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Jim Harding for Qu’Appelle Valley Environmental Society on the Yancoal Southey Project

 

YANCOAL SOUTHEY PROJECT: A HUGE STEP AWAY FROM SUSTAINABILITY

1. UNDERMINING PUBLIC INVOLVEMENT:

Yancoal’s Environmental Impact Statement (EIS) was only released on April 23, 2016, yet Yancoal tells us in its April 17th letter that “the public comments deadline will be May 24th”. Meanwhile it took the Saskatchewan Environmental Assessment Review Board two years to do its technical assessment.

The freeze on the process until after the April 4, 2016 provincial election contributed to the suppressing of these vital issues from public scrutiny. The extension of 15 days to June 6th remains a slap in the face of Saskatchewan’s democracy, especially for area farmers during high seeding time.

We know that “politics” and “economics” enter environmental assessment, mostly through narrow terms of reference and errors of omission. The big picture and the future typically don’t get sufficient attention. It is unacceptable for the broader public to only be given 45 days to consider the wider and long-term public interest.

QVEA POSITION # 1: Yancoal’s Southey Project should immediately be taken off the fast-track to allow public due diligence to prevail.

2. PROVINCE-WIDE REPERCUSSIONS FOR ENVIRONMENT AND WATER:

CARBON FOOTPRINT: The Yancoal mine could create as much as 1.09 million tonnes of C02 equivalents per year.[i] This would increase, not decrease Saskatchewan’s already high carbon footprint.[ii] Yet Yancoal has not looked at the potential of using any renewable energy and it even rejected co-generation (power from waste heat). This business-as-usual approach will not help Saskatchewan reorient its economy towards sustainability. The Yancoal project will not help Saskatchewan assist the country to cut its emissions by 30% below the 2005 level by 2030.

EXTERNALIZING COSTS: Yancoal wants to use gargantuan amounts of surface water to bring the potash above ground for processing; this solution mining will reduce Yancoal’s costs while externalizing huge costs to the environment and watershed.[iii] Yancoal admits that the benefits of solution mining include “lower up-front capital costs and no underground workforce.” This shows how, while costs are being externalized, benefits such as jobs are being greatly reduced.

Yancoal expressed an interest in a pipeline to Quill Lakes, perhaps to be supplemented by water from Last Mountain Lake. The Water Security Agency (WSA) and Sask Water prefer a costly pipeline from Buffalo Pound, possibly because they can better control the supply coming from Lake Diefenbaker.

Either way this is a totally unacceptable use and waste of fresh water. Yancoal’s figures suggest it will use 13 million cubic metres a year, 50% of the water used by Regina[iv]; it could be larger. Year in and year out for up to 100 years all this water would be permanently lost from the natural cycle. We must start to truly value and protect water; with the coming water crisis we can’t be removing fresh water from the hydrological cycle.

CLIMATE CHANGE: Furthermore, Buffalo Pound and Last Mountain Lake are both fed by Lake Diefenbaker, which provides domestic water to more than half of Saskatchewan’s residents. The amount of water in the South Saskatchewan River which, since the mid-60s, flows into Lake Diefenbaker has been markedly decreasing for a century and this decrease will accelerate with climate change. Recent summer flow levels have measured 86% below those recorded in 1910.[v] Both water quantity and quality will be at even greater risk.[vi] When surface water becomes scarcer, as it surely will, Yancoal and other companies could end up using water from and risking contaminating the Hatfield Aquifer on which many communities already depend.

A 2012 report already projected a 200% increase in water taken from the Qu’Appelle watershed by 2060.[vii] And this calculation was made before the Yancoal project or some other solution mines were even proposed.[viii] We see no credible provincial strategy behind the steady, incremental industrialization of water that will ensure that future water sources are protected and secure. [ix] The Water Security Authority (WSA) modeling and forecasting doesn’t even take climate change into account. There hasn’t been a study of the cumulative impact of Yancoal using the massive projected volume of water over 100 years[x]. Would the amount of water being extracted violate inter-provincial water-sharing agreements? There is simply too much uncertainty about future water supply or the impacts on other water users for this project to be approved.

NOT SUSTAINABILITY: Sustainability is about inter-generational justice; not undermining the ability of future generations to meet their needs. The incremental approach of the Sask Party government puts future generations at risk. It would therefore be foolish to approve the prolonged use and waste of such valuable water for the Yancoal mine.

QVEA POSITION # 2: Until a credible sustainable water strategy which takes climate change into account is developed there should be a moratorium on all mega-water industrial projects.

3. SEVERE IMPACTS ON LAND AND HABITAT:

VIABLE AGRICULTURAL DISTRICT: The area to be immediately affected by the Yancoal mine is a viable agricultural district: there are 126 homes and 325 residents within a 5-mile radius of the proposed mine site.[xi] The way Yancoal has been treating land owners is of great concern. Yancoal has resorted to corporate “divide and rule” tactics which pit those who are more removed from immediate impacts and see short-term benefits, against those that face the brunt and lasting effects of this mega-project.

UNDERGROUND IMPACT: This is not the way to approach the risks to the land, habitats and communities. Many vital questions remain. We know from other locations that fracking carries its own risks.[xii] Yancoal estimates that during operations it will be injecting underground about 20,000 cubic metres (m3) of brine a day from its reclamation ponds.[xiii] This amount of water will be permanently lost to the hydrologic system every day for the 100-year life span of the mine. And have the risks from the continual injection of such massive amounts of wastewater from solution mining underneath the Hatfield aquifer been fully considered?[xiv] It is admitted that subsidence or downward displacement of surface material would occur over the next 250 years but what would be the extent of land slumping? Are there other risks of underground movement, including earthquakes, such as have occurred from wastewater injection in the oil and gas industries across the border?[xv]

We prefer the Precautionary Principle. Some may want to argue that the geology is different here and that there has been some solution mine wastewater injection without noticeable underground impacts. The cumulative impacts, with Yancoal’s 100-year timeline and so many other solution mines being considered within this already vulnerable watershed should, however, now be very carefully considered.

