Welcome to The Hub’s Federal Election 2021 Policy Pulse, where we’ll be tracking all the policy announcements from the major parties, with instant analysis from our crew of experts.

With the election scheduled for Sept. 20, we’ll be monitoring 36 days worth of policy ideas, so watch out each morning for the day’s live blog where we’ll be tracking every announcement as it happens.

6:00 p.m. — Daily recap: O’Toole unveils a new wage subsidy program

The Tories announced a new wage subsidy program and the Liberals unveiled a plan to give paid sick leave to federally-regulated employees. Here’s the rundown, with more news and analysis below.

• Conservative leader Erin O’Toole highlighted the “job surge plan” from his party’s platform, which would fund up to 50 percent of the salary of new hires for six months.
• Liberal leader Justin Trudeau promised to grant 10 days of paid sick leave for all federally-regulated workers and to convene a meeting with the provinces to discuss paid sick leave for all Canadian workers.

4:00 p.m. — All this talk of housing on the campaign trail, but no mention of quality of life

The Hub contributor Howard Anglin notes that the word “beauty” is missing from all these housing announcements:

Both the NDP and the Conservatives have been talking about housing prices on the campaign trail, with the NDP promising to build 500,000 new “units” and the Conservatives promising one million new homes.

Amid all this talk about quantity of new houses, there is no mention by either party of quality of life in the neighbourhoods and communities they want to build. At least the Conservatives want to build homes, and not “units,” whatever those are.

If we go by recent Canadian house-building trends, it will mean the same two-pronged approach to urban development: forests of identical condo-towers downtown and ugly tract housing sprawling into the farmland and greenbelts around our cities.

What is missing in this is any thought for the built environment. Why must we build such ugly buildings? The middle-class housing of 120 years ago in New York and London is now the highly-desirable brownstones and terrace housing. We see something similar in Montreal in the attractive streets of the Plateau and Outremont.

Is our goal just a bigger Canada or a better life for Canadians? It sometimes feels like we are being ruled by property developers rather than politicians.

If we are going to keep growing our cities inexorably upwards and outwards as fast as possible (which we don’t have to do), can we at least build liveable neighbourhoods? It is possible. In the 1990s, Calgary turned a former CAF base close to downtown into Garrison Woods, a pleasant community of town houses, parks, and local shopping.

Why did not one party use the world “beautiful” in their announcements about new builds? Attractive houses on streets that encourage community interaction, where you would be happy to let your children play, near local shopping that you don’t always have to drive to, should be the default expectation.

The U.K. recently announced a plan to make all new neighbourhoods and housing beautiful. We’ll see if it proves realistic, but at least their government is talking about it.  

3:00 p.m. — The Conservative wage subsidy could be more than the economy needs

Aaron Wudrick, the director of domestic policy program at the Macdonald-Laurier Institute, weighs up the Conservative wage subsidy plan:

The Canada Job Surge Plan, proposed by the Conservative Party, could be useful to incentivize employment. With Canada’s unemployment rate currently at 7.8 percent, significantly elevated when compared to pre-pandemic levels, this is a legitimate policy concern.  Notably, however, this proposal would principally benefit businesses rather than households, which fills a persistent policy gap that ongoing economic relief has failed to meaningfully address.

That said, with economic indicators already pointing to a solid recovery and with unemployment on a downward trajectory, it is not clear that further stimulus is necessary. Additional stimulus risks raising demand above what the economy can supply without fuelling higher prices. We may already be seeing this with worryingly high inflation – and there is reason to believe that current inflation estimates are not fully capturing actual inflation in Canada.

Finally, with public debt at unsustainable levels, this policy has the potential to be yet another unsustainable expense. While it may seem useful in the short term, the costs of this idea will be borne by Canadians in the form of greater potential inflationary pressure and by future generations in the form of relatively higher taxes or lower spending in public services. 

2:15 p.m. — How many workers qualify for the Liberal paid sick leave proposal?

The Hub’s content editor L. Graeme Smith crunches the numbers on the Liberal announcement this morning:

The Liberals want to make it easier for those who are sick to stay home, announcing today a promise to grant 10 days of paid sick leave for all federally-regulated workers. They also plan to convene a meeting with the provinces to discuss implementation of similar policies for provincially-regulated employees as well. 

