The Truth About Canada (19 page)

Aside from all the benefits such as highways, bridges, parks, schools, colleges and universities, police, utilities, employment insurance, job training, garbage collection, programs for seniors, child benefits, and a long list of other public services, Statistics Canada tells us that in 2004 average taxpayers received $15.68 in government transfers for every $100 in employment income.
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Put another way, median family market income in 2004 was $55,800 and median income taxes were $8,600, but government transfers left net income of $51,200, or close to 92 percent of market income.
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For many of our most strident anti-taxers, civilization is a gated, privately patrolled community in Florida, California, Arizona, or Hawaii. But the vast majority of Canadians have something entirely different in mind when they consider the quality of life in a desirable society.

Lastly, on the subject of corporate taxes as opposed to personal taxes, the next time you read yet another one of big business’s never-ending pleas for even more reductions in their share of taxes, I hope you will consider the following important words from the OECD
Observer
of May 2007:

Business keeps finding ever more creative ways of getting around paying any taxes at all.… If more attention isn’t given to this issue, we could soon face a global tax crisis.

While corporate tax rates are falling, corporate profits are booming and wages are stagnating. After-tax profits in the U.S. are, as a proportion of GDP, at their highest in 75 years and in Japan and the Euro area they are close to 25-year highs. Meanwhile, wages in the U.S. are at their lowest level since 1966.

Relying on income and spending of wage earners to fund ever larger parts of public financing will either hollow out government budgets or lower worker incomes. For the sake of both equity and efficiency, business tax cannot be allowed to go on falling.

The upshot of inaction will be a loss of revenue for governments and a downward spiral of economic activity.

20

HOW COMPETITIVE IS CANADA?

“The lower our taxes get, the less competitive we have become.”

I
n 2001, the World Economic Forum (WEF) ranked Canada third in the world in competitiveness. By 2007, after a series of major corporate tax cuts, we were down in 13th place. But economist Jim Stanford put it in proper perspective:

In business lexicon, “competitiveness” is typically understood as synonymous with “low taxes.” Ironically the lower our taxes [in Canada] get, the less competitive we have become.

Nine of the 15 countries ahead of us on the WEF list collect higher taxes than Canada. Some of these countries rake in 50 percent or more of their GDP.

Back in 1999, when we ranked fifth on the WEF score-card, Canada’s taxes were slightly higher than the OECD average. Today they are substantially lower. Canada’s taxes have fallen faster since 1999 than any of the 15 countries ahead of us.
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The WEF has an explanation: “Countries that, like the Nordics, are investing heavily in education are likely to see rising levels of income per capita, growing success in reducing poverty and an increasing ability to establish a presence in the global economy.”

Stanford points out that education budgets in Canada are lower today as a share of GDP than in 1999, and more than 20 percent below 1993 levels. Now, how do we pay for education? Oh, yeah: taxes.

Stanford continues:

The utter lack of correlation between taxes and competitiveness did not stop Canadian business commentators from ascribing our weak performance to (what else?) high taxes and demanding still more cuts.

The failure of Canadian competitiveness is primarily due to the failures of our businesses.

Toronto Star
business and economics columnist David Crane quotes renowned Harvard University competitiveness expert Michael Porter to the effect that competitiveness “is a measure of how well a country uses the skills of its people, its investments in technology and infrastructure, its natural resources and its knowledge to efficiently produce goods and services others want to buy in open markets.”

The WEF report says the top-ranked country, Switzerland, “reflects a combination of a world-class capacity for innovation and the presence of a highly sophisticated business culture.” As Crane points out, by way of contrast, “One reason for foreign takeovers of Canadian companies is the lack of management skills by Canadian executives.”

The 2007 WEF report ranks Canada down in 20th place in business sophistication.

True. But there are many other very important reasons for so much foreign ownership and control, which I will discuss in the chapter on foreign investment in Canada.

Worth considering before we go on to the chapter on education is the fact that high-tax Finland has placed number one or number two on the WEF competitiveness list for five of the last six years, and Finland leads everyone in early-childhood development and ranks very high in numeracy and literacy skills in all its socio-economic groups.

That Canada is so far down the competitive list when our labour costs, construction costs, employee wages and benefits, land and industrial-space costs, utilities and infrastructures, rental costs, our abundance of resources,
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and so on, are so very competitive would be difficult to explain — unless you’ve read the preceding chapters on the failure of our big-business leaders to invest and innovate. In 2007, average business investment per worker in Canada was far below U.S., G7, and OECD levels.
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PART FIVE

21

EDUCATION IN CANADA

A GREAT SUCCESS, AND REMARKABLE FAILURES

I
f you were shocked by any of the comparative international figures you’ve read so far in this book, wait until the last paragraphs in this chapter, when you see how we compare in education funding.

The OECD says, “The share of the population that has attained qualifications at the tertiary level is a key indicator of how well countries are placed to profit from technological and scientific progress. Tertiary programs are designed to provide qualifications for entry to advanced research programs and professions and/or are intended to lead directly to employment.”

So, if we measure the number of people aged 25 to 64 years old who have attained a tertiary, in other words post-secondary, level of education, how does Canada do? The answer is very well indeed. In fact, Canada is in first place, ahead of all the other OECD countries, a big improvement over our fourth-place ranking in 2000. At 54 percent of the population in 2005, Canada was well ahead of the United States, at 39 percent, Japan at 37 percent, and Sweden at 34.5 percent, and well ahead of the OECD average of only 32 percent.
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We have steadily increased our percentage of students with post-secondary qualifications, from just under 30 percent in 1991 and 34 percent in 1998.

