Why Canada's productivity has been underestimated for decades(theglobeandmail.com)
theglobeandmail.com
Why Canada's productivity has been underestimated for decades
http://www.theglobeandmail.com/report-on-business/economy/canada-competes/why-canadas-productivity-has-been-underestimated-for-decades/article6546888/
52 comments
It'd be nice if we gave StatsCan, our National Boffins, the ability to make mathematically justifiable claims about the nature of Canada. Unfortunately, the current government decided that voluntary surveys were a perfectly sufficient form of data collection for our national bean counters, and has proudly proclaimed their disinterest in the use of stats to form policy. Don't worry though, the guy who came up with the previous idiocy has a Masters' in Econ. Joy.
Sarcasm notwithstanding, can you explain how the long form survey would have helped here? Adding to this, the short form survey is still mandatory where "mathematically justifiable claims about the nature of Canada" can still be made particularly with respect to demographics. Furthermore, compared to the census requirements elsewhere, the long form was unnecessarily intrusive (which included mandatory questions like how many rooms in your home have "missing or loose floor tiles.")
The decision to cancel the mandatory long form survey and make it voluntary was made June 17, 2010. The issue raised by Diewert suggests "that Statistics Canada has badly underestimated the growth of so-called multifactor productivity as far back as the 1960s."
The decision to cancel the mandatory long form survey and make it voluntary was made June 17, 2010. The issue raised by Diewert suggests "that Statistics Canada has badly underestimated the growth of so-called multifactor productivity as far back as the 1960s."
I'm not suggesting that cancelling the mandatory long form survey caused these alleged issues. I'm asserting that the way to fix them is not to further erode the ability of the government to collect and analyze data, as is happening under the current government. Further, I'd have more confidence in the ability of government to address these issues if this government hadn't made it very clear that it views statisticians and fact checkers as the enemy.
It's only related insofar as both problems stem from the Harper governments general disinterest in, and declination to fund, accurate data collection and analysis.
> The paper also challenges the reliability of official data from Statscan, which has been hit with deep budget and staff cuts in recent years. It said the agency is beset by “data problems.”
Big understatement. The current government (incidentally, elected to a "majority government" by 37.65% of the popular vote... which is 23.1% of eligible voters) has completely crippled Statscan by killing the mandatory long-form census... the thing that gave their statistics a basis in fact (http://www.theglobeandmail.com/news/politics/statistics-cana...).
Big understatement. The current government (incidentally, elected to a "majority government" by 37.65% of the popular vote... which is 23.1% of eligible voters) has completely crippled Statscan by killing the mandatory long-form census... the thing that gave their statistics a basis in fact (http://www.theglobeandmail.com/news/politics/statistics-cana...).
>>But he said the numbers could mean a lot to Canadian monetary and fiscal policy going forward.
Although I tangentially understand there could be implications to "monetary and fiscal" policies I would suspect these possibly revised productivity numbers will only weakly influence such policies.
The main thrust of Canadian economic policy since I can remember has been to control targeted inflation rates, which is presumably easier to measure, or at the very least uses a more widely accepted measuring process (e.g. basket of certain goods or other inflation indices).
With a renewed interest to control unemployment as opposed to inflation (more in line with the USA), I find it hard to believe that revised productivity measures over the past 50 years will much impact cabinet, Parliament or Bank of Canada decision making.
Can any HN economists comment on whether productivity measures would really have any impact on policies given overriding concerns on inflation or unemployment targets?
Although I tangentially understand there could be implications to "monetary and fiscal" policies I would suspect these possibly revised productivity numbers will only weakly influence such policies.
The main thrust of Canadian economic policy since I can remember has been to control targeted inflation rates, which is presumably easier to measure, or at the very least uses a more widely accepted measuring process (e.g. basket of certain goods or other inflation indices).
With a renewed interest to control unemployment as opposed to inflation (more in line with the USA), I find it hard to believe that revised productivity measures over the past 50 years will much impact cabinet, Parliament or Bank of Canada decision making.
