Time for the Conservatives to let go of the ‘job-killing carbon tax’ talking point

(and for the NDP to stop believing in it)

by Stephen Gordon

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I have to admit it, I’m amused by the terrier-like grip that the Conservatives have on the “job-killing carbon tax” talking point: after the first few dozen times, it just got funny. But the fact that they’re still using that phrase—and that the NDP is doing its best  to dissociate itself from itsuggests that both sides think that the talking point is an effective weapon in the battle for public opinion. So here’s what you need to know about the “job-killing carbon tax” line: it’s wrong.

Carleton University’s Nick Rowe once noted that apart from measures that directly affect the functioning of labour markets—employment insurance, payroll taxes, etc—the best prediction for the effect of a given policy change on total employment is zero. In other words, most policy debates shouldn’t be about jobs. Free trade, HST harmonisation or corporate tax cuts may affect which type of work is done and at what wage, but they won’t affect total employment. Some sectors will see employment increases, some will see it decrease, and depending on the measure being discussed, wages will go up or down. But there will be no long-run effect on employment. There will likely be some short-term dislocation, as some people become temporarily unemployed and must re-train and/or move to find work, but in an economy in which 200,000 people lose or leave their jobs in a given month and a similar number are hired, these transitions are usually short-lived (though the adjustment to free trade with the U.S. took longer).

And so it would be with a carbon tax. Sectors that cannot absorb the tax will see declining employment, and employment in the other sectors would grow. If the tax is introduced gradually, these shifts will absorbed into the usual flows in and out of employment, and total employment wouldn’t be affected even in the short run.

To the extent that a carbon tax will reduce employment in certain sectors, then yes, it “kills jobs.” So does a cap-and-trade system. And more importantly, so do regulations. Just as with a carbon tax and cap-and-trade, the regulatory approach that the Conservatives now prefer increases the cost of doing business. Some sectors will be able to adapt to this, some will not. Same with a carbon tax.

Job-killing regulations!

It has a certain ring, doesn’t it? But I still don’t want to hear it.




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Time for the Conservatives to let go of the ‘job-killing carbon tax’ talking point

  1. Oh good grief, man. What are you doing?

  2. The problem with a “carbon tax” is that it’s based on a socialist wealth redistribution scam.

    • Just like… um… every other tax?

    • Score one for the Con talking points.

    • So is fining me for dumping garbage on your front lawn a socialist wealth redistribution scam, too?

    • You’ve hit at the heart of the problem — not that a carbon tax is a socialist wealth redistribution scam, but the fact that the Conservative Government, in its heart of hearts, doesn’t believe in man-made global warming. Any action to reduce carbon, therefore, is a waste of time and money to them. If Harper and Co. would come clean on this, we wouldn’t have to be debating semantics (carbon tax vs. cap-and-trade vs. regulations). Watching the Tories pay lip service to reducing carbon while doing everything they can, here and abroad, to thwart those efforts is frustrating to say the least. I wish they’d just be honest about it.

  3. Your illustration gave me an idea, I think they should move to the more emotive “puppy-killing tax on everything.”

  4. I remember when the 13% h.s.t. came out, everybody was screaming. Now we have eco taxes, env. taxes, eco fee, env fees, etc., hidden or not, coming out of our ears, as much as 18%, up to 30% fees, and, yet people don’t seem to mind as much. Is it because they have been conditioned by the environmentalists, that we are responsible for all the bad things happening to nature and to the planet, and that we have no choice but to pay up!
    “FEAR sells, GUILT sells.”so these guys have become the governments best “(friends) / allies”, since they have created their biggest ” cash cow “, ever in history.
    Ex.: why would the “$ emissions testing $” for vehicles is so important for one province, while the neighboring one does not seem to think so, and don’t do it? Can someone explain me the logic here?

    • The Mike Harris neo-cons brought in emissions testing in ON. My guess is that they did it to get clunkers off the roads…

      McGuinty brought in eco-fees. These are actually pay-as-you-go conservative. It costs money to dispose of certain types of items like electronics, etc. So the cost of disposing them is built in. (I would prefer it be paid out of general revenues that way the tax is progressive.)

      The HST is actually the Harper Sales Tax. He bribed ON with $4.2B and BC with $1.8B to adopt the tax. He even paid off QC with $2.2B for NOT retroactively adopting the tax (according to Flaherty.)

      As for reducing greenhouse gas emissions, under Harper Canada has become the worst offender in the developed world. We have to pull our weight, we can’t remain environmental freeloaders. Fact is our grandparents sacrificed their lives so that we could have freedom. All that is required of us to preserve the world for our grandchildren is to act responsibly. If that’s asking to much, we are nothing more than lowlife ingrates.

  5. While I accept your argument in principle MrG, but could you please explain why in the context of free trade we seem[ so Broadbent and company claim] to have seen large loses in our vehicle manufacturing sector since the implementation of the FTA.
    These were good middle class jobs that don’t seem to have been replaced where they are most need ie., where most of the people live, Southern Ontario. Simply exchanging them for more service industry jobs isn’t that great a trade off is it? There is an argument to be made that the auto deal was a far more effective deal in both the short and long run for Canada than the FT deal.
    Again i think you may be missing part of the larger picture. Certain policies undoubtedly favour the business/investment/managerial/consumer side of the equation, others clearly offer a better break for the working guy on the shop floor. As a liberal i’m torn between the two most of the time. As a working guy i liked to be adequately compensated for my labour.

