YUKONOMIST: Elections and economic development

Keith Halliday.

Keith Halliday.

Ever since responsible government came to the Yukon in 1979, economic development has been front and centre in Yukon election campaigns.

Like health care, it’s a topic no party is ever against.

Over the years the parties have offered voters a smorgasbord of economic development policies. Exploration tax credits. Tax cuts. Immigrant investor programs. Loans to hotels. Sawmills. Innovation grants. New roads. Investment conferences. Tourism ads. Local preference on government contracts. Fibre optic cables. Small business tax credits. And so on.

However, the fact that economic development has been a hot election topic for 10 elections over 40 years illustrates how hard it has been to make real progress. Each of those ten winning platforms ended up in the crosshairs of the opposition a few years later in the next election.

Let’s look at some important indicators of private-sector development under the last two governments: 2011 to 2016 under the Yukon Party and 2016 to the present under the Liberals.

We’ll exclude the pandemic period since its statistics aren’t comparable, so for the current government will use data ending March 2020, before the pandemic really hit the Yukon. And we’ll use March 2012 and March 2016 as our starting points, rather than election dates, to avoid seasonal changes in employment which are so large in the Yukon.

Jobs is the first indicator. According to the Yukon Statistic Bureau, under the Yukon Party from March 2012 to March 2016 the number of private-sector jobs actually went down three per cent. From March 2016 to March 2020, under the Liberals, private-sector jobs went up 17 per cent.

As for government jobs, during the same period, the Liberals hired an additional 1043 government employees. Meanwhile, from March 2012 to March 2016, the Yukon Party created 327 new government jobs (although the 2012 Public Service Commission report may use a slightly different definition of employee).

For both parties, government jobs grew at a faster rate than private-sector jobs.

The second indicator is tax revenues. This is important both because it is an indicator of economic activity and because it helps us become less dependent on transfers from Ottawa

Tax revenue is not a perfect statistic to track private-sector development since it includes taxes paid by government employees. But it is a rough guide, since it includes corporate tax and private-sector personal tax revenue.

From the Yukon Party budget Main Estimates for March 2012 to March 2016, territorial tax revenue grew one per cent. For the Liberal four years, it grew 17 per cent.

However, it’s also worth pointing out that Ottawa increased cash payments to the Yukon much more rapidly during the Liberal four years. For the Yukon Party period, transfers went up $116 million or 12 per cent. For the Liberals, it went up almost exactly twice as much: $232 million, or 22 per cent.

Under both governments, the Yukon’s reliance on federal transfers actually increased. It went from 84.8 per cent of revenue in 2012 to 85.4 per cent in 2016 and 85.5 per cent in 2020.

So, during this period, the Yukon government grew faster than its supporting tax base. The increases were small, but still not the direction of travel we’d like to see for private-sector economic development.

The numbers for both periods above probably understate the role of the Yukon government in our economy. An unknown, but probably substantial, number of those new private-sector jobs are based on government grants and contracts.

Furthermore, this isn’t just a dogsled race between the number of government jobs and the number of private-sector jobs. The growth of government jobs can crowd out private-sector economic development.

Consider those 327 new territorial government jobs in 2012 to 2016 and the 1043 new territorial government jobs since 2016. And then add in new government jobs at municipal and First Nations governments. Given our low unemployment rate, many of those workers had to be brought in from Outside. While this makes our community bigger and more vibrant, it also makes our stretched housing market even tighter.

This means higher house prices, which discourage private-sector investment and jobs. A coder or artist who could live anywhere might choose Squamish or Nelson instead of Whitehorse because of our housing shortage.

It also means that local businesses are competing with well-paid government jobs for trained staff. This means higher wages, which is great for workers, but in effect discourages labour-intensive private-sector businesses from operating in the Yukon.

We’re now in our eleventh election since home rule in 1979. Judging from the media coverage to date, economic development is high on the agenda. Again.

When the candidates knock on your door and then retreat the recommended six feet, ask them why they think their economic development proposals will work better than those of the 10 sets of candidates who ran before them.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist and received the bronze for Outstanding Columnist in the 2019 Canadian Community Newspaper Awards.

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