Doing the math on political promises of job creation

All parties need to take more care in communicating how their economic policies affect employment


graphing calculator, calculator, Christmas giftColleague Aaron Wherry points me to this NDP press release, in which they quote my Maclean’s Econowatch posting on the “job creation tax credit” proposed by the Ontario NDP in the recent provincial election campaign. Good to know that Econowatch is so popular and citable!

My concern with the Ontario NDP proposal was the attempt to identify “new” jobs. I don’t think it is really feasible to identify which jobs are truly “new” and which ones would have been created anyway, even in the absence of the policy intervention. I would apply the same criticism to the 2011 federal NDP proposal (see p. 6), or the more recent federal NDP idea for a “job creation tax credit” in the 2014 budget consultations. (Thanks to Aaron Wherry for that link.)

What about the Liberal Party proposal for an EI premium exemption for new jobs? If there was an attempt to pay out only for new hires, then my criticism would apply. On the other hand, if the Liberal proposal just applies to net payroll job growth, the numbers are pretty close to working, in my view. I wrote today to a Liberal party policy analyst who confirmed the latter interpretation. Maybe that’s what the NDP (both federal and Ontario wings) had in mind, as well, but there weren’t enough details in any of the published policy documents to tell.

I have doubts about whether net payroll job growth should really be attributed completely to any such credit; clearly, some of the new payroll growth would happen even in the absence of the credit. This is the same criticism made in Stephen Gordon’s comments about attributing all job growth over the past eight years to the Conservative government: Much of this growth would have happened under most alternative policy scenarios.

I think there are grounds to challenge the communication of the Liberal proposal as being about “created” jobs, just as I challenged the NDP in the original Econowatch article. But, if the Liberal policy targets net payroll growth, then I don’t see a large math problem there.

All parties need to take more care in communicating how their policies affect employment. As Stephen Gordon often writes, in reality, economic policy has a larger impact on the quality and pay of jobs than on the raw head counts. Voters apparently want to hear about head counts, though. I just hope voters cast a critical eye on all claims of “created” jobs from any party.

Disclosure: I have occasionally advised the federal Liberals on economic policy matters. I am not involved in daily policy development and had no communications with them about this policy, except for today’s email mentioned above.

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Doing the math on political promises of job creation

  1. A credit for net new job creation is a bad a a credit just for new jobs.

    A company will just reduce current workers hours, perhaps even to part time, and hire a bunch of additional part time workers.

    Voila. Net new job creation.

    More perverse incentives than the Conservative plan.

    • That’s why Kevin is saying it needs to be on the total payroll, not the number jobs. No number of tricks regarding “job numbers” would work in that scenario, i.e. you are either paying more for employees in total, or you’re not.

  2. Some people seem concerned that I didn’t give the ONDP a fair shake in my original June piece. Here is an email I sent to an ONDP campaign staffer in May, four days before my ONDP EI piece was published in Econowatch.

    Maybe my email got lost in the frenzied atmosphere of the campaign, and that would be unfortunate. But I clearly did try to get the ONDP to clarify their numbers before I wrote the original post.

    From: Milligan, Kevin
    Sent: May-29-14 5:50 PM
    To: X
    Subject: info request

    Hi X,

    I don’t know if you’re still working on the Ontario election, but if not I wonder if you could forward this request to someone who could answer it.

    I’m planning to write a Maclean’s post on the ONDP’s proposed Job Creation Tax Credit. I will likely write this weekend, so if someone wants to provide me with information it should be before Monday.

    The information in the 6 page ‘platform’ document is scanty. I see no publicly available backgrounder. I don’t like that lack of transparency, but I suppose ONDP has its reasons.

    Here are my questions:

    1) How will ‘new jobs’ be identified for the Job Creation Tax Credit?

    2) Can you provide any detail on the 170K job estimate?

    Thanks. Kevin.

    Kevin Milligan
    UBC Vancouver School of Economics
    kevin.milligan@ubc.ca 604-822-6747

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