I want to consider only one question with my five minutes: does the federal government have enough money for further tax cuts?
After many years of large budget surpluses, many Canadians may assume that Ottawa has no problem finding extra cash. In our opinion, the days of large budget surpluses are over. As a result, we believe that if Ottawa embarks on new tax cuts, it will be setting the stage for very large spending cuts down the road.
Last year, of course, the federal government had a surplus of $13.2 billion, but since that time the Conservative government has implemented, by their own calculation, $9.9 billion in tax cuts, as well as further spending for defence and for cash in lieu of child care. As well, they have set aside $3 billion for debt repayment. By their own tally, in the May budget Ottawa would run a surplus of only $600 million.
More recently, we have re-examined Ottawa's finances. I believe our report is being circulated to you now. “Can Ottawa Afford More Conservative Promises?” is the title of the report.
We project that the federal government will have surpluses that are higher than in the May budget. By our projections, the 2006-07 surplus is around $4.2 billion. Remember that in addition there's an extra $3 billion set aside for debt repayment, but there's $4.2 billion available for use. A word of caution: some folks, in describing the surplus, are adding in that additional $3 billion set aside for debt repayment. We leave it out, as did the federal government in the May budget, because we're concerned about how much flexibility there is to fund new tax cuts or, of course, spending measures.
By our projection, the government has about $4.2 billion to work with this year, about $4 billion the following year, and maybe $5.3 billion in the third year. This is factoring in the fact that the forecasts for economic growth are far more pessimistic than they were in May. Of course, if they deteriorate further, then there will be less surplus than we have suggested.
Let's just look. Assuming they have somewhere around $4 billion to $5 billion in surplus to play with for the next three years, is that enough leeway to cut taxes further? Before the government can make new promises, it has to pay for the promises it has already made, promises that were not costed in the 2006 federal budget--nor are they factored into our projections of $4 billion to $5 billion of surplus over the next three years.
What is still on the government's to-do list that it still has to find money to pay for?
Number one, the Conservatives promised to address the fiscal imbalance. While they haven't told us how or when they will do that, this is potentially a very pricey item.
Number two, the Conservatives promised to reduce health care waiting times, yet no additional money was budgeted for that in the last budget.
Number three, the Conservatives promised more defence spending in their election platform than was accounted for in the May budget, so we should expect further defence spending of perhaps $4 billion between now and 2010-11.
Number four, the Conservatives promised to eliminate the capital gains tax on reinvestment. This is potentially very costly. I wouldn't be surprised at $2 billion per year, but we could debate that, depending on the specifics of the actual proposal.
Number five, the Conservatives promised to cut the GST rate by a further percentage point. Again, this is very costly; it is more than $5 billion per year, depending on when it's implemented.
We don't precisely know when the Conservative government plans to implement these measures. They don't have to do them all in the next budget, but the fact is that they could not afford to do all their promises in the next budget even if they wanted to. By our calculations, the GST cut alone would put them in deficit if they did it right now.
Under these circumstances, we don't think it's responsible for the federal government to make further tax cuts. If they make further tax cuts, they're going to have to find more money. There are two possibilities we would like to highlight for you: they could privatize assets, or they could cut spending more dramatically than they have so far.
In the last election platform they promised $22.5 billion in spending cuts over five years. Our concern is that a further tax cut now will set the stage for deep spending cuts in the future and will generate a straitjacket for any future government, of whatever party, which will be forced to radically downsize government to pay for these tax cuts as they hemorrhage money out of the treasury for years to come.
This morning, I would like to give you a rather brief outline on the state of the American economy for 2007.
According to current forecasts the predicted growth would be between 2.3% and 2.5%, but the American economy is sending out mixed signals. On the one hand, there is a very healthy corporate sector, but on the other hand, the real estate market is in a free fall. The great concern now is whether or not the recession in that market will affect consumer spending.
In my opinion, there is every likelihood that consumer spending will be seriously affected, a trend that has not been properly accounted for in economic forecasts.
