Last month, the Yukon government quietly launched its biggest economic development program in decades.
If it avoids the fate of the Liquor Act Review, Education Act Review, the Workers Compensation Review and the Review Committee Studying Government Reviews, it could have a bigger impact on our economic future than anything since the Alaska Highway.
In a clever twist from our friends at the Yukon government, this new economic development project is being run by the public schools branch and its energetic new assistant deputy minister.
The project’s bureaucratic code name is Secondary School Programming Study.
When people talk about economic development, they usually think about the Economic Development department. It has trademarked the term, after all.
Our Economic Development department gives money for a wide range of things.
Recent examples range from $29,404 for the filming of supernatural thriller Whisper in Whitehorse to $12,850 for the Faro Skateboard Park.
A more serious example is the $200,000 given in April to the Minto copper mine to do more exploration.
In June the mine’s owner had $14,590,000 in cash on hand, so it’s hard to tell how important the extra $200,000 was.
Perhaps because of that clever strategic investment, the mine will expand and generate enough tax revenue to pay many doctor salaries.
Or maybe it won’t.
Or maybe Minto’s investors would have paid for it anyway. It’s hard to tell.
Economic Development departments around the world face the same challenge.
Their ministers talk a great deal about “creating jobs,” but it’s actually very hard to tell if jobs are really being created or just moved from some other bit of the economy.
It’s clear that a government contract “creates” a job, but how do you figure out how many jobs “disappeared” somewhere else to pay for the extra tax burden.
And for every subsidized project, it’s very hard to figure out which ones will end up being sustainable enterprises that create value and someday pay some taxes to fund our entitlements.
If the subsidized business doesn’t last beyond its last government cheque, then you have a classic example of short term “job creation.”
The famous depression-era economist Keynes used the example of paying people to dig holes and then fill them in.
The Yukon government put a new twist on this idea with the skateboard park, paying people to dig a hole, fill only part of it in and then do kickflips and aerials over it.
The whole question comes down to the concept of “value-added.”
French economist Frederic Bastiat once wryly observed that a law banning windows would “create” thousands of jobs in the candle industry. But candlemaking pays poorly, and the law would also make anyone who worked inside a lot less productive.
The taxes used for economic development discourage economic activity somewhere.
We’re lucky in the Yukon, since the taxes that pay for our economic development spending are (mostly) raised in Ontario, Alberta and BC.
Still, one hopes Yukon government programs do not simply subsidize activity, but also create sustainable businesses that create value, profits and long-term wage streams.
And we don’t just want candlemaker wages. We want high wages.
The trick is how to get them.
In the short term, you can get high wages by being lucky. Work in an industry protected from competition, like a bank or a phone company.
Convince the government that devious foreign manufacturers are dumping their wares in Canada.
Get elected and vote yourself a raise … there are plenty of angles.
But if you don’t have an angle, you have to be highly productive to get high wages.
That’s where the public schools branch’s new study comes in.
There is a powerful, long-term link between education and productivity.
Look at the graph. Provinces with more educated people tend to have higher incomes per person.
According to the data, a province with 12 per cent of its population with a bachelor’s degree, or higher, would have a median income of $22,700.
But if over a number of years it could raise its university-educated population to 18 per cent, then its median income would go up 22 per cent to $27,800.
If you match median income against the number of people with advanced trades education or some college, you get similar but slightly weaker results.
Some may argue that the causality goes the other way — that it is high incomes that drive higher education. After all, only rich people can afford all those Roman history degrees.
All good points.
But I am confident, in the long run, that more education results in higher productivity and incomes.
So, despite the lack of fanfare, the High School Programming Study is actually critically important.
We Yukoners have big educational challenges.
Our graduation rate is 19 points below the national average. That means an ‘extra’ 91 Yukon kids without a diploma each year.
Last year at least five schools in the Yukon had averages below 55 per cent in Math 9 or Language Arts 9.
On attendance, a clear leading indicator of later underachievement, the average First Nations kid in the communities missed 31 days of school and the average non-First Nations kid missed 23 days.
We are not setting these children up for success, economic or otherwise.
And even worse, our government does not seem too worried.
As described in a previous column, the cabinet’s response to these challenges since 2004 has been to reduce the share of Yukon government spending allocated to the public schools branch.
If our elected representatives hadn’t made this decision, its budget would be $14.8 million higher this year.
So it’s nice to see public schools branch attempting to tackle the problem.
We should wish them luck.
Keith Halliday is a Yukon economist and children’s author.