How much of a ripple will this promise actually make? Perhaps not much. This is a policy whose general application is largely out of the government’s hands — that’s why the Liberals will need to sit down and work with the provinces if this is to be extended to most workers in Canada. 

Why? Because the vast majority of Canadian workers’ do not fall under federal domain. About 94 percent, in fact, fall under provincial law and jurisdiction. The federally-regulated private sector employs about 910,000 employees across Canada who work for about 18,000 federally regulated businesses and industries. 

Ultimately, then, only about six percent of the workforce would immediately qualify for the benefit as Justin Trudeau has laid it out. Any meaningful implementation beyond that is out of his hands and depends on how much the premiers are willing to cooperate with his plans.

1:30 p.m. — O’Toole’s wage subsidy could help offset biases against hiring the long-term unemployed

The Hub’s editor-at-large Sean Speer takes a deeper look at the Conservative wage subsidy program announced today:

Today Conservative leader Erin O’Toole profiled the party’s plan to boost post-pandemic hiring with a temporary wage subsidy that’s based on a new hire’s unemployment duration.

The sliding subsidy starts at 25 percent for every new hire’s salary (up to a maximum salary of $1,129 per week) and can be as generous as 50 percent for employees who have been unemployed for ten months or longer.

The proposal is premised on two policy concerns. The first is that while pandemic-induced employment losses have been reduced in recent months, there’s still about 246,000 fewer Canadians working than in February 2020 (see graph below). It may be that even as the economy fully reopens the labour market operates below pre-pandemic employment levels due to ongoing uncertainty. The wage subsidy could therefore help to nudge employers to hire new workers and in turn close the employment gap.

The second reason is that long-term unemployment currently accounts for 27.8 percent of Canada’s total unemployment. Long-term unemployment is defined as those who have been searching for work or on temporary layoff for 27 weeks or more.

This cohort ought to be a concern for policymakers because there’s considerable evidence that long-term unemployment can have significant effects on individuals and families — including one’s ability to reattach him or herself to the labour market.

These effects are a result of a combination of what’s sometimes called a “depreciation of human capital” (which basically refers to the erosion of one’s skills through lack of use) and a loss of social capital (which refers to the network of contacts and relationships that come from employment).

The idea of a sliding subsidy may help to offset biases that employers may have to hire someone who has been long-term unemployed.

The outstanding questions about the Conservative plan are: (1) whether generous wage subsidies are indeed necessary to close the pandemic-induced employment gap and (2) the implementation of the wage subsidy including the potential for gaming by employers.

But in theory the Conservative “Job Surge Plan” should encourage hiring and in so doing help unemployed Canadians get reattached to paid work.

12:00 p.m. — Policy deep dive: Why good policy on innovation would have to ruffle some feathers

The Hub contributor Matt Spoke goes deep on the Conservative plan to juice innovation in Canada:

Last week, before the election campaign kicked off, Conservative leader Erin O’Toole announced his strategy for Canadian innovation. I’m glad to see this topic addressed, but I don’t think they’re taking their proposals far enough, and I think that they continue to suffer from what other governments and parties fall victim to as well. 

Namely, politicians think of innovation as a sector of our economy, or worse, as a cute pastime for hoodie-wearing millennials hanging out in government-subsidized startup incubators.

Here are the big takeaways from O’Toole’s plan, and my thoughts on what they should be doing.

1. Reducing the income tax rate by 50 percent on patented technologies being developed and commercialized in Canada, by Canadian companies.
   
   You won’t find me arguing against a tax reduction on startups, but the condition tying this incentive to patented technologies only shows the lack of depth our politicians have when it comes to modern tech. Patents are not what they used to be, particularly in the fastest growing segments of our tech industries building modern software.
   
   This framing of the policy likely benefits incumbents at the cost of new entrants, which is a common theme in most existing government innovation programs.
   
   It also does nothing for Canadian companies with global aspirations, as their revenues will be taxed in the markets that they sell their products and services in.
   
2. Introducing flow-through shares as a tax incentive mechanism to encourage investment in innovative companies.
   
   Although there may be some merit to this policy, there are a lot of nuances that make technology companies different from junior mining firms (where flow-through shares were originally introduced).
   
   Instead of creating new complex tax deduction rules for investors, why not simply revisit the capital gains treatment of investments directed to certain types of early-stage innovative businesses?
   