ENDANGERED PRAIRIE ECOREGION: Underground contamination can come from pipeline leaks, rock fracturing and brine seepage into aquifers. Further, Yancoal plans to leave the salt tailings exposed. Just because this un-ecological practice has been allowed at potash mines does not mean it should continue. According to Parks Canada the Moist Mixed Grassland Ecoregion in the Prairies Ecozone where Yancoal wants to mine is already one of the most endangered areas in the world. And what are the risks of contamination of fragile fish habitat in the West and East Loon Creeks?

What are the risks of farm lands being greatly devalued? And why is Yancoal being allowed to side-step the foreign ownership guidelines? Yancoal has already purchased 4,200 acres but has an exception that allows them to buy up to 60,000 acres; does it really need this for a potash mine?

YANCOAL’S ENVIRONMENTAL RECORD: The foundational knowledge for all the technical assessments should be fully released and carefully scrutinized. Yancoal’s dismal environmental record abroad[xvi] should also be fully assessed.

QVEA POSITION # 3: At a minimum a panel of fully independent hydrologists should be formed to report on all the pertinent research about deep underground waste water injection before any further consideration is given to approving this project.

4. IMPLICATIONS FOR POTASH INDUSTRY AND PROVINCIAL REVENUE:

CONTROL OF POTASH: Yancoal is a Chinese state corporation which operates on a different time span than other resource companies. Their goal is as much about securing long-term global supply of non-renewables as it is about profitable production and marketing. It has a guaranteed interlocked purchaser, China.

With nearly half of known potash reserves, Saskatchewan is a prime target. And with its own domestic overuse and contamination of watersheds and aquifers, China is also interested in accessing cheap water abroad for its resource extraction. This greatly externalizes its costs onto the Saskatchewan environment.

ROYALTY IMPLICATIONS: Yancoal could be here for 100 years. This is its first such mine, which likely makes us their guinea pigs. And as it plans this huge project, other companies are laying off workers due to the slump in the global potash market. Is anything in place to ensure that Yancoal will not come to control Saskatchewan potash production and undermine the competition and the marketing system (Canpotex) that ensures that the province benefits somewhat from potash royalties? Will Yancoal’s involvement lead to lower prices as well as a shrinking commercial market? If BHP Billiton was kept from purchasing Potash Corp because it was considered a threat to this “strategic resource”, then shouldn’t Yancoal be held to the same standard?

QVEA POSITION # 4: Before this project is allowed to proceed any further there must be full public disclosure of all agreements and obligations made by the Saskatchewan government and those regarding the Chinese-Canada FIPA trade agreement which have any bearing on Saskatchewan’s long-term public interest in resource royalties and revenues.

5. SERIOUS CONSEQUENCES FOR QU’APPELLE VALLEY:

PROTECTING THE QU’APPELLE WATERSHED: The Lower Qu’Appelle is already considered to be facing “high intensity” stress regarding surface water allocation and ground water use. Roads, aquatic fragmentation, impact of landfills, livestock and fertilizer inputs, pesticides and contaminated sites all contribute to such stress in the watershed.[xvii] The diversion of millions of cubic metres of precious water for Yancoal’s mine will inevitably further undercut the aquatic health and recreational vitality of the Lower Qu’Appelle, which flows through the Qu’Appelle Valley. Furthermore, over the very long time span of the Yancoal solution mine, upstream saline and other contamination will almost inevitably make its way through the natural drainage system into the Loon Creek which goes into the already vulnerable Qu’Appelle Valley watershed.[xviii]

Yancoal’s solution mine has direct implications for both water quantity and quality throughout the Qu’Appelle Valley Basin. The environmental review process should therefore not be skewed to exclude those who will ultimately be impacted downstream. Downstream indigenous as well as settler communities have a lot at stake here, yet in both cases the broad public has not been directly involved in the review process. This is unacceptable.

QVEA POSITION # 5: Before this project goes any further there must be a full, informed public discussion of the implications of the Yancoal project for the quantity and quality of water passing through the Q

[i] Yancoal Southey Project, Saskatchewan Environmental Society, June 2, 2016.

[ii] In 2011 Saskatchewan surpassed Alberta as having Canada’s highest per capita carbon footprint. The Canadian average was 20 metric tonnes per person per year, while Saskatchewan was 68 metric tonnes per person per year. This is among the highest level anywhere in the world.

[iii] Other Potash companies also admit this transfer of costs: e.g. Encanto Potash Corp writes that at Muskowekwan First Nations it plans “a solution mine for a number of reasons including longer mine life, lower CAPEX (capital expenditure), higher rate of return and shorter time of production…” See encantopotask.com/muskowekwan project.

[iv] On its website Yancoal says it will use 1,450 cubic metres (m3) an hour, which would amount to 13 million cubic metres (Mm3) a year. Regina’s water consumption was 23 Mm3 in 2013.

[v] Glaciers feeding the headwaters of the two Saskatchewan Rivers have shrunk by 25-30% since the 1950s. The maximum depth of snow and number of days with snow on the ground have both declined significantly. See W.F. Donahue, Freshwater Issues and Challenges in Alberta, Canadian Forest Service, Science Seminar Series, March 13, 2008.

[vi] See “Climate Change and our Watershed”, In We Are All Waterkeepers, Fort Qu’Appelle Kairos, Sept. 2014, pp. 20-23.