I have with me a series of figures representing various US real estate market indicators; they are from an American publication, and I have been granted permission to use them. What these figures show is that, over the past five years, there has been an unprecedented increase in wealth. What is important to note, however, is that American households have used this wealth to spend beyond their means. People have been spending more than they are earning, there is a negative household savings rate, while the rate of spending and consumption is enormous. It is estimated that as much as $300 billion has been spent by consumers against the rising value of their properties.
A falling real estate market will put an end to this source of consumer funding and will no doubt force American household to return to saving. The effects of a slowdown in the real estate market are two-fold. There is the investment side, with residential housing construction in a normal year representing about 4.5% of the GDP in the United States. The rate for the past two years was 6%, meaning that a return to traditional construction rates would cut economic growth by 1.5%. That is a direct effect.
Then we have the indirect effect on consumption. If sustained consumption represents $300 billion, then 2.5% of the US GDP could be affected if people begin to spend less.
American forecasters are currently watching the trend in retail sales. They want to know if household spending is cooling off. The October sales figures were rather disappointing, but current opinion is divided. There is a great deal of uncertainty as to the US economic performance for 2007. In my opinion, a forecast of 2.5% is rather optimistic. Americans have been overspending for years now, and any slowdown in the rate of consumption will have a greater effect on GDP growth than current forecasts seem to predict. Therefore, a 2% forecasted increase for 2007 would appear to be closer to the upper range than what we might reasonably expect in terms of growth for that year. That being the case, there is a great deal of risk in the American economy at this time. And there is another risk — I don't cover it in this document but the Bank of Canada is well aware of it — namely, the effect on the US current account.
That is all I have to say. I will be happy to answer any questions you may have. I believe that I have stated the main point. Thank you.
Thank you for inviting me. Bonjour.
What I'm going to do is identify some of the specific tax changes that I think you'll be hearing about this afternoon and why I think they may be included in the package and what their impact on the economy might be.
I think you're going to see several specific tax changes--in fact, tax changes in most areas. As for personal income tax changes, I would say you can take these to the bank. The Conservatives will probably re-establish the levels for the lowest marginal rate that the Liberals left us with in the first part of the year, as well as for the basic personal amount. There is no way the Conservatives are going to want to go into an election with those two rates higher than where the Liberals left them.
On corporate income tax, the Conservatives have already said what they'd do. I think what they will say is that they will give a very high priority to getting down from the 21% to the 19% as soon as possible, fiscal conditions permitting.
On the GST, they'll remind us of the political commitment to that, and other than that, it's just too expensive to do anything very much very soon.
As for the marginal effective tax rate on investment, we'll probably hear quite a bit about that because that is what really affects productivity. Accelerated writeoffs for manufacturing equipment, possibly.
On capital gains, again they've had quite a few months to give a more precise, thorough think to those initial plans and may make a commitment to come out with a package that's affordable and manageable in budget 2007.
As for income trusts, I don't think they're going to address that specifically.
Tax policy issues. First is harmonization of taxes with the provinces. Here it's really the four western provinces and maybe Prince Edward Island that are at issue, but the main gains come from harmonizing with B.C. and Ontario. This is really a triple whammy win for the Conservatives and this is why they will put such a high priority on tax harmonization. Number one, if they do that, it does aid productivity. It can also address the fiscal balance question, because it gives some room to the provinces, if they wish to take it in a harmonized rate. As well, of course, it fulfills a political commitment they had.
On the fiscal balance and equalization issue, I think what we will see and should watch for is that they will make every effort to try to claim they've addressed that issue without spending very much incremental money on it, and we can talk about possible ways of doing that later.
On the issue of income splitting that you've heard quite a bit about lately, I wouldn't be surprised if they say they will undertake a study paper to be released later. I think that's a fundamentally sound policy, but it is expensive.
I think we're going to hear a lot about a productivity/economic growth agenda. That will probably be the theme of it, and I'll make just a couple of points on that.
