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Less Ottawa, More Province: How Decentralization Is Key to Health Care Reform

Despite high levels of public spending, Canada’s health-care system consistently performs more poorly than a number of peer jurisdictions with universal health-care systems. Governments across the country must address this policy challenge in a context of constrained resources, as the federal government and a number of provinces currently face increasing debt loads and other significant fiscal challenges. This paper considers the extent to which policy lessons from Canada’s past can help governments in Canada address the dual challenges of an underperforming health-care system and growing fiscal pressure on governments. Specifically, it considers the extent to which Canada’s experience with reform of federal-provincial transfers and welfare during the 1990s provides lessons that can be applied to the process of reforming Canadian health care.

During the 1990s, the federal government transformed its approach to providing financial assistance to the provinces to support their welfare and social assistance programs. Specifically, the federal government reduced transfers to the provinces but, in exchange, removed a number of “strings” previously been attached to federal funding that prohibited certain types of policy reform. For example, the provinces were permitted to create work requirements for receipt of welfare payments, which previously would have triggered the withholding of federal transfers.

The reform of federal transfers to the provinces led immediately to a wave of policy innovation and reform at the provincial level, as governments across the country pursued various policy paths designed to improve their welfare programs, create solutions that actually addressed local problems, and reduce program costs. Many of these reforms had the intended effects, as there was a marked decline in welfare dependency and government spending on public assistance in subsequent years.

However, no similar wave of policy innovation occurred following the 1990s transfer reforms in Canadian health care. This is largely because the government maintained the various “strings” that were attached to health spending transfers and, specifically, the terms and conditions of the Canada Health Act. As a result, health-care policy in the Canadian provinces has since the 1990s generally been largely characterized by policy inertia while spending on health care has increased considerably.

Canada’s experience with welfare reform provides a model with important implications for how to begin reforming and improving Canadian health care. By reducing transfers in real terms while amending specific provisions of the Canada Health Act that inhibit reform, the federal government can partially address the fiscal challenges it faces today while providing provinces with the freedom to innovate and pursue policy reforms to improve their health-care systems.

Such changes would allow for greater experimentation by each province as they seek out what policy arrangements have the best possibility of improving health-care performance. For instance, provinces would be well served to examine the introduction of cost-sharing arrangements (co-insurance, deductibles, and co-payments) used in most other universal health-care countries to ensure more efficient use of the health-care system by patients. Provinces might also look at removing regulations that currently prevent a greater supply of needed health-care professionals and investment within the health-care sector.

It is uncertain exactly what reforms different provinces would choose and this paper does not weigh the advantages and risks of specific reform options in detail. Instead, based on Canada’s experience with welfare reform, this paper recommends a crucial change, the devolvement of decision--making powers to the provinces, with the federal government permitting each province maximum flexibility (within a portable and universal system) to provide and regulate health-care provision as they see fit.

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Independent Schools in British Columbia: Myths and Realities

Calls for reductions to or elimination of funding for independent schools in British Columbia are based on misperceptions, specifically, that parents choose independent schools because public schools are underfunded; that independent schools are "elite" and that government funding of independent schools drain public expenditures.

The evidence demonstrates a contrasting reality. First, spending on public schools increased by 19.8% between 2004/05 to 2013/14, from $5.3 billion to $6.4 billion (an increase of 7.1% when price changes are considered).

Second, when the decline in enrolments in public schools is taken into account, per-pupil spending in public schools increased over the decade (2004/05 to 2013/14) by 18.3% from $9,971 to $11,797 (adjusted for inflation, in 2014$).

Third, over the decade (from 2003/04 to 2012/13) the vast majority of the increase in spending (61.3 %) went to staff compensation.

Fourth, enrolments in independent schools increased nearly 18% over the decade 2004/05 to 2013/14 and waitlist evidence from 2012 shows that increases may well have been higher had spaces been available. During the same period public school enrolments declined by 8.5%.

Fifth, the elitist caricature of independent schools does not hold. Most exist to serve other parental preferences in education. More than 55% are religiously-oriented and 20% have a specialty teaching or learning emphasis.

In 2015/16, the government spent an average of $8,288 per public school student for operational expenditures while it granted an average of $3,911 per independent school student. If funding were eliminated and more than 37,464 students migrated back to public schools, provincial expenditure on education would increase, further straining finances.