[vii] One proposal is to build an Upland Canal from Lake Diefenbaker to Buffalo Pound Lake to try to increase the flow to handle a projected 219% increase in demand for agriculture and a 172% increase in demand for industry and mining by 2060. See Clifton Associates, Upper Qu’Appelle Water Supply Project, 2012. Also see “Upland Canal Project”, Kairos 2014, pp. 14-16.

[viii] The Mosaic solution mine at Belle Plain already draws water from Buffalo Pound. The K & S Legacy solution mine near Bethune which the company admits will be “water-and-energy intensive” has now been told that it will also be provided water from Buffalo Pound. Vale was promoting a solution mine at Kronau which initially was to draw water directly from Katepwa Lake; it is now on hold. Western Potash is proposing a solution mine at Milestone, Karnalyte Resources is proposing another, the Carnallite project, at Wynyard and Encanto is proposing a solution mine on Muskowekwan First Nations. How many such water-gorging solution mines can the Qu’Appelle Watershed bear? Potash Corp also has a solution mine at Patience Lake near Saskatoon.

[ix]With climate change come earlier springs and algae buildup in the 5.5 metre deep Buffalo Pound Lake. Regina’s supply has already been restricted by 50% in May of 2015 due to this convergence. And the ability to increase the flow into Buffalo Pound from Lake Diefenbaker is highly limited, especially in winter months, without a very expensive canal mega-project, to which the WSA and Sask Party government has not committed. And even then there would, over time, be a reduced flow from Alberta.

[x] One billion, 300 million cubic metres of valuable surface water would be taken out of the natural system. This is not sustainable.

[xi] Havelock Special Projects Committee.

[xii] See Bob Weber, “Fracking, Not Water Disposal, Caused Canadian Earthquakes”, Canadian Press, March 29, 2016. David Eaton at the University of Calgary studied 12,000 fracked and disposal wells drilled in Western Canada by the oil and gas industry between 1985-2015 and found that earthquakes were twice as likely to be associated with fracking as with wastewater disposal.

[xiii] If Yancoal uses 34,800 cubic metres of water a day (1,450 m3 an hour), this figure of 20,000 m3/day suggests there will be some recycling of water before it is disposed.

[xiv] “The amount of pressure on the injected water should be disclosed and the risk of earthquake generation should be investigated.” Saskatchewan Environmental Society (SES) submission, June 2, 2016.

[xv] “Earthquakes and Hydraulic Fracking”, Earthwork Fact Sheet, n.d., states that earthquakes have been “linked to fracking wastewater injection in at least five states.” Also see “Earthquakes triggered by fracking wastewater in Oklahoma”, Associated Press, July 3, 2014. This reports that the salty “wastewater is leftover from unconventional wells that drill for oil and gas with the help of high pressure fracking and from the removal of water from diluted oil. These new methods mean much more wastewater has to be discarded.”

Also see Terry Reith and Briar Stewart, “Do fracking activities cause earthquakes? Seismologists and the state of Oklahoma say yes”, CBC News, April 28, 2016. This reports that a number of earthquakes in Oklahoma have been “blamed on the injection of wastewater from oil production into wells”.

The 700 people from 20 countries who attended the Seismology Society of American meeting in Reno Nevada heard about studies showing that there definitely is a relationship between “deep disposal and earthquake activity” that has been increasing since 2011.

Could a similar thing occur from potash solution mining when the massive amount of toxic brine wastewater is injected into deep wells?

[xvi] Yancoal is a subsidiary of Yanzhou Coal and Yankuang Group, one of China’s largest fossil fuel conglomerates. Yancoal controls 10 coal mines in Australia and plays a big role in China’s huge C02 emissions. Coal mining and coal-generated electricity also contribute to widespread toxic contamination of both land and water in China. See Jim Harding, Are We ready to Sell Our Future to China? R-Town News, May, 31, 2014 and also available at: www.crowsnestecology.wordpress.com

[xvii] State of the Watershed Report, Water Security Authority, 2010, p. 32-36.

[xviii] The first lake, Pasqua Lake is already suffering from a massive nutrient load which comes in part from decades of Regina’s untreated sewage.

Peter, middle-aged white man, sitting in an empty church, looking at camera.

Brief to SaskForward: Regina Anti-Poverty Ministry

By Peter Gilmer, Regina Anti-Poverty Ministry.

 

Introduction

The Regina Anti-Poverty Ministry (RAPM) is a social justice ministry of Wascana Presbytery of the United Church of Canada.  Bonnie Morton and myself work for a board which is a cross-section of church members, representatives of community groups that deal with poverty issues and first voice volunteers.  Our board has always had at least one third of its membership being low-income people.

RAPM does its work in three areas which are individual advocacy, public education and social justice.  Individual advocacy involves providing support for low-income individuals and families to ensure that they are receiving those benefits that they are entitled to and that they are being treated fairly by the institutions that they are dealing with.  Public education involves providing educational workshops and resources on poverty issues and social justice involves consulting and working with low-income people and community partners to develop and promote public policies that would move us toward the elimination of poverty in Saskatchewan.

In our individual advocacy casework, we have been handling over 2000 cases per year.  While people contact our office for many different reasons, there is one common denominator.  Virtually everyone who requests our individual advocacy services have incomes that are too low and costs for basic needs that are too high.  Though it is not said often enough, it should be obvious that a major problem for low-income people is that their incomes are too low.  The other side of the problem is rising costs for necessities.

We cannot eliminate or even combat poverty without a plan.  That is why a comprehensive strategy is so important.  At the same there are very specific ingredients to such a strategy that will be essential for its success.

Since 1997, RAPM has identified key anti-poverty proposals through extensive consultation with low-income people and community groups dealing with poverty issues.  The following proposals arise time after time.  They are adequate income security benefits, a living wage, quality and affordable housing and childcare, equity initiatives and fair taxation.

