Chapter 6 Blog

The CanWest News Service had an article titled Canada’s economy created 9300 jobs in May, lower than expected, published on Saturday, June 09, 2007.

The article talks about Canada’s unemployment rate still remained at a 33 year low of 6.1 per cent in May even though the economy created 9300 jobs last month, which was lower than expected (Analysts’ forecasts for job creation in May had ranged from 5000 to 23000). Statistics Canada stated “Construction, information, culture and recreation, and accommodation and food services have been the main source of employment growth in Canada since the beginning of 2007.” While these three industries also buoyed in May, the trade sector and the goods manufacturing sector discouraged employment growth. This could also have an impact on wheather the Bank of Canada boosts interest rates in June. But Douglas Porter, deputy chief economist at BMO Capital Markets, believes that the result is not enough on its own to keep the bank from raising rates. The chief economics strategists at TD Securities, Marc Levesque said the real surprise was the lost of 6400 jobs in the service sector last month. He believes this sector should be standing as one of the stronger sectors in the current BC economy.

Connections to Chapter 6:In chapter 6, we learned about multipliers and their effects, AD/AS and GDP. If the Bank of Canada is going to raise interests rates, reducing the spending in Canada (lower aggregate demand) and increase savings. On the other hand, if the Bank is going to stick with the current rate or decrease rate, there will be an increase in spending and less saving, which will increase Aggregate demand, bringing a boom in the economy.

Chapter 5

The Edmonton Journal (November 06 2006) had a article on how the GDP of Canada will suffer when the US undergoes recession.

A senior Canadian government economist suggests we do not underestimate the influences the US housing “bubble” and the slow down of the economy can make on Canada because they change so quickly that the effect is hard to predict.

Bank of Canada governor David Dodge also suggests the same idea. He warned the people that it would be a mistake to underestimate the potential impact of the recent slowing in the economy even though the world economy is more elastic today than in the past. “Slower US growth has clearly caused Canadian GDP to fall short of expectations, but it is important to think of this as a cyclical slowdown for Canada.” He said the impact to the Canadian economy is greater than the bank is expecting.

The export promotion agency said slowing global economic growth would increase the pressure on Canadian exporters. Because the US economy is at the centre of weaker global performance, the slowdown from the US housing market will spread to other economies.

EDC forecast US growth would slow to 2.2 per cent in 2007, which is its weakest performance since 2001. There is a 25 per cent chance that the US economy will slip into recession. The report forecasts global growth will slow to 4.0 per cent in 2007,down from 4.8 this year (2006) and Canadian growth to 2.4 from 2.8 even if the US avoids recession.

Export Development Canada chief economist Stephen Poloz said growth will be unbalanced during this time, led by emerging economies while the manufacturing sectors in developed economies, like Canada, bears the brunt of the slowdown.

There will be a decline in energy and metal exports, which means weaker prices. Consumer goods and forestry will each suffer approximately seven per cent drops. British Columbia being a large forestry sector will bear the brunt of the export slump.

Chapter 5 tells us that GDP is calculated using the sum of consumer spending, the investments made by industries, exports minus imports and government spending. If BC will suffer a lot in the forestry sectors, forest industries will invest less into their business, there will be fewer exports. This clearly interrupts the GDP growth in Canada. In any economy, there will be a time of recession and expansion. Going back in the article, David Dodge says “…it is important to think of this as a cyclical slowdown for Canada.” I think this is quite correct, since a economy can be looked at using a graph with the wave shap (reaching its maximum and minimum).

Chapter 4

The Vancouver Sun had an article about under reported taxable income on January 27, 2007. The underground economy is not only about drug deals and illegal affairs. It also includes the legal transactions that happens everyday.

Canada Revenue Agency has an eye on economic transactions, usually carried out in cash, that are not reported on an income tax return. Economists have estimated, the size of the underground economy in Canada to be approximately 15 percent of gross domestic product.

Ken Peacock, the director of economic research at the Business Council of B.C. said there could have been $25.2 billion worth of unreported activity in 2005 alone. B.C. probably has the largest underground economy in Canada, not only because of illegal deals, but also because of the high proportion of self-employed workers and the large service sector in B.C.

The people in the service industry has the greatest opportunity to under report his taxable income because there could be no paper trail of transaction when a service is delivered. For example, when you pay your hair stylists, how often do you receive a receipt?

In 2004 to 2005, the CRA convicted 211 people of tax evasion, raising an additional $11.6 million in tax revenues, plus $10.9 million in fines. Out of the 211 people, 21 was sent to jail, Bradley Alvarez, communications officer, said. He also said people who do not report income may be receiving government tax credits and rebates to which they are not entitled for.

