Sign in | Sign up

Analyzing the Atlantic Canada Problem

[Article Image]

Canada's best thinkers should be finding solutions to the region's economic woes, not just holding it up as an exemplary lost cause.


Photo by medmoiselleT available under a Creative Commons License

Follow The Mark

Facebook64
Twitter64
Rss64
Email64
First published Jun 16, 2009

You don’t get to to be a Fraser Institute senior fellow, or a London School of Economics Chevening Scholar, or a fellow with the Manning Centre for Building Democracy, if you aren’t particularly intelligent.

But when it comes to providing an analysis of the "Atlantic Canada problem," John Williamson, who happens to be all of the above, seems to take off his thinking cap – or, more accurately, starts acting less like an academic, and more like a talk show host or politician.

Take Williamson's commentary on Employment Insurance in Atlantic Canada in the National Post. Here are some select nuggets and my comments below:

Federal government changes in the 1970s to EI made leisure more attractive by paying richer benefits in areas of high unemployment. The result was predictable: Some people decided collecting pogey was preferable to extra work. It was a rational response to lousy public policy. The Atlantic provinces can afford such a rich system because workers in the rest of Canada pay for it. EI payroll taxes paid by central and Western Canadians make it possible. These workers transfer more than $500-million in benefits annually to the East Coast. But that’s not the worst part. The Atlantic EI scheme retards job creation by making it more costly for business to hire workers. Companies that have, in the past, been ready to hire could not find enough workers willing to trade leisure for regular work. This choice is influenced by generous EI payments and explains the paradox of both high unemployment and a labour shortage in the region. As a result, companies invest less in Atlantic Canada or leave in search of more willing workers in New England or central and Western Canada. The result is more unemployment and an exodus of young people to the United States or other parts of the country. It is a vicious circle with less economic growth, more dependency and declining opportunity.

People assume that high unemployment rates call for increased EI, but it is worth considering to what degree generous EI has caused chronic unemployment. Indeed, were EI rules similar across provinces, there would be an incentive for workers in areas with high unemployment to move to locations with more jobs.

Now let me start out with a couple of general comments:

  1. I am not a big fan of seasonal EI and have been clear about that on [my blog](http://www.davidwcampbell.com). I think the Feds have substituted credible economic development policy and effort with beefed up EI to keep people happy, and politicians in rural Atlantic Canada have willingly settled for this.
  2. What frustrates me the most about Williamson and his kind – the brilliant academics charged with researching this issue – is that they love to blame Atlantic Canada for everything but the real problem. Consider: They blame equalization. They blame EI. They blame oppressive government. They blame a culture of defeat.

Such explanations might be expected from the feeble minded, or the simpletons who wag their heads while listening to talk show rants, but from credible academics? Visiting professors? It just shows that they're human, and bring to the table the same biases as us mere mortals.

My position on all of this is simple:

Williamson, in his piece for the Post, blames EI for a lack of investment, out-migration, and what he calls a culture of "leisure." But anyone with even the most basic understanding of the situation realizes that EI is a symptom, not a cause, of the region’s economic problems. Employment insurance may have slightly exacerbated the region's economic woes, but people like Williamson make it sound as though Atlantic Canada had this booming economy, then imposed an evil EI program that killed it. And watch out: the Liberals and the NDP want to do the same thing in the rest of Canada.

Equalization is likewise a symptom, though, admittedly, it has also worsened the problem.

Finally: a culture of leisure? I don’t buy that at all. There may be a fraction of the population that would prefer to take a $10 per hour seasonal job for half the year and earn $5 per hour on EI for the other half, rather than $8 per hour to work year-round, but if the economy were strong, this already-small percentage would dissipate. You can’t tell me that an auto manufacturing plant in Caraquet, New Brunswick wouldn’t get thousands of applicants.

The need for a real economic development think tank in Atlantic Canada

It is increasingly clear that our best and brightest are not turning their minds to solving the economic development riddle in Atlantic Canada, but using this region as their “what not to do” example for the rest of the country. This is callous and cynical, but true.

We need to have local researchers studying these issues from a minimally-influenced ideological viewpoint. AIMS is a credible think tank (in the sense that it employs Ph.Ds), but it is way too ideological to really address the issues.

The real problems in Atlantic Canada are based on a chronic lack of business investment in this region, and the fallout from that over successive generations. When the federal government stepped in, they gave pogey down here while spending most of their economic development resources in the Windsor to Montreal corridor. This misguided effort had the negative, if unintended, consequences we see today.

I don’t entirely disagree with Williamson, except that he directs his analysis towards warning the rest of the nation not to become Atlantic Canada. If he had any real concern for the region, he would be offering suggestions to redress the business investment paradox here. It is unfair, and not useful, for central and western Canadian academics to simply use Atlantic Canada as a worst-case scenario example. Imparting superficial analyses and calling them insight provides nothing but fodder for simple-minded media outlets.