 

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Economic Freedom of the World: 2016 Annual Report

The index published in Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are per-sonal choice, voluntary exchange, freedom to enter markets and com-pete, and security of the person and privately owned property. For-ty-two data points are used to construct a summary index and to meas-ure the degree of economic freedom in five broad areas: 

  • size of government: expenditures, taxes, and enterprises;
  • legal structure and security of property rights;
  • access to sound money;
  • freedom to trade internationally; and
  • regulation of credit, labor, and business.

Since our first publication in 1996, numerous studies have used the data published in Economic Freedom of the World to examine the im-pact of economic freedom on investment, economic growth, income levels, and poverty rates. Virtually without exception, these studies have found that countries with institutions and policies more consistent with economic freedom have higher investment rates, more rapid eco-nomic growth, higher income levels, and a more rapid reduction in poverty rates. 

The EFW index now ranks 159 countries and territories. Data are available for approximately 100 nations and territories back to 1980, and many back to 1970. This data set makes it possible for scholars to analyze the impact of both cross-country differences in economic free-dom and changes in that freedom across a time frame of three and a half decades. 

Economic freedom around the world in 2014 

Average chain-linked rating
The average chain-linked economic freedom rating for advanced coun-tries with ratings since 1985 has increased from 6.9 to 7.7 in 2014. The average chain-linked economic freedom rating for developing countries with ratings since 1985 has increased from 5.0 to 6.7 in 2014. 

Top-rated countries
Hong Kong and Singapore, once again, occupy the top two positions. The other nations in the top 10 are New Zealand, Switzerland, Canada, Georgia, Ireland, Mauritius, the United Arab Emirates, and Australia and the United Kingdom, tied for 10th.

Other major countries
The rankings of some other major countries: the United States (16th), Germany (30th), Japan (40th), South Korea (42nd), France (57th), Italy (69th), Mexico (88th), Russia (102nd), India (112th), China (113th) and Brazil (124th).  

Lowest-rated countries
The 10 lowest-rated countries are: Iran, Algeria, Chad, Guinea, Angola, the Central African Republic, Argentina, the Republic of the Congo, Libya and, lastly, Venezuela.

Nations that are economically free out-perform non-free nations in indicators of well-being
Nations in the top quartile of economic freedom had an average per-capita GDP of $41,228 in 2014, compared to $5,471 for bottom quartile nations (PPP constant 2011 US$).

In the top quartile, the average income of the poorest 10% was $11,283, compared to $1,080 in the bottom quartile in 2014 (PPP constant 2011 US$). Interestingly, the average income of the poorest 10% in the most economically free nations is twice the average per-capita income in the least free nations.

Life expectancy is 80.4 years in the top quartile compared to 64.0 years in the bottom quartile.

Political and civil liberties are considerably higher in economically free nations than in unfree nations.

Chapter 1: Economic Freedom of the World in 2014
The authors of the report, James Gwartney, Robert Lawson, and Josh-ua Hall, provide an overview of the report and discuss why economic freedom is important. 

Chapter 2: Country Data Tables
The chapter provides detailed historical information for each of the 159 countries and territories in the index.

Chapter 3: Gender Disparity in Legal Rights and 
Its Effect on Economic Freedom
by Rosemarie Fike
The EFW index uses many objective measures that implicitly assume that all members of society have equal access to economic institutions. This is not a reality for many women across the world. Formal legal re-strictions to the economic rights of women in many countries prevent a significant portion of the population from engaging in mutually beneficial exchanges. In addition, social norms can place very real barriers in front of women wishing to own property, operate a business, and engage in voluntary exchange. This chapter considers several alternative methods of adjusting the EFW index to account for gender bias present in the data used in its construction.

National Case Studies
Three case studies examine the profound effect of major shifts in eco-nomic freedom in three countries: Venezuela, Ireland and the United States. In each, the authors of the chapter explain the causes and re-sults of the changes in economic freedom.

Chapter 4: The Critical Role of Economic Freedom in 
Venezuela’s Predicament
by Hugo J. Faria and Hugo M. Montesinos-Yufa
Venezuela has been trapped in a lengthy decline in economic freedom that started long before Hugo Chavez assumed the presidency in 1999. But Chavez, his United Socialist Party of Venezuela, and successor, Nicolás Maduro, have presided over a continued, stunning slide in economic freedom that landed Venezuela in dead last place among approximately 150 countries from 2010 to 2014. The economic consequences have been disastrous and, if anything, are getting worse.

