Proceedings of the Standing Senate Committee on
Social Affairs,
Science and Technology
Issue 21 - Evidence, December 1, 1998
OTTAWA, Tuesday, December 1, 1998
The Standing Senate Committee on Social Affairs, Science and Technology met this day at 10:00 a.m. to consider the dimensions of social cohesion in Canada in the context of globalization and other economic and structural forces that influence trust and reciprocity among Canadians.
Senator Lowell Murray (Chairman) in the Chair.
[English]
The Chairman: Colleagues, this is our twelfth meeting pursuant to our mandate to study social cohesion in Canada. This morning, as I said to the witness privately, could be something of a turning point for us. In previous meetings, we have heard a good deal of evidence, some of it anecdotal, about cleavages in our society, about the polarization of jobs and incomes under the pressure of globalization and technology. This morning, we have a witness who, far from being speculative or anecdotal, is in possession of the facts.
Dr. John Myles is a University Distinguished Research Professor at Florida State University and Visiting Research Fellow at Statistics Canada. Until 1992, he was Professor of Sociology at Carleton. His fields of research include comparative social policy, and since the mid-1980s, he has been conducting research on the distribution of earnings and family income in Canada. In 1996, he received the Harold Adam Innis Award for the best book in Canadian social science. Dr. Myles is an elected member of the American National Academy of Social Insurance and a research fellow of the Caledon Institute, Ottawa.
With that brief introduction, I turn over the floor to Dr. Myles, who has a fairly brief opening statement to make, after which we will invite senators to comment and ask questions.
Mr. John Myles, Visiting Research Fellow, Statistics Canada: Senator Murray, senators, fellow Canadians, thank you for having me this morning. I should mention from the outset that no university professor believes that he or she can say anything in ten minutes, so I have taken the liberty of leaving a few articles for your bedside reading.
I have been doing research at Statistics Canada now for a little over a decade on topics related to the changing world of work, wage inequality and its impact on the Canadian family. This morning I want to highlight some issues that are of concern to me and I hope of some interest to you. I should hasten to add that I speak this morning not as a representative of Statistics Canada but as a university research professor and a concerned Canadian.
To begin, I should like to spend a little bit of time establishing the link between the world of work, inequality, and the question that concerns this committee, namely, social cohesion. My basic proposition is not original. Virtually every theorist of democracy from the Greeks to John Stuart Mill recognized that concern for, and willingness to contribute to, the public good could only thrive in a society of equals. In all modern market economies, inequality begins in the labour market, in the pay cheques that working men and women take home at the end of the week or the end of the month.
Earnings inequality in Canada is high by international standards, not as high as in the United States but considerably higher than in nations like Germany, Holland or the Scandinavian countries. In Canada, a high-income earner makes almost four times what a low-income earner takes home, compared to a ratio of two-to-one in Scandinavia or three-to-one in Germany. I like to think of these ratios as a measure of the social distance between someone near the top of the scale and someone near the bottom. We are not talking about the distance between CEOs and the cleaning staff. Rather, let me invite you to think about the difference between a full professor or senior manager and a junior secretary. The reason for those differences is that the relative wages of the secretary, the clerk, or the factory worker in Germany or Sweden are higher than in Canada or the United States, about 70 per cent of the average wage in Europe compared to about 45 per cent in Canada. You will see one of the reasons for this shortly.
This table that you see before you also suggests that where wage inequality is low, people are more willing to contribute to public social programs. I always try to explain to my students that this is not because Swedes and Germans get an infusion of civic spirit or of solidarity when they are born. Rather, Swedes and Germans, because of low wage inequality, are by and large simply redistributing money to themselves, providing themselves with public goods from which everyone benefits at some stage in the life course. It takes only very basic mathematics to show that where market inequalities, earnings inequalities are high, distributive conflicts are likely to be much more intense. This is the reason I worry about the labour market. In high-inequality societies, the state has to play Robin Hood, and although Robin Hood is a popular mythological figure, his life expectancy tends to be short.
Perhaps I can bring the argument closer to home by looking at some Canadian trends. The top line in Chart 1 shows the rise in market-based inequality among Canadian families since 1980, inequality in the size of the pay packets that mom and dad bring home from work each week. That trend line is clearly up, and up substantially since the beginning of the 1980s.
The bottom line, in contrast, shows the good news. By providing larger social transfers to low-income families, which of course means higher taxes for high-income families, Canada has been more or less able to stabilize the final distribution of income over most of this period. We would see much the same trends, by the way, if we were looking at low-income statistics or poverty rates.
However, in the last few years, there have been signs that the system is losing steam as the state's Robin Hood role has risen year after year. Inequality and low income levels have risen somewhat since 1994, a period when normally we would expect that they should be falling as a result of labour market developments. Low-income families have not benefited proportionately from rising earnings, and social transfers have been falling.