Economists will tell you how important that is, that it's really the only route to sustained increases in our standard of living. Sometimes productivity/economic growth is thought of as the same thing as tax cuts, and whenever I address this I try to make the point that this is not the case. A lot of really important things on the program side can be done for productivity. Training and education infrastructure are important, and there are many important things on the regulatory side as well. So that's important.
Productivity/economic growth is always a matter of degree. Virtually any tax cut will have some impact on productivity. Often it's secondary. Sometimes it can even be negative. Even though he is probably going to talk long and emphatically about a productivity/economic growth agenda, it's always a question of balance between that and other issues that are done for equity programs.
I want to emphasize for people who are interested in a productivity/economic growth agenda that the key thing is, what does this tax change do for the incentive structure?
What we really need in this country are a lot more tax cuts that increase the incentive to work, increase the incentive to join the labour force, and increase the incentive to save, innovate, invent, and invest.
Those are really the questions you should be asking about what it does for that incentive structure.
The second item of great importance to us is fiscal imbalance. Of course, when it comes to the surplus, we are not expecting it to be as high as what as been experienced over the past 10 years, even though it will be appreciable, since the first six months saw it at $5.3 billion. We must not, however, forget the expenditure side of the equation.
We did a little study. From 1997-1998 to 2005-2006, federal government spending increased by $235 billion. The surplus was $67 billion, for a total of $302 billion. This flexibility was either used for expenditures or remained in the surplus.
Expenditures increased by 58% during the same eight-year period. Thirty-nine per cent went to transfers, 62% for department operating expenses and the increase for the population and inflation was 24% while the GDP increased by 33%.
Do you not think that the government expenditures might allow enough flexibility to settle the fiscal imbalance? Not by cutting funding to literacy and women's groups, as they did in September, but by reducing spending on the government operations themselves, which appear to be increasing at a faster rate than the economy, the population and the consumer price index.
I would like to hear your opinion on this.
If I could start again, there is what we in the fiscal business call a natural wedge that is formed. That's because the interest on the public debt is tending to be flat to trending down. In fact, even if interest rates don't go down further, you will see flatter declining interest on the public debt because bonds were being issued at 10% ten years ago and they're being reissued at 4% as they come up for renewal. That gives you the fiscal dividend that you referred to, and it allows you to run your program spending up to some degree. But that has already been done to a considerable degree.
As you noted, program spending has been rising at a considerable trend in the May budget. While in future it is not to rise at quite the pace it had in previous years, it's still rising at a fair clip. We still have to go off the base of the surpluses that were projected at that time, and, as I said, I think they could be $1 billion to $2 billion higher than that. If a government wishes to keep to its commitment of paying down $3 billion of debt, that doesn't give an awful lot of room for additional initiatives, and there are a number being floated around in addition to the fiscal imbalance.
I should just say something in reference to your question about fiscal imbalance. You were asking about the growth on a national basis. There has never been a time in Canada that a national number has been less relevant for anybody in the country. There's no part of the country and no sector of the country growing remotely close to that average. For example—
Thank you, Mr. Chairman.
We thank all of you for being here. Whether we're members of the government or the opposition, we appreciate reality checks on the finances of the nation. I think they're very helpful to all of us.
As you will know, we've been focusing, as a committee, on productivity and international competitiveness. I found very helpful an article that one of you did. Don Drummond did an article in the fall issue of the International Productivity Monitor, but he actually referred to work that all of you have done on productivity. He said that economists in Canada “believe weak productivity is compromising the Canadian standard of living and threatens many aspects of the quality of life that Canadians cherish.” So this is a very important issue. The article identifies quite a number of areas where Mr. Drummond feels there is a consensus among economists on measures that need to be taken to increase productivity to make sure that Canada's standard of living and quality of life is maintained and enhanced.
I would like to give each of you an opportunity to emphasize to the committee the two or three areas where you feel it is most important for the government to take action to ensure productivity, which of course really is Canadians' standard of living and quality of life. For which areas would you say, if you don't do anything else, do this to maintain Canada's productivity?
Maybe we can start with you, Mr. Orr, and just go around.
I have more than four reasons, but I won't go through all of them. I'll pick out four, as you requested.
