Worthwhile Canadian Initiative

Tracking the Bank of Canada's staff projections through the 2008-9 recession

The Bank of Canada has released an archive of the staff projections prepared for the Governing Council for the quarterly Monetary Policy Reports. There's a five year lag, so the most recent set of projections are the ones prepared in 2013Q4. While these projections don't answer the question "What was the Governing Council thinking?", it does answer the question "What projections were the Governing Council looking at?"

Are education attainment levels the root cause of all good earnings news?

An earlier post noted that the real earnings gains over the past 20 years were as clean an example of a composition effect as you're likely to see. Earnings among full-time workers with a given level of education have shown some modest growth over time, but average earnings growth for all full-time workers has been stronger than it has been for each of its components:

Why do we care about the labour share of income?

And by 'we', I mean 'Canadians'.

A lot has been said and written about the decline in the labour share of income, usually calculated as total employee compensation divided by nominal GDP. This decline is generally regarded as a negative development: the reduction in the share of income going to workers is interpreted as a symptom of suppressed wage growth and of increased income inequality.

I don't doubt that this is a useful narrative for understanding what has been happening in many countries, the US in particular. But I can't see how it fits the Canadian experience. Movements in the Canadian ratio of wages to national income  appear to be a story of the denominator, not the numerator.

A well-deserved tribute to Nick Rowe

As you may know, Nick has retired from teaching. His career as a teacher and blogger has earned him this very nice tribute in the pages of The Economist:

Learning macro is a source of anxiety for many students. Teaching it can give their professors the jitters, too. The subject is notoriously difficult to explain well. During his 37 years at Carleton Mr Rowe remained, by his own admission, “fairly low down the totem pole” as a researcher. But he became a thunderbird at conveying macroeconomic intuition. In the past decade this served him well in his second intellectual career, contributing to Worthwhile Canadian Initiative, an economics blog. Many a controversy has benefited from one of his ingenious analogies or numerical parables, usually involving some kind of fruit.

 

 

Project Link update

I've just updated Project Link, my attempt to piece together the bits and pieces of published Statistics Canada data into a coherent history of the post-war Canadian economy. (The introductory post is here, and a post on the first update is here.)

Here are the main elements:

1. Incorporating Statistics Canada's long-awaited publication of its expenditure accounts from 1961-1980. As you may recall, when they revised the GDP numbers back in 2012, the new series started in 1981 instead of 1961. (This is what I had in mind when I fumed that "Statistics Canada must be the statistical only agency where the average length of its time series gets shorter from one year to the next.")
2. Pushing back the starting date for the LFS and SEPH employment numbers to 1946, along with unemployment rates and average weekly wages. The CPI and CPI inflation have also been pushed pack to 1946.
3. Including the income measures of the economic accounts : GNI (what we used to call GNP), NNI and disposable income. I've also gone out on a limb and tried to construct measures of Gross Domestic Income consistent with StatsCan's methodology, and that's covered in a separate post.

More details below the fold.

Gross Domestic Income in Canada, 1947-2018

The latest update of Project Link includes estimates for national accounts income measures: Gross National Income (formerly known as Gross National Product), Net National Income, compensation of employees, and disposable income, all going back to 1947Q1.

I've also added Gross Domestic Income. GDI is a fairly recent arrival in the national accounts, and it takes into account the income effects of changes in the terms of trade. Looking at GDI has been particularly useful in understanding the Canadian economy over the past fifteen years, since it picked up the incomes gains and losses incurred as the prices of Canadian resource exports rose and fell. Since GDP measures activity - and not necessarily the income it generates, GDP was not as useful as it usually is. (See my beer and pizza explainer.)

How much more can governments spend by switching to a debt ratio target?

In my recent National Post column, I make reference to some back-of-envelope calculations to the effect that replacing the fiscal anchor of balanced budgets to one of a fixed debt-GDP ratio allows the federal government to increase spending by 1.2 percentage points of GDP, or by about $25 billion.

I'm going to work through the math here, and I'm going to take it very slowly - partly for the benefit of people who are seeing these sorts of manipulations for the first time, but mostly so I don't screw it up. 

Regional disparities in Canadian economic growth: Theory and evidence

In its recent release of income data from the 2015 census, Statistics Canada helpfully provided data tables for median incomes in 2005 and 2015 for various regions in Canada. The headline number was the 12.7% increase in median Canadian incomes, and there's been some commentary about how the gains during the last decade were not uniformly shared. But there but there was something missing in those discussions of regional gains, namely, the initial level. When you start thinking about both starting points and the changes, it's not clear why you would expect - or want - the gains to be evenly distributed.

Project Link update: Labour Force Survey, 1953-2017

I've updated and expanded the data archived on Project Link, my attempt to take the fragments of data published by Statistics Canada and piece them together into a coherent whole.  

In my post introducing Project Link, I made note of a chart I came across while putting together the headline data from the Labour Force Survey going back to 1953. I had always more-or-less assumed - admittedly without looking at the data or even thinking very much about it - that the surge in female labour force participation rates started sometime in the 1960s or 1970s. But it turns out that the trend goes back to at least to 1953, when the LFS started being conducted on a monthly basis.

A composition effect in earnings growth and education attainment levels in Canada

I came across this post by Mickey Kaus a while ago, on trends in US earnings broken down by education attainment levels. From about the mid-70s to the mid-90s, earnings growth diverged sharply: increasing strongly for those with high levels of education, and falling for people with lower levels of education. Earnings growth has been more balanced since then, but the gaps carved out by this divergence have not been filled in.

This isn't an exercise we can repeat for Canada; this kind of earnings data only start in 1997. But I was curious to see what it would look like, and I found as neat an example of composition effects as you'll ever see.