I should also mention that young Canadian families have probably reached their upper limits in what they can do to offset those trends. Until the end of the 1980s, the falling wages of young men, the fathers of our young children, were offset largely by the fact that more mothers and wives went out into paid work and when they did, they worked longer hours. Younger couples also had fewer children so the family budget went further, and they were having them at older ages when their earnings were higher. Obviously, all of those trends have their upper limits or their lower limits. Fertility rates cannot go down forever and we now seem to have reached those limits.
I wanted to emphasize two things this morning regarding what we might do to turn this situation around, to see to it that low-income families might be able to raise their earnings. The first will be familiar to you. That is to provide more and better institutional supports to help young parents, especially single parents, to enter the labour market and to stay employed. This means not only more adequate childcare, but also better parental leave policies to ease the transition of young parents back into the labour market.
The second way we can assist families to raise their earnings is to ensure that once they are in the labour market, once they have those jobs, they have the skills to attract decent wages. When I speak of skills, I am not concerned with the high end of the labour market, with the engineers, the scientists, or managerial talent. Indeed, I believe that recent discussions of the brain drain are a red herring distracting us from the much more serious problem that lies at the other end of the labour market among the least skilled members of the labour force.
A major reason that earnings inequality is high in Canada and the United States is the high level of inequality in the distribution of the job skills that are relevant for a post-industrial information economy. We now have excellent data on this topic. Almost one fifth of the Canadian adult population, about twice the rate found in Europe, are unable to extract and use information taken from simple documents. If you like, in the discussion I can give you some examples of those documents. It is a long-standing feature of both Canadian and American educational and training policies that we tend to focus our political concern and our financial resources on the top 20 per cent of students. The Millennium Fund might be an example of this. We leave the bottom 20 per cent to look after themselves.
In the long run, I want to get you thinking that to solve the problem of earnings inequality requires solving the problem of skill inequality among Canadian workers.
Let me conclude by emphasizing that the problems associated with higher inequality are more difficult today when real incomes are stagnant or even falling. Back in the golden age of the 1950s and 1960s, when I was growing up, when the pie was growing, the rich were getting richer but the poor were getting richer as well. When the pie is not growing, it is true by definition that someone's gains must show up as someone else's losses. For that reason, distributive conflicts tend to become more intense. The particular strategies I have emphasized this morning are intended to get the pie growing again, but in a way that benefits those families whose share of the wage pie has been falling.
Senator Cohen: You mentioned that inequality begins in the labour market and that with this inequality we see an increase in the social distance between "us"and "them". In view of this, what can we do to make sure that long-term employment does not lead to social isolation and to the collapse of our social networks? Those social networks are the glue that binds the individual to his communities.
Mr. Myles: If I can clarify, is your concern with long-term employment?
Senator Cohen: Yes. My concern is also with how people become socially isolated. They become almost invisible when they reach a certain level, and people in corporations and with high incomes have tunnel vision. I want to know how we handle that because everything could collapse. What do we do?
Mr. Myles: First of all, let me try to recapitulate what you are getting at. When people are out of the labour market for long periods of time, for whatever reason, for example because of unemployment or because a young mother is out taking care of her children for two or three years, their human capital, what the economists call their kind of job experience and their connections to the labour market, tends to atrophy. The longer one is out, the more difficult it is to get back into the labour market, and certainly the more difficult it is to get back in at a wage that makes sense for families to say that mom should perhaps go back to work at this point. That concern is also quite prominent in Europe at the moment.
Some of the proposals I am encouraging you to think about this morning are intended to try to keep people tied to the labour market through, in the case of the young mother, better parental leave programs. One of the major reasons for parental leave programs is to maintain parents' ties with the labour market when they are out taking care of their children. To facilitate their re-entry is one device.
The second point I try to emphasize, the problem of skills development, is also crucial. I am not speaking simply about retraining programs. We have to think all the way back to our primary schools and our secondary schools and think about the kinds of mathematical and literacy skills people emerge with in their late teenage years and the kinds of avenues they then have into the labour market. It makes a big difference, for example, if you can assume that your high school graduate can read a document that contains some calculus, as in Germany, rather than being concerned that your factory worker has difficulty with basic arithmetic.
Once we move further into the job career, once people are in their 20s, 30s and 40s, then again I think we have to find ways of keeping people somehow tied to the labour market. That is one of the main functions of job retraining programs, if they are done properly. If they are not simply classroom experiences but rather are tied to actual employment sites, as they typically are in many European countries, those ties can be maintained. Those networks with the labour market can be maintained even during periods of interrupted employment.
Senator Cohen: If I recall, several years ago when they were reviewing the whole area of employment insurance and they gave the authority to look after skill retraining back to the provinces, there were no national standards. Is the fact that there are no national standards a weakness? There is training but perhaps it is not what the job market requires.
