Vance Buchwald said there’s no future in coal, the county should back eco-tourism

Quentin Lee Strawberry Photo from RCMP
Updated: Bleeding man came to door frantically calling for 911 help, neighbour testifies in murder trial

Quentin Strawberry on trial for second-degree murder accused of killing Joseph Gallant in 2019

Ben King scores for the Red Deer Rebels during the third period of a Western Hockey League game against the Calgary Hitmen at the Westerner Park Centrium Saturday. (Photo by Rob Wallator/Red Deer Rebels)
Rebels complete comeback to pick up first win of season

Rebels 3 Hitmen 2 (OT) The Red Deer Rebels were able to… Continue reading

Edmonton Oilers' Connor McDavid (97) checks Ottawa Senators' Chris Tierney (71) during third-period NHL action in Edmonton on Monday, March 8, 2021. THE CANADIAN PRESS/Jason Franson
Oilers open three-game homestand against Senators with 3-2 victory

Oilers open three-game homestand against Senators with 3-2 victory

Dave Mercer poses in this undated handout photo. Fishing is Dave Mercer's passion. When he's not taping episodes for his fishing show, 'Dave Mercer's Facts of Fishing,' doing his podcast and weekly fishing tips, he can usually be found on the water. Mercer is also in his 11th year as an MC for the Bassmasters Classic and Elite Series and after watching Canadians Chris Johnston, of Peterborough, Ont., and Jeff Gustafson, of Kenora, Ont., capture tournament this in less than a year, Mercer is confident the third Canadian on the tour, Johnston's older brother, Cory, will win a circuit event either this year or next. THE CANADIAN PRESS/HO - Dave Mercer Outdoors Inc.
Bassmasters Elite Series MC Dave Mercer enjoying Canadians’ success on circuit

Bassmasters Elite Series MC Dave Mercer enjoying Canadians’ success on circuit

Meghan McPeak, left, and Randy Urban do play-by-play for the Raptors 905 team in Mississauga, Ont., on Wednesday, January 25, 2017. THE CANADIAN PRESS/Nathan Denette
Toronto Raptors using all-female broadcast crew for televised game later this month

Toronto Raptors using all-female broadcast crew for televised game later this month

Toronto Six get another crack at Isobel Cup women’s hockey championship

Toronto Six get another crack at Isobel Cup women’s hockey championship

Canada's Mikael Kingsbury celebrates after finishing first in the final of the World Cup men's dual moguls skiing competition, Friday, Feb. 5, 2021, in Deer Valley, Utah. Canadian moguls star Kingsbury captured a gold medal for the fifth time at the world championships today.THE CANADIAN PRESS/AP/Rick Bowmer
Mikael Kingsbury wins world men’s moguls championship

Mikael Kingsbury wins world men’s moguls championship

A Canadian Premier League soccer ball is shown on a podium in this undated handout photo. THE CANADIAN PRESS/HO, Canadian Premier League/Chant Photography *MANDATORY CREDIT*
Canadian Premier League offers first look at its bottom line

Canadian Premier League offers first look at its bottom line

Team Manitoba skip Jason Gunnlaugson directs his team as he plays Team Wild Card One at the Brier in Calgary, Alta., Monday, March 8, 2021.THE CANADIAN PRESS/Jeff McIntosh
Alberta’s Bottcher hands Wild Card Three’s Middaugh his first loss at the Brier

Alberta’s Bottcher hands Wild Card Three’s Middaugh his first loss at the Brier

Rheal Cormier, left, receives his jacket from Ferguson Jenkins during his induction to the Canadian Baseball Hall of Fame in St. Marys, Ont., on June 23, 2012. THE CANADIAN PRESS/Dave Chidley
Former Canadian major-leaguer Rheal Cormier dies after battle with cancer

Former Canadian major-leaguer Rheal Cormier dies after battle with cancer

Most Read