Can any HN economists comment on whether productivity measures would really have any impact on policies given overriding concerns on inflation or unemployment targets?
> Can any HN economists comment on whether productivity measures would really have any impact on policies given overriding concerns on inflation or unemployment targets?
I'm not an economist, but I'm a Canadian. And I'm going to give you an answer that's not what you're looking for, but it's important:
No impact. Our government has been very, very clear about this. Measures, data, and statistics are intentionally buried and ignored during policy making. So if they exist, no, they won't have any impact. I'll quote our government for you:
"We don't govern on the basis of statistics"
I'm not an economist, but I'm a Canadian. And I'm going to give you an answer that's not what you're looking for, but it's important:
No impact. Our government has been very, very clear about this. Measures, data, and statistics are intentionally buried and ignored during policy making. So if they exist, no, they won't have any impact. I'll quote our government for you:
"We don't govern on the basis of statistics"
It's unfortunate, but true. Harper wants to be able to implement policy without pesky reality-based counterarguments getting in his way.
I'm pretty heavily slanted towards the economic liberty side of things, but I simply can't abide a prime minister who so proudly proclaims his disdain for stats. Especially a PM who has an MA in Economics.
I'm pretty heavily slanted towards the economic liberty side of things, but I simply can't abide a prime minister who so proudly proclaims his disdain for stats. Especially a PM who has an MA in Economics.
Perhaps his Econ degree is the reason Harper disdains stats...
I'm not a Canadian, nor an economist, but:
If the Canadian central bank is like any other central bank in the non-Euro world, it governs primarily on the basis of statistics. There's political influence, sure, but monetary policy revolves primarily around numbers. And depending on which version of mainstream economics you subscribe to, the importance of central bank policy in macro supply-demand equilibrium ranges from "all-important" to "almost all-important".
Those macro figures are crucial in unemployment and inflation numbers, and are increasingly suspected to play a part in the labor-capital balance.
TL;DR Medium-term macro numbers depend primarily upon the central banker manipulators of macro numbers.
If the Canadian central bank is like any other central bank in the non-Euro world, it governs primarily on the basis of statistics. There's political influence, sure, but monetary policy revolves primarily around numbers. And depending on which version of mainstream economics you subscribe to, the importance of central bank policy in macro supply-demand equilibrium ranges from "all-important" to "almost all-important".
Those macro figures are crucial in unemployment and inflation numbers, and are increasingly suspected to play a part in the labor-capital balance.
TL;DR Medium-term macro numbers depend primarily upon the central banker manipulators of macro numbers.
> "We don't govern on the basis of statistics"
For those curious, as I was, this quote seems to originate from: http://www.ctvnews.ca/justice-minister-defends-day-s-unrepor...
For those curious, as I was, this quote seems to originate from: http://www.ctvnews.ca/justice-minister-defends-day-s-unrepor...
Oh lordy, I can see the politics in Canada isn't much better than the US:
Liberal justice critic Mark Holland agreed that unreported crime is a legitimate phenomenon, but questioned Day's suggestion that it justifies expensive new prisons during an era of huge budget deficits. "Is this an absurd reason to spend $10- to $13-billion on Republican-style mega-jails? Do they propose to lock up people who aren't being charged? To round up anybody who looks suspicious?"
Liberal justice critic Mark Holland agreed that unreported crime is a legitimate phenomenon, but questioned Day's suggestion that it justifies expensive new prisons during an era of huge budget deficits. "Is this an absurd reason to spend $10- to $13-billion on Republican-style mega-jails? Do they propose to lock up people who aren't being charged? To round up anybody who looks suspicious?"
It's actually worse, because in Canada, a government with a majority gets to pass all of their legislation, no matter how bad it is. In theory, this should not happen as Members of Parliament (a geographically representative body) "cross the aisle" (to borrow the US phrase) to vote against legislation that is bad for their constituents. This never happens though, because any majority member who votes against the party is immediately kicked out.
