To the editor:
Successive Liberal and Conservative governments told us corporate tax cuts will create jobs and encourage investment.
In fact, from 1999 to 2009 investment in manufacturing has fallen by an average of 2.4 per cent per year.
Machinery and equipment investment in manufacturing fell by 1.6 per cent per year. A recent Conference Board report puts Canada 13th out of 16 advanced countries in terms of productivity.
The investment slump also helps explain our sluggish job-creation record.
In November 2010, Canada had 374,000 more jobs than in November 2006, an annual increase of 74,800. That might sound impressive, but over the same period, Canada's working-age population rose by 1.2 million or 253,000 per year.
Meanwhile, Canada lost 274,000 jobs in the goods-producing sectors and a devastating 438, 000 manufacturing jobs over the past five years.
In the recession - just as in the boom that preceded it - corporate profits have outstripped employment, investment and wages in Canada. It's one more reason to abandon the strategy of cutting corporate taxes, which clearly hasn't delivered jobs or investment.
Corporate profits fell from $65.4 billion in the fourth quarter of 2008 to just $55.1 billion the following three months. But by the end of 2010, profits more than recovered their level of two years before, rising to $65.5 billion in the fourth quarter, up more than 17 per cent in 2010.
Meanwhile, investment, employment and wages have lagged. Business spending on machinery and equipment rose 6.3 per cent during 2010, while labour income (not factored for inflation) was up just 48 per cent, and employment just 1.9 percent.
Statistics Canada points out corporations have long been accumulating cash, not investing it - in spite of generous tax cuts from Liberal and Conservative governments
Unfortunately, there's little sign of a flood of corporate investment despite huge tax cuts.
Recently-released projections for capital spending indicate that while total investment rose 8.4 per cent last year, machinery and equipment spending went up just 4.7 per cent. For 2011, StatsCan states things are likely to be worse: an expected 40 per cent increase in overall capital spending, with just 2.4 per cent in projected machinery and equipment investment.
This helps explain Canada's still-sluggish employment picture. The unemployment rate rose to 7.8 per cent in January; it fell by only half a per cent last year.
Corporations are sitting on mountains of cash; there's not enough investment to drive job creation.
What it doesn't explain is why the federal government continues to stick with the tired, discredited policy of tax cuts for corporations that just sit on their cash rather than create jobs.
Norm Prevost
United Steelworkers Union Local 1-425