We have taken these proposals for debate through the courts of the United Church so that they have become the official positions of Saskatchewan Conference of the United Church of Canada.  They are also positions that fall within the framework of human rights.

  1. Economic Rights

Poverty is a human rights violation.  In 1976, Canada with the approval of all the provinces, signed the United Nations Covenant on Economic, Social and Cultural Rights.  Article 11 of this covenant recognizes the right of everyone to an adequate standard of living for themselves and their family, including adequate food, clothing and housing and to the continuous improvement of living conditions.  Article 7 of the covenant recognizes the right of everyone to the enjoyment of just and favorable conditions of work which ensure all workers with fair wages for a decent living for themselves and their families as well as equal remuneration for work of equal value.

This means that issues such as adequate income security benefits, a living wage, quality and affordable housing and childcare and pay equity are not just social policy concerns.  These are basic human rights.  Social and economic rights are human rights that the federal and provincial governments are obligated to uphold.  The United Nations Committee on Economic, Social and Cultural Rights has been very critical of Canada and the provinces for not ensuring these rights in such a wealthy nation.

Saskatchewan needs to entrench these rights in enforceable legislation.  We also need an agency with legislative teeth to monitor compliance.

  1. Adequate Income Security Benefits

When we allow social assistance rates to be set too low we are legislating poverty.  Saskatchewan went 24 years without a significant increase to social assistance rates.  Between 1981 and 2005 the basic allowance was never above $195 per month which works out to $6.50 per day for food, clothing, personal and household items as well as transportation.  Between 2005 and 2007, with a strong push from our organization and others, there was a $60 increase to $255 per month.  Unfortunately it remains at that rate today.  The cost of living has risen drastically in the past eight years but the basic allowance has not.  Saskatchewan Assistance Plan (SAP) rates must be raised to meet basic needs and then indexed to the cost of living.

More recently we have seen the introduction of the Saskatchewan Assured Income for Disability (SAID) Program for persons with significant and enduring disabilities.  It is more dignified and less intrusive than SAP and now has benefit rates that are $350 per month higher.  Despite these improvements, it still falls thousands of dollars per year below the poverty line.  It should be set at a socially acceptable rate, similar to seniors benefits or approximately $1600 per month and then indexed to the cost of living.

As inadequate as SAP is, it is actually better than the Transitional Employment Allowance (TEA).  TEA is the social assistance program for persons who are considered potentially employable and we have called for its elimination.  TEA is based on SAP rates for adult and shelter allowances but is even less adequate because it has capped rates for utilities and no provision for special needs.  It is also ironic that a program called the Transitional Employment Allowance claws back all earned income dollar for dollar.

Along with benefit levels that take actual cost of living indicators into consideration, we also believe that those on income security programs should be allowed to keep considerably more earned income and other income and assets before it is deducted from their benefits.  Wage exemptions should at least be doubled and simplified with a flat rate.  All exemptions and special needs benefits should also be indexed.

In recent years, there has been a resurgence of the idea of a basic income program.  A basic income is an unconditional, adequate income to ensure a life with dignity and self-determination for everyone.  It would provide a floor of economic security to which other forms of income could be added.  A basic income would provide financial recognition and remuneration to those individuals who perform essential, socially valuable work that is unpaid, such as family caregivers and community volunteers.  It is time we redefined productivity.

RAPM understands that such a program is not on the immediate horizon and wants to ensure that present income security measures are enhanced in the mean time.  However, we do believe that Saskatchewan could move in a basic income direction.  The implementation of a universal basic income supplement to provide greater adequacy of income would go a long way toward promoting the idea that a decent income should be a right of citizenship like medicare or public education.

Saskatchewan has a rich history of creating progressive and universal social programs which have become a model for the rest of Canada and a universal basic income supplement would allow us to build on that proud tradition.

  1. A Living Wage

A socially adequate or living wage is an essential component of any effective anti-poverty strategy. It is also a necessary protection for the lowest income workers. That is why the United Nations Covenant on Economic, Social, and Cultural Rights recognizes the right to remuneration, which provides workers with fair wages to provide a decent living for themselves and their families.

With a minimum wage of $10.72 per hour, Saskatchewan is once again near the lowest minimum wage in Canada. Since 2007, Regina food and housing costs increased by 45% while the minimum wage increased by only 28%. Therefore, many minimum wage earners are worse off than they were eight years ago.

According to the Saskatchewan Branch of the Canadian Centre for Policy Alternatives, a living wage for a Regina family with two working parents and two children was $16.46 in 2012. At present approximately 25,000 people work at the minimum wage in Saskatchewan. Many more people work in low-wage employment as 23% of Regina households earned less than the CCPA living wage in 2011. Minimum wage increases provide a positive ripple effect of higher wages for low-wage earners as employers attempt to maintain a structure of wage differentials among categories of employees.

Almost two-thirds of minimum wage earners are women. A living wage would help reduce the wage gap between men and women.

Members of other equity seeking groups are also more likely to work at or just above the minimum wage. Raising the minimum wage creates greater equity between groups in our society.

There is no empirical evidence that minimum wage increases reduce employment.  However, some research indicates that employment actually expands when the minimum wage is increased.  Princeton economists David Card and Allan B. Kruegar came to this conclusion when they studied the impact of a large minimum wage increase on fast-food restaurant employment. In New Jersey, a minimum wage of 19% was followed by an increase in minimum wage employment. In neighbouring Pennsylvania, which did not follow suit, minimum wage employment lagged behind. Card and Krueger concluded that New Jersey’s increase in in the minimum wage increased employment in that state. There is good reason for this. Low-income people spend all their money in the local economy. Boosting their incomes boosts economic activity to create jobs.

