Comparing Quebec and Ontario: Political Economy and Public Policy at the Turn of the Millennium 9781442621176

Table of contents :
Contents
Acknowledgments
COMPARING QUEBEC AND ONTARIO. Political Economy and Public Policy at the Turn of the Millennium
1. How Do Advanced Political Economies Differ? Why Does It Matter?
2. Typing Provinces: The Political Economies of Ontario and Quebec
3. Budgeting: Why Some Tax and Spend More Than Others, and How
4. Social Assistance and Transfers: Redistributing, but Differently
5. Childcare and Early Learning: Can the Residual Mould Be Broken?
6. Economic Development: Can States Still Intervene?
7. Quantitative Evidence (1): Comparing Policy “Effort”
8. Quantitative Evidence (2): Comparing Redistributive Outcomes
Conclusion: How Large and Durable Are These Differences?
Notes
Index

Citation preview

COMPARING QUEBEC AND ONTARIO Political Economy and Public Policy at the Turn of the Millennium

Can subunits within a capitalist democracy, even a relatively decentralized one like Canada, pursue fundamentally different social and economic policies? Is their ability to do so less now than it was before the advent of globalization? In Comparing Quebec and Ontario, Rodney Haddow brings these questions and the tools of comparative political economy to bear on the growing public policy divide between Ontario and Quebec. Combining narrative case studies with rigorous quantitative analysis, Haddow analyses how budgeting, economic development, social assistance, and childcare policies differ between the two provinces. The cause of the divide, he argues, is underlying differences in their political-economic institutions. An important contribution to ongoing debates about globalization’s “golden straitjacket,” Comparing Quebec and Ontario is an essential resource for understanding Canadian political economy. (Studies in Comparative Political Economy and Public Policy) rodney haddow is an associate professor in the Department of Political Science at the University of Toronto.

Studies in Comparative Political Economy and Public Policy Editors: MICHAEL HOWLETT, DAVID LAYCOCK (Simon Fraser University), and STEPHEN MCBRIDE (McMaster University) Studies in Comparative Political Economy and Public Policy is designed to showcase innovative approaches to political economy and public policy from a comparative perspective. While originating in Canada, the series will provide attractive offerings to a wide international audience, featuring studies with local, subnational, cross-national, and international empirical bases and theoretical frameworks. Editorial Advisory Board Jeffrey Ayres, St Michael’s College, Vermont Neil Bradford, Western University Janine Brodie, University of Alberta William Carroll, University of Victoria William Coleman, University of Waterloo Rodney Haddow, University of Toronto Jane Jenson, Université de Montréal Laura Macdonald, Carleton University Rianne Mahon, Wilfrid Laurier University Michael Mintrom, Monash University Grace Skogstad, University of Toronto Leah Vosko, York University Kent Weaver, Georgetown University Linda White, University of Toronto Robert Young, Western University For a list of books published in the series, see page 377.

Comparing Quebec and Ontario Political Economy and Public Policy at the Turn of the Millennium

RODNEY HADDOW

UNIVERSITY OF TORONTO PRESS Toronto Buffalo London

© University of Toronto Press 2015 Toronto Buffalo London www.utppublishing.com Printed in the U.S.A. ISBN 978-1-4426-4966-8 (cloth) ISBN 978-1-4426-2701-7 (paper)

Printed on acid-free, 100% post-consumer recycled paper with vegetable-based inks. ____________________________________________________________________ Library and Archives Canada Cataloguing in Publication Haddow, Rodney, author Comparing Quebec and Ontario : political economy and public policy at the turn of the millennium / Rodney Haddow. (Studies in comparative political economy and public policy) Includes bibliographical references and index. ISBN 978-1-4426-4966-8 (bound). – ISBN 978-1-4426-2701-7 (pbk.) 1.  Ontario – Social policy.  2.  Ontario – Economic policy.  3.  Ontario – Politics and government.  4.  Québec (Province) – Economic policy.  5.  Québec (Province) – Social policy.  6.  Québec (Province) – Politics and government.  I.  Title.  II.  Series: Studies in comparative political economy and public policy HC117.05H33 2015  330.9713  C2014-907979-6 ____________________________________________________________________ University of Toronto Press acknowledges the financial assistance to its publishing program of the Canada Council for the Arts and the Ontario Arts Council, an agency of the Government of Ontario.