It's the parliamentary system, that's how it's supposed to work, no?
If the legislation is bad enough, members can cross the floor and join another party. If the legislation is on something crucial (budget) it's a non-confidence vote and an election is held.
If the legislation is bad enough, members can cross the floor and join another party. If the legislation is on something crucial (budget) it's a non-confidence vote and an election is held.
> members can cross the floor and join another party
>"We don't govern on the basis of statistics"
K, coming off my expat hot list.
K, coming off my expat hot list.
Please note that this is (hopefully) only a temporary aberration and that it will be changed following the next election.
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This is a bit of a tangent, but I was wondering if anyone on HN has any experience moving from the US to Canada?
I'd like to live in Toronto at least for a couple of years, but I'm not sure how involved the redtape would be, especially because I'm a freelancer and I won't really have a Canadian employer, clients, or a business purpose I can claim for my residency.
I'd like to live in Toronto at least for a couple of years, but I'm not sure how involved the redtape would be, especially because I'm a freelancer and I won't really have a Canadian employer, clients, or a business purpose I can claim for my residency.
I moved from Austin, TX to Victoria, BC (still on work permit). To me, your simple plan seems nigh unachievable. From the Canadian government's point of view, what you have proposed sounds like taking a lot more than you give.
From the CIC website: "If you plan to stay longer than six months or intend to work in Canada, you may be considered a temporary worker and have to apply for a work permit." Self-employment wouldn't be an option for a work permit, even though software developers kind of fall into the skilled worker class (which helps with some bits but is a very long shot for you to bank on); you'd almost certainly need to be working full-time, and your employer needs to file for a Labour Market Opinion (LMO) to justify hiring you, which can take some time.
If you have further questions, email me at http://scr.im/amh.
ADD: Skilled worker info that I dug up.
"As of July 1, 2012, CIC will temporarily stop accepting applications for the Federal Skilled Worker Program (FSWP). This temporary pause does not apply to those with a qualifying job offer or applying under the PhD stream. We will likely start accepting applications again when the revised FSWP selection criteria take effect. Proposed FSWP changes should come into force in early 2013." http://www.cic.gc.ca/english/information/applications/skille...
List of non-LMO work permit options: http://www.cic.gc.ca/english/work/apply-who-permit.asp
From the CIC website: "If you plan to stay longer than six months or intend to work in Canada, you may be considered a temporary worker and have to apply for a work permit." Self-employment wouldn't be an option for a work permit, even though software developers kind of fall into the skilled worker class (which helps with some bits but is a very long shot for you to bank on); you'd almost certainly need to be working full-time, and your employer needs to file for a Labour Market Opinion (LMO) to justify hiring you, which can take some time.
If you have further questions, email me at http://scr.im/amh.
ADD: Skilled worker info that I dug up.
"As of July 1, 2012, CIC will temporarily stop accepting applications for the Federal Skilled Worker Program (FSWP). This temporary pause does not apply to those with a qualifying job offer or applying under the PhD stream. We will likely start accepting applications again when the revised FSWP selection criteria take effect. Proposed FSWP changes should come into force in early 2013." http://www.cic.gc.ca/english/information/applications/skille...
List of non-LMO work permit options: http://www.cic.gc.ca/english/work/apply-who-permit.asp
Side tangent to the tangent -> How do you like Victoria?
Family and I are moving there in a month (I'm US citizen, rest of family is dual US/Canadian). We live in Australia now but are making the move to Victoria nearly sight unseen. I visited it for a week scouting and liked it quite a bit, though living there might be a different story.
Family and I are moving there in a month (I'm US citizen, rest of family is dual US/Canadian). We live in Australia now but are making the move to Victoria nearly sight unseen. I visited it for a week scouting and liked it quite a bit, though living there might be a different story.
If you're okay with a slower pace of life and plenty of light rain, Victoria is great. Being in my late 20's and having moved from Austin, I miss having the abundance of late-night venues and stellar cultural events, but Victoria isn't without its charms. Email me at the address above if there are any topics you'd like to discuss further; I could buy you a drink when you get into town.
