Measuring What Matters
The scandals that cling to Stephen Harper’s Conservative government like so much cheap tinsel, from Pierre Poutine to Nigel Wright’s cheque and everything in between, have put us at considerable risk of a federal election campaign next year that looks a lot like the last one: the opposition parties will argue that the Conservatives’ behaviour makes them unfit to govern, while the Conservatives will insist they are the only ones who can be trusted to protect the country’s economy.
To which you might say, so what? After all, it makes sense that parties would try to frame a campaign around the themes they decide best reflect their own strengths and their opponents’ weaknesses. If that means five weeks of the party leaders talking past each other, so be it.
But what is good for the parties is not necessarily good for the country. Clashing ideas make for good campaigns, but clashing themes do not, because they fail to accomplish a central purpose of the exercise: not just selecting a government, but sparking a meaningful debate over how best to address the pressing challenges of the moment, and gauging the success of the current government at meeting those challenges. And that debate, in turn, works best when we start with some basic agreement over what those challenges are.
Forcing the parties to engage each other in debate has become harder with the splintering news landscape and the rise of social media, which lets each side talk directly to its supporters. Absent a national crisis, or some crystallizing question like free trade in 1988, it is probably unrealistic to expect anything meatier from modern Canadian election campaigns than questionable assertions, partial arguments and cherry-picked facts. But that is no reason not to think about what a better campaign would look like, and to keep striving to achieve it.
For instance, imagine a campaign in which the opposition parties acknowledged that what constitutes good behaviour for a government is inherently subjective, and instead accepted the Conservatives’ argument that a government ought to be judged above all else on its handling of the economy. There is nothing inherently right-wing about that premise; after all, every voter wants a good job.
When I say the next campaign should not focus on behaviour, I am using that term to mean two things. First, there is the way the Conservatives have been practising politics—stifling the parliamentary budget officer, muzzling government scientists, neutering Elections Canada, appointing increasingly ideological justices, replacing budgets with economic action plans, burying information requests and demonizing refugee claimants. Second, there is the range of actions that usually make up incumbent parties’ pitches for re-election, from laws passed and programs launched to agreements signed and dollars spent. On the hustings, the parties can argue endlessly over whether the Canada Job Grant or the latest targeted tax break made the economy better or worse. It is more enlightening simply to look at whether things are, in fact, better or worse.
In order to do that, we must first decide how to measure “better or worse” and then ask how Canada has done by those measures since the Conservatives took office. Should we be happy with that performance? And if not, what exactly do the opposition parties propose doing better? After all, if you cannot decide how to measure something—an endeavour that is close to my heart as an editorial writer for Bloomberg View—then you are going to have a hard time improving it.
Talking about metrics also helps elevate debates above personal preferences or party affiliations. Choose the most important issue, the categories that comprise it, and the indicators that best measure those categories; keep insisting the parties address those indicators; and you have got the makings of a meaningful exchange.
So what makes a strong economy, and does Canada’s fit that description? I nominate six categories that ought to be addressed in any real debate over the economy: gross domestic product, the labour market, earnings, household debt, poverty and the environment.
That list does not capture every component of an economy, and one could argue whether it ought to include other indicators—Canada’s trade deficit, for example, or the federal budget deficit as a share of GDP. But the point is to start with a manageable number of categories whose importance most people can agree on.
Start with gross domestic product, the most commonly cited gauge of an economy’s performance. The Organisation for Economic Co-operation and Development forecasts that Canada’s economy will grow by 2.3 percent in real terms this year. That is the same rate that is projected for OECD countries overall; next year, Canada’s growth is forecast to slip below the OECD average. So while the Conservatives may boast about a growing economy, in relative terms Canada’s once-impressive performance has been replaced with a struggle to hold even with the country’s peers.
A campaign about the economy ought to include the ingredients for long-term GDP growth, and there are plenty of candidates—for example, share of Canadians with a post-secondary degree, or patent applications filed by Canadian companies. But it is hard to beat research and development spending along with its corollary, the number of people working in science and technology.
Does that metric count in the Conservatives’ favour? Not even a bit. In 2006, Canada spent almost $30 billion on research and development; until that point, the annual figure had risen each year for three decades, even after accounting for inflation. In 2007, that increase slowed; in 2008, it reversed. And by 2012, the most recent year for which Statistics Canada has released data—and three years after the recession ended—R&D spending in real terms was barely above the level of a decade previous.
