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February 22, 2022

Macro view: Fiscal policy designed to redistribute income upwards

Some economists believe that fiscal policy has been designed to redistribute a massive amount of income upwards from manual labourers to the wealthy professional class.

Dean Baker

Dean Baker, senior economist at the Centre for Economic and Policy Research (CEPR), tweeted on Ross Douthat, a New York Times columnist’s interesting views on Canadian truckers protest against Covid-19 vaccine mandates. Baker believes that Douthat is right about Canadian anti-vax protestors having reason to be angry, but over fiscal policies, not over the mandates.

Douthat argues in his column that support for the protest has arisen due to a resentment by people who do various types of manual labour as against the professional class. Baker, however, believes that not many news outlets are able to reveal that this deterioration in the people who do manual labour is a result of deliberate fiscal policy. Giving an account of this striking absence, he stated that a piece titled The Age of Anti-Ambition that was substantiated by data on the record quit rates in the US by the Labour Department and a drop in labour force participation since the start of the pandemic was not new, as labour force participation rates (LFPRs) always fell during recessions.

Baker further argues that there is more than meets the eye about the decline in LFPR in the US, which is being widely regarded as The Great Resignation. For instance, the drop in LFPR from the pre-pandemic peak to January 2022 is 1.4 percentage points for the prime age workforce between 25 and 54 years. Therefore, while the more than half of the drop in the LFPR is supported by the 1.8 million people who reported jobless or looking for a job in January due to Covid-19, the actual surprise of the pandemic recession was how little the LFPR dropped, he added.

Baker stated that the market never includes a piece that states that the economy was deliberately structured to benefit the more highly educated workers at the expense of workers without college degrees, unlike the hints in Ross Douthat’s column. For example, there have been several pieces on the pandemic billionaires, including the five on biotechnology company Moderna in last July.

Armine Yalnizyan

Armine Yalnizyan, economist and an Atkinson fellow on the Future of Workers, retweeted an article shared by Matt Lundy, an economics reporter with The Globe and Mail, on the Great Resignation still not much of a trend in Canada coming out of the pandemic recession. According to Statscan, only 7.3% of the Canadian population aged between 15 and 69 years were planning to leave their jobs within the next year, compared to 16.1% in 2016.

Although a great time to switch jobs with newer employees receiving higher wages, longer-tenured Canadians are preferring to keep their jobs. According to Statistics Canada’s latest Labour Force Survey, the job-switching rate, that is the number of people who remained employed from one month to the next but who changed jobs, was 0.8% in January. This was higher than early in the Covid-19 pandemic but also typical of the rates before the public health crisis.

Economists believe that workers have learnt to adapt and remain effective during the two years of Covid. Therefore, it is likely that taking a new job could disrupt that balance, adding to the pandemic stresses.

Nick Bunker

Nick Bunker, an economist at Indeed, tweeted on unemployed workers continuing to find work as the job-finding rate increased in the US. However, he added that the current elevated rate is partly because of those workers temporarily laid-off now returning to work.

Additionally, a job finding rate just a bit under the pre-pandemic average reveals the more enduring forms of unemployment.

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