Earlier today, the Ontario government announced that it is “partnering with Cisco Canada to launch the largest job-creating investment in the history of the province’s tech sector.” We should naturally be skeptical of any deal that sees taxpayer dollars go to a firm that made over $2 billion in profit just last quarter. However, reading through the details of this plan, skepticism turns to outrage. This is a plan that is explicitly designed to increase income inequality and transfer money from poorer regions of the province to one of Canada’s wealthiest cities and will likely not create a single new job.
The deal promises that “up to 1,700 jobs” will be added in the next six years, with the province providing “up to $190 million” in return, for a cost of $112,000 per job. Cisco estimates that 80% of the new jobs will be in Ottawa, a city with one of the lowest unemployment rates in the province at 5.7%. And if a 5.7% unemployment rate seems relatively low, it towers over the sub-3% rate in the Information and Communications Technology (ICT) industry. Because of the low unemployment levels of both the city and the sector, the number of net new jobs created here is likely to be zero. Cisco will be simply luring away workers that would have worked for other ICT companies (or who would have been hired anyway by Cisco even without the handout). This will help raise the wages of workers in that sector, but does nothing for jobs. Those jobs are already very well compensated, so this is acting as a wage subsidy to high-income workers, paid for by the general population.
We should understand what this deal is not. This is not a plan to “create jobs” for low and medium-skilled workers in Leamington and London, who have few options now that their plants are closed. A plan focused on laid-off manufacturing workers would have a worthwhile goal, though it may not necessarily be sound public policy (the devil is in the details). But that is the exact opposite of what this plan does; I cannot begin to even understand what the province is attempting to accomplish here. The net effect of the Ontario government’s new policy is to subsidize jobs in an already strong labour market, increase the wages of already high-income workers and give hundreds of millions of dollars in corporate welfare to one of the largest and most profitable companies in the world. This easily ranks as the worst Canadian public policy of 2013.