Mr. Myles: I do not feel qualified to comment on the specifics of what the provinces have been doing recently. Much of the work I have done suggests that that is not a new problem. It is a long-standing, historical tradition in Canada that dates from the post-war era.
When Canada needed skilled tradesmen in the period of reconstruction, when we needed tool and die makers, rather than train them in Canada, we went to Europe to find them. We did not establish the kind of training infrastructure or training tradition that probably should have been put in place at that time. I am a great believer in the role of historical institutions and their continuity over time. That is really what we are seeing now in the contrast between Europe and North America. I think we are ill-equipped now at the end of the twentieth century to deal with many of those problems. I would rather not put the blame on any specific provincial government; it is just a good old Canadian tradition.
Senator Cohen: It is one we should look into.
Senator Poy: Dr. Myles, you mentioned that graduates lack the education to understand certain things, even documents. Does that go back to the three R's, which were dropped a number of years ago? What are your comments on that?
Mr. Myles: I am not a pedagogue. I teach in a university but I am not experienced in all of the debates at the primary and secondary school levels. I should like to give you an answer that is a little bit like the answer I gave to the previous question. I think this certainly goes back to when I was a child. We have always had, and we continue to have, a kind of cultural bias in Canada and the United States, and perhaps it is a common feature of the Anglo-Saxon cultures, to think of skilled people as people who go on to post-secondary education. You either make it past that barrier or you do not.
When North American economists, including Canadian economists, calculate the skill distribution, the human capital resources of the workforce, the most common measure is the ratio of university to high school graduates. That tells us that we do not believe that people who have not gone to university have very high skill levels.
Historically, according to the figures that I have given you, that is true. However, other countries have paid a lot more attention to making sure that the young people who make it through 10 or 12 years of education emerge from that process with a much higher level of literacy and numeracy than the typical North American child. I think it is really only in those recent literacy studies that we have an indication of low literacy. They are called literacy studies but that is misleading. It is a level of literacy. The figures that I gave you were not about illiteracy but rather low literacy.
Senator Poy: In your teaching profession, you probably find that there are many university students and university graduates who have low levels of literacy.
Mr. Myles: You are now touching on the favourite complaint of all university professors in Canada and the United States. That is so in part because, compared to 30 years ago, the proportion of high school students who go on to university now is much higher. When I went to university, it was a rare event. Maybe 12 per cent of students went on to university, so you were creaming off the top of the high school classes. University professors who taught in the 1960s have fond memories of what it was like to teach that population. Now when we are taking in 40 per cent or 50 per cent of the high school graduating class, we have a very different job to do.
The Chairman: Are you saying that standards have fallen, Dr. Myles?
Mr. Myles: I think we are dealing with a different population. We have a different challenge to deal with. With 50 per cent of young people going on to university now, the level of skill development that many of them bring to university is very different than was the case in 1960 when 12 per cent went to university.
The Chairman: That is a truly awful indictment of the public school system in this country, is it not? Virtually everyone in this country goes to school, and there are almost no countries that spend more than we do as a percentage of GDP on education. The most shocking statistic you give us is that one fifth of our adults are functionally illiterate.
Mr. Myles: I think it is scandalous. I do not think it is new. That is not a result of declining standards in our educational system. It is much like the problem I alluded to earlier, where there is a long-standing historical tradition in Canada of not training the tool and die maker. There is a long-standing historical tradition in our school system of worrying mainly about the top 20 per cent or 30 per cent of our students and not paying enough attention to the bottom 20 per cent or 30 per cent.
The Chairman: If you allow a greater number into university, your entrance requirements must have declined over the years.
Mr. Myles: That may well be.
The Chairman: It is easier to get in and easier to get out.
Mr. Myles: These literacy distributions measure not only low literacy but high levels of literacy, and Canadians do just as well as Europeans at the upper end of the distribution. The top end of the distribution looks just as good in Canada as it does in Germany or Sweden or the Netherlands. The top 20 per cent, 30 per cent or 40 per cent of our students are doing quite well by international standards.
The problem really shows up in the bottom 20 per cent to 30 per cent. I do not think we have taken this problem seriously and I think there are good historical reasons for it.
I also do work in industrial relations. North American employers, particularly in manufacturing, organized production processes around the assumption of having a labour force with a relatively low skill level. They did not demand that their workers provide the skills that European employers demanded. Instead, we relied upon a much greater degree of supervisory infrastructure to control a rather unskilled labour force in our factories and in our shops traditionally. Those problems are not new.
Senator Poy: You mentioned Germany and Holland as examples of the European system. Other than for historical reasons, why did Canada not follow the system that they have? Why do we send people to Europe for training? It would be much cheaper and better for the country to have the same system here so that we could train our own people.
