Canada Trying To Limit Costs

Press, Volume CVII, Issue 31500, 14 October 1967, Page 26

Canada Trying To Limit Costs

(From

MELVIN SUFRIN,

N.Z.P.A.

special correspondent) TORONTO, Oct. 11. Canadians are being asked to join in a campaign to hold down costs and prices or face the consequences —higher taxes.

The request comes from the Finance Minister (Mr Mitchell Sharp), who says the Federal Government will apt unless business and labour take voluntary steps to cool off an economy that is beginning to heat up. The Government itself is reducing spending. And although it cannot escape a $740,000,000 budget deficit this year, it is aiming at a balanced budget in 1968-69. Mr Sharp claims it has already cut $650,000,000 from its estimates for next year and will keep on cutting. There is even a possibility its programme of national medical care insurance, due to go Into operation next July 1 will be postponed for a second time as an economy measure.

Several provinces have said they dislike the requirement that, to qualify for Federal payments, their plans will have to be universal. The Federal Government may seize on this as an excuse to talk some more instead of putting the programme into effect on target. In his state-of-the-economy message to Parliament, Mr Sharp asked the provinces and together spend more than does the central Government —to cut their budgets as well. He called on industrial and labour groups to consider

how best they could organise campaigns to cut the rate of increase in costs and prices. If they could not come up with an effective plan of action, Ottawa would move in to deflate the economy. This could mean a sharp tax Increase that would siphon off excess purchasing power, reduce production and profits and, unhappily, raise unemployment Latest figures show that 247,000 Canadians are unemployed. But while this may seem high, it is only 3 per cent of the labour force In a country as geographically and economically spread out as Canada, this is about as low as unemployment can ever be expected to fall in peace time.

Canada’s labour force is described as the fastestgrowing of any developed capitalist country in the world. It stands at 8.101,000. and 277,000 new jobs tiave been created in the last year.

But any satisfaction with this progress is offset by the fact that while wages have been rising, productivity in industry has failed to keep pace.

Nearly 400.000 workers in large-scale industries won wage gains averaging 1.7 per cent last year and a similar number are receiving an additional 6.5 per cent this year. At the same/time several big industries are negotiating new contracts and Canada's ear workers are pressing for parity with those in the United States. Productivity, oh the other hand, grew by a poor 1.1 per cent in 1966, less than half the advance in the United States.

This means the productivity gap between the two countries is widening although the Canadian standard of living remains fairly close to that of the United States.

What it amounts to, simply, is that Canadians are living beyond their means apd show no inclination to slow down.

After a period of stability, consumer prices have been going up rapidly in the last few years. They now are 4.1 per cent higher than they were a year ago. But this does not seem to have dampened the demand for all sorts of goods, many of them luxuries.

For example, the price of quality beef has been rising quickly in the last couple of years but retailers report hardly anyone switching to cheaper cuts or lower-priced meats. The consumer complains bitterly but continues to buy. By way of reminding Canadians that they should watch their spending more closely, Louis Rasminsky, governor of the Bank of Canada, said in his annual report: “You cannot get a quart of wine out of a pint jug.” He declared that if unit labour costs continued to rise faster, and productivity. increased much more slowly, than in the United States, the result would be total loss of Canadian competitiveness, and for a country that depended on exports as much as'Canada did, this could mean economic disaster, . The idea of formal Government guide-lines for wages and prices has been previously rejected by Mr Sharp. The principle runs counter to the Minister’s free enterprise philosophy. And Canada, depending as it does on large amounts of foreign investment and with its economy so sensitive to foreign influence, would have a difficult time enforcing any such directives.

What Mr Sharp wants, therefore, is for labour and industry to draw up their own guide-lines and try to make them work.