In 1975, Saskatchewan’s minimum wage was the equivalent of 119% of the poverty  line. If it had been indexed at that point it would be over $12 per hour now.

Throughout the 1970’s and early 1980’s, the Saskatchewan government maintained a minimum wage that was the highest or among the highest in Canada. Between 1971 and 1982, Saskatchewan’s minimum wage was increased fourteen times, tripling it in the process.

As part of a comprehensive anti-poverty strategy we call on the Government of Saskatchewan to set the highest minimum wage in Canada with the long term goal of an actual living wage.

  1. Affordable Housing

The biggest growth in RAPM’s casework since 2006 has come in the areas of rental coverage, availability and conditions as the crisis of a lack of affordable housing for low-income people continues.

Between 2006 and 2010, average rent went up by 43% in Regina.  The next three years saw an additional 20% increase.  In 2010, the last year for which figures are available, over 3,400 people used Regina shelter beds.  If the hidden homeless (those who are couch surfing, in overcrowded accommodations or living rough) are factored in it is estimated that this number would double.

Behind these statistics is tremendous human misery that we encounter every day.  We must consider what is needed to make a truly comprehensive housing strategy that benefits all citizens.  First of all, we need to ensure that we maintain the traditional Canada Mortgage and Housing Corporation definition of affordable housing as not exceeding 30% of household income.  Housing cannot be considered affordable just because it is at or below average market rent.  Skyrocketing rents in recent years have meant that average market rent is far beyond the means of the people we work with.  There needs to be a priority given to social housing where rent is geared to income.  There must be substantial additional public funding to facilitate the acquisition and creation of a large number of social housing units for low-income individuals and families.  Facilitating this expansion should be a top priority for all levels of government.

Long before the rental availability and affordability crisis, Saskatchewan faced the problem of having many sub-standard, ill-maintained rental properties.  The present rental market has meant that low-income tenants are now in an extremely vulnerable position when it comes to addressing rental conditions because their options are so limited.  There is a need for rental unit licensing and/or a rental unit inspection program to ensure explicit quality standards for all rental properties.

RAPM continues its call for rent control legislation on low and mid-range accommodations.  At present the only regulations involve how frequently rents can be increased.  What is needed is control on how much rents can be increased in a given year.  At present, 80% of Canadians live in jurisdictions with rent controls but we do not.  Rental increases have caused tremendous hardship for many low-income people and tenants need protection.

RAPM has always pushed for enhanced shelter allowances and rental supplements and will continue to do so.  However, there are many other basic needs that income security benefits should be meeting rather than largely ending up in the hands of landlords.  Rent controls combined with social housing would lead us in the direction of being better able to ensure all basic needs could be met.  Surely a reasonable accommodation can be reached between property owners, tenants and the province regarding limits on rental increases. Generally those with wealth and power can defend their own interests but governments have a vital responsibility to protect those who cannot.

  1. Quality Childcare

Quality and affordable childcare is an essential ingredient in the workplace participation of parents with young children–especially mothers. In Scandinavian countries a single mother and her children are no more likely to live in poverty than any other household due to family friendly policies with childcare as the centrepiece. In Saskatchewan, over 40% of female headed lone-parent families live in poverty.

Quality childcare is also an excellent way to provide better early childhood education that ensures that all children have an equal chance at good development.

We are still in need of a national childcare program. In the meantime there should be increased provincial funding for more regulated childcare spaces and enhanced childcare subsidies for families.

Unfortunately Saskatchewan continues to do very poorly on this front. At 7.6% Saskatchewan has the lowest percentage of children for whom there are regulated childcare spaces in Canada. The national average is 20.5% and Quebec has 37.4%. Indeed of the provincial/ territorial allocations to regulated childcare, Quebec accounted for 60% of the total. This has not only allowed them to have over 85,000 regulated spaces, it has allowed them to set an affordable parent portion for childcare costs.

In their study of a living wage for a typical family of four in Regina, the CCPA found that childcare was a close second to housing as the highest cost factor for such a family. We should move as quickly as possible toward Quebec’s model of affordable childcare. At the same time we should set the short term goal of doubling regulated childcare spaces with properly trained and justly paid staff.

  1. Equity Initiatives

There continue to be groups who disproportionately bear the brunt of poverty in Saskatchewan. That is why we must ensure greater economic equity for First Nations and Metis peoples, new Canadians, women, and persons with disabilities.

The socio-economic gap between Aboriginal and non-Aboriginal people continues to be the biggest gap of all in Saskatchewan. This gap must be closed given that Saskatchewan’s economic , political and cultural future will be largely shaped by todays First Nations and Metis children and youth.

According to figures released last year, the First Nations unemployment rate was roughly 15% compared to 4.4% for the province as a whole. More than 18,000 First Nations adults in the province remain on social assistance, the same level as five years ago. According to the 2011 National Household Survey, 29% of Aboriginal persons had low-incomes compared with 12.2% for non-Aboriginal people.

Obviously we need representative workplace and retention programs to break down systemic barriers including discrimination. We also have to consider revenue sharing with First Nations as an essential part of an anti-poverty strategy. First Nations people continue to suffer negative social and economic consequences because of colonial oppression. They have consistently asked for a share of the bountiful wealth of this province which is derived from the resources of the land. We therefore call upon the Government of Saskatchewan to enter into meaningful discussions on resource revenue sharing with First Nations.

Recent immigrants to the province, those who arrived since 2001, had a low-income rate of 24.3% in 2011. Persons with disabilities are also dealing with unacceptably high rates of unemployment. Along with Aboriginal people and women these groups need to be fully included in representative workplace strategies.