3. Stopping government funding of foreign-owned technologies and companies; namely: Huawei.
   
   Of course, the Canadian Federal Government should not be subsidizing Chinese state-owned research and development. On this policy, the devil will be in the details.
   
   Already today, many of our innovation-focused government incentives are tied to CCPC rules (Canadian Controlled Private Corporations), which in principle sound positive, but in practice constrain world-class Canadian entrepreneurs from raising significant sums of capital from more established venture capital markets like the U.S.
   
   You don’t have to look much farther than home-grown Shopify. Their success, although a Canadian story, was fuelled heavily by U.S. investment dollars. We should celebrate this, not seek to discourage it.
   
4. Fixing the SR&ED program by simplifying the application process and moving it to another government department.
   
   Any Canadian entrepreneur who has dealt with SR&ED will agree that this program is completely broken. I would argue, irreparably. 
   
   Although I agree that it’s laughable that our #1 government incentive program for innovation is managed by the CRA, I don’t think the solution is to transfer it to a different government department.
   
   SR&ED is a political third rail, but ultimately it needs to be unwound. The billions of dollars we spend on it every year have no measurable impact on our economic growth, other than having spurred an industry of specialized “form-filling” consultants.
   
   We should redirect those billions of dollars to a new sovereign wealth fund focused on investing in technology businesses, and operated at arm’s length from any bureaucracy in Ottawa. Singapore has found meaningful success with this model through Temasek; which has now become a globally renowned tech investor.
5. Addressing the “brain drain.”
   
   Although O’Toole made mention of the fact that we see a large number of our STEM graduates moving to the U.S. to pursue opportunity, he didn’t specifically address how we might solve this.
   
   The proposed policies above will have a part to play in creating a more attractive market in Canada, but ultimately we could be more precise with addressing our brain drain problem.
   
   The University of Waterloo, for example, sees more than 50 percent of its graduating software engineers move to the U.S., after having received four years of heavily subsidized Canadian post-secondary education.
   
   A brain drain policy would revisit our education funding to post-secondary students, such that it ties any subsidy to a condition of working or building a business in Canada post graduation. Simply put, if a Waterloo engineer wants to move to Silicon Valley, they should reimburse the federal government for the subsidized portion of their prior 4 years of tuition.

I’m encouraged by O’Toole prioritizing this topic leading up to an election. We’re past due for some public debate on why we continuously fail on innovation compared to our peers.

That said, it’s critical that we approach this through the right frame. Innovation is not a separate topic from economic growth. Innovation should be how we think of all economic policy. If we are not encouraging more global competitiveness and productivity within our industries, we will continue to fall behind others who do.

The focus should also not be on jobs. Jobs will be a result of intelligent economic policy focused on growth. 

Our politicians should be asking questions like “how do we create an economy that regularly generates 5 percent GDP growth annually?” We need bold thinking to address this.

“Why are our largest businesses (with the exception of Shopify and maybe Lululemon) all incumbents who primarily only operate in Canada?”

“How do we help create a class of new companies that have global aspirations and technology at the centre of their businesses?”

The party that thinks this way, and is not scared to ruffle some incumbent feathers along the way, has my vote.

11:00 a.m. — O’Toole announces subsidy program for new hires

Conservative leader Erin O’Toole was in Winnipeg this morning to announce a new subsidy he says will create jobs in post-pandemic Canada.

O’Toole highlighted the “job surge plan” from his party’s platform, which would fund up to 50 percent of the salary of new hires for six months. The program would begin after the current wage subsidy ends in the fall.

The job subsidy starts at 25 percent and scales up based on how long the new employee was unemployed before being hired.

10:00 a.m. — Trudeau promises paid sick leave for federal employees and more money for ventilation

Liberal leader Justin Trudeau was in Winnipeg to highlight a proposal for paid sick leave for federal employees.

The Liberal leader promised to grant 10 days of paid sick leave for all federally-regulated workers and to convene a meeting with the provinces to discuss paid sick leave for all Canadian workers.

Trudeau also promised tax credits for businesses to upgrade ventilation, including HEPA filters, and funding of $100 million to improve common spaces like libraries and gyms.