If one looks only at the 25 to 34 age group, Canada is still in top spot, but the United States slips to eighth. In this group Canada, at just over 53 percent, is far ahead of the OECD average of 31 percent. Only Japan
comes close to Canada in this age group. In a less definitive study, Statistics Canada said that in 2005, 72 percent of Canadians aged 25 to 34 had “some type” of post-secondary education, compared to only 54 percent in 1980.

While Canada has the highest rate of post-secondary education among all 30 OECD members, it’s important to note that much of our high ranking comes from enrolment in colleges. Looking only at graduation from universities, we’re in sixth place, tied with Australia and Korea at 22 percent, while the United States is first, at 30 percent. Canada is ahead of the OECD mean of only 15.5 percent, but also well behind Norway at 28.4 percent.

This said, on a per-capita (and troubling) basis, we produce only about half as many MAs and about one quarter as many PhD graduates as the United States. In 2006, only 5.8 percent had a degree above a bachelor level. The Institute for Competitiveness and Prosperity at the University of Toronto has estimated that the current gap costs Canada some $30-billion annually.
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In 2004/2005, enrolment in Canadian universities surpassed the one million mark for the first time. It was the seventh consecutive year that a new enrolment record was set. (University enrolment had previously been on the decline in the mid-1990s.)
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In 2004/2005, there were over 413,000 university students enrolled in Ontario, over 263,000 in Quebec, over 88,000 in Alberta, and 87,000 in B.C.

Let’s now see how effective our other school systems are. The OECD has a Program for International Student Assessment to measure student knowledge and skills in mathematics, science, reading, and cross-curricular competencies at age 15. The survey involved 3.5 hours of testing time in mathematics, and one hour each for reading, science, and problem-solving.

As in the past, Canada once again comes out very well. In reading skills, we’re fourth overall, well above the OECD average, and also above the United States. In science, we’re third, once again above both the OECD and U.S. averages. In mathematics, we’re seventh, while the U.S. is far down in 24th place. In another slightly different international
mathematical test, Canadian students ranked third, behind only Finland and Korea.

South Korea tops the reading scale, followed by Finland and Hong Kong. In science, Finland and Hong Kong lead the way. In math, Taipei, Finland, and Hong Kong are tops.
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Certainly, it’s interesting to note that in Canada school dropout rates have declined significantly, from about 17 percent during the 1990/1991 school year down to 9 percent by 2005/2006. And many dropouts (27 percent by one study) return later to complete high school. Of those who do return and graduate, about half go on to post-secondary studies. This said, Canada’s high school dropout rate is still higher than in many OECD countries and twice the rate for Norway.

Let’s look at the percentage of foreign students in our universities and colleges, and see how they compare with other countries. Seven OECD countries have a higher percentage of foreign students as a percentage of all post-secondary enrolment. New Zealand is by far the highest, at 28.3 percent, followed by Australia at 19.9 percent and Switzerland at 18.2 percent. Canada, at 7.4 percent, is slightly ahead of the 7.3 percent OECD average, and even further ahead of the 3.4 percent for the United States,
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but in 2005 we attracted only 2.8 percent of cross-border tertiary students.

In 2004/2005, a record 75,200 students from other countries were enrolled in Canadian universities, up 7.3 percent from the previous year. Half the foreign students were from Asia, and over 46 percent of these were from China.
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Some 17 percent came from Europe, and 18.5 percent from the Americas, including the United States. This said, where Canada was once in the top five as a destination for foreign students, we’re now 14th.

Before we go on to look at tuition costs and government funding; let’s consider a growing and serious problem at our universities. Queen’s University’s Kim Richard Nossal, president of the Canadian Political Science Association, points out that from 1976/1977 to 2003/2004, full-time enrolment in Canadian universities almost doubled with only a tiny increase in faculty. In political science, there were almost 9,000 more
students, but only 27 more professors! Another political science problem is that in several important Canadian universities, such as the University of British Columbia, the University of Toronto, and McGill University, American-trained academics are in the majority: 59 percent at U.B.C., 69 percent at U. of T., and 76 percent at McGill.
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In Ontario, which has the worst student-faculty ratio in the country (24 to 1 compared to the national average of 18 to 1), universities are threatening to turn away even more aspiring entrants or have even greater levels of classroom crowding. For fall 2003, the University of Ottawa received 51,000 admission requests (many of whom, of course, also applied elsewhere), but accepted only 6,000 new students. For fall 2007, University of Calgary required entrance grades were at an all-time high of 85 percent.

More and more qualified students have found it difficult to get into a university of their choice in Canada, while at the same time tuition fees have risen so dramatically that these fees have become a major problem. In 1990/1991, undergraduate students paid an average of $1,469. By 2007/2008, they were paying an average of $4,524 (in Quebec, undergraduate fees were less than half the national average at only $2,025). There has been some suggestion that future tax credits will help alleviate the problem of high tuition fees, but as Ian Boyko of the Canadian Federation of Students said, these are “back-handed measures. They may help people recoup some of the costs, but don’t improve access to post-secondary education.”
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In May 2007, a report by the Canada Millennium Scholarship Foundation said that forgone tax revenue would be much more effective if the money was given directly to students in grants or loans, and warned that the system of future tax credits mostly benefits high-income families whose children would likely be going to university anyway.

The bottom line is clear to see. The full-time post-secondary enrolment rate for those with parental income over $80,000 is almost double the rate for those with parental income under $40,000. In another comparison, in the 1990s, about 40 percent of young Canadians from families with an income of $100,000 or more had a university degree. That
compares with only about 19 percent from families with an income of $25,000 or less. By 2005, the percentage from well-to-do families had increased to 46 percent, while those from lower-income families inched ahead to 20 percent. In 2003, the most recent year for which statistics are available at this writing, only 31 percent of 19-year-olds from families in the bottom 25 percent of income distribution had attended university, whereas 50 percent of the same age group from the top half of income distribution had.
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