The sharpest drop, from 2009 to 2012, corresponds to annual reductions in federal R&D employment. The Conservatives inherited a federal government in which the number of people working in research and development had been growing since 2003. That trend continued until 2009, when the level peaked; since then, it has fallen every year. Ottawa now employs about the same number of R&D personnel in natural sciences and engineering, for example, as it did in Stephen Harper’s first year as prime minister. The next campaign should ask whether laying off scientists is good for the economy.
But a debate over the economy cannot stop with GDP, either current or future; it is one indicator among many, and probably the least tangible in people’s daily experiences. A more relevant gauge is the strength of the labour market. Here, too, some measures are better than others.
Perhaps the least illuminating way to talk about jobs is in raw numbers—for example, finance minister Jim Flaherty’s boast last October of “more than 1 million jobs created since the depth of the global recession.” In fact, that one phrase neatly encapsulates the dangers of letting the parties choose which indicators to use in a debate about the economy. It uses a period that will produce the biggest number of jobs, does not say what that period was, ignores how many were lost in the prior period, and fails to distinguish between full-time, part-time and contract employment. Then there is the attempt to dazzle with big numbers: Is a million a lot? How many jobs does the country usually generate over a similar period?
An only slightly better measure is the unemployment rate. Of the seven years after the Conservatives took office, Canada’s unemployment rate was higher than the OECD average for four years and lower for three. The latest year for which the OECD has released cross-country figures, 2012, shows Canada beating the OECD average by 0.9 percentage points. But even that is not terribly enlightening: the unemployment rate fails to measure people who have stopped looking for work.
Is there a better way to assess the health of the job market under the current government? Start with the employment-to-population ratio—the percentage of working-age Canadians who have a job. Instead of cherry-picking a time period, let’s start at the beginning of the Conservatives’ time in office. And let’s compare the change over time in Canada’s ratio with all OECD countries over the same period.
At first glance, the share of Canadians who were working in 2012 looks pretty good after the recession: 72.2 percent, almost back to the level in 2006—72.8 percent—when the Conservatives took office. But that rate of recovery turns out to match the OECD as a whole, for which the employment-to-population ratio in 2012 was also just shy of where it was in 2006. With Stephen Harper often taking credit for a post-recession rebound in employment, he needs to explain why Canada’s rebound was no greater than average, and why that counts as a success.
Now look at one of the most vulnerable populations in a shaky labour market: young workers. The year the Conservatives took office, 11.7 percent of those aged 15 to 24 were unemployed. That rate peaked at 15.2 percent in 2009, and has hovered above 14 percent since then. That leaves young Canadians in a better position than their peers elsewhere in the developed world, where average youth unemployment was 16.3 percent in 2012. But an election campaign is precisely the time to compare different plans for bringing Canada’s youth unemployment levels even lower.
In gauging the health of the job market, the ability to find a job is only half the story. The other half is how much money people are making. When the Conservatives took office in 2006, the median family income was $47,600. In 2011, the latest year for which Statistics Canada has released figures, it was $47,700. (Both figures are in 2011 dollars.) In other words, at the end of Harper’s first six years as prime minister, a household in the middle of the income distribution was pulling in $100 more than it did when he took office. In fact, 2011 median income was $1,600 lower, after controlling for inflation, than it was in 2008.
Things have looked a little better for those at the top of the income distribution. In 2006, adjusted market income for the highest-earning 20 percent of Canadian families was $104,000; by 2011, that had increased 5 percent, to $109,200. The change was less sunny for the bottom quintile of families, who saw their adjusted market income fall 6 percent over the same period, to $8,300 from $8,800.
Another important indicator on income is the share of Canadians earning the minimum wage. In a healthy economy, that share would be steady, or even falling. Instead, the portion of workers getting the adult minimum wage last year was 6.7 percent, a 50 percent jump over the level when the Conservatives took office.
One could argue that an increase in minimum-wage workers was to be expected during the recession. And indeed, the share started rising in 2009. What is worrisome for the economy is that four years later, the portion of minimum wage workers does not seem to be falling back to pre-recession levels.