I agree with you that everybody who comes out to work, with a high school education or even junior high, has to understand instructions. They have to be able to read. They have to be able to measure and to calculate. Even in the basic building trade, they have to be able to do that.
Mr. Myles: The historical reasons are not difficult to understand. How they get reproduced over time and brought into our contemporary society is a more interesting question. The comment I am making here today is not new. When I was an undergraduate at Carleton University in the 1960s, it was something I heard from one of my most distinguished professors at the time, John Porter, whom many of you may recall.
The question is why we have not begun to do anything about it. I do not have an academic or a scholarly answer to that question. I do not think that we have challenged ourselves on this issue very much. I think it is taken for granted as part of our culture that to be educated means to go to university.
Senator Poy: What about the ones who do not go?
Mr. Myles: We do not consider education to be equally important for those who do not go to university; in other words, we do not worry as much about the skills of the less skilled. Why that is so also has a little bit to do with our industrial relations system, which has been fairly rigid. Particularly in the manufacturing sector of the Canadian economy, there is a set of labour institutions organized around the assumption of relatively low-skilled labour.
We have compared the industrial relations system and the skill content of work of European and North American workers, employers, supervisors and so on in the industrial sector. The data I worked on, from the early 1980s, are now somewhat dated. Still, the data show that employers have organized their production processes and have developed a set of industrial relations practices that build on the assumption that their employees will not be highly skilled workers.
We know from much research that if you work in a job that is undemanding, your learning skills will atrophy. That is, if jobs do not make demands of you intellectually and cognitively, over a period of time your cognitive abilities, including your ability to learn to acquire new skills, also atrophy. That is almost reinforced by the nature of our employment system in Canada.
Senator Poy: You mentioned inequality in job skills. What do you mean by that? How do you correct that? Does it not depend on who wants what skill?
Mr. Myles: Let me give you an example. I have seen an interesting piece of research which compares the distribution of scores on mathematics tests students take at the age of 13 to the distribution of earnings of those same people when they are age 30. This exercise was done for a variety of different countries, and the distributions map onto each other almost perfectly. You are probably all familiar with newspaper stories reporting average scores in high school mathematics around the world or average scores in language fluency in different countries and saying Canada is above this country but below that country. We tend to focus on the average and we have not really focused on the distribution around that average. The problem we face in Canada, and to an even greater degree in the United States, is that the inequality of the distribution of those literacy and mathematical skills is very high. Think of the United States. It has the best rocket scientists in the world at one extreme. It has its Harvards. Then it has some of the worst public educational systems in its ghettos at the other extreme. It creates those extremes, and those extremes show up once those people end up in the labour market.
Canada does not have the same scale of problem as the United States, and we are fortunate for that. I could talk a little bit about how we have succeeded in that in the last while, because there are some success stories as well.
Senator LeBreton: In your remarks you said that what we need to turn the situation around is more support for young parents to enter the labour market. You mentioned childcare and parental leave. How do we square that real need, because it is a real need, with the current thinking about tax cuts and the "I am all right, Jack" attitude of people who think only of how they are doing? Where do you see tax cuts entering into this in terms of how much money should be expended on the tax cut side compared to the program spending side?
Mr. Myles: Let me say something first of all about the demand for tax cuts. Initially, I was trying to account for the current pressure for tax cuts. If you recall that upward sloping line in market inequality, that is precisely the kind of precondition I have suggested leads to a growing resistance to contributing to the public good, if you will. Therefore, I am not particularly surprised to see the growing resistance to yet more taxes or the demand for tax cuts.
The first answer to your question or the first approximation is that we are in a tough situation. We are in a tougher situation than they are in countries where earnings inequality is much lower. One of my answers to that is that when you are in a tough situation, you have to work harder. My model for addressing those kinds of questions is a now dead Swedish labour economist called Gösta Rehn. He was a major factor shaping the development of labour market policy and social policy in post-war Sweden. His big secret was always to look for what he would call a positive sum solution, a win-win solution. I think the only way to persuade people that there is a public effort worth getting involved in is if we find solutions that do not just appear to be plausible but really provide a gain to everyone.
That is why I have emphasized strategies that put the bulk of the effort on helping low-income families and low-income workers increase their earnings. That is going to require some social investments. However, it does not necessarily require only social investments by governments. That is a concern for corporations as well. Childcare and parental leave policy also should be major concerns of Canada's corporations, of our private sector firms. I am not a fan of workfare but one of the promises of some, although not all, so-called workfare programs is that by linking people to the labour market, you help them to increase their earnings. Even in some of the more draconian reforms in the United States, it becomes obvious very quickly that to help people get into the labour market you also have to make some social investments. If you want the young mother, the 25-year-old woman with a young child at home, to work, you have to provide her with some way of caring for her child.
