Thank you.
On behalf of the 3.3 million members of the Canadian Labour Congress, we want to thank you for the opportunity to present our views today.
The CLC brings together workers from virtually all sectors of the Canadian economy, in all occupations and in all parts of Canada. The most important economic problem faced by Canadians today is not government deficits, and the solutions are not to be found in returning to balanced budgets too quickly. The most pressing problems faced by Canadians are a sluggish economic recovery, a stalling job market, record-high levels of household debt, along with inadequate employment insurance coverage and a lack of retirement security. Canadians expect their federal government to tackle these problems.
Exports have been slow to rebound after the recession and predictions of stronger economic growth have repeatedly been moved back. Business investments are not where they have been at this point in previous economic cycles. The October, 2014, monetary policy report released by the Bank of Canada suggests that this is because of a semi-permanent loss of capacity in several manufacturing export sectors. We should not expect to see business investment and hiring pick up until it is clear that the Canadian economy is on more solid footing.
The overall labour force participation rate and the employment rate have still not recovered to their pre-recession levels. On the contrary, they have stagnated since mid-2012. The Bank of Canada's labour market indicator shows that labour market slack is larger than just the unemployment rate alone illustrates. Specifically, many economists are concerned about elevated levels of long-term unemployment and involuntary part-time work, as well as high levels of unemployment among vulnerable groups, such as new Canadians and racialized workers. Employment growth has been shallower than labour force growth for core-age workers, and the labour force participation rate is at its lowest level in 10 years.
So in that context, what can government do to spur economic growth and good jobs? The International Monetary Fund's recent World Economic Outlook suggests that the time is right for governments to make some much needed infrastructure investments. They go so far as to suggest that clearly identified infrastructure needs could be financed through borrowing, without increasing debt-to-GDP ratios, and, in fact, possibly reducing debt-to-GDP ratios faster than would otherwise allow us to do. Since public infrastructure investment increases growth in both the short term and the long term, all of the conditions that the IMF has identified as ideal for public investment are present in our economy right now. We are experiencing an extended period of labour market slack and low business investment. Canada has a very low level of public debt, borrowing costs for the federal government are and will remain very low for some time, and many needed public investments yield a high rate of return in terms of immediate job creation, public benefits, and the growth of private sector productivity.
National economic research has identified major public investments that would be largely self-financing, since the positive impacts on economic growth and on private sector productivity boost future government revenues. For example, the Toronto board of trade argues that major investment in mass transit would substantially reduce business costs due to traffic congestion, boosting productivity. The leading Quebec economist Pierre Fortin calculates that the annual costs of the Quebec child care subsidy is covered by the benefit of the increased labour force participation rate of parents.
The initial costs of a major public investment program could be covered by raising the federal corporate tax rate, which we estimate would raise between $4 billion and $5 billion dollars per year in additional revenues. The current no-strings-attached cuts to the corporate tax rate have had very limited impacts on new private-sector investment, although I would like to note that the CLC continues to support targeted support for new private-sector investments through investment tax credits for write-offs for new machinery and equipment investment.