As incomes stagnated, the cost of living rose, pushing households deeper into debt. In 2006, Canadian households had debt equal to 135 percent of their nominal disposable income, a figure roughly equal to U.S. households and about one fifth lower than in the United Kingdom.
By 2012, household debt had jumped to 165 percent of disposable income in Canada, while it fell to 111 percent in the United States and 152 percent in the United Kingdom. In fact, of the seven countries for which the OECD reports these data, Canada’s household debt levels were the highest for that year, the latest for which figures are available.
Unsurprisingly, much of that increase came from larger mortgages, as housing costs have rocketed up and Canadians borrow more to pay those costs. Mortgage debt as a share of nominal disposable income rose from 82 percent in 2006 to 105 percent in 2012. In effect, Canada switched places with the United States, where those figures moved in the opposite direction. Flaherty responded to those pressures in 2012, shrinking the maximum mortgage period for government-insured loans and reducing what people can borrow against their homes; the next election campaign is a good time to argue over whether those steps were enough, and whether they came too late.
Just as gauging the labour market means looking at the most vulnerable, looking at income means measuring poverty. Given the political weight of the topic, it is probably not surprising that there is plenty of room for manipulating the numbers.
Statistics Canada uses three distinct indicators for measuring poverty. The low-income cut-off measures the number of families that spend more than a certain amount of their income on food, shelter and clothing. The market-basket measure is more complicated and more subjective: it is meant to reflect the cost of a broader set of basic goods, adjusted by region.
Those two indicators can present a complicated picture, not least because they contradict each other. The cut-off approach shows poverty levels falling slightly between 2006 and 2011 (the latest year for which data is available), from 10.3 percent after taxes to 8.8 percent. The basket measure shows a slight increase in poverty over the same period, from 11.7 percent to 12 percent.
Moreover, the adjustments built into both measures allow the government to make statements such as that of industry minister James Moore, who brushed off a question in December about poverty rates in British Columbia by saying the definition of poverty “is not quite an apples-to-apples comparison all across the country.”
That is a valid concern. So Moore must not have realized that Statistics Canada offers a third poverty indicator, one that allows comparisons across regions, over time and between countries. That indicator, called the low-income measure, is simple: it tracks the portion of households making 50 percent or less of the median household income.
That measure shows that relative poverty has ticked up slightly under the Conservatives, from 12.4 percent when they took office to 12.6 percent in 2011, after taxes. That overall rate masks even greater changes among more vulnerable populations. In 2006, the share of men 65 or older living in relative poverty was 6.8 percent, about the same as it had been since 2002. That rate increased with the recession—and then, once the recession ended, it kept increasing, reaching 9.1 percent in 2011.
The number of women 65 and older in relative poverty also rose, from 11.8 percent in 2006 to 14.4 percent in 2011. That is one in seven elderly Canadian women, higher than at any point in almost two decades leading up to the recession. (The market-basket measure shows much greater rates of increase in seniors’ poverty rates during that period, with those increases measuring 61 percent for men and 72 percent for women.)
Poverty’s direst corollary is hunger, without which no examination of the economy is complete. Statistics Canada breaks hunger into two categories of what it calls “food insecurity”: moderate (“indication of compromise in quality and/or quantity of food consumed”) and severe (“indication of reduced food intake and disrupted eating patterns”).
The data here are limited; Statistics Canada only presents figures for two periods, 2007–08 and 2011–12. But the change between those periods shows the share of Canadians not getting enough to eat increased, from 7.7 percent to 8.3 percent. If that seems like a small change, consider that an increase of that magnitude in the unemployment rate, for all its shortcomings, would be headline news. At the same time, for all the Conservatives’ talk of a strong economy, the share of children facing moderate or severe food insecurity barely budged, inching from 5.1 percent in 2007/08 to 4.9 percent in 2011/12, with 1 in 40 Canadian households with children reporting severe food insecurity. A campaign focused on the economy could, and should, include offering ideas for reducing that level further.
The final category that any debate on the economy must include is the carbon emissions associated with economic activity. That means judging the Conservatives not only on the tonnes of carbon Canada releases into the atmosphere each year, which Environment Canada says will be 20 percent higher than the country’s international commitments for 2020. It also calls for using what is arguably a more important indicator: carbon intensity, or the tonnes of carbon emitted per dollar of economic output.