We also continue to call for pay equity legislation. The purpose of such legislation is to close the wage gap by ensuring female-dominated jobs are paid fairly in relation to male-dominated jobs. This legislation should be proactive as opposed to complaints based and it should be comprehensive, covering all classifications of employees. The legislation should be administered by a Pay Equity Commission and there should also be an independent tribunal created to deal with litigation under the legislation. Saskatchewan women deserve nothing less.

  1. Fair Taxation: Closing the Gap

There is no avoiding the fact that poverty elimination is impossible without a more equitable distribution of wealth and income. There are many social needs that can only be met by an increase in public revenues.  Housing, childcare and income security programs have to be paid for if we are to ensure that peoples basic needs are met.

Saskatchewan has a high rate of income inequality. A 2009 study by the Saskatchewan Branch of the Canadian Centre for Policy Alternatives showed that Saskatchewan had the widest income gap between the richest and poorest 10% of families with children in Canada. It also showed that the richest 20% of Saskatchewan residents received 43% of all after tax income compared to 5% for the poorest 20%. This only shows a small part of the disparity as wealth inequality over time would be much greater.

According to the Canadian Association of Food Banks, Saskatchewan had the largest growth of food bank usage (26.6%) between March 2008 and March 2013 in Canada. This period also saw a significant growth of millionaires in the province.

There is a growing body of public health research that shows that beyond a minimal amount of wealth, the health and quality of life of a society depends less on its overall wealth than on how equitably its wealth is distributed.

In their book, “The Spirit Level: Why More Equal Societies Almost Always Do Better”, epidemiologists Richard Wilkenson and Kate Pickett show that those societies with less income inequality have higher life expectancy, lower infant mortality, better general health and mental health, fewer addictions, better literacy and education rates, less crime, less violence, higher status of women, higher levels of trust, greater amounts of international aid and greater environmental sustainability.

Perhaps what is most surprising about the findings is that it is not just low-income people that benefit but that every stratum of society including the richest are better off in more equal societies. In fact, the evidence suggests that every level of society is equally better off in relation to these and many other indicators as equality grows.

The research shows what many of us have morally or intuitively believed. Equality is good and growing economic inequality is very bad. The gaps between us tear the social fabric, breakdown community, are very costly and diminish us all.

At present, we only have three personal income tax brackets in Saskatchewan ranging from 11% to 15%. The top tax bracket kicks in around $120,000. This means that whether you made that much or are a millionaire you are in the same tax bracket. We believe that a progressive graduated tax system with at least another bracket would be more just and equitable.

When it comes to lost revenue an even bigger concern is low royalty rates on our non-renewable resources. Small changes in royalty rates shift millions of dollars to either public services and social programs or resource company profits. Given that these are non-renewable resources that should advance the common good of the people of Saskatchewan, we need to get the best return possible because when they are gone, they are gone forever. A better return could go a long way toward the enhancement of social programs and the elimination of poverty.

On the door on the Regina Anti-Poverty Ministry is a sign that states, “The existence of poverty is shameful. To be poor is not.”  Poverty is not a choice. It is legislated. It is the result of public policy and economic inequality. But there is hope because there are policy alternatives and we have the wealth and resources to end poverty. We can have a more just, equitable and humane Saskatchewan. What is need is the public and political will to make that happen. Together lets make it happen. Let’s make poverty history!

 

Bibliography

Canadian Food Banks Association, Hungercount 2013, p. 7 and 28.

Canada Mortgage and Housing Corporation, Rental Market Report, Regina, October 2011 and October 2014.

Card, D. And Kruegar, A. (September 1994). Minimum Wage and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania. The American Economic Review.

Ferns, C. And Friendly, M. (2014). The state of early childhood education and care in Canada 2012. Moving Childcare Forward Project (a joint initiative of the Childcare Resource Unit, Centre for Work, Families and Well-Being at the University of Guelph and the Department of Sociology at the University of Manitoba).

Gingrich, P. (September 2009). Boom and Bust: The Growing Income Gap in Saskatchewan, Saskatchewan Branch of the Canadian Centre for Policy Alternatives.

Gingrich, P., Enoch, S. & Banks, B. (2014). A Living Wage for Regina, The Saskatchewan Branch of the Canadian Centre for Policy Alternatives.

National Council of Welfare, Preschool Children: Promises to Keep (Spring 1998) Minister of Public Works and Government Services Canada, Ottawa.

Statistics Canada, CANSIM 282-0073 and 282-0074.

Statistics Canada, National Household Survey 2011.

United Nations Covenant on Economic, Social and Cultural Rights. Part III; articles 7 and 11

Warick, J. (April 13, 2015). Aboriginal employment stagnant economist says. The Star Phoenix as shown in the Regina Leader Post.

Wilkenson, R. And Pickett, K. (2009). The Spirit Level: Why more Equal Societies Almost Always Do Better. (London: Allen Lane).

 

 

 

The Futility of Austerity: Lessons for Saskatchewan

By The Canadian Centre for Policy Alternatives – Saskatchewan Office.

Introduction

The Canadian Centre for Policy Alternatives – Saskatchewan Office welcomes the opportunity to present our views and recommendations to SaskForward. The CCPA is Canada’s leading progressive think tank with offices in Ontario, British Columbia, Saskatchewan, Manitoba, and Nova Scotia. The CCPA is a registered non-profit charity. We depend on the generosity of our more than 12,000 individual supporters across Canada.