Similar to the assignment we did at the beginning of the chapter, the report from Vancouver Sun and the articles from the assignment, both reminded us that ALL income from employment, business, property and other miscellaneous sources. Some examples might be tips from working, rental income, whether from an illegal or legal suite.

The underground economy obviously needs some clean up. Canada’s current tax system is self-reporting. Will it help if every T-4 has to undergo some kind of system by some government trustees or officials before they are officially submitted?

Why do these things happen? Don’t you know the services that the government provides, like health care, education , legal aid, all come from tax dollars? If people are under reporting, how are these services going to keep running? Under reporters are just going to take away services indirectly. The real sufferers are the honest tax payers who are probably going to pay more tax because others are not paying their own share.

So if you want to reduce your tax payable, try doing some charity donations instead. =D

Economics - Chapter 3 - Should the medical system be fully under the government, and independent of any unions?

There is an article in The Vancouver Sun today titled Jail nurses vote for strike. As all of you know, some nurses in BC are under the B.C. Nurses Union. Unions help members get better wages, benefits and working conditions.
Prison nurses and other support staff at 10 provincial jails have voted 94 per cent in favour of taking a strike action. But what if the union is not involved with the system? Will there even be any strikes?
I think the government should be fully in charged of the health care system, and it should be independent of any unions. Because health care and medical needs are necessary to ALL, it should be taken seriously. If there are strikes, there will be short of staff, and more or less affecting the public who needs the service. For example: there might be three physiotherapists, but there is a strike, there might only be one, so not as many patients will get the treatment. When strike is not happening, it takes around four to five hours in the emergency until you get your service. Can you imagine how long you will have to wait when they are short of staff? What happens when a seriously injured person came into the emergency and needed aid instantly, but there are not enough nurses and staff to go around and help every body?

Without strikes, public will have more of a reliable medical system. Just like the education system, when teachers goes on strike, all public schools are not in session, this really affects the progress of learning for us, and for the long term, we are the people who will be working in the near future, we might miss out opportunities because we missed the x number of weeks and was not prepared.

Private medical clinics do not have registered nurses, who can only provide simple services, but it restricted to provide any services like working in a surgery.

Every registered nurse must be a member of the B.C. Nurses Union. But did they all joined willingly? Willing to sacrifice their income and time to go to the picket line?

Therefore, I think medical system should be independent of unions. Government should be fully involved for better services for the public.

I was listening to AM1470 on the radio the other day, they had a representative from BC Hydro to talk about the growing population and demand in BC. As the population grow, demand for electricity follows. It is expected to increase by 1.7 % every year for the next 10 years. Lower Mainland and Vancouver Island consume around 70% of the whole province's electricity. It is estimated that by the end of this decade, our existing generating resources will be unable to meet the demand. Because of this problem, they came up with an action plan. Their objective is to make British Columbia electricity self sufficient within the decade ahead. The enery plan encourages customers to to use electricity more effieciently or to use less at certain times. Here's a brief idea of how the plan works:

• customers sign up if they want to participate in this conservation plan
  
• two periods in a day - "rush hour" (from 3pm-10pm) & other times
• during rush hours, rate for electricity will be higher
• participants will receive a fixed amount of "rebate" for their higher rates

Personally, i don't think this plan will help meet their objective because during rush hour, this is when most people are home. They cook, shower, wash... etc. Resources won't be conserved even though they WANT to. You don't expect people to cook dinner after 10, do you? Rather than charging them more, I think a better plan would be giving out benefits to those who does not exceed a certain kWh in a month. Those who exceeds will not gain or lose anything.

How does this relate to Chapter 1 & 2:
Electricity is a scarce item. This is why we are trying to conserve resources for future use. But will this particular plan really help conserve resources? We can calculate the costs for a participant using the energy plan.

Question: Whether or not to participate in the energy conservation plan.
Choice: Participate

Oppourtunity Costs: enjoy lower rates

Actual Costs: -paying higher rates
-getting a fixed amount of "rebate" that does not neccessary cover the exceeded amount paid, in other words:
(higher rate x enery used) - (Rebate) - (Lower rate x energy used) = (+) num.

Because electricity is a necessary item, it has no substitutes, it is considered to be inelastic. The "PQ" graph does not really work on this issue, becaue when price goes up, quantity demanded is suppose to be lower. But in this case, price goes up during rush hour, and during this time, people are not able to use less.

For more information about the BCHydro plan, visit:
http://www.bchydro.com/