Why the Canada Summer Jobs Program Should Be Scrapped

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Canada
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It was December 2017 when the Trudeau government first introduced their infamous attestation requirement for the Canada Summer Jobs program. This change meant that organizations could only get grants if they affirmed that their “core mandate” supported certain values, such as “reproductive rights”. Naturally, many groups opposed the changes, pointing out that the requirement violated their freedom of expression and conscience.

The government recently announced changes to the attestation for the upcoming year, choosing to forego the sweeping “core mandate” clause in exchange for a more targeted limitation on the nature of the job. The change is effectively an admission that the original attestation went too far, but of course, they would never concede this explicitly. In any case, it has been largely successful in pacifying the majority of their opponents.

Unfortunately, the restrictions were not completely removed. The updated form now states that “ineligible projects and job activities include…projects that actively work to undermine or restrict a woman’s access to sexual and reproductive health services.” This narrower scope might be more amiable for many of the groups that were originally targeted, but it should be no less disturbing for those who care about liberty and fairness. Despite being bound by the charter to provide “equal benefit of the law without discrimination,” the government continues to use these grants as a tool to systematically bolster organizations they like while starving ones that oppose them.

I want to stress that my point here is not specifically about the issue of abortion. My goal is to denounce any program that makes funding conditional upon an agreement to refrain from opposing the current government’s ideology. This is a very dangerous precedent, and its end game is nothing short of Orwellian. Praise the ruler, and you will be rewarded. Voice your dissent, and you will be punished.

With all that said, one of the things I find striking is that while most critics are talking about how to run the program almost no one is having the discussion about whether to run the program. But if you’ll oblige me for a moment, I think that’s a discussion that desperately needs to be had. While I am deeply concerned about the ethics of the program, I am equally concerned with its economic shortcomings.

For example, student unemployment remained flat in 2016 even though the Liberals had doubled the funding from the year before. Granted, other variables may have obscured the true effect of the additional funding, but at the very least it’s hard to make a convincing success story from these data.

And even that is just scratching the surface. What is most troubling is the underlying economic absurdity that is characteristic of all government “job creation” programs. The argument is perhaps best laid out in Chapter 4 of Henry Hazlitt’s Economics in One Lesson.

Hazlitt begins by pointing out that “all government expenditures must eventually be paid out of the proceeds of taxation”. It’s an obvious observation, perhaps, but one that comes with radically underestimated implications.

“For every dollar that is spent on [a government funded] bridge, a dollar will be taken away from taxpayers. If the bridge costs $1,000,000 the taxpayers will lose $1,000,000. They will have that much taken away from them which they would otherwise have spent on the things they needed most…What has happened is merely that one thing has been created instead of others.”

So at best, government job programs are a zero-sum game, but that is assuming these jobs are just as productive as jobs in the free market. Dwight R. Lee reminds us that this is not always the case.

“[There was] an engineer who, while visiting China, came across a large crew of men building a dam with picks and shovels. When the engineer pointed out to the supervisor that the job could be completed in a few days, rather than many months, if the men were given motorized earthmoving equipment, the supervisor said that such equipment would destroy many jobs. ‘Oh,’ the engineer responded, ‘I thought you were interested in building a dam. If it’s more jobs you want, why don’t you have your men use spoons instead of shovels.’”

You can always create more jobs by getting people to do increasingly inefficient tasks, but it soon becomes obvious that the economy suffers as a result. This is why free market competition is so important, because it uses the price mechanism to ensure that jobs are only created if they will be profitable, and thus efficient. In a free market, employers are forced to consider the opportunity cost of every additional job, which means they have a strong incentive to only create jobs that are economically viable.

In contrast, the guaranteed job grant removes the need for businesses to consider the cost of the position, because there is no direct cost to them. The result is that jobs are created regardless of whether they produce enough value to justify the investment. In theory, it’s possible that some of these jobs could still be as productive as their free-market counterparts. However, if that were the case, they would likely be created anyway without the extra funding, so the grant would simply subsidize the existing job rather than creating a new one.

Foreseeing this dilemma, the government included a clause (Section 12.1(c)) that requires employers to attest that “the job would not be created without the financial assistance provided”. It sounds like a great way to help poor businesses that otherwise couldn’t afford additional employees, but it’s not quite that simple.

As a matter of fact, the problem of student unemployment has nothing to do with businesses being too poor to hire people. You can always reallocate resources to create more jobs if it is worth the cost. So when a business says, “we can’t afford this job,” what they’re really saying is, “the value this job would produce fails to exceed the cost it would incur”. By not creating the job they are demonstrating that, in their opinion, the job is an inefficient use of scarce resources. If there were a business case for it, the job would already exist.

Consider the irony, then, that grants are only given for jobs that would not otherwise be created. This program, by design, creates jobs that employers have deemed are a waste of resources. It takes money from the private sector, where jobs are only created if they can be economically justified, and pours it into a program where the only jobs that are eligible are ones that can’t be economically justified. When you say, “we attest that this job would not exist without the funding,” you’re basically saying, “we attest that this job is too inefficient to be profitable in the free market.”

Hazlitt comments on the futility of this approach.

“I have not spoken of the hundreds of boondoggling projects that are invariably embarked upon the moment the main objective is to “give jobs” and “to put people to work.” For then the usefulness of the project itself, as we have seen, inevitably becomes a subordinate consideration…Under such circumstances it is highly improbable that the projects thought up by the bureaucrats will provide the same net addition to wealth and welfare, per dollar expended, as would have been provided by the taxpayers themselves, if they had been individually permitted to buy or have made what they themselves wanted, instead of being forced to surrender part of their earnings to the state.”

So if government job creation programs are so bad for the economy, why do they continue to see such widespread support? The answer, Hazlitt tells us, is in their psychological advantage.

“We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs [and products] destroyed by the $1,000,000 taken from the taxpayers.”

Governments always look good when they give away other people’s money, especially when it benefits special-interest groups like grant recipients who profit at the taxpayer’s expense. But remember, you’re not getting a grant for providing the best value at the lowest price. You’re getting a grant because the Liberal party wants to secure votes in your riding.

So here’s the end of the matter. If your goal is to create a prosperous society that manages scarce resources efficiently, then it’s time to kill the Canada Summer Jobs program and all other “make work” programs. But if, on the other hand, your goal is merely to create jobs, regardless of how little they contribute to the economy, then, by all means, you are more than welcome to hand out spoons and ask people to start digging. Just don’t be surprised if some of us libertarians chuckle when you boast about the success of your program.

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