Global financial crisis impacts on Canadian provincial economies and welfare states

Political Science

Canada: Comparative Politics

Canada, like any other nation suffered terribly from the effects of the global financial crisis. The economic impacts from Global Financial Crisis were resolved through Canada's political and provincial administration structures. The Great Recession further intensified such trends towards elements of the precarious unemployment across Canadian provinces such as British Columbia mostly with certain population groups. This paper intends to illustrate how the global fiscal crisis has affected provincial economies in Canada.

Global Financial Crisis Impact on Provincial economies

The goal was to establish suitable forms of welfare states that mediated on the effects of forces of the global market forces through the determination of levels of state intervention within the provincial economic marketplaces. The liberal welfare regime in Canada as compared to the conservative one in Germany and social democratic from Scandinavian countries focused less on welfare provision and citizen security. This translated into a greater commoditization and lower quality allocation of resources to critical areas of the sector (Brownsey & Howlett, 2001). Global economic events like global financial crisis affected the comfort of the citizens through associated social consequences and reduced insulation from market swings. Financial crises have tendencies of making the long-lasting economic implications and structural effects (Dunn, 2003).

The financial system deleveraging in the dramatic economic impacts is best evidenced through the northern periphery. Canada is globally perceived as a haven with minimal economic implications from the financial crisis. The decline of Canada's post-crisis GDP of was relatively timid. An average of 3.6% decrease in economic activities between 2008 and 2009 led to the recession lasting for nine months (Yeh-Yun Lin, Edvinsson, Chen & Beding, 2013). However, the impacts on the budgetary process brought about by the crisis had long-lasting and reliable records in major regions. Budget deficits among the provinces averaged at above 6% GDP in the year 2009 and reduced to around 3% in 2012.

While such deficits increased pressures on provincial governments to respond to their with more sustainable options, it was moot on whether there was desire to avoid deficits at any costs due to historical low financing government debt costs. Ontario had 1.5% for fixed-rate bonds ranging for three years and 2.8% on fixed-rate bonds for periods of 10 years. With the glaring 'social deficits' across the provinces, there were alternate courses of action aimed at addressing budget deficits mainly through revenue increases and spending cuts (Farnsworth & Irving, 2011).

Health Care

In health equity, the desirable options for addressing budget shortfalls include raising revenue through progressive taxation forms and generating additional revenue. The provincial administrations should not be deterred from raising revenues based on the anticipated responses of administering action to expenditure activities (Brownsey & Howlett, 2001). The alternative implication is the identification of over-reliance elements of spending cuts, unlike income increases. The programs are viable options in figuring out fiscal deficits. Provincial governments have ruled out revenue increments since the start of the global financial crisis.

The position is that taxes will not be increased despite individual and corporate taxes for a large corporation and high-income earners decreasing extensively in the last three decades. For instance, corporate tax rates fell from above 50% in the 1970s to around 25% in the year 2012 on combined provincial and federal rates. Similarly, the top rate of marginal tax in the Canadian provinces continues to display a downward trend from 80% in the 1970s to around 49% in 2013. One of the striking elements since 2000 is the provincial 'own source' revenues where revenues from fees and taxes collected by provincial administration as compared to federal government transfers declined by 2.4% of GDP. The concept is primarily linked to extensive cuts of provincial rates on corporate tax based on the period (Dunn, 2003). Government-initiated reports assessing the finances of provinces such as British Columbia noted that alternative fiscal scenarios have revenue collections retained to highs of 2000 while budget deficits would be corrected by 2010.

There were more funds and resources targeting social services and programs. However, the major options that were placed forth by the provincial governments include addressing financial shortfalls and cutbacks on socio-economic programs expenditure on various areas. The affected sectors include program areas and health care spending with a direct relationship to the economic development aspects. In consequence, 2012 budgets have outlined extensive allocations for program cuts between 2012 and 2015. With such progressive political oppositions, provincial governments are implementing cuts on expenditures and increasing small tax rates (surtax) among those in the bracket of high-income tax to balance the budget (Hart & Tindall, 2009). Overreliance on cutbacks for specified programs as ways of addressing economic problems is described to have larger impacts to lower income individuals as compared to higher income individuals and widens the gap in inequities. It appears incredibly shortsighted when the implications of austerity budgets as implemented forego the ability to sustain domestic demand while provincial governments engage in public sector job cuts and widespread layoffs that also undermines the economy (Yeh-Yun Lin, Edvinsson, Chen & Beding, 2013).