Awesome, thanks. I'll drop you a line when I finally get into town!
Feel free to get in touch with me too - check my profile for contact info. I've lived in Victoria for about 13 years - I moved here from other parts of Canada, so a bit of a different scenario than that being discussed.
See above :)
I did the move for school. In that case, it is very easy (and working after school is easy as well). For you, you'd probably need to find an employer sponsor your work permit. This is difficult unless you're highly qualified since they can find employees without the extra paperwork in Canada (and Canadian companies are legally obligated to fill slots with Canadians unless they can't find any, which is easy enough to get around but still a PIA for employers). Your other option is to have a canadian partner/family member sponsor you to move to Canada (not super complicated, but takes over a year). There are more options, such as 'skilled worker' immigration, but I forget the specifics. Basically you'll need to wait a long time (unless you can cough up half a million dollars for business class immigration). I am back in the US for a couple years but I intend to move back using my Canadian partner to sponsor my immigration (I miss Canada!).
The "skilled worker" immigration is the ticket for anybody trying to move from the US. However, to qualify for this, you will probably need an employer to sponsor it. This route also depends on credentialing, so academic transcripts and whatnot will be scrutinized.
What is it that you miss about Canada? Much of what I read on HN would point to advantages of being in the U.S. compared to pretty much everywhere else.
http://www.cic.gc.ca/english/work/special-business.asp
"Business visitors
A business visitor is someone who comes to Canada to engage in international business activities without directly entering the Canadian labour market. Business visitors usually stay in Canada for a few days or a few weeks but are able to stay for up to 6 months. A business visitor is a separate category with separate requirements. Business visitors do not require a work permit. For more information, see information for business visitors."
That might work as a freelancer.
And this wording is interesting:
"Business people covered by NAFTA do not need a labour market opinion (LMO) from Human Resources and Skills Development Canada (HRSDC). This means that Canadian employers do not need to have a job offer approved by HRSDC to hire an American or a Mexican business person, as set out in NAFTA."
I am not a lawyer and definitely not particularly familiar with Canadian law. Just found this page that seemed that it might have some answers to part of your question.
Frank
"Business visitors
A business visitor is someone who comes to Canada to engage in international business activities without directly entering the Canadian labour market. Business visitors usually stay in Canada for a few days or a few weeks but are able to stay for up to 6 months. A business visitor is a separate category with separate requirements. Business visitors do not require a work permit. For more information, see information for business visitors."
That might work as a freelancer.
And this wording is interesting:
"Business people covered by NAFTA do not need a labour market opinion (LMO) from Human Resources and Skills Development Canada (HRSDC). This means that Canadian employers do not need to have a job offer approved by HRSDC to hire an American or a Mexican business person, as set out in NAFTA."
I am not a lawyer and definitely not particularly familiar with Canadian law. Just found this page that seemed that it might have some answers to part of your question.
Frank
I thought the business visitor case might not apply because he was hoping to move for several years, but it might be worth looking into the conditions for renewal (though 5 renewals might be pushing his luck).
The wording on the NAFTA bit doesn't help as much as you might hope, though; GP doesn't match any of the long-term categories so his main sticking point is the 6-month maximum for business visitors.
The wording on the NAFTA bit doesn't help as much as you might hope, though; GP doesn't match any of the long-term categories so his main sticking point is the 6-month maximum for business visitors.
Coming to Canada for 6 months or 12 months to work? I think that is really easy; those visas are available at the border. All you need is a passport. If you want to stay longer, though, there's tons of red tape.
Boston -> Toronto here. It wasn't as easy as you might hope. My wife's employer paid for an attorney to manage the paperwork, which was pretty awesome. Total time to permanent residency: about 3 years. Since our residency was finalized within the last 6 months, the 3-year estimate is pretty current; I think this should be considered the lower-bound.