7:00 a.m. — The daily agenda for Day 6

Liberal leader Justin Trudeau will be in Winnipeg to make an announcement at 8:45 a.m. local time (9:45 a.m. ET).

Conservative leader Erin O’Toole will be in Winnipeg at 10 a.m. local time (11 a.m. ET) to make an announcement.

NDP leader Jagmeet Singh will be in Saskatchewan to make an announcement at 11 a.m. local time (1 p.m. ET).

Welcome to The Hub’s Federal Election 2021 Policy Pulse, where we’ll be tracking all the policy announcements from the major parties, with instant analysis from our crew of experts.

With the election scheduled for Sept. 20, we’ll be monitoring 36 days worth of policy ideas, so watch out each morning for the day’s live blog where we’ll be tracking every announcement as it happens.

5:00 p.m. — Daily Recap: Trudeau pledges big money to long-term care

The Liberals promised lots of cash for long-term care and the Conservatives tackled Canada’s housing shortage on Thursday. Here’s the rundown, with more news and analysis below.

• Liberal leader Justin Trudeau promised $9 billion to address short-falls in long-term care, including pledges to train 50,000 long-term care workers and to raise the minimum wage for personal support workers to $25/hour.
• Conservative leader Erin O’Toole promised to build one million homes over the next three years and promised to ban foreign buyers who are not living in or moving to Canada from buying homes.

4:30 p.m. — Liberal long-term care funding promise is substantial, but many questions remain

The Hub contributor Livio Di Matteo examines today’s Liberal long-term care announcement:

Canada had 81 percent of all COVID-19 deaths occur in long-term care homes — the highest proportion in the OECD.

Not surprisingly, Liberal leader Justin Trudeau announced a promise to provide $9 billion to address short falls in Canada’s long-term care sector. In addition, there was also a pledge to train 50,000 long-term care workers to address staffing shortfalls as well as raise the minimum wage for personal support workers to $25/hour. This is a well-intentioned investment given that Canada’s population is aging, there are long waiting lists for LTC and compared with the OECD average, Canada had fewer health-care workers (nurses and personal support workers) per 100 senior residents of LTC homes in 2018.

However, long-term care is under provincial jurisdiction rather than federal. According to the CIHI while no clear differences in pandemic outcomes were observed across funding models (public, private or mixed) across the OECD, countries with more centralized LTC provision (e.g., Australia, Austria, Hungary, Slovenia) generally had lower numbers of COVID-19 cases and deaths. Thus, additional funds alone may not be sufficient in addressing care and staffing, issues as well as the older vintage of many long-term care homes.

Needless to say, Ottawa will at minimum need to negotiate individual deals with provinces similar to what is underway in child care. While the plan is to also develop a Safe Long Term Care Act to ensure that seniors are guaranteed a higher standard of long-term care, this will more directly intrude on provincial jurisdiction and even if implemented there is the question of how and whether it would be enforced. The Canada Health Act for example tied federal funding to the provinces for health with compliance to its conditions but since 1981 there has been no major instance of any federal government ever withholding funds for non-compliance.

Along with being under provincial jurisdiction, LTC is a diverse sector in terms of operation. Currently Canada’s long-term care sector has over 2,000 homes of which 46 percent are publicly owned and 54 percent privately owned but with the ownership varying widely across provinces. For example, Newfoundland and Labrador have 2 percent privately owned (for profit or non-profit) whereas while Ontario has 16 percent publicly owned, 57 percent by private for profit corporations and the remainder by private not-for-profit. Both within and across provinces, there will be no one size fits all solutions to fixing the problems in home care.

Finally, given that the Canada Health Transfer for 2021-22 is estimated at $43 billion, $9 billion is a substantial increase in money going to health care and goes some distance in increasing the federal government’s share of provincial health spending which is at about 22 percent.

However, it falls short of the $28 billion dollar increase the provinces were asking for in Spring of 2021. Moreover, the question remains as to how quickly the funding will be rolled out and over how many years.

4:00 p.m. — Here’s how the Conservatives plan to expand Canada’s Magnitsky law

Marcus Kolga, a Canadian human rights activist and senior fellow at the Macdonald Laurier Institute, examines the Conservative platform:

The Conservative platform includes significant proposals to strengthen Canada’s existing Magnitsky human rights and anti-corruption legislation.