I would rather use the two suggestions I made as a kind of template. I think there is room for additional private and public investments in helping people, particularly when it can be seen that those investments will actually have some positive outcome for the long-term earnings of those individuals who will probably have higher earnings and be less reliant on public support as a result.
Senator LeBreton: Therefore, it is an education program to the public at large.
Mr. Myles: I think it is also the way we start encouraging people to think about how you help people increase their earnings. It is often associated with a very small "c" conservative agenda. I do not think that is right. I think it is helping people improve their earnings. We are past the stage in history when mom will go back to the kitchen.
Senator LeBreton: Thank God for that.
Senator Johnstone: You mentioned the state playing Robin Hood. You also mentioned that the transfer payments are slowing. Assuming that there will always be some that will be dropping behind, would you like to discuss with us some of the alternatives?
Mr. Myles: Do you mean in the form of transfer payments?
Senator Johnstone: If the state is going to play a lesser part and transfer payments continue to slow, what are the alternatives?
Mr. Myles: Let me make my argument very clear. I am suggesting that one of the reasons transfer payments are slowing is that earnings inequality is rising. The slowing of transfer payments need not go on forever. The slowing in the growth rate of transfer payments will slope down if we allow earnings inequality to rise in Canada and if we allow the distribution of market incomes to rise.
Think, for example, of a small community that wants to provide itself with a public library. There are a few very rich people in that community and many very poor people. How will they raise the revenue for the library? Like Willie Horton said, you have to go where the money is. You have to take a lot of money from a few very well-to-do people. The low-income people do not have much money to provide to finance the public library. The well-to-do people will say, "Thank you, but I can buy all the books I want for much less than you will ask me to pay in taxes."I think if we have continued increases in market income inequality, we will simply have an insoluble problem; there will be increasing tax resistance.
On the other hand, there is no need to think that we have to let inequality in market incomes go on rising forever. That would create insoluble problems for us, but that is where we have to start thinking. In fact, until the middle of the 1990s, Canada did an interesting and probably good job correcting and offsetting some of the developments of the labour market. Just comparing Canadian and American trends over the past two decades is quite astounding. For example, we have used our resources well in the development of the child tax benefit system and the national tax benefit. That is a very important innovation relative to traditional forms of social provision. We have gone much further than the United States with that.
However, in the long run, we cannot rely on those kinds of solutions forever. We cannot rely on a transfer system to continue bearing the brunt of a labour market that gets out of control. I do not have one solution. There are many parts of the pie, but I think the first objective is to help low-income families improve their situation in the labour market. If we succeed in doing that, the problem of raising tax revenues for social transfers will solve itself. As their earnings go up, those families will have more money to pay more taxes. There will be less demand for tax revenues to redistribute to low-income families. You can do different kinds of things with public revenues when you have low inequality than you can do when you have very high inequality.
[Translation]
Senator Ferretti Barth: I have listened to your presentation and to your responses. I have a very simple question for you. Do you believe that social cohesion is within the realm of possibility?
[English]
Mr. Myles: Are you referring to the social union in federal-provincial relations?
[Translation]
Senator Ferretti Barth: After listening to a number of witnesses, I have to wonder if social cohesion can be achieved? There are many obstacles in our way. Are people prepared to listen to government directives? Is it not time for the government to stop being paternalistic, to bring in some tax relief and to allow families and individuals to manage their income according to their own personal needs?
When we consider that the government is poised to give five dollars per child for day care, maybe it would be better to allow a deduction, or to refund a specific amount each year to people, whether they are single parents or not. It is time to give people some responsibility for managing their own life according to their own needs with a view to improving their standard of living.
As an expert, given all of these variables, do you believe that it will be possible in the future to achieve social cohesion in Canada?
[English]
Mr. Myles: There are two parts to your question. First, in the context of the current discussions about the social union, there is concern about levels of government and the divisions, of which we are all very well aware, in federal-provincial relations, about Quebec and the rest of Canada, and so on and so forth. I do not feel particularly qualified to discuss that, nor do I want to get into that particular topic this morning.
Let me come to what I think is the second point you were making, the notion that government doing things for us is a form of paternalism. I think that kind of understanding can easily emerge when governments become very distant from people. Someone asked me what my politics are. Sometimes I say I am a democrat. I do not mean big "D" Democrat as in the United States. I mean small "d" democrat. One way I take care of myself is by collaborating with my fellow citizens to create a government and public institutions. If I do not think that that government represents me, then I have to do something about it. Democracy is, in fact, people taking care of themselves.
The question, then, is how democratic is our democracy. We have many difficulties. Some of those difficulties have to do with the problem of income inequality, which I have already spoken about. Some of them have to do with other kinds of historical, regional and ethnic divisions in Canada.