Trends in carbon intensity are important because they measure the country’s progress toward the ultimate goal of climate activists: not just cutting emissions, but cutting emissions without sacrificing our material standard of living. A government making progress toward lower carbon intensity can credibly claim a good environmental record.
That is not a claim the Conservatives can easily make. In 2006, Canada emitted five tonnes of carbon for every US$10,000 of economic output, according to data from the U.S. Energy Information Administration that controls for price differences between countries and over time. That was 9 percent higher than in the United States, and 31 percent higher than the OECD average.
By 2011, the latest year for which the EIA has published cross-country data, Canada’s carbon intensity had fallen to 4.4 tonnes per US$10,000, a reduction of about 12 percent. But both the U.S. and the OECD average dropped by almost 10 percent over the same period, meaning economic activity in Canada is still unusually carbon-heavy by comparison. In fact, only four developed countries—Estonia, Korea, Australia and Poland—had carbon intensities higher than Canada’s in 2011, a number that is unchanged since 2006. This is not an area of the economy where Canada is winning.
Looming over those figures is the effect of increased development of the oil sands. By the government’s own estimates, that increase will push Canada’s carbon emissions back up in absolute terms, putting the country out of reach of the commitment Harper made in 2009 to cut emissions 17 percent below 2005 levels by 2020. But just as worrisome, it could slow or even reverse the decline in Canada’s carbon intensity levels, moving us further away from other developed countries. It is fine to brag about becoming an energy superpower, but seeking that mantle ought to include tackling the environmental consequences with a similar amount of bravado.
How much of this is the government’s fault? Isn’t it possible that if the Liberals or NDP had taken office in 2006, GDP growth would still be dipping below the OECD average, R&D spending would still be falling, earnings would still be stagnant, the share of Canadians working for minimum wage would still be 50 percent higher, families’ debt loads in 2012 would still be 48 percent greater than in the United States, poverty rates for the elderly would still be greater than in 2006, a larger share of households would still be hungry and Canada’s carbon intensity would still be 27 percent greater than the OECD average?
The answer, of course, is yes. Many of these changes are the product of a mix of forces, from global economic pressure to demographic and technological shifts, and some may have been too strong for the federal government to overcome, whichever party held the reins. But government actions matter, especially when one party makes a strong economy the core of its argument for public support. And an election campaign that fails to generate a debate on a handful of key economic problems, with each party explaining how it would address those problems and why, is one that gives the winners a free hand to act as they please, pursuing a mandate so vague—who does not want a stronger economy, for the middle class or anyone else?—as to be meaningless.
A better question than the importance of policy is the ability of most voters to make sense of it. How much economic detail is the average voter really interested in? Isn’t it better for everyone if the parties focus instead on the values that motivate them and the strength of their character, and then ask voters to let them pursue the policies that best match those values?
That view might have made a lot of sense 100 years ago, when anything more than a high-school education was the preserve of the lucky few. It might even have made some sense 20 years ago, when information on the economy (or anything else) was harder to get. But almost two thirds of Canadians aged 25 to 54 now have a post-secondary education of some kind, and 83 percent of households have access to the internet at home. Meanwhile, social media has made the policy views of academics more readily available and accessible to the public, as Andrew Potter argued in these pages last year.
So Canadians have more access to information than ever before, more capacity to make sense of it and more people willing to help them understand the fine points. The picture of voters as unlettered rabble, trudging in from the fields every few years to mark an X for the candidate who appears the most trustworthy and then hoping for the best, is as insulting as it is outdated. Assuming that voters cannot understand the employment-to-population ratio or median earnings figures, or do not care what those things say, relegates campaigns to a battle of symbols, in which the objectives are trust and likeability, the weapons are attack ads, and the losers go looking not for better ideas but better smiles.
Of course, a meaningful campaign about the economy, making clear the policy options for improving it and highlighting the tradeoffs of those options, probably is not the campaign we are going to get next year. But it is a campaign that voters and the media can push for. It is a campaign that would serve the country better than another pointless argument about what constitutes appropriate parliamentary behaviour. And it might even be fun to watch.