Our submission focuses on one broad transformational change that the Saskatchewan government could adopt immediately that would have wide-ranging impacts for the provision and delivery of services and programs throughout the province. Put simply, our recommendation is for the government to rescind its announced austerity measures and resist further spending cuts in favour of expanded public expenditures during this period of economic downturn. The instinct of governments across the political spectrum when faced with economic contraction has been to cut public spending as a means to reduce deficits and restore growth. This instinct is certainly shared by the Saskatchewan government, which has recently announced large spending cuts in health ($63.9 million), education ($8.7 million) and social services ($9.2 million). This is in addition to funding and program cuts announced in the 2016 budget which saw cuts to Seniors and Children’s Drug Plans, reduced funding for the Alternative Measures and Aboriginal Courtworker Program, elimination of funds for urban parks and claw-backs to some social assistance programs.

Unfortunately, this instinct to cut during an economic downturn is counter-productive to restoring growth and may result in a protracted economic slump. As this submission will demonstrate, the adoption of austerity measures during an economic downturn can have the perverse effect of prolonging economic stagnation, driving up unemployment, increasing deficits and debt and hindering the growth of the economy.

Assessing Austerity
Due to the boom in commodity prices, Saskatchewan was able to weather much of the economic recession that beset the rest of the world since the financial crisis of 2008. It is only with the recent downturn in commodity prices – particularly oil – that Saskatchewan is beginning to feel the symptoms of economic stagnation that have plagued other regions. The silver-lining is we have a wealth of recent examples from around the world to assess which policies can best combat an economic downturn and return us to more robust growth.

The United States can act as a particularly useful laboratory to assess the efficacy of austerity, as state-level governments addressed the economic recession in divergent ways. As Adam Hersh notes, since the start of the Great Recession, twenty U.S. states adopted varying degrees of public spending reductions as the best means to address the downturn, while thirty states adopted varying degrees of expanded public spending. Surveying the results of these divergent responses to the economic recession in the United States, we see that states that adopted an expansionary fiscal policy were able to pull themselves out of recession sooner, while experiencing less of the negative economic impacts of the recession. Overall, states cutting spending cut expenditures on public services and investments by an average of 9.1 percent over the course of the recession and recovery, from 2007 through 2011. States that expanded expenditures did so by an average of 8 percent. As the chart below illustrates, states that adopted an expansionary fiscal policy experienced less unemployment, higher private sector employment growth and significant growth to GDP in comparison to those states that adopted wide-spread spending cuts. Indeed, the greatest divergence between states was in economic growth. Expanding states accelerated well ahead of their prerecession growth rates while cutting states languished with growth much slower than before the recession. At the worst of the recession in 2009, GDP growth in expenditure-expanding states was on average 2.4 percentage points below the prerecession pace of growth. Expenditure-cutting states fell much deeper into the recession hole, with their GDP growth rates on average falling 4.6 percentage points below their prerecession level.

state_cuts_vs_spending

Enacting a Vicious Circle
The negative experience of these states that adopted austerity should not come as a surprise. Despite the prevailing economic orthodoxy that austerity measures can restore growth during an economic downturn, actual empirical evidence of this occurring is in very short supply. Even the International Monetary Fund (IMF) – once a champion of fiscal austerity – has been forced to admit this. Assessing 30 years of evidence, the IMF unequivocally concludes: “In economists’ jargon, fiscal consolidations [austerity] are contractionary, not expansionary. This conclusion reverses earlier suggestions in the literature that cutting the budget deficit can spur growth in the short term.”

Moreover, the IMF demonstrates that adoption of austerity measures during an economic downturn is “likely to lower incomes—hitting wage-earners more than others—and raise unemployment, particularly long-term unemployment.” Such effects will have the consequence of exacerbating deficits as falling incomes diminish government tax receipts while growing unemployment puts fiscal pressure on social supports like employment insurance, social assistance, re-training allowances, etc. Thus, attempts to cut spending to tame deficits may have the perverse effect of increasing existing deficits, as prolonged economic stagnation taxes both government revenues and social spending. In light of this, the IMF advises governments to consider delaying deficit-fighting measures until a more robust economic recovery is evident. Conversely, the IMF demonstrates that public investments – particularly in economies experiencing low economic growth – can significantly increase output, lower unemployment and actually bring about a reduction in the public-debt-to-GDP ratio because of the much bigger boost in output.

Debts and Deficits

Despite the demonstrated wisdom of the above approach, calls to increase spending – and deficits in the short-term – during an economic downturn face the political problem of “deficit hysteria” that is particularly acute in Saskatchewan. Due to the fiscal mismanagement of the Grant Devine-era Progressive Conservatives, the Saskatchewan public is particularly wary of accumulating debt in even the best of economic times. However, allusions to current government debt and deficits as reminiscent of the Devine years are not helpful in this regard. Despite current government debt levels, Saskatchewan’s economy is much larger than what is was in the 1980s and 1990s. While Devine-era debt reached over 40 percent as a percentage of GDP (closer to 60 percent if we include Crown debt), Saskatchewan’s current debt as a percentage of GDP is only 19.9 percent, the second lowest in the country after Alberta. Compare this to Manitoba’s 30.9 percent, British Columbia’s 26.6 percent, or Ontario’s 39.6 percent and Saskatchewan’s debt burden is relatively low, leaving the option for enhanced public spending open. As Lovely and Pinsonneault of the National Bank conclude in their analysis of Saskatchewan’s 2016 budget:

Overall then, the debt burden can be deemed low (second only to Alberta), with the interest bite very manageable, contingent liabilities fairly limited, liquidity very healthy and budget flexibility/taxing room available (should it ultimately be required).

Saskatchewan does have space to increase spending and even to increase taxes should the government deem it necessary. If the choice is between drastic public spending cuts that will only prolong the economic downturn, drive up unemployment and further exacerbate current deficits, the prudent choice would be to borrow sensibly now so as to restore the economy to a position of strength whereby deficits can be more aggressively and productively attacked in the future.