Let me just say one word about inequality and democracy. The United States, which has the highest level of inequality, also has traditionally had the lowest level of public voting in the western world. The reason for that is pretty clear. The very poor in the United States do not see the government as having much to do with them. Rather, the government is something that does things to them. Indeed, when I am in the United States discussing poverty policy, my discussions are usually with people in Washington, academics, and well-meaning people talking about what "we" will do to "them".
I began with a basic proposition that is my answer to your question: low inequality is a precondition for democracy. If you allow inequality to rise, you erode the conditions that make democracy possible. That does not mean that income inequality, material inequality, is the sole condition making people feel that their government has little to do with them. The other kinds of cleavages that we have alluded to here are equally important.
[Translation]
Senator Ferretti Barth: You mentioned literacy. Increasingly, people have access to well-paying jobs. I recall the 1970s. There was work for everyone in Montreal, even for new immigrants. Foremen told workers what they had to do and they responded like robots. Later, though, it became important to have well-trained workers. Illiteracy was a common problem. Soon, workers had to be skilled and have a certificate of qualification. They needed to put in many hours on the job in order to keep their job.
This has been going on for many years now. Now that we are aware of the problem, we want to resolve it. We are gradually doing that. Would you not agree?
[English]
Mr. Myles: I have given you some bad news. To cheer you up, let me give you in response some good news as a nice change of pace. If we look at the cross-national data on literacy, something very striking and sad comes out in the United States. There is absolutely no difference across age groups in the levels or distribution of literacy. In other words, the young people coming out of the school system in 1990 have levels of literacy similar to those of people aged 55 to 64. That is after massive increases in school participation across time.
Canada, in contrast, does show real gains. That is, if one looks at the older age groups and the younger age groups, one can see real gains being made across the generations. Something good is happening, so the cup is half full, not just half empty. The rates of low literacy among our young people are still twice those found in Europe but they are much lower than those found in the United States.
The Chairman: Is there any significant regional variation in Canada or provincial variation in what you call the national scandal?
Mr. Myles: Is it a regional scandal?
The Chairman: Is there significant regional or provincial variation?
Mr. Myles: I cannot answer that question, Senator Murray. I have not looked at the regional breakdown on those numbers, quite frankly, because that has not been the focus of my work.
[Translation]
Senator Ferretti Barth: My background is Swiss Italian. There are many recognized arts and trades institutes in Europe. Young persons who do not wish to go on to university may choose a trade school based on their area of interest. They receive theoretical and practical training, along with a diploma upon graduation. I do not know if we have these kinds of institutes in North America.
Parents here want to send their children to school. They make tremendous sacrifices to give their children an education so that they can become doctors, engineers, lawyers and so forth. It is almost an obsession with them. Universities and colleges turn out a high number of professionals. However, the result is often a brain drain because graduates are unable to find jobs. What should we do to address this problem?
[English]
Mr. Myles: The phenomenon you are describing is, of course, often brought up in discussions of, for example, the German apprenticeship system, in which virtually 80 per cent of young Germans eventually get some kind of occupational qualification either through the post-secondary system or through the apprenticeship system. Getting those qualifications provides them with links to the labour market because employers participate in those programs. It is certainly the case that young German workers do not bear the brunt of the problems that have emerged in Germany over the last decade, whereas in North America it is primarily the younger workers who have borne the brunt of the problems.
Some people feel that perhaps we should try to import that system. Some elements of it would be nice. I would think it a little bit Utopian to bring that system holus-bolus to North America. The work-study programs in Canadian universities and high schools that try to link young people with the labour market while they are still students are experiments in this description.
Let me point to the second part of what you just spoke about. Why is it that Canadian parents, especially middle-class Canadian parents, will be unhappy or upset if their child does not go on to get at least a bachelor's degree in university and preferably some post-graduate certification? That goes back to the very first point I made about the earning structure in Canada. If the only way of making a decent wage is to get up near the top of the income distribution, it is quite rational for parents to push that line on their kids.
Maybe I can shock you a little bit by drawing another comparison. I have been living in the southern United States for the last few years. If a child comes home and says, "I am going to become a schoolteacher," it is a little bit like a child coming home and saying, "I am going to become a nun." Being a schoolteacher is very low paid work in the southern United States. It does not allow, as it does here, an individual or a family to sustain a reasonable, even middle level lifestyle. It is almost considered charity work. The salaries are extremely low. Parents do not want their children to become schoolteachers. Salaries of schoolteachers in Canada are much higher, relatively speaking, than they are in the United States, and here it is considered a respectable profession.
I think one can expect that, if a clerical worker or service worker is so low paid that parents do not have an expectation that their child would be able to maintain a decent standard of living, this attitude will get reproduced. In other words, these things feed into one another. The low wages in those occupations reinforce the belief that only the low skilled, the unable, will go into them. As a result, we spend all our time trying to equip our kids with Ph.Ds.
