Labour Rebates

hand_shake_smile.jpgBy now we’re very familiar with a ‘grip and grin’ photo accompanying a government press release trumpeting the number of great new jobs created. The latest examples of this are the recent announcements at Invesco and DoseCan for workforce expansion.  But why are we celebrating jobs that are only marginally above the poverty line? According to a CBC article most of these new jobs will start at around $30 K a year: that works out to about $15 an hour at full time. These are not ‘good paying new jobs’ - they are entry level roles, created with labour rebates funded by millions of taxpayer dollars. And what will happen to those jobs when the labour rebate runs out? Those jobs may well turn out to have an expiry date.

The Innovation and Development Labour Rebate (IDLR) is a refundable labour rebate, which may apply to projects in support of the development and/or commercialization of new products, processes, and services within a strategic industrial sector that will be sold primarily beyond the borders of PEI.

Government officials work hard to attract businesses, jobs, and investment to the province, often by offering financial incentives like labour rebates to preferred businesses that they want to encourage to expand or even relocate. However, financial incentives used to entice businesses come directly at the taxpayers’ expense. This targeting is an attempt to steer the economy by lowering the cost of doing business in a strategic sector, and while this can be very effective in growing new industry and supporting targeted markets, it can also come with significant economic cost, market distortions, and worker inequality.

Small local businesses do not generally fit into the current strategic industrial sectors, and so do not qualify - this gives an unfair advantage to the larger qualified companies. Financial incentives also create artificial competitive advantages among firms. Because incentives reduce the cost of doing business, those who receive incentives have a better chance of survival than those that do not receive aid.

Inequality persists on a number of levels. Most countries are seeing a persistent and growing gap between their highest and lowest earners. Government can make a difference and address the inequality gap by offering incentives to businesses and industries that are sustainable and committed to the well being of their employees, starting with paying a living wage.

Low wages are bad for the individual, working full time hours and struggling at the poverty line. Low wages are also bad for the economy. There are good economic reasons to raise the incomes of low-wage workers. Raising wages increases overall consumer spending power and the amount of money circulating in the economy, as those with lower incomes spend more of what they earn than do those with higher incomes, and they spend it in their communities.

Rather than focusing on developing the next special tax break or subsidy, government officials should instead focus on creating a better business environment to attract and retain businesses, mandating consistent and sustainable minimum wage increases, and provide workers with the best opportunities to secure a truly good-paying job.