University of Toronto Press acknowledges the financial support of the Government of Canada through the Canada Book Fund for its publishing activities. This book has been published with the help of a grant from the Federation for the Humanities and Social Sciences, through the Awards to Scholarly Publications Program, using funds provided by the Social Sciences and Humanities Research Council of Canada.

Contents

Acknowledgments  vii 1 How Do Advanced Political Economies Differ? Why Does It Matter?  3 2 Typing Provinces: The Political Economies of Ontario and Quebec  28 3 Budgeting: Why Some Tax and Spend More Than Others, and How  63 4 Social Assistance and Transfers: Redistributing, but Differently  99 5 Childcare and Early Learning: Can the Residual Mould Be Broken?  131 6 Economic Development: Can States Still Intervene?  163 7 Quantitative Evidence (1): Comparing Policy “Effort”  197 8 Quantitative Evidence (2): Comparing Redistributive Outcomes   238 Conclusion: How Large and Durable Are These Differences?  262 Notes 287 Index 369

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Acknowledgments

As well as the documentary and statistical evidence referenced in the text, this book also relied on interviews with fifty-seven public servants and non-governmental spokespersons, all of them knowledgeable about one or two of the four policy fields examined here. Of these, thirty-one were in Ontario and twenty-six in Quebec; thirty-six respondents were public servants and twenty-one were non-governmental actors, including representatives of business associations, labour federations, and social policy advocacy, program delivery, or research organizations. Between three and six public officials were interviewed for each of the four fields in each province. Interviews on average were about one hour long. All of these anonymous research participants receive my warm thanks for their generous contribution. Graduate students provided me with invaluable assistance in researching this study. Saman Chamanfar, Isabel Coté, Yanick Dufresne, Josh Gordon, Van Hoang, Chris Laroch, Anthony Sealey, Ian Swain, and Julien Brunet identified and organized relevant newspaper and periodical articles and government documents, and prepared summary chronologies of them as well as of key policy developments. I thank all of them profusely for their help. The research was financed by a grant from the Social Sciences and Humanities Research Council of Canada.

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COMPARING QUEBEC AND ONTARIO Political Economy and Public Policy at the Turn of the Millennium

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Chapter One

How Do Advanced Political Economies Differ? Why Does It Matter?

Can sub-state jurisdictions within a capitalist democracy, even a relatively decentralized one like Canada, pursue fundamentally different social and economic policies? Is their ability to do so less now than it was before the advent of globalization and post-industrialism? The present study addresses these questions by comparing policymaking and policy outcomes in the Canadian provinces of Ontario and Quebec since the 1980s when scholars began to refer widely to globalization as a constraint on the autonomy of states in affluent societies.1 It addresses four policy fields: budgeting, social assistance and related income supplementation, childcare and associated family measures, and economic development. Most comparative political economy (CPE) and welfare state scholars contend that states retain the ability to advance different objectives, that they are not now constrained to adjust policies in a marketoriented and laissez-faire direction. Yet this broad concord is tentative and vulnerable to reversal in the face of new evidence as the postindustrial era lengthens and as the economies of advanced countries integrate evermore with each other and with those of the developing world. Researchers also hesitate to generalize about the persistence of choice across policy sectors, arguing that options are more constrained in some fields than in others. Adding further complexity, this scholarship now divides between qualitative and historical comparisons of a few cases and larger-N quantitative studies. CPE and welfare state scholarship exhibits the fissure regarding the respective merits of qualitative and quantitative research that has riven political science.2 Current comparative scholarship concentrates almost exclusively on sovereign states as the unit of analysis, a focus that can be traced at least

