YUKONOMIST: The benefits of big government

Keith Halliday. (Yukon News file)

Keith Halliday. (Yukon News file)

With an election coming, you don’t get any prizes for guessing that the Yukon government’s new budget would be a record breaker.

Record cash from Ottawa, at $1.4 billion dollars.

Record spending at $1.6 billion dollars, or almost $40,000 per Yukoner.

Record territorial debt at $175 million.

The list of projects is prodigious. In the five-year capital plan, there is something for nearly everyone. Next year promises $47-65 million in highways projects. There’s a 47-unit mixed-use housing project. A Bilingual Health Centre. A grid-scale battery to store renewable power. And even $22-33 million for a new Arts and Heritage Resource Centre to complement the Kwanlin Dun Cultural Centre and MacBride Museum expansions completed in recent years.

But the real marvel of the territorial budget was the economic forecast produced by the economists at the Department of Finance.

It predicted that, despite the pandemic, the Yukon’s economy actually grew in 2020. While growth of 0.9 percent wouldn’t be much to throw your toque in the air about normally, during a planet-shaking public health emergency it is remarkably good.

The International Monetary Fund (IMF) released its latest prediction for 2020 in January, pending the arrival of the year’s final actual figures. For the 30 big economies they looked at, only three enjoyed positive growth like the Yukon.

One was China, whose strongly enforced lockdown measures allowed the economy to re-open relatively early in the pandemic. Turkey’s positive performance relied on hefty boosts in lending by state-owned banks, which raised worries among some economists about inflation and downward pressure on the currency. And Egypt rounded out this small group, with strong support from the International Monetary Fund and other international lenders.

Looking just at rich democracies, none on the IMF’s list managed positive growth. Spain and the UK suffered stunning drops of around a tenth of their economic output. Australia and the US did the best in this group of countries, seeing their economies shrink around three percent. The forecast for Canada was shrinkage of 5.5 percent.

So how did the Yukon manage to eke out positive growth? Our democratic system doesn’t permit the same kind of lockdown enforcement possible in China. The Yukon government doesn’t own any banks it can encourage to lend freely. Nor can we ask for a big loan package from the IMF.

But we do have the transfer payment.

In January 2021, the Yukon had 9,900 public sector employees according to the latest Yukon Statistics Bureau report. That was up around 600 from 9,300 in March 2020, just as the pandemic was hitting.

Government jobs represent 46 percent of the total workforce. Statistics Canada says the equivalent number for Canada overall is 22 percent, or less than half of that.

It’s important to remember that our population is small and all our employment statistics suffer from fluctuations.

But the overall message is clear: government is large and growing in the Yukon. And that sure helps when the private sector is whalloped by an unexpected economic crisis.

And don’t forget that the transfer payment doesn’t just support government workers. Lots of Yukon families make their livings either fully or partly due to government contracting.

This is evident from the Yukon’s tax revenue for the current fiscal year, which the recent budget forecasts will come in about three percent higher than expected.

There aren’t many treasurers around the world dealing with higher than expected tax revenues.

The Yukon government’s own tax revenues cover only about eight percent of its spending this fiscal year, so this is not a huge windfall. But it’s a clear sign that the economy did better than many expected.

But modest positive growth overall does not mean that everyone had a good year.

Far from it. The list of Yukoners who suffered severe pandemic impacts is as long as the project lists in the capital budget. There are badly affected industries such as tourism. Think of school-age youth. Mental health issues are significant. And many more.

Now is indeed the time for government spending. Fortunately, the transfer payment means that the Yukon government has the resources to support Yukoners suffering from the pandemic more comprehensively than cash-strapped governments in many other parts of the world.

Now it’s up to our MLAs to work through the 380-page Operation & Maintenance and Capital Estimates document to make sure that spending is as effective as possible.

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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