Chapter 5: Economic Freedom and Growth in Ireland, 1980 to 2014
by Robbie Butler and John Considine
Ireland has had a moderately high level of economic freedom back to the initial year of the EFW data in 1970. In the 1970s and 1980s, its score was typically around 6.5 out of 10 and its rank around 20th. Ireland entered the top 10 in 1995 and has remained there except for a couple of years following the financial crisis of 2008. Since 2010, Ireland has regained its momentum in both economic freedom and economic growth, as the authors show. It re-entered the top 10 in economic freedom in 2012.

Chapter 6: Economic Freedom in the United States, 1980 to the Present
by Dean Stansel and Meg Tuszynski
While the reduction in economic freedom of the United States has been moderate relative to that of Venezuela, nonetheless the decline has been substantial. The United States’ high-water mark in economic freedom came in 2000 with a score of 8.65 and a rank of second place. The decline has been steady since and, in 2010, the United States fell out of the top 10. The recent economic performance of the United States has been sub-par and its recovery from the Great Recession has been the slowest since World War II.
 

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Consumption Inequality in Canada: Is the Gap Growing

Increasing interest in economic inequality, especially in the media, has spawned an impressive number of academic studies, most focusing on income inequality. Inequality of consumption (people’s spending) has received much less attention. This study addresses this issue and provides measures of consumption inequality for Canada over the period 1969–2009.

Because actual consumption is closer to one’s standard of living (utility) than income, it might be a preferred indicator if we wish to track gaps in economic well-being over a period of time. Income represents a “potential” standard of living. However, people can borrow (or dissave) to expand their standard of living beyond what their income will allow. They can also save some of their income, which reduces their current consumption and thus their living standard. This paper makes the case that measuring consumption inequality can give us a better insight into economic inequality over time.

This paper examines several conceptual and measurement issues related to consumption. For example, a difficult question arises as to how to handle the purchase of substantial durable assets, such as houses. Such assets yield a stream of consumption over a long period of time that is not adequately captured by mortgage payments. Those payments are highly variable. They can range from zero (for those who have paid off their home) to $20,000 or more—for exactly the same asset. Similar problems occur with durable goods like autos, furnishings, and major appliances. While there may be ways to impute the flow of consumption from durables, they are not perfect. Studies that make such adjustments typically do so for housing only. Unless there is an important change in the underlying pattern of the acquisition or distribution of such durable purchases over time, the case for adjustments and imputations is weaker.

Similarly with prices. The measurement of consumption inequality involves tracking the differences in actually reported, aggregate, nominal consumption over a period of time. We do not look at the individual choices that people make to get to those aggregate values, nor do we attempt to examine the price searching or the substitutions they made along the way.

In this paper, the only adjustment made to the raw data was for household size. We know that households have become progressively smaller over time, due both to reduced fertility and divorce. So the total consumption of a household is now shared by fewer members. Adjusting for household size using an equivalence scale is, by now, a standard practice for empirical studies of inequality.

The recent (since 2012) literature from the US on consumption inequality shows that, while income inequality has been increasing, consumption inequality has been flat or has declined somewhat. The only recent paper examining consumption inequality in Canada (Norris and Pendakur, 2015) makes a series of adjustments—for consumption flow of durables, using price indexes to deflate nominal consumption, and other imputations. They show that neither income nor consumption inequality in Canada changed much between 1997 and 2009, although the pattern for each was different.

This study, adjusting raw income and consumption data only for household size and using the Gini coefficient as the measure of inequality, finds that while income inequality has increased modestly (by about 11 percent) between 1969 and 2009, consumption inequality is only about 3 percent higher over that 40 year period. In other words, measured consumption inequality has essentially been flat. These results stand in contrast with the prevailing impression of a sharply growing gap and increasing polarization in Canada. This impression is heightened by a few reports that mismeasure income inequality. The torrent of media stories about an “alarming” rise in inequality has been effective in creating an image of a far more economically divided society.

It is important to point out that this result ignores such things as quality improvements (which likely benefit lower income households more) as well as price searching and substitution behaviour, which is likely to be equalizing. While this is certainly not the final word on the trend in consumption inequality in Canada, it does suggest that living standards are not more unequal now than was the case several decades ago. In other words, it is premature to claim that the gap in living standards between the rich and the poor is growing, at least in Canada.