4  Comparing Quebec and Ontario

to Max Weber’s foundational writing on the modern state.3 A fundamental innovation in this book is to instead compare subunits within a federation. The mainstream literature’s focus is understandable: many cases of interest to CPE and welfare state scholars are unitary states; even for most federations, specialists may agree that decision-making authority resides mainly with the senior government, not with provincial or state subunits. As will be argued in the next chapter, however, this is not the case for Canada, where provinces have jurisdiction in most areas of social policy and possess substantial power over budgets and economic intervention. The two provinces examined here are Canada’s largest; their combined population of 21 million accounts for almost two-thirds of the Canadian total. As components of the Canadian federation, Ontario and Quebec share similar formal political institutions, and their past and present policymaking is substantially conditioned by relations with the same federal government in Ottawa. These similarities, and others, such as comparable size, location, jurisdictional authority, and exposure to economic globalization and continentalization, reduce the range of variation between the cases to a manageable level. The cases differ, I shall argue, with respect to three causal mechanisms4 that characterize their political economies and one that typifies their political cultures. The political-economic differences pertain to (1) the extent of policy collaboration among economic and social actors; (2) the salience of polarization between the major political parties on economicredistributive issues and the presence or absence from the party system of a credible neoliberal party; and (3) the degree to which the state is able and willing to intervene in economic development. These differences may both foster and be strengthened by (4) the presence or absence of a nationalist cultural identity. These variations mean that Ontario and Quebec belong to different cells of a typology that can be derived from current CPE and welfare state scholarship, one that anticipates quite different policy outcomes in cases that diverge in these ways. The purpose of this enquiry is to ascertain whether these hypothesized differences are evidenced in the cases studied; if so, whether this results in divergences between Ontario and Quebec in economic and social policymaking processes and in policy outcomes; whether these differences are of a kind and extent anticipated by the typology; and whether they are substantively important. This book’s other contribution is to address the features of globalization and post-industrialism that make scholars tentative in assessing

How Do Advanced Political Economies Differ?  5

the continued possibility of policy variety. First, the study extends the empirical base of this research by being up-to-date and by extending the field of inquiry to include comparisons among Canadian provinces, where it has not previously been pursued systematically. The case studies encompass policy developments to the end of 2010 and therefore consider the impact of the 2008 economic crisis. Second, the four policy sectors identified for examination span the divide between economic and social policy, and bridge important distinctions within each. Recent scholarship offers distinctive assessments of the potential for policy variety to persist in different fields. It suggests different conclusions about the viability of choice in the macroeconomic sphere, including budgeting, compared to microeconomic interventions, such as economic development. And social policy scholars portray the trajectory and prospects of selective and transfer-based measures very differently from those for more encompassing services. The four policy sectors were selected to span these distinctions, permitting a more robust test of the persistence of variety. Third, this study uses both qualitative and quantitative methods, combining research strategies in a manner that is increasingly recommended in political science. Chapters 3 to 6 offer comparative case studies of policymaking and outcomes in Ontario and Quebec in the four selected fields. Chapters 7 and 8 use regression. Statistical data series considered here begin in the early 1980s; the qualitative case studies trace developments since 1990. The book seeks to reconcile these disparate kinds of evidence. Finally, the fact that this is a study of subunits within a sovereign state gives it the potential to make a distinctive contribution to the literature on globalization, postindustrialism, and public policy. Canadian provinces have considerable policy discretion. The federal government in Ottawa nevertheless also retains important resources. Provinces therefore lack the full range of tools available to national governments elsewhere, which are the focus of most comparative work. They therefore represent something of a “least-likely case” for establishing continued policy variation.5 If this study uncovers considerable persistent policy variation nevertheless, it will offer particularly compelling evidence in favour of the view that variety can survive the allegedly homogenizing influence of globalization. The rest of this chapter considers relevant theoretical and methodological issues. Much current CPE and welfare state research divides affluent capitalist democracies between those that rely on collaboration among societal actors from those, more market-oriented, that do not.

6  Comparing Quebec and Ontario

The next section explicates this tradition and its central importance for the present project. The following one indicates the relevance of scholarship on variable state intervention. The remaining sections identify this study’s response to the recent “ideational turn” in political science; define globalization and post-industrialism and indicate their importance for CPE; review recent scholarship’s distinctive findings across policy sectors about the impact of these forces; and examine the debate about qualitative and quantitative methods and explain how this book proposes to span this divide. The chapter ends with a distillation of its implications for the hypotheses developed in chapter 2. Collaborative and Liberal Political Economies Most CPE scholarship argues that variations among advanced capitalist democracies in social and economic policy have been resilient, or declined modestly, in recent years. These findings are reported by researchers who, for the most part, see these differences as reflecting institutional distinctions among countries. Institutions are “formal and informal rules, regulations, norms, and understandings that constrain and enable behaviour.”6 Comparing the institutions of different states, for institutionalists, helps us detect the sources of their differences. While not fixed, institutions are resilient. “Once created, institutions are powerful external forces that help determine how people make sense of the world and act in it.”7 Not all valuable CPE and welfare state writing today is institutionalist.8 But much is, and this approach forms the basis for the typologies discussed in this and the next section, and for the first three causal mechanisms tested in this study. Moreover, I shall argue that the most important alternative perspective in the CPE literature, the “power resources” approach, can be accommodated to an important degree by institutionalism. The approaches discussed here include the leading ones in current institutional CPE. They do not agree on all points, but in spite of disagreements they share the insight that advanced political economies broadly divide between those that are collaborative and those that are liberal. It is this central distinction that is important for the present study. A literature that emerged during the 1970s divided advanced capitalist economies between neo-corporatist and pluralist cases. The former, typical in northern Europe, were characterized by well-developed, encompassing, and strong organizations for both business and workers. In such a setting, where both employers and unions had considerable

