Alberta to Bump Minimum Wage Starting in October

Business’ may cry foul, but Alberta, despite being one of the wealthiest provinces in the country, when the oil price is high, has the lowest minimum wage in Canada. The affects on the economy will be negative, say small business owners and service related industries. Of course, every argument has two sides. Here are some examples where minimum has not crippled the economy, and why it won’t happen in Alberta.

Here are some helpful sources to suggest minimum wage won’t throw the economy into a permanent recession.


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anti-Keystone XL campaign was made possible by a paradigm shift by environmentalists

An interesting point made in this month’s cover story for Oilsands Review,

“The blame game behind the anti-Keystone XL campaign was made possible by a paradigm shift in the consciousness of American environmentalists. The traditional environmentalist sought to reduce their footprint by limiting material consumption. But this, unfortunately, demands an austere lifestyle that is out of touch with today’s mainstream culture. Today’s self-dubbed environmentalists can now maintain a consumption-driven lifestyle. They only need to ensure their consumables are green. As a result, they can conveniently offload the responsibility for environmental performance from the demand side (consumer) to the supply side (producer).”

Utility Functions (Mathematical Representation of Preference)

The following section from DiscussEconomics on microeconomics and preferences discusses the mathematical representation of preference using utility functions.

Using utility function : U(x) = U (x1, x2, x3.......xn)
(Where U is in fact mu.)

This assigns a number (utility number to every consumption bundle in a person’s preference ordering. 1. Now if someone is indifferent between two bundles, the U function assigns the same number to both bundles:
utility function

2. Now if you prefer 1 bundle to another, the utility function assigns a larger number to the preferred bundle:
utility function 2


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Why Alberta Oil Savings is Not like Norway but should

Alberta_vs_Norway_infographic

It is entirely plausible the only result from the Alberta savings fund (currently at just under 18 billion) after the oil boon will be a paltry 4.6 billion. That’s $4.6 billion generated from decades of revenues and trillions of royalty dollars.

A handful of Albertans lament on the lost savings and the short sightedness of politicians (can’t blame corporations, their duty is to the shareholder and that’s revenues in the present). There’s a good article out of Alberta Oil Magazine touting the irreconcilable differences between Alberta and the country Norway when it comes to savings of oil wealth. It’s an easy comparison to make–rich Norway vs. now poor Alberta.

The article is right, comparing the two isn’t a fair comparison, they are different entities, in particular the tax structures. The article, however, opens with the most profound statement of the problem–Alberta has done a horrid job in the past 30 years saving their oil wealth. The culture in the province is spend hard and fast.

There’s no question that Alberta has done a bad job of managing the wealth that its oil and gas sector has been throwing off for more than half a century. Despite generating almost $190 billion in non-renewable resource revenues since 1980, the value of the Heritage Fund stood at $17.3 billion at the end of last year. And of the $33.4 billion in income that it’s thrown off, the Heritage Fund has retained just $4.6 billion. Norway, in contrast, has managed to save much, much more of its non-renewable resource revenues. The value of its sovereign wealth fund sits at nearly $1 trillion, or $177,000 for every Norwegian citizen. Alberta’s per-capita figure? A shade over $4,300.

If oil friendly media doesn’t want to make the connection between Norway and Alberta, and we can do some more work in connecting Alberta with Alaska. Although they aren’t Norway, Alaska has done a far better job then Alberta in saving their own oil royalties.

It’s true Alberta probably couldn’t save at the same rate as Norway, but they could get close to Alaska. The stunning reality is, recently, Alberta hasn’t saved and all and isn’t in a position to do so for perhaps a decade. Politicians attempt to make the argument that merely protecting the Alberta Heritage Fund from inflation is a triumph. It doesn’t help that the same ruling party has been in power in Alberta for nearly fifty years.

At the end of the day, there is no political pressure to save the vast oil wealth for future generations. There was a time, even before oil was $100 a barrel, where there was talk Alberta could save enough to completely eliminate income taxes. That was only 15 years ago, but now it’s talk about running deficits and increasing taxes. This reality could be permanent.