Senator Cohen: I want to support a couple of your statements. You talked about the top 20 per cent of the class getting all of the attention. It really horrified me that the bottom 20 per cent do not get the attention they need. In the 1970s, my son was teaching. At that time, the classes were streamed into A, B and C. My son was told not to concentrate on the Cs because they will not achieve, but to put his work into the As. He chose the Cs. That was when the book Future Shock by Toffler came out. He took those "C kids" and put them in a circle in chairs and they discussed that book. He said their thirst and need for knowledge was absolutely amazing when they had been totally ignored. That situation was repeated. After six months he gave up teaching. He said it was futile because that was the mindset.
Unfortunately, here we are in the 1990s and you are telling us that the situation has not changed much. I think it is something that we have to sink our teeth into and do. As for your alarming statistics on illiteracy, I think, Mr. Chairman, that we should take a look at the regional breakdowns that you asked for. That illiteracy could be the basis for many of the problems that we are seeing in the whole area of unemployment.
One more point is that the poor do not vote. I work a lot in the area of poverty. They do not feel that they have a vote. We have never heard of a politician that runs on a platform for the poor. The amazing thing is that when a politician works with the poor, they cannot believe their good fortune. They cannot believe that there is somebody who wants to speak for them. I think that this is a door opener that many politicians should pay attention to, because the poor are a group that is growing in proportion and nobody is taking their concerns seriously.
I have a point to make about community colleges. In my province of New Brunswick, the graduates of community colleges, where they have skills training, are almost 90 per cent employed, whereas the graduates from university with their Bachelor of Arts degrees are struggling and going back for another degree and another degree. It really backs up. The information you gave us this morning is so valuable.
Mr. Myles: I think it would be a big mistake on our part to think of the problems of our least skilled students purely as a problem of curriculum and teachers. It is not just something that happens in the schools. It is also something that happens outside the schools in terms of what demands society puts on the schools and what employers want. Are employers telling the schools, "We need good clerks and we could pay them more if they could do A, B and C" ? I know from my own experience that when I hire a research assistant, if I know that I can get really high quality work out of that student, I am quite willing to pay that student $10 an hour instead of $8 an hour.
The Chairman: What did you mean by the phrase "a labour market out of control" ?
Mr. Myles: We can speak about that at many levels. I am a great believer in markets. I think the notion of a market is a wonderful idea. Markets are very efficient for getting bananas to Winnipeg at Christmas and getting turkeys on our table at Thanksgiving. Markets are efficient at dealing with commodities, things that are produced for sale. However, people are not commodities. At least, they are very different kinds of commodities. When we begin to act and to think as though people, our workers, ourselves, are simply the sum total of our commodity value and when we let an unfettered market for people control our fates, that is letting the market get out of control.
I do not think we have ever had a pure labour market. It has never existed. We always regulate the market for people to some degree. If you allow a spiral of ever higher earnings inequality go on long enough, you get yourself into difficult, sometimes irreversible problems. That is what I meant by letting the market get out of control. In the United States right now, it is extremely difficult to deal with problems precisely because the level of inequality is already so high. In other words, once you let the genie out of the bottle, it is very hard to stuff that genie back in again.
When I see that upward trend in Canada I worry because, if that trend continues, I know that once it gets up there, it will be difficult bring down again.
The Chairman: I should know this, but in what field of study was your Ph.D.?
Mr. Myles: It was in sociology.
The Chairman: When you say, "If you allow those trends to continue, that inequality to proceed", are you talking about public opinion or are you talking about government regulation? Is the remedy to be found in the tax system? You have implied elsewhere in your presentation that government redistribution was of limited usefulness in combating that.
Mr. Myles: I did not wish to imply that it is of limited usefulness. I wanted to imply that you soon exhaust the capacity of the tax transfer system to deal with the problem. You can put a bandage on a problem, but if the problem keeps getting worse, you need more and more bandages and at some point you run out of bandages. We have a variety of tools at our disposal that we have always used to regulate the market.
The Chairman: When you speak of "we", do you mean the government?
Mr. Myles: I include the government. I include labour unions. I include corporations and employers' associations. We have many institutions for organizing the market for people.
The Chairman: You mentioned the national child benefit. That is a new agreement that was added on to something done several years back by the previous government. The child benefit that was worked out by the present government and the provinces is, I think, good social policy and good federal-provincial relations. The great advantage of it, as I understand it, is that it provides incentives for people on welfare to enter the workforce; or, to put it another way, it removes some of the disincentives to their doing so. Are there better ideas?
Mr. Myles: I am a reluctant fan of the child tax benefit, although not reluctant in the short run. I think it has proven itself. I think it is a massive improvement over traditional social assistance legislation, which essentially forbade one to work.
The Chairman: This deal enables the provinces, should they wish to do so, to remove those disincentives because it provides fiscal room for them to do so.