I think our number one problem on the tax side is the high marginal effective tax rates. They kick in for people up to about $50,000 in income. I know we instinctively think of marginal tax rates as being bad for high-income people, but they're much higher when you take away the social benefits at low incomes, usually higher than 60%. So there's very little incentive to upgrade your education, take second shifts, and look for a better job and what not.
I would say that the employment insurance system would be number one. There's been no study that I'm aware of, or none with any credibility, that hasn't said that this is a disincentive. It subsidizes people to stay where the jobs aren't, and discourages them from going to where the jobs are.
My third one would be immigration. We're within a few years of having 100% of our population growth being determined by immigration, so the economic welfare of immigrants will largely determine the economic welfare of the nation. That's a very sad story, and it has been for the last 20 years. The problems go through the whole thing--the design of the system, the administration of the system, the integration of immigrants.
My final one is a remaining problem, not in the federal jurisdiction but largely in the provincial area. We talk about the high rates of taxation on capital, and largely they're provincial. We still have provincial internal barriers to trade. We have overlapping jurisdictions. One aspect that I particularly appreciated in the spring budget was Mr. Flaherty's use of some fairly harsh, bold language to say that if we want to get our productivity up, we need some improvements on the provincial side, not just federal.
Thank you, Mr. Chairperson.
Thanks to everyone for coming today. I trust that you will be giving serious consideration to an ongoing relationship with our committee, since we are interested in, and passed a motion to ensure that we have, some independent forecasting advice until such time as the mechanism in Bill kicks in. We hope this is the start of a regular appearance before the committee.
The main reason we need you here today is that the minister gives his economic update this afternoon, and we're in the middle of finalizing our report based on pre-budget consultations. We're trying to get a lay of the land that's as accurate as possible, starting with the surplus dollars available.
I'd like just a quick go-round on that again. Ellen has given us an indication not to expect more than $4.2 billion surplus for this year, and for next year a forecast of $5.3 billion. That is way lower than any of us expected. That's been a real eye-opener for me and I'm sure for others.
If I go back to the reports that you gave us all last October, I know that we're all in the neighbourhood. Global, for example, was thinking more in the line of $8 billion or $9 billion flexibility. I think that was the same for everybody across the board. So things have changed.
Since Ellen is the only one who has given us a specific number, does everyone here concur with that number, in a ballpark way? Are we looking at roughly $4 billion in surplus for this year?
Okay, but you're giving us a ballpark figure, so we have to take that into account when we assess both our pre-budget presentations and whatever Mr. Flaherty is going to talk about this afternoon. There is limited room. If you consider the fact that another drop in the GST is about $6 billion, even on that basis, just on that term, we don't have enough money, never mind income splitting, which is $5 billion or $6 billion, never mind taking into account all the other things Ellen and others mentioned. We have to be very careful about what we push for and what will actually produce productivity.
There is a real debate about whether or not another drop in corporate income tax will do that. That's an expensive proposition. The question for us is, does that produce competitiveness and productivity?
Don Drummond had some comments in the paper not too long ago questioning whether or not the business sector has done its job of translating tax breaks into real investment in this country that leads to more jobs, higher productivity, and so on.
My questions are as follows. For anyone who wants to answer, does a drop in the corporate income tax from 21% to 19% produce much in terms of productivity? Does the capital gains really do what you're talking about? Does the marginal effective tax on investments do it, or do we need to look at some other things? For example, could you say that the cancellation of the national day care program produces competitiveness? Would it not make sense to look at that in terms of increasing productivity? On some of the other stuff the government has done, does an increase in defence spending increase productivity? Does the 1% drop in GST produce competitiveness?
Ellen, maybe you could start, and then Don and then Dale. Could you give me a response?
Thank you to these witnesses. Certainly it's much more pleasant listening to you on this side of the table than on the other side of the table.
I want to go with the projections of surplus for the next couple of years, even though it looks as if a lot of commitments made in the 2006 budget go forward four or five years, which probably to you folks means a lot more than it does to the average folks.
