In my Employment Law class this week, we had (another) discussion about the tensions between employment regulation and ‘free’ market ideologies. People like Richard Posner and Richard Epstein of the “Chicago School” of law and economics (I’ve noted these writers before), and organizations like The Fraser Institute in Vancouver advocate that government intervention in the labour market is wrong-headed and inefficient, since it artificially raises labour costs causing results that actually are harmful to the economy. They argue that, ‘in the long run’, a free labour market will more effectively address concerns about poverty, income inequality, and employment discrimination than will employment standards, collective bargaining, and anti-discrimination laws. John Meynard Keynes, who argued that governments needed to actively intervene in markets, responded famously that, “in the long run, we are all dead”.
The themes in this discussion are raised in an interesting article by Ed Broadbent in the Globe and Mail yesterday. Broadbent was noting that 20 years ago, the Canadian government passed a resolution to end child poverty in Canada by the year 2000. In fact, he notes, although the Canadian economy grew and was highly productive during the 1990s, child poverty remained virtually unchanged.
Why is it that Finland, Sweden and Denmark have almost wiped out child poverty, and we have not? Why do more than 600,000 Canadian kids wake up hungry and go to school trying to read, write and think on an empty stomach?
Broadbent blames government policy. He notes that most poor children in Canada have working parents. But they earn too little to provide adequately for their children. Governments could address this problem if they care to, according to Broadbent. Part of the problem, he argues, is that Canadian governments have not kept minimum wages at an acceptable level. And the governments have changed tax policies to benefit the richest Canadians rather than to tackle the embarrassment of child poverty in one of the world’s wealthiest nations. He notes that the vast majority of wealth gain in Canada over the past 20 years has gone to the richest 10 percent of Canadians, and has not trickled down to the average Canadian because our tax and employment law policies have failed to ensure this result. Instead, the middle class is disappearing and income inequality is growing quickly. This is a point we have discussed numerous times on this blog.
What is Broadbent’s solution? Increase the tax rate on people earning greater than $250,000 per year. That would effect a very small percentage of Canadians, who would still be very wealthy by national standards, but would give the government an additional $3.7 billion that could then be used to target child poverty. What do you think of that argument? No doubt, the ‘free-marketeers’ will argue against that strategy because they are almost always against tax increases of any sort. “Lower taxes” is their mantra. But what solution do ‘free-marketeers’ offer for child poverty and the growing and very worrying gap between the rich and everyone else in North America? Their usual answer–“leave it to the markets”–seems woefully inadequate. Or do you disagree?