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Ontario’s 5-point plan doesn’t give manufacturers much hope for recovery


June 16, 2009
By Paul Hogendoorn


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Ontario Premier Dalton McGuinty recently spoke at a luncheon in London about his new “five-point plan for recovery” for the province of Ontario. Like many present, I wanted to hear a message that would offer legitimate hope for an economic recovery – and a plan that I could really believe in.

A simple litmus test for any economic plan is to look at two things: where is the money coming from and where is the money going to? Many plans fail the first test by either borrowing from the future or increasing the tax burden today. This plan likely fails the first test and clearly fails the second.
McGuinty has a near tunnel-vision focus on education and healthcare. His plan calls for even more “investment” in these two sectors, either directly or indirectly. That in itself is mildly alarming, but what is absolutely alarming is his apparent belief that investment in these two sectors will somehow stimulate sustainable economic growth.
And that doesn’t make sense. It’s our historic economic strength and well-being that has enabled us to invest in and build on our education and healthcare systems – in fact, all of our social infrastructure systems, including ambulance, police, fire protection, etc. – and not the other way around. The private sector is primarily responsible for creating and building this province’s economic wealth, and that’s where this plan is really lacking.
Even some items that were supposed to be aimed at business are actually strategies that benefit the education sector. The tax exemption for profits made on commercializing new technologies only applies to technologies developed by our universities and colleges – meaning they have to be licensed from the universities and colleges. New technologies developed in the private sector are not applicable. The money allocated for the employee retraining program and the apprenticeship programs also end up as more revenue for the colleges. Yes, we need education, and yes, our people need usable skills. But first, we need to have healthy businesses and industries that create the jobs and the employment opportunities that these people would fill. There is little, if anything, in the five-point plan that would stimulate this kind of growth.
The other tax “incentive” the Ontario Premier mentioned for industry was the elimination of the capital tax. Of all the taxes that most companies pay (federal and provincial income tax, the Employer Health Tax, municipal taxes, etc.), the capital tax is likely the smallest one. Although appreciated, the net result is that it won’t affect us much at all. McGuinty argues that this makes us the lowest taxed jurisdiction in the Great Lakes region, but these states are all suffering as badly as we are. The competition for jobs does not come from them, it comes from Alabama, Texas and other southern states that have created a far more industry-friendly business climate. They are attracting most of the new industrial investment in North America; we need to be competitive with them.
Much of our social infrastructure is paid for by our industrial employers. The Employer Health Tax (EHT) pays the bulk of the cost of healthcare. The municipal taxes paid by industry (in London anyway) are nearly five times higher than residential tax rates, meaning industry carries a disproportionate share of the cost of public education too. How then will our province be able to pay for the growing “investment” in education and healthcare when our manufacturing industries are in decline and no longer able to shoulder the disproportionate share of the load they have willingly carried for so long?
I am convinced that McGuinty really believes his plan will work – and even though I really want to believe too, I can’t. How can he be so passionate and so genuine, but yet so completely wrong?
The key to understanding this plan’s inherent shortcomings wasn’t in the plan itself – it was McGuinty’s bio and introduction that gives us a glimpse as to the primary political influences in his formative years; his parents. The bio says that “they [his parents] passed on their commitment to education, family and community service to each of their 10 children.” It goes on to say that his mother is a retired nurse and his father was a teacher and professor.
Growing up, the economic security and contentment in the McGuinty household would have been directly connected to the state of our education and healthcare sectors. Dad was a teacher, mom was a nurse. It is no wonder, then, that his plan for economic recovery directs even more money towards healthcare and education with little (if any) consideration for how these bills are ultimately paid.
Too bad we can’t all be employed in the public sector, because then, I might believe his plan too…

Paul Hogendoorn is president of OES, Inc. and chair of the London Region Manufacturing Council (LRMC). You can reach him at phogendoorn@oes-inc.com. For more information about the LRMC, visit www.manufacturinglondon.com.