Ms. Russell's projection is that it's going to be in the range of $4 billion. Mr. Drummond's is $1.8 billion to $2.8 billion, and I assume Mr. Orr is somewhere in there, but certainly not disagreeing greatly with that. I want to go through what's left.
If he goes with personal income tax changes--in other words, he takes the November 2005 update, photocopies it, and puts pretty blue paper on it--what is that going to cost him, and where will that leave him? He's bumping up the first basic personal exemption and presumably bringing the marginal rate back down to where it was at 15%. What is that going to cost?
That is for Mr. Drummond, or any of the three.
But you can certainly understand a rationale for that. There's quite a penalty right now for trade in stocks. You want to hold off because you don't want to incur the tax. The original election campaign document put the cost at $100 million, and by my reckoning, that's off by at least a factor of ten. It depends as well on whether you allow it just for individuals. Everybody forgets that corporations have capital gains as well. In fact it's about the same amount of revenue as for individuals, so that ten factor could even be higher.
You could certainly do it. You might remember that in 1985 there was the ISIP program, which was an account that you were allowed to establish over a lifetime. It only taxed capital gains on the real portion. My suggestion is that if you wanted to go ahead with this, set it up as a lifetime account. The trading has to take place within an account. If you want to limit the costs and limit the regressivity of the measure, put on whatever lifetime cap you want--$100,000, $200,000, $500,000.
So it is doable. I just don't think one would want to allocate that much revenue to do it in an unrestricted fashion.
I'll make two comments.
First, I agree with Don, and I think the overwhelming issue here is the concept that the family--the household--is the spending unit, and the taxes should be based on that. That's why I and a lot of other economists are in favour of income splitting.
This notion that there could be some side impact on labour force participation makes me very frustrated. It leads me to believe that some people here might not favour income splitting because of this side effect. But as far as I can see, no party here is going to tackle the employment insurance system.
If you want to do something, if you're really concerned about labour force participation, then there are 300,000 people in Quebec and eastward, under the age of 45, who are unemployed today. By our forecast and most other people's forecasts, there will be 300,000 people in Quebec and eastward unemployed in 2010. Many of those people will be the same people. Most of those people could get jobs in Alberta and B.C., and the federal government does not really focus on this question of moving people to where the jobs are. They're spending a lot of money on unemployment insurance, but there is not a high priority on moving people from one province to the other to go where the jobs are.
As a matter of fact, as you know, the unemployment insurance system now is perverse, in that sense. Qualifying for unemployment is easier if you're sitting in an area of relatively high unemployment. It should be the reverse. There you go. If you're worried about incentives for labour force participation, it's sitting out there for you to take action on.
Ms. Russell, you made a rather impassioned plea, it seems, for keeping government revenues higher. It's kind of ironic, in a way. The reason you're here, I think, is in large part because the previous government's tendency was to use fiscal prudence excessively and to therefore create excessively large surpluses, which deprived Canadians of debate on the use of said surpluses, because their forecast didn't match what Canadians ended up producing in terms of surpluses. And now all of you are chiming in on the need for us to be fiscally prudent and to actually be very conservative in our projections, I think.
Madam Russell, you made the impassioned plea that we should make sure we have more revenue in the hands of government so we can do good things with it. I wonder if you extend that thesis to the idea that we've overtaxed Canadian workers--some estimates say by over $40 billion--certainly in the EI fund alone, over the last decade. Surely you don't carry that thesis to the idea of keeping the EI premiums excessively high, because that would really be a tax on Canadian workers and small business largely, wouldn't it?
Thank you, Mr. Chairman.
I would like to come back to family income splitting and what you see in terms of an impact.
Those who support this type of measure often say that it would favour the middle class, that it is a measure intended for the middle class. I am not a forecaster, which is why I would like to hear your opinion. To my way of thinking, middle class means a family with a small house, two working parents whose income is about the same, who send their children to school, etc. I would like to know how a family, with each partner earning about the same amount, would benefit by transferring part of one income to the other partner, when both incomes are essentially the same. It seems to me that this type of measure would be more advantages for a couple where one earns a very high income while the other stays at home or earns much less than the partner.