Global Financial Crisis Impact on Labor Market in the Provinces

The working population in most provinces of Canada has increased their reliance on food banks. This was an illustration of alternative major pathway where the global financial crisis undermined provincial performance. The impact on labor markets is based on long-standing trends of replacing adequate and precarious employment. The provincial labor markets underwent a dramatic transformation based on neoliberal globalization pressures and ultimately the steep reduction of manufacturing employment. There are fundamental inequities in the individuals with access to proper or standard employment. For instance, newcomers such as workers of color, people with disabilities, and individuals from marginalized communities have unequal access to decent jobs and standard work prior before an economic crisis (Yeh-Yun Lin, Edvinsson, Chen & Beding, 2013).

The dependence of export to the United States among a number of such as Saskatchewan was greatly affected in terms of the labor markets within the global financial crisis in the region. Workers with precarious employment have ascertained vulnerability to economic downturns because they are on the line to bear immediate cutbacks and layoffs consequences. However, economic recessions tend to amount in compositional alterations of job types that intensifies trends towards increased employment precariousness. The occurences at the provincial level have a generalized and better insulation from pressures of the labor market while middle-aged employees with skill sets are not protected from aftermath cutbacks in financial crises (Farnsworth & Irving, 2011). The lifetime employment relationships or job seniority are considered in times of such cutbacks. Men bore disproportionate shares of job losses across all sectors known to avail permanent employment on a full-time basis at high wage rates.

In contrast, workers from low pay end and tenure scales such as youth, lone mothers, recent immigrants, and those workers with little training, education, and skills. Gradual economic downturns have impacted the concept of vulnerability and insecurity. From 2008 to 2011, youth employment rate reduced by five percent and proportion of immigrants working declined by 3.8% meaning that there was an increase of precarious employment. The suffering between the levels of immigrant unemployment and workers of Canada widened in the Great Recession (Dunn, 2003). Self-employment that was previously linked to reduced income instability and social protection has significant increment along the years based on the global financial crisis. The global economic recessions continue accelerating general change trends in the labor market based on part-time works as well as perception of youth and seniors as the right individuals for the job.

The accelerated trend to the concept of precarious employment raises more concerns due to the nature of work arrangements and inability to attend to pathways of secure employment (Dunn, 2003). In addition, there are higher risks of entrapment where workers continual to cycle around temporary contracts and presented with minimal opportunities of moving towards improved security. Job insecurity is chronic stressors identified as social contributors to mental health through triggering somatic stress and arousal of neural responses. Post financial crisis period has extended the erosion based on income potential among precarious workers as perceived by steep decline of market incomes on real average for lower income families in British Columbia and other provinces.

Food insecurity

Food insecurity during the global economic crisis reached unprecedented levels in Canada prior the austerity agenda started in 2012. Trends in food security across Canada were measured from 2005 based on health surveys on the Canadian community. Food insecurity is the lack of ample access to foods that are nutritious and in sufficient quantities. In extreme cases, the available food is of inferior quality for purposes of maintaining good lifestyles (Peterson & Nadler, 2014). From 2005, food insecurity became an increasingly major concern in Canada, and there was a significant acceleration based on onsets of the financial crisis. In 2011, close to 12.5%, Canadian households faced experienced food insecurity at different levels as compared to 11.2% in 2008. The outcomes affected 450,000 more Canadians. The growth in food insecurity was manifested in the increased application of food banks. Three percent population was receiving food from food banks in Canada in 2012, which was a 2.4% increase from 2011 and higher as compared to 2008 (Yeh-Yun Lin, Edvinsson, Chen & Beding, 2013).

The level of reproach to great elements of Ontario, Quebec and New Brunswick were based on 5% Ontarians categorized as food insecure (Otero-Iglesias, 2014). Working people increasingly sought to have food bank assistance with the lead ship from UN special rapporteur addressing right to food criticizing Canada for improper strategies on food security for the vulnerable people and others living in deplorable conditions. Poverty rates had significantly risen, and the measure of poverty within Canada is measured based on Low-Income Measures (LIM). The relative poverty measure defines poverty lines as median income's 50% after adjustments for family sizes. The LIM technique continues to show an upward trend in most provinces of Ontario to 13.3% in 2010 from 8.2% in 1990.