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Education Spending and Public Student Enrolment in Canada

Summary

  • To accurately understand education spending, both enrolment changes and the effects of price changes must be considered. For Canada as a whole, over the last decade (2004-05 to 2013-14), the increase in per-student spending in public schools is 25.8% (once adjustments have been made for inflation). Specifically, per-student education spending in public schools, accounting for changes in prices, increased from $9,876 to $12,427 between 2004-05 and 2013-14.
  • Saskatchewan saw the largest increase in per-student spending in public schools (after adjusting for inflation). That province experienced a 39.0% increase—from $10,476 in 2004-05 to $14,562 in 2013-14. The smallest increase was in British Columbia (18.3%). Per-student spending in public schools in all 10 provinces increased over this period (after accounting for the effects of inflation).
  • In aggregate, Canada increased education spending in public schools by $12.7 billion more between 2004-05 and 2013-14 than was necessary to account for enrolment and price changes. If per-student spending in public schools had remained constant over this period, the aggregate amount of education spending in public schools in 2013-14 would have been 20.3% lower.
  • Provincially, Saskatchewan recorded the largest difference (28.2%) between the actual spending on public schools and what would have been required to account for price and enrolment changes. The smallest difference between actual spending on public schools and what was necessary to account for inflation and enrolment changes was in British Columbia (14.6%).
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Summary

  • The Canadian Consumer Tax Index tracks the total tax bill of the average Canadian family from 1961 to 2015. Including all types of taxes, that bill has increased by 1,939% since 1961.
  • Taxes have grown much more rapidly than any other single expenditure for the average Canadian family: expenditures on shelter increased by 1,425%, clothing by 746%, and food by 645% from 1961 to 2015.
  • The 1,939% increase in the tax bill has also greatly outpaced the increase in the Consumer Price Index (706%), which measures the average price that consumers pay for food, shelter, clothing, transportation, health and personal care, education, and other items.
  • The average Canadian family now spends more of its income on taxes (42.4%) than it does on basic necessities such as food, shelter, and clothing combined (37.6%). By comparison, 33.5% of the average family’s income went to pay taxes in 1961 while 56.5% went to basic necessities.
  • In 2015, the average Canadian family earned an income of $80,593 and paid total taxes equaling $34,154 (42.4%). In 1961, the average family had an income of $5,000 and paid a total tax bill of $1,675 (33.5%).
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Report Card on British Columbia’s Secondary Schools 2016

The Report Card on British Columbia’s Secondary Schools collects a variety of relevant, objective indicators of school performance into one easily accessible, public document so that all interested parties—parents, school administrators, teachers, students,and taxpayers—can analyze and compare the performanceof individual schools. Parents use the ReportCard’s indicator values, ratings, and rankings to compare schools when they choose an education provider for their children. Parents and school administrators use the results to identify areas of academic performance in which improvement can be made.

Where parents can choose among several schools for their children, the Report Card provides a valuable tool for making a decision. Because it makes comparisons easy, the Report Card alerts parents to those nearby schools that appear to have more effective academic programs. Parents can also determine whether schools of interest are improving over time. By first studying the Report Card, parents will be better prepared to ask relevant questions when they interview the principal and teachers at the schools under consideration.

Of course, the choice of a school should not be made solely on the basis of any one source of information. Families choosing a school for their students should seek to confirm the Report Card’s findings by visiting the school and interviewing teachers and school administrators. Parents who already have a child enrolled at the school can provide another point of view. Useful information may also be found on the web sites of the ministry of education, local school boards, and individual schools. In addition, a sound academic program should be complemented by effective programs in areas of school activity not measured by the Report Card. Nevertheless, the Report Card provides a detailed picture of each school that is not easily available elsewhere.

Certainly, the act of publicly rating and ranking schools attracts attention; attention can provide motivation. Schools that perform well or show consistent improvement are applauded. Poorly performing schools generate concern, as do those whose performance is deteriorating. This inevitable attention provides an incentive for all those connected with a school to focus on student results.

However, the Report Card offers more than motivation; it also offers opportunity. The Report Card includes a variety of indicators, each of which reports results for an aspect of school performance that might be improved. School administrators who are dedicated to improvement accept the Report Card as another source of opportunities for improvement.

To improve a school, one must believe that improvement is achievable. This Report Card provides evidence about what can be accomplished. It demonstrates clearly that, even when we take into account students’ characteristics, which some believe dictate the degree of academic success that students will have in school, some schools do better than others. This finding confirms the results of research carried out in other countries. Indeed, it will come as no great surprise to experienced parents and educators that the data consistently suggest that what goes on in the schools makes a difference to academic results and that some schools make more of a difference than others.