The Morality of Austerity

In addition to the economic argument against austerity, there is also a moral one that governments must consider. In essence, austerity arguments often boil down to a moral argument, as austerity is framed as the necessary “penance” for profligate spending during boom times. But austerity assumes that everyone shares in the pain of cuts equally. This is simply not true. Given that austerity measures primarily target public spending for programs and services, the effect will be to punish those that rely on these programs and services far more than those who do not. Mark Blyth – Professor of International Political Economy at Brown University – notes that the “effects of austerity are felt differentially across the income distribution.” If you “reside in the middle or the bottom half of the income and wealth distribution, you rely on government services, both indirect (tax breaks and subsidies) and direct (transfers, public transport, public education, health care). Those further up the income distribution who have private alternatives (and more deductions) are obviously less reliant on such services. If state spending is cut, the effects of doing so are, quite simply, unfairly and unsustainably distributed. Moreover, it seems particularly cruel to put the burden of cuts on those at the bottom of the income distribution who were least likely to have shared in the province’s prosperity during the boom period, and may have even been negatively impacted by the rising costs of living associated with the boom years.

Taxes and Revenues

The sad truth is that the government relied far too much on inflated resource prices as a major source of revenue during the boom period. Indeed, these extra revenues were effectively used to subsidize tax cuts that with the end of the commodity boom now appear unsustainable. The prudent course would have been to maintain or raise tax and royalty rates during the boom period to create a sizeable resource revenue or heritage fund that could have been drawn upon once commodity prices inevitably returned to earth. Such a fund would have allowed the government to maintain relatively stable spending levels even as their tax revenues fall during an economic downturn. Unfortunately, the government did not follow this course, and the current deficit position is the result. The decline of revenues now has the government contemplating certain tax increases and/or elimination of exemptions. As the government considers new sources of revenues, we would ask the government to once again contemplate the moral argument of austerity – ensuring that those least able to absorb tax increases are not asked to bear the burden of the government’s decisions.

In general, raising taxes during an economic downturn is not good policy, since what is needed most during an economic slump is for spending to increase from both the public and private sectors. But if tax revenues must be raised to fill deepening budgetary holes, then the sensible way to proceed is to focus these increases on wealthier households. Their ability to absorb such increases is obviously the strongest, which means that unlike other households, they are not likely to cut back significantly on spending in response to tax hikes. There is also an equity issue here. Over the past decade, the wealthiest households in Saskatchewan have received a disproportionate share of income growth in comparison to the bottom half of Saskatchewan families, with the boom years being particularly kind to the wealthiest in our province. As these households prospered the most under the tax regime of the current government, it seems appropriate that they should shoulder a portion of the burden during the economic downturn. For instance, in response to the recession, at least eleven U.S. states implemented a temporary surtax (between 1 to 5 percent) on high-income earners as a means to restore government revenue, while other states like New York and California introduced new high-income tax brackets and limited the amount of deductions that taxpayers could make. Saskatchewan might consider a similar temporary surtax on very high-income earners in the province as a more equitable means to raise revenue than a general sales tax increase which would disproportionately harm low-income earners who spend a larger share of their income on consumption.

Business Taxes

Perhaps the biggest beneficiary of tax changes during the boom period has been Saskatchewan’s small business. Under the current government, the small business tax rate on the first $500,000 of eligible business income has been reduced from 4.5 percent to 2 percent, making Saskatchewan’s small business tax the second lowest in the country after Manitoba. These cuts are in-line with the rest of the country that have seen provincial small business income tax reduced on average by three-fifths over the past decade. Given the size of these reductions, from an equity perspective it seems reasonable to consider raising the small business tax rate – at least temporarily. Restoring a half or even a full percentage point to the small business tax rate would still leave us competitive  Alberta’s 3 percent or British Columbia’s 2.5 percent rate while generating much-needed revenue. A similar argument could be made for increasing the corporate income tax rate, which has been reduced from 17 percent to 12 percent over the past decade – part of the general trend of shifting the tax burden away from business and onto individuals. Saskatchewan’s rate is virtually identical to our neighbours with Alberta at 12 percent, Manitoba at 12 percent and B.C. at 11.5 percent. Restoring the rate to 13 percent – at least temporarily – would not significantly impact Saskatchewan’s competitiveness, particularly given that taxes – in all their forms – represent only between 3% to 11% of location-specific business costs. Instituting the above rate changes for high-income earners and business would be a much more equitable response to the economic downturn than public spending cuts and consumption tax increases.

Conclusion

As a late-comer to economic turbulence, Saskatchewan at least has the advantage of being able to assess the efficacy of policy responses by those who have gone before us. The opinion of the International Monetary Fund (IMF), the Organization of Economic Co-operation and Development (OECD) and the U.S. Treasury is that austerity measures during an economic downturn leads to contraction – not expansion. Unfortunately, the government appears set on choosing the austerity path despite a wealth of evidence from around the world that demonstrates the futility of austerity during an economic downturn. Not only do austerity measures fail to restore growth, prolong economic stagnation, increase unemployment and exacerbate deficits, but they ask the most vulnerable in our province to foot the bill for the rest of us. Politicians who advocate austerity regularly counsel that we “all need to tighten our belts.” As Mark Blyth observes, that’s all well and good if we are “all wearing the same size pants,” but we don’t. Austerity asks those with the least space left on their belts to tighten the most. The Saskatchewan government is in its current fiscal position because it made certain choices during the economic boom that have now come back to haunt us. We have outlined certain policy choices the government could make during this time of economic downturn that ensure the most vulnerable among us don’t continue to pay the most for choices that benefitted them the least. We hope the government will seriously consider the available evidence on austerity and recognize that the path it has set upon – while perhaps politically the easiest – is certainly not the wisest.