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Renze Nauta: Having a job can help ex-offenders set their life on a better path

Commentary

The last nine months have seen a depressing spate of news stories detailing horrific crimes on Canadian streets. Random stabbings on public transit partly defined the recent Toronto mayoralty byelection and spurred the federal government to introduce a bill to reform the bail system in Canada.

In the midst of this, it is more important than ever for governments and political parties of all stripes to offer a solution that goes beyond tougher bail and sentencing, as much as these policies may be called for under the circumstances. A governing agenda must also address what happens to ex-offenders after they leave prison.

A recent Cardus report investigates how and why crime and unemployment are related. There are a lot of different theories for why some people commit crimes and others don’t. Some researchers have even questioned whether there is much hope for offenders once they have settled into a pattern of crime. But our review of the empirical literature shows that, despite an early “consensus of doubt,” more recent findings have clearly shown that having a job can help ex-offenders set their life on a better path.

This shouldn’t be surprising to anyone. Work is about more than just money. It has all sorts of non-financial benefits, including better physical and mental health, greater life satisfaction, less family conflict and divorce, and lower instances of substance abuse. The inherent dignity of work can provide a greater sense of meaning and direction in a person’s life. That’s why Cardus argues for pro-employment policies for those with disabilities, the poor, and the disadvantaged. There is no reason to think it should be any different for ex-offenders.

As obvious as it might seem that there is a relationship between crime and unemployment, there are some important nuances that policymakers need to be aware of. For one thing, employment has a different effect on someone’s likelihood of committing a crime depending on how old they are. For most people, having a job is associated with avoidance of crime. But for adolescents, too many hours working at a job is actually associated with the opposite: teenagers who work more than 20 hours a week are actually more likely to commit crime than their peers who work less than that. Why? Because working that much might be a sign of a rough home life or a strained relationship with parents.

Herein lies a key message for those concerned about public safety: as important as employment is for reducing crime, it is even more important to have a strong and stable family life. Research shows that these family bonds are crucial for everyone in avoiding crime, but it is especially true for teens.

There is another side to the crime-unemployment relationship, too. Not only can unemployment lead people into committing crimes, but also committing crimes (and having a criminal record) can make it really difficult for people to rebuild their lives and find a job later on. This can lead them further into unemployment. It’s a vicious circle that we need to break.

The issue has several facets.

From an economic perspective, ex-offenders represent an untapped labour pool, which is no small thing in an economy short of workers. Studies show that employers tend to underestimate the value that ex-offenders can bring to a company. This is value that could be captured to improve the overall productivity of our labour force.

From a public safety perspective, we want fewer ex-offenders to become repeat offenders simply because we don’t want more crime. It’s neither realistic nor just to lock up all prisoners forever, and most people in prison today will walk free one day. Giving them the possibility of employment could mean that we have fewer victims of crime in the future.

But most fundamentally, from the perspective of human dignity, we owe it to ex-offenders themselves to ensure that they have a chance at having a job and rebuilding their lives. If we truly believe that all human beings have dignity and that that dignity encompasses our capacity for work, then any tough-on-crime, public safety, or social agenda should reflect this.

Trevor Tombe: After another rate hike, will the Bank of Canada’s inflation battle ever end?

Commentary

Canada’s inflation fight continues.

“[The Bank] remains concerned that progress towards the 2 percent target could stall, jeopardizing the return to price stability,” it said after its July 12 meeting.

“While the Bank expects consumer spending to slow in response to the cumulative increase in interest rates, recent retail trade and other data suggest more persistent excess demand in the economy,” it continued.

Given these concerns, Canada’s central bank raised its primary policy interest rate to 5 percent this week, which is the tenth increase since early last year, when the rate was barely above zero. We’re now at levels not seen since 2001, and the speed of the increase exceeds any in over four decades.

This raises borrowing costs for consumers, businesses, and governments. “We know this tightening cycle has not been easy for many Canadians,” said Deputy Governor Paul Beaudry recently, “but the alternative, not controlling inflation, would be far worse.” 

The idea is simple: when interest rates go up, consumers and businesses demand less of many goods and services. This should take some of the pressure off prices. Even if the main items driving high inflation are not overly sensitive to interest rates, lower demand for other things could bring their prices down to compensate.

Knowing when to stop increasing rates is the tricky part.

Raising rates to 5 percent might have been the right move. Or it might have been a mistake. Depending on who you ask and what data they have in mind, the Bank may have gone too far or not far enough. 

It is not clear which view is right. Even the Bank notes that “a considerable amount of uncertainty surrounds [its] forecast.” 

Either way, the Bank of Canada opted for the least risky option. I’ll explain.

The Good News

First, the good news.

Consumer prices are 3.4 percent higher than they were a year ago, according to the most recent data for May 2023. This inflation rate is far lower than its peak of 8.1 percent last June. And most products tracked by Statistics Canada have seen a decrease in their pace of price change.

The big driver of this improvement is energy. It was the main reason why prices went up, and now it is the main reason why prices are going down. At least for this critical component, inflation pressures were indeed transitory.

There are also signs of improvement elsewhere. 

Groceries are now the biggest current contributor to Canada’s high inflation. Increases for those items have thankfully begun to slow, and this should continue as production costs have also been easing. Goods inflation is also improving, especially as consumer demand for many consumer durables, such as furniture, major appliances, and certain vehicles, may be falling. 

As for shelter costs, while still high, they may not be a big source of concern for the central bank. The biggest factor here is rising mortgage interest rates, which are up because of Bank rate increases rather than market conditions. In May, mortgage costs for homeowners contributed nearly a full percentage point. And among homeowners without a mortgage, I estimate their average personal inflation rate to be 2.6 percent, a full 0.8 points lower than for the average Canadian. This matters since if the Bank’s policy rates don’t rise further, neither will mortgage costs. We control which way they’re headed.

This is all good news. Most major items are trending in the right direction. Canada’s headline rate of inflation in June will almost certainly come in below 3 percent, and reaching our 2 percent goal may not be too far off.

This is one perspective. And one that suggests we’ve raised rates too high. But another way of looking at the data suggests a much more difficult road ahead.

The Bad News

The Bank doesn’t just look at the overall rate of inflation when making its decisions.

Instead, it has a number of ways to measure “core” inflation that leave out volatile factors. This does not mean that things like food and energy are not important. Of course they are. But this approach to measuring inflation tends to provide a better indicator of where overall inflation is headed. It’s therefore a better guide to monetary policy decisions today. 

Unfortunately, these measures are still too high and have stopped improving. 

“The stubbornness of core inflation in Canada suggests that inflation may be more persistent than originally thought,” the Bank noted in its quarterly analysis of Canada’s economy.

Service (excluding shelter) inflation is particularly worrisome. Restaurant prices rose nearly 7 percent last year. Travel services rose nearly 12 percent. Consumers having significant post-pandemic pent-up demand for such services may complicate the Bank of Canada’s job. These are normally items that are sensitive to interest rate changes, but today consumers are buying more, not less, of these services.

These data suggest the path back to 2 percent inflation may be more difficult than the drop we’ve seen so far, and further rate increases may be necessary.

Choosing the Least Risky Option

So which story is the right one? 

The truth is, no one really knows. Both the good and bad news stories offer important perspectives. And Canada’s central bank has a difficult job. Its decisions have a slow and uncertain impact on the economy. 

But if raising rates yesterday was a mistake, it’s an easier one to correct. The alternative error, not raising rates when they should have, is worse. The longer inflation stays above our 2 percent goal, the more entrenched expectations become and the harder it is to fight.

This may be what the Bank of Canada has in mind, especially since, with the benefit of hindsight, we were probably too slow to raise rates two years ago. It does not want to make the same mistake twice.