Am I mistaken in my assessment of the average middle income earner and am I out in left field when it comes to assessing the impact that will have on the middle class? Who would like to be the first one to respond?
Income splitting can only be billed as a middle-class item. It's exactly the same as virtually any tax cut. The vast bulk of people are in the middle class, so that's the vast bulk of people it affects.
But just by definition, it affects people who have unequal distribution of incomes. As you pointed out, if both members of a couple have $30,000 of income, there's nothing in it for them. The greatest benefit is in the less equal incomes. In the extreme, if one person has a million dollars, and one has zero, they're going to have a phenomenal savings. It could affect low-income people as well. If one had $45,000 and one had $15,000, there would be a considerable savings. Obviously the split between the two incomes is where you really benefit. It's just the same as with the pension splitting that was announced on October 31.
I'm going to have to go very quickly, because I have so much I want to say.
I guess I'd start by indicating that the three elements that of course go into a fiscal forecast are revenue, interest payments on debt, and program spending. It doesn't seem that we're really considering all facets of some of this in some of the presentations. Certainly, Ms. Russell, you may have delivered, if not the most partisan, certainly one of the top 10 of presentations that we've actually received.
In considering tax cuts, you're doing a very straight-line approach to your calculation. Have you given any consideration to economic expansion from a tax cut?
My thanks to the presenters. It's been interesting, as always. I want to continue the line of thought was using, and I think was as well.
I like numbers. It's nice to talk about 3% of the GDP, but let's talk about numbers. As an accountant, I like to see what the numbers are. If we look at what the projections were from the last independent forecasters, pretty well everybody was almost within $5 billion in terms of program expenditures. It's the revenue. Everybody was predicting around $210 billion, but the revenues came in at $222 billion. I know there were some accounting adjustments, but we're still predicting $227 billion this year, or maybe in the $230 billions. Isn't the growth going to come from the revenues?
Mr. Orr, if we look at what The Fiscal Monitor is saying, it's $5 billion. Shouldn't we double that and say we're still expecting $12 billion to $13 billion? That's easy mathematics. The revenues should be going up. Finance always seems to be undercutting. I think you guys underestimated revenues. Shouldn't we be looking at $13 billion to $14 billion?
Really, what happened in the last budget—I'll get to you as well, Ellen—was that the government decided to cut the GST, but they increased income taxes. It was almost an offset.
Mr. Orr, perhaps you can answer that, and I'll give Ms. Russell a chance as well.
I'm going to give the rationale on why I said that.
It's been a source of frustration to me all the time I worked in government, because everybody would always say that with all that spending, there have to be billions and billions of dollars that somehow just disappear, so you can cut and no one feels it. Obviously, by definition, every single dollar the government spends goes to something or to somebody, and there are always implications to it.
You have to make choices, and Parliament makes choices. You're politicians, so you therefore have to make political choices. But there isn't some little mysterious bag out there that you can cut and no one's going to feel the effect of it.
So yes, the cherished programs get touched, as does the money that goes to people, whether they're civil servants or people on some type of assistance. That's the harsh reality of the world. Unfortunately, you have to face those choices when you cut spending.
I want to come back to that. I think everybody can see it's a dumb choice, but one of the arguments that were made by our colleagues opposite, including the one who will rebut me, is that it's an effective way to help those low-income Canadians who aren't necessarily helped by a lower marginal rate but who don't pay tax.
I asked the Library of Parliament for some information on this, and what I had back was the estimated savings from a 1% reduction in GST, from 6% to 5% . For the average single person making $20,000, it would be a savings of $52, and for the average Canadian making $100,000 or more, it would be $647. That's startling to anybody who figures out that the more you spend, the more you save. I would argue that not only is it a dumb move, it's also a mean move.
I wonder, Ms. Russell, if you have a comment on that.
Or the low-income supplement of the child tax benefit, or many other ways that we could assist. Thank you for that.