Job tenures and the gig economy

A few weeks ago, Alex Usher drew my attention to this post by the Pew Research Center, on job tenure patterns of 18-35 year-olds in the United States. The takeaway point was that, contrary to an oft-repeated narrative about the "new gig economy", job tenure patterns among millennials resemble those of the generation previous.

Of course, Canada is not the United States: what do job tenure data look like for younger cohorts up here? It turns out that this may be one of those rare cases where Canadian data are richer than American data: the Labour Force Survey has been asking about job tenure since 1976, and we can focus on more tightly-defined age groups.

I've calculated three job-tenure measures:

• Median job tenure
• Proportion with job tenure of one year or less
• Proportion with job tenure of five years or more

These are broken down by age group (25-29 and 30-35), by sex, and by educational attainment (high-school graduates and university graduates). I've also limited attention to full-time workers, and excluded the self-employed. I've put everything in an excel file you can download here. The excel file also includes average job tenures, but I won't be talking about them here.

L'affaire Potter

You are all, I think, familiar with the details of L'Affaire Potter, so I need not enumerate them here. If you aren't already familiar with this story, you probably don't care what I have to say about it, so you can skip the rest of this post. But as a Quebec-based academic with a weekly column in a national newspaper, I feel obliged to say something.

Internal migration flows in Canada

Discussions about demographics are typically focused on trends in fertility/morbidity and immigration/emigration, and these are what matter at the national level. But at the local level, trends on internal migration are also important. Statistics Canada has been publishing data on inter-provincial migration for years, but there's only so much you can get out of them. Migration trends within large provinces such as Ontario and Quebec may be more important for local service providers than inter-provincial trends.

Happily, Statistics Canada started publishing data on migration flows between Census Metropolitan Areas (CMAs) and between non-CMA regions in its Cansim Table 051-0065. It's still not as good as the county-to-county migration flows data published by the US Census Bureau, but it's a start. Moreover, the series begin in 2011, so there's a limit to the information you can extract from them.

That said, my first pass at what we can learn from these internal migration data is below the fold.

Project Link: Piecing together recent Canadian economic history

I've already ranted a couple of times - here and here - about Statistics Canada's 'Attention Deficit Disorder': its habit of starting new time series using new methodologies without updating the historical data. As I put it in my first rant,

Statistics Canada must be the only statistical agency in the world where the average length of a data series gets shorter with the passage of time. Its habit of killing off time series, replacing them with new, 'improved' definitions and not revising the old numbers is a continual source of frustration to Canadian macroeconomists.

But of course ranting about the problem isn't the same thing as solving it. I kept thinking of this old Peanuts cartoon:

So I decided to light a candle.

The economics of SSHRC research grants IV: A collective action problem

As irritating as it was, SSHRC's infatuation with Research in Buzzword Studies is not why Insight Grant (IG) success rates have stayed so low, even as the budget envelope has increased. The problem is the hard-won budgetary rigour that was established during the last years of the old Standard Research Grant (SRG) program disappeared when the IG was introduced.

The economics of SSHRC research grants III: Research in Buzzword Studies

When SSHRC replaced the old Standard Research Grant (SRG) program with the Insight Grant (IG) program, it did more than simply increase the budget for research grants. It also introduced "priority research areas" (see Frances on this here) that would receive special attention. It turned out that the amounts allocated to these new research areas would account for all of that grant increase, and more.

The economics of SSHRC research grants II: Cutting and restoring budgets

In the first post of this series, I noted that much of the reduction in SSHRC research grant success rates during the transition from the old 3-year Standard Research Grants (SRG) to the new 5-year Insight Grants (IG) could be explained by the stock-flow dynamics of changing grant durations. But that's not the whole story: success rates also depend on the total funding envelope.

Here is the history of success rates (projects funded as a percentage of applications) and funding rates (total research funds awarded as a percentage of total requested) for the entire SRG program:

The economics of SSHRC research grants I: Why are success rates so low?

I've participated a few times in the adjudication process for the Social Sciences and Humanities Research Council (SSHRC) research grant programs: twice as a reviewer, and three times as chair. (Chairs have to be bilingual, so Quebec profs are often called up to serve as chair.) Regular WCI readers - and of course researchers in humanities  and social sciences - will recall that SSHRC reorganised the way it runs research grants: see Frances' post here and Livio's here.

I've long been interested in the mechanics of how SSHRC allocates research funds, and I was curious to see how things had changed during the transition from the old Standard Research Grant (SRG) program to the new Insight Grant (IG) program. So when I was invited to serve again as chair for the economics committee chair for the 2014-15 exercise, I was happy to accept. That was more than a year ago, but I finally got around to writing something down about it.

Bargaining power and the incidence of taxes on high earners in Canada

Today I'm presenting a paper at the meetings of the Canadian Economics Association: "Bargaining power and the incidence of taxes on high earners in Canada." The bottom line is that once you take into account the fact that high earners have bargaining power - that's why they are high earners in the first place! - then it's by no means clear that increasing the top marginal personal income tax rate will result in a progressive redistribution of after-tax income.

This is a theme I've been pursuing for years. From a post I wrote in November of 2009:

How much revenue will the Liberals generate with a new tax bracket on high earners?

[I started writing this post in May, but I stopped when it looked like the Liberals were not going to be in a position to implement this measure. Happily, I didn't actually delete it.]

[An earlier version made a stupid mistake; I did everything under tha assumption that the increase was 3 percentage points, and not 4. Gah.] 

The Liberal Party of Canada is proposing to increase the federal tax rate on taxable income above $200,000 from the current rate of 29% to 33%. According to the LPC, this measure will generate $3b in revenues: