I have taken a look through the NDP platform and plans for Alberta moving forward.  Here are my thoughts and considerations on their ideas from a seasoned finance and HR perspective.

(1.1) A job creation tax credit: We’ll introduce a Job Creator’s Tax Credit to directly and effectively help Alberta businesses who invest to create new jobs.

How it works:

The credit will help employers by refunding 10 per cent of each new employee’s salary to a maximum salary of $50,000.  The NDP estimates the credit will create 27,000 jobs.  The cost of the program is estimated to be $89M in each of the 5 years.

The Reality:

One can anticipate a number of employer games being played.  For example, when the price of oil ramps up, oil patch employers simply have to declare that the job is new, and presto, a $5,000 tax credit is created.

Prediction:

Only an improving economy will create sustainable jobs. The employer will not spend $45,000 or more to obtain a tax credit of $5,000 unless the economy improves.  If the economy improves, the 27,000 job creation target will be met.  If the economy improves modestly, a few jobs will be created but they likely would have been created regardless.

Alternative Take:

Many successful government led job creation examples from the United States and the European Union have shown job creation best practices that the NDP may wish to examine.

(1.2) A careful review of how Alberta will promote resource processing and fair royalties: We’ll establish a Resource Owners’ Rights Commission to report to the new Premier and the Legislature within six months on measures to promote greater processing of Alberta’s energy resources, and to ensure a full and fair return to the people of Alberta for their energy resources. We’ll act on recommendations within the first year of the next term of the Legislature.

The Reality:

Greater processing of local energy, while laudable, may be difficult to deliver. If the private sector can’t make it work, it is hard to understand how more local processing can feasibly take place in the absence of massive government subsidies.  In terms of the royalty review, higher royalty levels may serve to decrease job creation in the energy sector so the net result may be negligible.

Alternative Take:

Is it possible to take advantage of green and local energy processing initiatives, increasing royalties, and create more jobs?  Incentives and tax rates are two powerful levers available to policy planners.  The NDP have a chance to create a new path where incentives and tax levels create new opportunities

(1.3) We’ll ensure the benefits of better economic policies are more widely shared by increasing the minimum wage to $15 per hour by 2018.

Raising the minimum wage by about 50% over 3 years would seem to risk a decline in minimum wage jobs.  Numerous studies have shown that common economic supply and demand prevails.  Politicians have never overturned the law of demand where when the price of labour rises, the quantity of labour demanded will decline (all things being equal).

Workers who keep their minimum wage jobs are better off but at the expense of unskilled, mostly young workers who either lose their jobs or can’t find a job at the new higher minimum wage.

A higher wage attracts new job seekers but does not guarantee them a job.  Evidence suggests that a 10 percent increase in the minimum wage leads to a 1 to 3 percent decrease in employment of low-skilled workers in the short run and a larger decrease in the long run.  (Source: Forbes, 5/07/2013, The Minimum Wage Delusion, and the Death of Common Sense.)

Alternative Take:

Job creation is likely a better long term focus than mandated artificial wage increases.  While undoubtedly popular with some of the NDP constituent labour base, the small business and entrepreneurial NDP base may disagree that increasing the minimum wage is a wise move.  Job creation incentives, whether in energy, renewable energy infrastructure, or entry level jobs, are more likely to resonate with Albertans and be more prudent over the long term.

Prediction:

Alberta will keep pace with normal minimum wage increases and this promise will be watered down or disappear.  The job creation agenda will, however, have a positive impact.  Studies have shown that seed money for workforce training, start-up capital, and new job incentives do create a lasting economic impact.  This area is where the NDP agenda will pay off.