I can't imagine how it would work for a freelancer. In my case, I tagged along with my wife who had a formal offer of employment. If not for her employer, I don't think it would have been possible to get the work visas and ultimately get residency.
Boston -> Toronto here. It wasn't as easy as you might hope. My wife's employer paid for an attorney to manage the paperwork, which was pretty awesome. Total time to permanent residency: about 3 years. Since our residency was finalized within the last 6 months, the 3-year estimate is pretty current; I think this should be considered the lower-bound.
I can't imagine how it would work for a freelancer. In my case, I tagged along with my wife who had a formal offer of employment. If not for her employer, I don't think it would have been possible to get the work visas and ultimately get residency.
I moved from San Francisco to Toronto this year. My move was very easy because my new employer sponsored me for a work visa, but my understanding is that it is fairly straightforward process even without an employer.
Skilled worker or some such, don't need a job to sponsor you, takes 16 months (sometimes less, although probably sometimes more).
Can anybody explain how that could happen?
The difference between "shrinking since 1977" and "growing a percent a year since 1977" is so huge (at least 50% productivity) that I cannot believe that this is true.
Are people working fewer hours than the statistics bureau is aware of? If so, what do these people do in their spare time that does not show up as a "hey, that's funny" at the statistics bureau?
Or are there scores of 'died, but still reported as working' workers?
Alternatively, if the productivity is in "output per unit of capital": how do they hide using fewer resources from the government? Stockpile oil amd machinery? Or do they produce more, but sell on the black market?
For at least one of these, the estimates that the statistics bureau makes about them would, by now, have to be off by at least 20% or so. I think they would have noticed that.
On the other hand, I can easily see them as underreporting productivity growth by a few tenths of a percent each quarter, especially when reporting shortly after each quarter ended.
The difference between "shrinking since 1977" and "growing a percent a year since 1977" is so huge (at least 50% productivity) that I cannot believe that this is true.
Are people working fewer hours than the statistics bureau is aware of? If so, what do these people do in their spare time that does not show up as a "hey, that's funny" at the statistics bureau?
Or are there scores of 'died, but still reported as working' workers?
Alternatively, if the productivity is in "output per unit of capital": how do they hide using fewer resources from the government? Stockpile oil amd machinery? Or do they produce more, but sell on the black market?
For at least one of these, the estimates that the statistics bureau makes about them would, by now, have to be off by at least 20% or so. I think they would have noticed that.
On the other hand, I can easily see them as underreporting productivity growth by a few tenths of a percent each quarter, especially when reporting shortly after each quarter ended.
Most likely mistakes were made when calculating inflation rates. This is actually a pretty easy thing to do and will easily go unnoticed.
As evidence that this can occur, consider the US - inflation was known to be overstated by 1.3%/year before 1996.
https://en.wikipedia.org/wiki/Boskin_Commission
We probably do better by now, but there are still fairly well known upward biases in our inflation calculations. For example, consider the lack of hedonic adjustments to medical care in CPI. If an laparoscopic surgery today costs more than living in pain in 1970, the BLS counts the cost increase in "medical care" as inflation.
http://www.bls.gov/cpi/cpihqaitem.htm
As evidence that this can occur, consider the US - inflation was known to be overstated by 1.3%/year before 1996.
https://en.wikipedia.org/wiki/Boskin_Commission
We probably do better by now, but there are still fairly well known upward biases in our inflation calculations. For example, consider the lack of hedonic adjustments to medical care in CPI. If an laparoscopic surgery today costs more than living in pain in 1970, the BLS counts the cost increase in "medical care" as inflation.
http://www.bls.gov/cpi/cpihqaitem.htm
Ah! That makes sense, as inflation rate computations, in the end, are somewhat/largely/almost entirely subjective.
What's today's equivalent of the $800 20 inch CRT television set of 1990? A 40 inch LCD tv? With ($700) or without ($500) 3D? Or maybe a television and a $600 tablet?
So, it looks like a disagreement about the way to calculate inflation, with the challenger shouting hard, as he should, since it is the only way to make an impression.