    • Yes this is another hole in the free-market “job creating” theory. Corporate profits often go up when businesses kill jobs with corporate downsizing and move production out of the country killing even more jobs.

      The money is not trickling down — it is trickling up. This amounts to a wealth transfer from average hard-working people — who end up getting paid less wages and benefits — to wealthy businessmen and shareholders (the only group whose living standards are on the rise.)

      Is it really surprising that we have seen a steady decline of GDP growth over the past 20 years of free-market globalization? (The 2010s was the worst decade for growth since the 1930s.)

      With less money in people’s pockets, they have less to save, spend and invest. That means less money in the economy. What’s worse is that we are holding on to yesterday’s living standards with record levels of personal debt.

      First, the right-wing libertarians promise prosperity with their reforms. Next they are telling us to learn to live on a lot less as living standards head on a downward spiral.

      But these people are blinded by their greed. They are killing the markets they make their riches from. The end result will be depression. (Which we are a lot closer to than most people realize.)

  6. If your argument is that jobs will be lost and jobs will be created, that really is inarguable. What is overlooked, I believe, is also the principle that jobs will be created where it is cheap to create jobs. This is not necessarily, in this current world, the same place where the jobs were lost.

    Which puts an interesting lens on the Conservative howling, because with a price on carbon, jobs will be lost in Alberta. In the tar sands. In the resource industry which is driving the Canadian economy right now. Our fragile economy…

    And in typical all out, no-compromise, black or white fashion, there is no way to do it gently, therefore it can’t be done.

    So the Conservative complaint is really just a howling distraction from the actual issue. Once again.

    • We already have a partial carbon tax. Excise tax on gasoline amounts to a roughly $40/tonne CO2 carbon tax. Yet the Canadian economy manages to function.

      It’s also grossly misleading to suggest that the entire Canadian economy relies on the tar sands. Canada has a huge, highly diversified economy, of which the tar sands is a small but significant part.

      • “We already have a partial carbon tax. … Yet the Canadian economy manages to function.”

        So a “carbon tax” doesn’t kill jobs?

        “It’s also grossly misleading to …”

        I really don’t believe I said that.

        • You said our economy is driven by the oil sands. It is true to the extent that the Canadian dollar is highly correlated to the price of oil. If the correlation were weaker, perhaps exchange rate vs the USD might be closer to the PPP level of 85 cents, and we wouldn’t have the largest-ever trade deficit.

          The tar sands are a net positive (it’s like finding dollar bills on the ground) for Canadians. But that does not imply we should formulate tax policy to specifically favour that industry (which is already overheated, besides).

      • Also, if the tar sands is such an insignificant part of the economy…. What’s the problem with hobbling them with a ‘job killing carbon tax’?

        • I specifically said it was significant. The opposite of what you attribute to me.

          At any rate, a carbon tax would not only impact the tar sands industry. Furthermore, the tar sands need not be as carbon intensive as they are. The idea of using nuclear power to create the process heat for in-situ extraction has been mooted.

          The problem with ‘a job killing carbon tax’ is that it misunderstands what a carbon tax does. I have seen an economic study where the net impact of a carbon tax on the Canadian economy is positive in the long run. Take that with a grain of salt if you want, but it is not obviously true that a carbon tax is ‘job killing’. Even if it were, that is beside the point.

          • You said ‘small, but significant’. Seems like an oxymoron, what is it then. Small? Or significant?

          • Both. Tar sands related activity represents in the neighbourhood of 2% of GDP. Not insignificant, but hardly enough to move the needle on the economy as a whole. Industries that are bigger: finance, information and communication technology, transportation. So all the rhetoric about tar sands driving Canada’s economy is overwrought.

  7. What on earth makes you think the truth of the matter has any bearing on whether they use it?

  8. People should realize when neo-cons talk of “creating jobs” and “killing jobs” they are referring to trickle-down economics. What they really mean to say is that higher corporate profits will trickle down and create jobs. Lower corporate profits will kill jobs. So the theory goes.

    But the economy is much more complex than this simple ideology indicates. Take a country like Sweden that has strong “job killing” green regulations, very high “job killing” taxes, and “job killing” social spending (they rank #2 in the world.)

    The fact is, Sweden has one of the (actual) strongest economies on the planet. Last year it had 3.9% GDP growth (Canada 2.5%.) It ranks #4 on the WEF Global Competitiveness Index (Canada ranks #14.) And it has 37% debt/GDP (Canada has 85%.)

    Take a country like the US. It has the lowest “job creating” taxes in the developed world. It got rid of “job killing” banking regulations. In the end it suffered a financial market meltdown that doubled the unemployment rate. It now has 103% debt/GDP.

    The truth about economics is that the marketplace is extremely fickle. Companies have to constantly reinvent themselves and adapt to an ever-changing environment. So when businesses have taxes or regulations imposed on them, businesses do what they always do: adapt.

    Last, regulations, including green ones, can actually create job and business opportunities as new industries are created.

    So the idea that the highest corporate profits translate into the best job creation is a fallacy.

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