September 16th, 2014

Math is hard if you’re Justin Trudeau

Yesterday Justin Trudeau announced that he would create 176,000 jobs for a mere $225 million in cash from the EI fund.

Hold on a minute. In the last three years, net employment growth was around 134,600 jobs per year. So Liberals are arguing that they are going to more-than-double annual job growth by lowering premiums for some employers.

A simple “Zap” from Trudeau and it’ll all be taken care of.

But wait, what about the costing of this?

Mr. Trudeau’s second big problem is that his costing only considers net new jobs created, not gross new jobs created. But since every business that expands their payroll receives an exemption for each new employee hired—regardless of how many other businesses lose employees—the true cost will be based on gross job creation, not net.

Statistic Canada data shows that gross job creation is typically about 5 times higher than net job creation, meaning the real cost of Mr. Trudeau’s proposal will be 5 times higher than he claims. Based on Mr. Trudeau’s own numbers, that would be a total cost of over $1.1 billion.

Of course, Mr. Trudeau also seems to forget that exemption will end up going towards many jobs that would have been created anyway.

Economist Kevin Milligan recently noted that an empirical study on job creation tax credits found that you create one new job for every eight jobs that would have been created anyway.

Canada would need to gain approximately 1.5 million new jobs for the Liberal EI premium cut to directly create 176,000 new jobs.

  • If an additional 176,000 jobs really were created, the total price tag could be over $1.5 billion a year.
  • So, if there were no additional new jobs created by this credit, the Liberal plan could still cost as much as $700 million – over three times Mr. Trudeau’s estimate.

While Libs and Conservatives steal from the Employment Insurance fund for badly thought out jobs plans, the NDP proposes measures that will actually get Canadians back to work.