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The way out of the 'pink recession'

Roslyn Kunin: Pandemic relief was necessary, but moving forward, governments should transition towards investing in 'social infrastructure.' It would bring better returns in productivity, employment, and tax dollars in the future.

How the economy will be rebuilt in the wake of the COVID-19 pandemic is a major concern for us all. There are many unknowns, making the near future and the years ahead even murkier than usual.

So uncertain is Canada’s federal government about economic and financial prospects that it’s not producing a budget, or even an outlook on financial prospects.

No one can tell the future but Canadians might prefer leaders who assembled some expertise, generated best estimates (subject to revision, of course) and made and implemented some plans rather than just throwing their hands in the air.

One thing just about everyone agrees on is that the current economy looks more like a U on a chart than a V. We’re at the bottom of the graph and it will take a while before we start to bounce back up.

Evidence for this was seen when lockdown conditions were eased, yet neither consumers nor business people rushed out to spend or invest in the amounts needed for the economy to reach anywhere near its pre-pandemic level.

Foreign trade is plagued with uncertainties, and we know international tourists and students are staying home.

The only current source of funds required to get things moving is government.

Government actions have already prevented the economic collapse generated by the pandemic and lockdowns from turning into a major depression. By getting dollars into the bank accounts of people and businesses quickly and effectively, enough economic momentum was maintained in spite of unemployment being at a 50-year high.

Such generous giveaways can’t persist. First, even governments can’t allow their debt to continue to grow at its current accelerated rate. Second, having met their most immediate needs, many recipients of government grants and loans are saving them against future uncertainties rather than contributing to the current economy.

Instead of handouts, governments would do better to invest in infrastructure. This not only generates jobs in the short term, but results in greater productivity, employment and tax dollars in the future.

When we think of infrastructure, most of us picture heavy-duty construction creating roads, bridges, hydro dams and the like, providing employment the moment they’re started. To help an economy at once, we need projects that are ‘shovel ready.’

However, the employment generated by that infrastructure work is blue-collar – traditional male jobs. This hasn’t been a problem in past recessions, since those downturns tended to hit male workers and their jobs much harder than female ones.

The pandemic has created what’s often referred to as a pink recession. Consumer services have been most affected. Women and the jobs they often hold have been hit the hardest. So old-fashioned shovel-ready construction projects aren’t going to be much help. Laid-off service workers can’t be turned into heavy equipment operators in the short run.

But there is infrastructure that’s badly needed in Canada and would result in broadly-based employment: social infrastructure. It would provide the underpinnings for the human side of our economy.

Elder care is an example. Its needs and shortcomings are now painfully obvious.

Better infrastructure for mental health issues would alleviate many community problems. More such social infrastructure would mean police would be less likely to be put into situations they can’t deal with effectively.

Training is an example of social infrastructure. Investing in training is much like investing in transportation. Both make it possible or easier for organizations to produce and distribute the goods and services that we need. It allows them to offer access to different markets in the latter case and by providing appropriately skilled staff (human capital) in the former.

Government spending on social infrastructure not only generates short-term jobs. It leads to long-term employment, a productive and prosperous future, and a stronger society.

That’s a good use of our tax dollars.

Troy Media columnist Roslyn Kunin is a consulting economist and speaker.

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