Countermeasures

At the point of scheduling reforms, policy-makers in Canada focused efforts and resources towards solving immediate problems within the banking sector. The provincial governments and the federal central bank provide macroeconomic stimulus based on monetary and fiscal policy. Global banking system restoration to healthy preconditions for recovery within economic activity and credit supply was a critical effort by the provincial administration. It is important to take more priorities in defining longer-term reforms. The environment and need for sustainable restoration of the provincial financial systems were based on a citizen's needs. Governments from most affected provinces provided substantial supports towards financial markets and institutions after their inefficiency during the global financial crisis. Most of the administrations ensured increased access to funding for banks through offering guarantees to wholesale debt issuance and injected more capital into banks. Others have facilitated banks in the reduction of risks within the balance sheets.

There are different ways of implementing the de-risking components of balance sheets. Governments should buy their assets outright while placing them in entities that are separate to banks and ensure such assets that remain on the banks' balance sheets for possible losses. Provincial economies have players investing in joint investment resources and purchasing such assets (Otero-Iglesias, 2014). The approaches mentioned are used in most provinces affected by the crisis. From this angle, it is unclear of the appropriate ways of dealing with such issues. The critical component is that such issues are addressed in totality. Despite such considerable efforts, the levels of confidence within financial systems are still fragile. Market-based indicators for issues of trust have gradually improved in the recent years (Porter, 2014).

Money market spreads in Canada have retraced major increase occurring based on the previous failures. Equity markets continue to stage partial recovery trends based on U.S. Government initiative to release further details on its programs and concept of de-risking balance sheets for bank performance (Farlow, 2013). Another effort towards dealing with immediate problems includes placing considerable efforts towards financial system architecture reforms and preventing similar forms of crises from happening again. The policy initiatives within the scope include alterations to credit rating regulation of financial agencies and establishment of pay incentives for financial institutions and immediate staff as well as bank liquidity and capital regulation.

Evidence illustrates that Great Recession and austerity drive unleashed during the period had significant impacts to the development of Canadian provinces. Further deepening of economic inequities led to inequitable access to health care, poor educational attainment, and dispersed geographical location. The concept illustrated that must more research as a way of having a better understanding of the possible solutions of economic decline on equitable resource utilization. Similarly, the assessment of the way public policy options affected complexities in economic investment remains infant (Ferran, Moloney, Hill & Coffee, 2012). However, while the policy responses to such economic shocks have global variation within the contexts of differential equity outcomes, comparative policy solutions are aligned to assess the failures and successes of specific responses of corrective policies. For instance, recent evidence based on Canada's economic performance illustrate that economic stagnation and financial collapse do not necessarily affect other elements of the industry.

The evaluation implodes more concern for the scope of public policy activities that militate against negative effects of economic equity among the provinces based on severe economic recessions. The work realm of Canada shifts requisite focus of provincial economic performance on the social security policies and levels of activity of labor markets in militating against employment downturns. The concept also plays a significant role in the prevention of further replenished employment standards and quality deterioration (Nanto, 2009). The development shows that government economic recovery policies such as social security have a significant role in deepening or ameliorating the economic recessions' impacts.

The provinces of Canada based on preliminary analysis confirm that austerity responses that were a policy driven further undermined equitable distribution of national resources while amplifying existing socio-economic inequities. The social assistance cutbacks based on benefits and declines regarding housing funding and loss of health benefits (job-related), the global financial crisis response continues to have adverse effects on people with less flexible incomes as they desire to forego government support.

Conclusion

Current economic recovery alternatives are readily available. Many Canadian economists warn that continued intensification of austerity will eventually make the application process in Ontario, and Alberta are less likely to achieve deficit reduction targets. This is because austerity focuses on undermining generation of national tax revenues through stifling economic development and financial growth. One way that provinces in Canada can avoid the negative implications such as falling back into recession includes focusing on making investments in the much-needed infrastructural as a way of tackling 'social deficit' in the administrative systems. Viable options in this scale include investing in better social protection, early learning, and affordable housing. While public debt is never less expensive, societal returns based on such investments should be rather high while and the population paybacks in terms of strategy should be significant.

Lastly, provinces such as Ontario and New Brunswick should ensure that socio-economic equity is the focus of policy-making. This requires a robust impact assessment on investment performance for all policies including welfare reforms. Financial crisis affords Canadian citizens unique opportunities of reassessing and breaking with neoliberal projects and selecting different paths that translate into more equitable resource distribution. However, efficiency and effectiveness requires better mobilization for public as well as better engagement based on political elites while moving the economic development approaches into mainstream decision-making.