Canada’s Sergei Magnitsky law allows the government to target foreign officials and individuals involved in human rights abuse and corruption with asset freezes and visa bans. There is open source evidence that individuals and entities connected to regimes in Russia and China, that engage in political repression and human rights abuse, hold assets in Canada. The law was introduced by Conservative Senator Raynell Andreychuk and MP James Bezan and passed unanimously in 2017 with the active support of Foreign Affairs Minister Chrystia Freeland.

The Canadian government has been reluctant to use the Sergei Magnitsky Law and lags behind allies in designating new entities. In the United States, the State Department regularly engages with civil society groups about sanctions policy and encourages their involvement in nominating new designations.

The Conservative platform proposes a much welcomed update to Canada’s Magnitsky legislation by offering a formal role for civil society and Parliament in the sanctioning process and greater transparency in what is currently an opaque process with no accountability. Greater openness and engagement in Canada’s sanctions process will indeed enhance the overall effectiveness of it.

The Conservatives have also suggested the creation of an innovative, judicially monitored mechanism for transferring assets frozen under the Sergei Magnitsky Law to be transferred to the victims of human rights abuse — including refugees.

2:00 p.m. — How does the Conservative promise on housing compare to Canada’s recent performance?

The Hub’s content editor L. Graeme Smith and editor-at-large Sean Speer take a look at housing:

Today Conservative leader Erin O’Toole announced his plan to build one million new homes over the next three years in order to address the supply-side drivers behind Canada’s ongoing housing affordability challenges.

The question is: how does the Conservative Party’s target of one million new homes compare to Canada’s recent performance?

Historically speaking, it would represent a pretty significant increase. Total housing starts from 1972 to 2020 averaged fewer than 200,000 new housing units per year.

In 2021, though, we’ve seen a notable increase in new housing starts. Over the year’s first seven months, the annualized rate of housing starts per month has averaged 290,098 (see graph below).

This means that the Conservative target would represent a 14-percent increase over the country’s performance thus far in 2021. It’s a stretch goal for sure as The Hub contributor Chris Spoke rightly points out, but it would be building on growing awareness of the supply-side factors behind Canada’s housing affordability challenges.

The biggest challenge to achieving the target is that the federal government’s policy levers influencing housing construction are somewhat limited. Land-use and zoning regulations as well as development charges reside primarily at the provincial and local levels.

Research shows that these restrictive regulations and high building fees are major contributors to Canada’s poor performance on housing supply. A Scotiabank report from earlier this year showed, for instance, that Canada has the lowest number of housing units per 1,000 residents of any G-7 country.

Reaching the Conservative goal will therefore depend on policy reforms to liberalize land-use policies at the provincial and local level. In order to catalyse such policy changes, the Conservatives would place new conditions on federal transit funding that require greater housing density along transit lines.

It’s difficult to know at this stage if that will be enough to boost new housing builds at the rate envisioned by the Conservative government. But even if the three-year target ultimately proves too ambitious, it’s a good sign that the policy debate on housing affordability is shifting from demand-side to the supply-side of the housing market.

1:30 p.m. — Trudeau pledges $9 billion to address long-term care issues

Liberal leader Justin Trudeau was in Victoria today promise $9 billion to address short-falls in Canada’s long-term care sector.

Trudeau also pledged to train 50,000 long-term care workers to address staffing shortfalls and raise the minimum wage for personal support workers to $25/hour. He also promised to double the home accessibility tax credit to $20,000.

Although long-term care falls under provincial jurisdiction, Trudeau compared it to childcare, where he said it’s important for the federal government to step up and offer funding.

12:00 p.m. — Erin O’Toole’s promise to build a million new homes in the next three years could get tricky

The Hub contributor Chris Spoke examines the Conservative housing proposal:

Conservative Party leader Erin O’Toole has promised that, if elected, he will implement policy changes that will lead to one million new homes over the next three years. Foremost among these is a requirement that municipalities that receive federal funding for public transit allow increased housing density near the funded transit.

It’s unclear whether this requirement would only apply to new transit or existing transit as well, or whether it would apply to the areas surrounding transit stations or along transit routes.

Either way, it’s a great proposal that acknowledges that 1) housing in our big cities is expensive because there’s not enough of it, and 2) there’s not enough of it because restrictive municipal land-use rules constrain new supply.

