Toyota's vote of confidence in Canadian workers and medicare

'Treating people decently is sometimes a competitive advantage.' - The New York Times

Woodstock - Score a big one for the constructive role of government in society, especially for Canada's public medicare program and the country's internationally-recognized education standards.

The latest vote of confidence comes not from fringe voices on the left, or even from the centre of the political spectrum. It comes directly from the world of business and in the process it puts those critical of Canada (naysayers like Conservative leader Stephen Harper) squarely on the defensive.

When Toyoto Motor Corp. announced that it would build a new $800-million car-manufacturing plant in Canada, it did much more than give the Canadian auto industry a major shot in the arm. It was also a vote of confidence in the Canadian way of life.

In doing so, Toyota also exposed the hollowness of the anti-government rhetoric routinely pumped out by the corporate sector, its bought-and-paid-for think tanks (like the Fraser Institute) and media flagships like the National Post and most of Canada's open-mouth, right-wing radio.

The plant will be Toyota's second in Canada. It will build the RAV4 sport utility vehicle and have a capacity of 100,000 vehicles a year.

A 'wrong-headed' philosophy

Predictably, the business press was muted in reporting this aspect the story. But there were exceptions. A notable one was the New York Times.

"Modern American politics is dominated by the doctrine that government is the problem, not the solution," The Times reported July 25 in an article by Paul Krugman.

"In practice, this doctrine translates into policies that make low taxes on the rich the highest priority, even if lack of revenue undermines basic public services. You don't have to be a liberal to realize that this is wrong-headed," he wrote.

"Corporate leaders understand quite well that good public services are also good for business. But the political environment is so polarized these days that top executives are often afraid to speak up against conservative dogma. Instead, they vote with their feet."

U.S. politicians made a mighty effort to convince Toyota to build its new plant on American soil. Several southern states offered hundreds of millions of dollars in incentives. But Toyota turned its back on them and came to Canada.

In doing so, it cited two main reasons - the quality and training of Canadian workers and the advantages offered by Canada's universal medicare system.

Each of these are advantages that the National Union of Public and General Employees (NUPGE) has long believed are under-appreciated by the business community - especially within Canada - and that more should be done to promote.

Taxes so low they backfired

"What made Toyota so sensitive to labor quality issues?" Krugman asked.

"There are other reports, some coming from state officials, that confirm (Toyota's) basic point: Japanese auto companies opening plants in the Southern U.S. have been unfavorably surprised by the work force's poor level of training.

"There's some bitter irony here for Alabama's governor. Just two years ago voters overwhelmingly rejected his plea for an increase in the state's rock-bottom taxes on the affluent, so that he could afford to improve the state's low-quality education system. Opponents of the tax hike convinced voters that it would cost the state jobs."

But superior education standards weren't the only reason. Medicare also played a huge role in the company's decision.

"Canada's other big selling point is its national health insurance system, which saves auto manufacturers large sums in benefit payments compared with their costs in the United States," Krugman wrote.

"You might be tempted to say that Canadian taxpayers are, in effect, subsidizing Toyota's move by paying for health coverage. But that's not right, even aside from the fact that Canada's health care system has far lower costs per person than the American system, with its huge administrative expenses. In fact, U.S. taxpayers, not Canadians, will be hurt by the northward movement of auto jobs.

"To see why, bear in mind that in the long run decisions like Toyota's probably won't affect the overall number of jobs in either the United States or Canada. But the result of international competition will be to give Canada more jobs in industries like autos, which pay health benefits to their U.S. workers, and fewer jobs in industries that don't provide those benefits. In the U.S. the effect will be just the reverse: fewer jobs with benefits, more jobs without."

U.S. loses big

The article concludes:

"So what's the impact on taxpayers? In Canada, there's no impact at all: since all Canadians get government-provided health insurance in any case, the additional auto jobs won't increase government spending," Krugman added.

"But U.S. taxpayers will suffer, because the general public ends up picking up much of the cost of health care for workers who don't get insurance through their jobs. Some uninsured workers and their families end up on Medicaid. Others end up depending in emergency rooms, which are heavily subsidized by taxpayers.

"Funny, isn't it? Pundits tell us that the welfare state is doomed by globalization, that programs like national health insurance have become unsustainable. But Canada's universal health insurance system is handling international competition just fine. It's our own system, which penalizes companies that treat their workers well, that's in trouble.

"I'm sure that some readers will respond to everything I've just said by asking why, if the Canadians are so smart, they aren't richer. But I'll have to leave the issue of America's comparative economic performance for another day.

"For now, let me just point out that treating people decently is sometimes a competitive advantage. In America, basic health insurance is a privilege; in Canada, it's a right. And in the auto industry, at least, the good jobs are heading north." NUPGE

Web posted by NUPGE: 27 July 2005

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