The wealth of Alberta has been squandered and it can never be recaptured. The only saving grace is that people may have had the chance to personally save more because of overall lower taxation. But who saves money for the future, right?

Could we see $20 per barrel price of oil?

The answer is yes, and the ones who will suffer? Well, everyone will, but North American producers, particularly in the shale and bitumen markets, will suffer the most.

Why is this happening? Well North American production has increased and nobody else worldwide is declining their outputs. Factor in global demand is low and you get a simple ECON 101 picture of why prices continue to decline. Only an increase in demand coupled with reduction in supply will return the market to a sense of equilibrium. But $100 oil may be done for half a generation or forever.

Infrastructure Spending Is Zero. That’s 0 with a zero

Lawrence Summers, Professor and President Emeritus at Harvard University, has made an assertion that has startled many economists and has gotten the the policy thinkers in a buzz. His models suggest that the total government spending (of all levels) adjusted for inflation, on national infrastructure, is zero.

There are a set of further rationale for increased infrastructure investment. Can it possibly make sense that at this moment, as I speak to you, the share of public investment in GDP, adjusting for depreciation, so that’s net share, is zero. Zero.

Full link to his article here: http://larrysummers.com/2015/02/25/reflections-on-secular-stagnation/

Consumption Bundle Assumptions

Introductory Macroeconomics

Following up from our introduction to economics/macroeconomics article, this post talks about ‘self-interest’ and maximizing over a set of preferences subject to constraints.

Let’s start off with some examples, but first, the tools we’ll need (some images used because it’s a bit tough to get the right characters).

Consumption Bundle (CB):
consumption bundle

Preference Ordering: Will use statements to rank bundles from least to most. It is possible to construct if: 1. You are always able to make such a statement, 2. Statements are consistent.

Let’s explore some of these ordering assumptions.

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RRSP Tax Benefits and Hints – Get Ready to Buy

RRSP Tips and Benefits

Now is the time to buy buy buy into some respectable mutual funds (or perhaps stocks if you have guts). The market is all time lows, which means folks who have money can invest into quality companies at 1/2 to 1/3 of the price. Here are some tips as the end of the tax season fast approaches.

– Consider the preferred tax treatment for dividends and capital gains on investments held outside your RRSP when determining which types of assets to hold inside your RRSP. Be sure to take into account the new lower tax rates on eligible dividends.

– Consider a spousal RRSP for retirement income splitting if you expect your spouse’s retirement income to be lower than yours. Keep in mind that your retirement income from your matured RRSP may qualify for new spousal income splitting rules. Especially relevant if you’ve run out of contribution room.

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The Impact on the Economy: Oil Prices Dip Below $50 a Barrel

JessicaFender / Pixabay

It seems like a bygone era when fuel prices were this low. Oil dipped below $50/barrel for the first time in 10 years. Prices at the pump are the lowest in a decade which makes commuters and truckers thrilled, but what about the economy as a whole, and what can we expect in the New Year with depressed oil prices?

Well first things first, there is no conspiracy theory, if we follow Occam’s Razor, and in this case we should, then we should conclude that the cause of the recent decline is simply supply and demand economics. The world demand for oil is low, major economies like India and China are slowing, and as such the current supply is starting to accumulate. It doesn’t help matters that oil producing nations are not slowing production. OPEC is happy to continue pumping; Saudi Arabia has no interest in shutting off the pumps no matter how low oil goes.

So there are supply factors with major producers, but ultimately the reason why global prices for oil have declined, and declined so swiftly, is an issue of demand. No, it’s not to punish Russia, no it’s not to slow increases in US shale production.


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Merry Christmas From DiscussEconomics

From everyone here at DiscussEconomics we want to wish you a great Christmas. Hopefully your bills won’t get the better of you this season, but hey, if people didn’t spend we’d have nothing to talk about! If you don’t do the Xmas thing then hey, Happy Holidays nonetheless. Keep yourself tuned for the latest news re: the economy and personal finances, in the new year. Winter is slow but we’ll be on top of it.

Exciting changes and additions are planned for next season including an new design so don’t forget to come back soon for a visit and to bookmark us in your browsers and news feeds.