I want to ask about education. Mr. Drummond, I had the pleasure of being at a conference you spoke at maybe a year and half ago in Halifax--the AAU. You made some very good points about the competition from emerging economies and the fact that Canada has to move up in the value chain. We have to invest in education, in R and D. Tuitions have gone up. The student-to-faculty ratio is a lot worse than it was 15 to 20 years ago. We need more money. What we've seen in research and development and on education from the government has been pretty skimpy.
The focus has been on tax credits that will do nothing to get Canadians into university or community college, upgrading their skills, but it will help those who are already there.
I wonder if any of you would have a comment. How do we educate more Canadians? Should the focus be on low-income grants? Do we need more research or should we continue tinkering with the tax system, which helps people who are already going to university and/or community college?
First of all, to the credit of the current government and the previous government and the provinces, Canada has started to reinvest in post-secondary education. We just about killed the beast off in the 1980s and early 1990s, but we have fresh wind with that. We have a couple of weaknesses in graduate programs and the like, but we're fairly strong.
I don't think student tuition fees themselves are the problem, but you absolutely can't allow financing to be a restraint to somebody going. I would urge you to look at a proposal that was kicked around previously in Canada, but we never went with it, and that was income-contingent repayable loans. The student gets the money up front and pays it back according to income. That will get rid of the financial burden at the beginning of it. That does need to be complemented with low-income grants, but the government has moved in that direction, as most of the provinces have as well.
It was great. That was actually an interesting debate to watch.
I'm certainly not going to rebut my good friend across the way, other than to say it was interesting to hear him say that the cut in the GST was a mean and dumb move. He represents a party that actually wanted to eliminate it entirely. I guess it would have been seven times as dumb and seven times as mean if you had actually done that.
In any event, since January, approximately 260,000 full-time jobs have been created. Mr. Orr, you made a really good point about the.... I think all of us enjoy travelling across the country and learning a lot about individual provinces, and seeing the bounty, if you will, with respect to Alberta.
On the transfer, I was wondering if you could comment on two things: one, why you think there are an additional 260,000 people working in this country today who weren't working in January of this year; and further, how we would accommodate the transfer of those 300,000 jobs you spoke about, in terms of making sure they have the opportunity to be dispersed throughout the country.
I guess the starting point is where the jobs are coming from. They're disproportionately coming from the west. Quebec and Ontario have been particularly weak. We have an important manufacturing sector, and we've seen a tremendous shedding of jobs in that area.
As I noted before, the national statistics right now are completely meaningless, for a whole host of variables. For example, with inflation, we have a bizarre situation. Every single province other than Alberta is below the national average. The real gross domestic product in Alberta increased this year by about 7%; the nominal income growth there is probably more like 14%.
Looking at the impact does somewhat mask the weakness we've had in the manufacturing sectors. That's really a story of some ongoing struggles in adapting to the stronger value of the Canadian dollar and, now, some additional pressures from the weaker demand from the United States.
The main reason job creation has been so strong is the strength in the energy sector. A lot of that job creation has been in Alberta--in vast disproportion. Also, there are the interest rates. Even though they were moving up, they're still relatively low by historic standards and they are helping the construction industry.
What can we do to increase interprovincial mobility? I mentioned EI, but I want to emphasize that the perversities in EI are only a part, maybe even a small part, of why interprovincial mobility is as weak as it is.
One thing I would like to see is a program, in HRSDC, for example, specifically focused on interprovincial mobility and looking at the family as a family. It's a big decision to make that move, find the job, help the family move, counselling, and all that. It's a social program, to help that mobility. I think that's something the federal government could do. I harp on EI, because we've been talking about it for 15 years. It's within your grasp to make those changes. But it is only a small part.
At the same time, I should say that what has happened in the province of Saskatchewan is amazing. Job creation has been weaker in Saskatchewan over the last decade than in most of the eastern provinces, yet the unemployment rate is always one of the lowest. People move from Saskatchewan when job prospects are weak; they don't move from the east.
So you can't just blame our EI system. It's a very complex issue as to why there are all those jobs out there and we have 300,000 people in the east who are unemployed.