Comparative and historical data enable parents and school administrators to gauge their school’s effectiveness more accurately. By comparing a school’s latest results with those of earlier years, they can see if the school is improving. By comparing a school’s results with those of neighbouring schools and of schools with similar student characteristics, they can identify more successful schools and learn from them. Reference to overall provincial results places an individual school’s level of achievement in a broader context.

There is great benefit in identifying schools that are particularly effective. By studying the techniques used in schools where students are successful, less effective schools may find ways to improve. Comparisons are at the heart of improvement: making comparisons among schools is made simpler and more meaningful by the Report Card’s indicators, ratings, and rankings.

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How Alberta's Carbon Emission Cap Will Reduce Oil Sands Growth

Summary

  • The Alberta government has proposed implementing a 100 megatonne (Mt) cap on greenhouse gas (GHG) emissions that result from oil sands operations.
  • This paper estimated future emissions levels from oil sands production using oil sands production forecasts to 2040 from the National Energy Board.
  • Based on estimates of future production, this policy has the potential to constrain future oil sands production. In a scenario based on current emissions intensity levels, the policy could reduce cumulative production between 2025 and 2040 by 3.34 billion barrels of oil. In a scenario where the emissions intensity of oil sands production is reduced, the policy could result in cumulative production losses between 2027 and 2040 totaling 2.03 billion barrels of oil.
  • The cumulative value of the lost production could be large, totaling CA$254.74 billion (in 2015 dollars) in a scenario based on current emissions intensity levels. In a scenario where the emissions intensity of oil sands production is reduced, the cumulative lost value could be CA$153.41 billion (in 2015 dollars).
  • The policy could cumulatively abate 236 Mt of CO2 equivalents, at an average cost of CA$1,035 (in 2015 dollars) per tonne of GHG emissions in the current emissions intensity level scenario between 2025 and 2040. The cumulative level of GHG abatement would be lower in a scenario where emissions intensity reductions occur but come at a higher cost.
  • The 100 Mt cap on GHG emissions appears to place large costs on Canadians by potentially constraining future growth in oil sands development, while providing little in the way of avoided GHG emissions.
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Michigan’s strong economic performance since 2011 stands in contrast to Ontario, a jurisdiction that also has a large manufacturing base as a central feature of its economy but one that has not experienced an economic resurgence comparable to Michigan’s in recent years. Between 2010 and 2014, Michigan’s real economic output has increased slightly faster than Ontario’s, despite slower population growth. Michigan’s manufacturing output growth exceeded Ontario’s significantly between 2011 and 2014. Furthermore, while Ontario has experienced a dramatic and economically harmful run-up in public debt since 2011, Michigan has actually seen a slight decline in net public debt as a share of its economy. These results stand in stark contrast to the situation in the early years of this century, when Ontario consistently outperformed Michigan on most measures of economic performance.

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Changes in Economic Freedom in Venezuela, Ireland, and the United States

Venezuela has experienced a lengthy decline in economic freedom that started long before Hugo Chavez assumed the presidency in 1999. But Chavez, his United Socialist Party of Venezuela, and successor, Nicolás Maduro, have presided over a continued stunning slide in economic freedom that landed Venezuela in dead last place from 2010 to 2014 among the approximately 150 countries ranked in the index published in Economic Freedom of the World (EFW). This has created an immense human tragedy for the people of Venezuela who suffer runaway inflation, lack of even basic medicines and food (except for the politically connected), hunger, riots, and soaring crime, with Caracas taking its place as the murder capital of the world.

Ireland, on the other hand, is a good news story. Ireland has had a moderately high level of economic freedom all the way back to the initial year of EFW data in 1970. Significant reforms were initiated in 1986/1987, pushing Ireland’s EFW rating sharply upward to around 8.0. Ireland entered the top 10 in 1995 and it has remained there except for a couple of years following the financial crisis of 2008.

While the reduction in economic freedom of the United States has been moderate relative to that of Venezuela, the decline has been substantial since 2000. As in Venezuela, the drop has been a non-partisan affair. The high-water mark in economic freedom came in 2000 with a score of 8.65 and a rank of second place, just below Hong Kong. The decline has been steady since. In 2010, the United States fell out of the top 10 and its ranking is now in the mid-teens.

 

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