Flying Without a Net

The Economic Freedom (For the Rest of Us) Index, 2000
September 28, 2000

(OTTAWA)--Although the economic well-being of Canadian workers has improved notably in the past two years, it remains significantly poorer than before the last recession, mainly because of a sharp decline in social programs and income security measures.

This is the finding of a new study prepared for the Canadian Centre for Policy Alternatives by Amanda Brown of York University and Jim Stanford of the Canadian Auto Workers.

Titled Flying Without a Net: The Economic Freedom of Working Canadians in 2000, the study develops a quantitative index of the well-being of Canadian workers. Called the Economic Freedom (For the Rest of Us) Index--EFRU, for short--this index confirms that formal labour market indicators in Canada, such as the unemployment rate and real earnings, have now fully recovered to pre-recession levels. Most of that improvement occurred in the last two years, driven by strong economic growth and job creation.

These gains, however, have been tempered by a decline in recent years in the various income supports and social protections which also contribute to the real economic welfare of most Canadians. Budget cutbacks and deregulation in the late 1990s dramatically reduced the extent to which these various programs supplement workers' private labour market earnings.

The overall EFRU Index gained more than two full points in 1998 and 1999, making up about half the ground lost earlier in the decade. But the Index remains more than two full points below the level that prevailed in 1990, before the onset of the last recession--solely because of the drop in social protections.

"The erosion of the network of social security measures," warns Stanford, "means that Canadian workers are more dependent on private labour market outcomes than at any other point in Canada's recent history. When labour markets turn down again--as they surely must, sooner or later--Canadian workers will be left largely unprotected. They are, in short, now flying without a net."

The study also offers a provincial ranking of economic well-being. For 1999, Ontario once again provided the highest level of economic well-being for its working citizens, as it has through the 1990s. British Columbia was a close second, while hard-hit Nova Scotia and Newfoundland generated the worst economic conditions for their workers.

The Economic Freedom (For the Rest of Us) Index was launched two years ago as a counterpart to the "economic freedom" project of the conservative B.C.-based Fraser Institute. The Fraser's index, however, focuses on freedom for corporations and investors, whereas the EFRU Index aims to quantify the economic status of those Canadians who must work for a living.