If the challenger's arguments have merit, I guess the statitics bureau will slowly react by incorporating them into their computations. 'Slowly', IMO, is a virtue here. These computation methods should be designed by committee.
What's today's equivalent of the $800 20 inch CRT television set of 1990? A 40 inch LCD tv? With ($700) or without ($500) 3D? Or maybe a television and a $600 tablet?
So, it looks like a disagreement about the way to calculate inflation, with the challenger shouting hard, as he should, since it is the only way to make an impression.
If the challenger's arguments have merit, I guess the statitics bureau will slowly react by incorporating them into their computations. 'Slowly', IMO, is a virtue here. These computation methods should be designed by committee.
Today's equivalent of the 20" CRT is a 20" CRT, or at the very least a 20" TV. If that now costs $500, that means that the inflation rate was negative (or at least the TV's contribution to inflation was).
I don't know if inflation calculations were the problem in Canada, I'm just pointing out that it's one possible way.
Incidentally, there is a completely non-subjective way to calculate inflation: choose a fixed basket of goods. I.e., look at what someone in 1970 actually purchased, and then look today at what those goods/services [1] cost today. The only problem with this is that to calculate inflation from 1980 to today, you need to pick a 1980's basket rather than a 1970's basket, i.e. CPI stops being a single quantity you can push forward and backward in time.
[1] Also, don't choose categories of goods like health care - choose actual goods like appendix removal or aspirin.
I don't know if inflation calculations were the problem in Canada, I'm just pointing out that it's one possible way.
Incidentally, there is a completely non-subjective way to calculate inflation: choose a fixed basket of goods. I.e., look at what someone in 1970 actually purchased, and then look today at what those goods/services [1] cost today. The only problem with this is that to calculate inflation from 1980 to today, you need to pick a 1980's basket rather than a 1970's basket, i.e. CPI stops being a single quantity you can push forward and backward in time.
[1] Also, don't choose categories of goods like health care - choose actual goods like appendix removal or aspirin.
"Incidentally, there is a completely non-subjective way to calculate inflation: choose a fixed basket of goods."
That 'choose' part is subjective. http://www.bls.gov/cpi/ (stress added):
"The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for _a_ representative basket of goods and services"
Your 'or at the very least a 20" TV' acknowledges that, too. How do you objectively choose between the two?
Similarly, "like appendix removal or aspirin": who determines that "aspirin" is the actual good, and not "pain killing" or "prevention of strokes"?
That 'choose' part is subjective. http://www.bls.gov/cpi/ (stress added):
"The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for _a_ representative basket of goods and services"
Your 'or at the very least a 20" TV' acknowledges that, too. How do you objectively choose between the two?
Similarly, "like appendix removal or aspirin": who determines that "aspirin" is the actual good, and not "pain killing" or "prevention of strokes"?
From the article:
> Statistics Canada issued a response... saying the
> agency follows international guidelines and practices.
> Given that Canadian productivity is frequently compared
> with that of the U.S., the methodology behind the
> estimates for Canada “should be comparable to the
> largest extent possible to that used by the U.S.
> Bureau of Labour Statistics,” said Wulong Gu of
> Statscan’s economic analysis division.Am I reading it right that America has to import skilled workers, but Canada has so many they try to keep them out?
Anecdotally that appears to be correct. My company tried to sponsor a graphic designer to come up from the States. We were denied because the gov't said there were more than enough skilled graphic designers available.
To be fair though, there really are enough skilled graphic designers around - especially in the cities.
Software developers on the other hand...
Software developers on the other hand...
Obviously depends on the market, but... in Vancouver for example, median wages are simply not competitive when compared to what's available 3 hours south of the border.
Completely agree with you. It's a good time to be a software developer! :D
Sidebar, why didn't the reporters ask Statscan to respond to the allegations in this story? Seems a bit one-sided.
The article quoted the official response to the paper. Canadian government officials are routinely muzzled, the official response is all you get these days.
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