Mr. Myles: It provides room for low-income families to improve their actual living standards when they go to work. I think that has been a major achievement. I think we could do better with it, but it was a huge step in the right direction. I get a little concerned about the long term because the other appeal of the national child benefit and the initial child tax credit was that it was financed by savings elsewhere in the child system.
The Chairman: It came partly from family allowances.
Mr. Myles: It was the family allowances plus the child tax deductions that existed back in the 1980s.
The Chairman: Well, what about that?
Mr. Myles: I think that was a wonderful rationalization of the family support system.
The Chairman: In terms of progressive policy, do you think that it was a mistake to do away with the child tax deduction?
Mr. Myles: No, not at all.
The Chairman: No, I did not think so.
Mr. Myles: My point is that we were able to do that partly because we were able to take savings from another part of the social budget and put them into the child benefit.
The Chairman: What is wrong with that?
Mr. Myles: It was wonderful. However, I am concerned about the next time. Five or 10 years from now, if we want to increase the national child benefits again in response to yet higher inequality in the labour market, we will have to put in new funds, new revenues, new taxes.
The Chairman: It is not my role to defend the present government, but they have provided for $2.4 billion over a period of years.
Mr. Myles: I think that is terrific. However, I am a little concerned that because of the national tax benefit, there is a sense in Ottawa that we have now done our thing for the low-income population and it is time to do something for the middle class. I am not opposed to the expansion of the Millennium Fund, for example, or to expanded health care benefits. I am not opposed to any of those programs, but I am concerned that there will be a big shift in priorities in terms of what political constituencies might be appealed to in the next few years.
The Chairman: As you yourself pointed out, progress on matters such as the child tax benefit was made possible because the government a few years ago did away with the universal family allowance and converted the deduction into a more progressive child tax benefit. If you combine the removal of those benefits with the fact that real incomes have been stagnant or declining, you can understand the anxiety of some people of the middle class and the desire of politicians to address that. You cannot go always in the same direction.
Senator Cohen: The child tax benefit program certainly is a step in the right direction but I wanted to point out that it would be far more effective if it were indexed to the cost of living because it is going to lose its value each year.
Mr. Myles: Absolutely.
Senator Cohen: Also, for some of the provinces, once the child tax benefit has been received that sum is reduced from the payments that they get for poverty. Therefore, it might help the working poor but it does not help the people who are living in poverty. Those are two areas where we could improve the child tax benefit program if we took another look at it.
The Chairman: I am glad that you mentioned the role of the private sector and of corporations in particular with regard to such matters as childcare, parental leave and, of course, skills training. Are you aware of any new thinking regarding the challenge facing the private sector now and in the years to come and regarding new approaches that the private sector might take?
Mr. Myles: Possibly the most innovative thinking on that has been going on -- dare I say it -- in the United States, in part, I think, because people concerned about those issues are less hopeful that any solution will come from other kinds of sources. The large American corporations in particular have done some extremely interesting experiments with family policy, both in terms of work schedules and family leave arrangements and in terms of providing other kinds of support for their employees.
There have also been some excellent research studies to which I could refer the committee.
The Chairman: I wish you would do that. That would be helpful.
Mr. Myles: There are models we can look to. I suppose my colleagues in the United States worry that those interesting experiments tend to be done by the leading edge corporations, corporations that are large and quite successful. The problem is finding ways to generalize them outside of those large, successful firms. The question is whether that interesting work in the United States will go beyond the experimental stage. I think bringing the corporate sector into the problem is a good idea.
The Chairman: Would you not also include the voluntary sector?
Mr. Myles: I think the voluntary sector is important. I worry, however, that the voluntary sector will be used as an excuse for the corporate sector not to get involved. I think the people with the resources, the people with influence, have to become involved in those issues. If they are not included and not actively engaged, I would hold out little hope for success. The voluntary sector is definitely important but I would begin by recruiting the big boys and girls.
The Chairman: It may be that there is a role for government and the voluntary sector at the level below the huge corporations, the middle size and smaller size companies.
Mr. Myles: I would think the role of government would not be just to raise taxes and spend money but to mobilize various segments of society, bring them together and play the role of democratic leader.
[Translation]
Senator Ferretti Barth: How do you feel about the advent of large retailers such as Loblaws here in Canada? How will this impact the small business sector?
[English]
Mr. Myles: Are you asking me what my view is of big versus small?
[Translation]
Senator Ferretti Barth: This is truly astounding.
[English]
Mr. Myles: I must confess to having a bias. My father was a manager of one of those big stores, and that concern goes back to the 1920s when he began, so perhaps I am not an unbiased commentator on that kind of problem.
The Chairman: I think we all shop at them.
Thank you very much, Dr. Myles. You have given us a great deal of food for thought this morning.
The committee adjourned.