That said, we should ask ourselves whether it will be enough, paired with the rest of the CPC platform, to deliver on the promise of one million new homes.

For context, we saw 586,200 housing completions over the last three years, so we’re talking about an additional ~400,000 homes, or a 70 percent increase, over the next three years.

And here’s where it gets tricky. Real estate development projects in our big cities can take five to eight years to complete, from land acquisition to entitlements and approvals and construction. At a minimum, our next two years of completions are already mostly baked in.

Those ~400,000 additional homes will mostly have to be completed in the third year of the promise, if they’re to be completed at all, which is closer to a 200 percent increase from the best of our last three years (200,262 completions in 2018).

Can that be done? It’s possible, but it would require aggressive negotiations with provinces and municipalities to fast track the required upzoning around transit stations or routes as well as expedited project approvals.

10:30 a.m. — Did we really experience a ‘she-cession?’ The answer is complicated

The Hub’s editor-at-large Sean Speer crunches the numbers behind the pandemic-induced recession:

Yesterday on the campaign trail, Prime Minister Justin Trudeau generated a bit of a buzz by describing the pandemic-induced recession as a “she-cession” and arguing for policies that prioritize a “she-covery.”

It’s actually not the first time that the prime minister and other Liberal Party spokespeople have used this language to characterize the gender-based effects of the recession. The government’s April budget, for instance, referred to a “she-cession” a handful of times.

Although it has enthusiastically adopted its use, the government itself didn’t coin the phrase. It originated with progressive economist Armine Yalnizyan who first used “she-cession” in March 2020 to describe the pandemic’s early employment effects on women.

The question, of course, is: have we experienced a “she-cession” in which women have been disproportionately affected by the pandemic-induced recession?

The answer is somewhat complicated. If the point is that the recession has affected female employment in relative terms more than previous ones, then there is indeed evidence to support this view.

Because public health restrictions generally targeted face-to-face transactions, the recession battered service-based industries — such as restaurants, retail, hospitality, and health care — in which female workers are disproportionately represented. This stands in contrast with past recessions which have tended to hurt male-dominated industries like manufacturing and construction more than other sectors.

Similarly if it refers to the effects that school and daycare closures have had on working mothers, there’s also evidence that they’ve imposed a disproportionate burden on women.

Data from Statistics Canada, for instance, shows that the majority of women (64 percent) reported that they mostly performed homeschooling or helping children with homework during the pandemic, while only 19% of men reported being mostly responsible for this task.

But if the idea of a “she-cession” is that women have experienced disproportionate employment effects, the evidence is weaker. While the female unemployment rate peaked higher (13.9 percent) than men’s (13.5 percent) in May 2020, the rates have since fallen to 7.8 percent for men and 7.0% for women in July 2021 (see graph below).

The same goes for participation rates: at its pandemic-induced trough, women’s labour participation fell by 5.5 percentage points in April 2020, compared to 5.7 percentage points for men. Both have since nearly fully returned to pre-pandemic levels (see graph below).

As mentioned above, the point here isn’t that the pandemic hasn’t imposed real burdens on women but rather that the employment effects haven’t necessarily been disproportionately felt by female workers.

To the extent that “she-cession” is therefore narrowly referring to these employment effects, the best that can be said is it may have described labour market outcomes in the early days of the pandemic.

9:00 a.m. — O’Toole touts plan to build a million new homes over three years

Conservative leader Erin O’Toole was in an Ottawa suburb today highlighting his party’s plan for housing.

The Conservative platform touts a promise to build one million homes over the next three years and a pledge to ban foreign buyers who are not living in or moving to Canada from buying homes.

O’Toole also promised to create a new market for mortgages that would have seven- or 10-year terms which he said would increase stability and reduce the need for mortgage stress tests.

The Conservatives have also promised to tweak the mortgage stress test, to avoid “discriminating against small business owners, contractors and other non-permanent employees including casual workers.”

7:00 a.m. — Where the leaders will be on Day 5

Liberal leader Justin Trudeau will in Victoria to make an announcement at 10 a.m. local time (1 p.m. ET).

Conservative leader Erin O’Toole will make an announcement at 9 a.m. in Ottawa.

NDP leader Jagmeet Singh will be in Edmonton to make an announcement about health care at 9:30 a.m. local time (11:30 a.m. ET).