How Do Advanced Political Economies Differ?  7

power, these parties were both capable of collaborating and willing to collaborate in policymaking.9 The result was relatively extensive welfare states to protect the interests of workers, whose unions reciprocated by restraining wage growth. In Anglo-Saxon pluralist countries, in contrast, these economic interests were poorly organized and competitive, in a context where the needs of business tended to prevail over those of much weaker labour in policymaking. The result was less redistribution and a less-regulated economy. As we can see, the distinction between neo-corporatism and pluralism therefore has two aspects: the former experiences more “cooperative relations” among social actors, but it is also characterized by a different “balance of power” among them, one less favourable to business. Since the late 1980s, scholarly interest in neo-corporatism has waned, in part the result of a possibly exaggerated view that these forms of organization and bargaining have declined significantly.10 A “varieties of capitalism” approach (hereinafter “VoC”) has subsequently emerged, however, echoing important elements of the older literature. For this theory, differences among political economies can be attributed to variable behaviour by firms. In coordinated market economies (CMEs), firms coordinate among themselves, and with banks and their workers; they favour institutions that facilitate these relationships. CMEs exist, again, in northern Europe and, in a different configuration, Japan. Where firms instead rely on competition in unregulated markets, they resist government regulation of their access to technology, capital, and skills, and efforts to facilitate unionization. This liberal market economy (LME) pattern prevails in the Anglo-Saxon nations identified as pluralist by the older literature. As the world economy became more competitive after the 1970s, governments responded to these business preferences by reinforcing coordinative capacity in CMEs while reducing regulatory barriers in LMEs. Rather than becoming more alike, these models diverged further.11 VoC encounters criticism.12 Observers argue that many countries are neither CMEs nor LMEs, instead embodying a mix of features from each model.13 Many also argue that VoC does not explain how a country’s institutions change, other than by being subjected to a shock from outside, which then induces substantial disruption until a new “equilibrium” emerges. For Kathleen Thelen, this shortcoming can be addressed by abandoning the VoC view that institutions neatly reflect the (harmonious and homogeneous) interests of a country’s firms. They should instead be seen as conditioned by a shifting balance of power

8  Comparing Quebec and Ontario

among multiple and often conflicting interests, in the business community and among workers and other constituencies.14 Conflict typically involves national organizations that represent different interests. Thelen’s approach therefore returns CPE to the focus on organizational strength and relations among interests that characterized neocorporatism scholarship. This attention to the institution-generating role of evolving power relations also suggests the possibility of reconciling institutionalist political economy with the “power resources” approach, with which it has often been seen as incompatible, especially since VoC theory emerged.15 The 1970s neo-corporatism literature arguably bridged this distinction. It discerned political economies that differed in the extent of cooperation among actors, an institutional variation, as well as in the balance of power among them, the focus of power resources approaches. By concentrating largely on firms and on the extent of cooperation among them, VoC focuses largely on the first of these. Thelen reminds us that they are both important. She also helps us reconcile the study of production regimes, VoC’s focus, with another leading institutional typology: Gøsta EspingAndersen’s theory of welfare states.16 Esping-Andersen identifies different cross-class alliances, reflected in governing party coalitions, as the foundation of three distinctive welfare state regimes. The working class historically favoured expansive social security. But a generous welfare state emerged under the leadership of labour’s social democratic party allies only in the Nordic countries. In Continental Europe, welfare states instead were created under the influence of Christian democratic parties. Finally, a liberal regime emerged in Anglo-Saxon countries under the dominance of business- and marketoriented middle-class parties. These welfare states are smaller, encourage citizens to provide for themselves in the market, and favour selective programs.17 With time, the originating coalition’s preferred welfare mix is institutionalized: existing programs attract the loyalty of voters, becoming difficult to displace. For Paul Pierson, a “new politics of the welfare state” emerged after the 1970s; social programs thereafter faced cost pressures combined with continuing demands from recipients for program maintenance; reform now became difficult.18 Yet the result has not entailed immobility, as research suggests that political coalitions have continued to influence welfare state change since the 1980s.19 Consistent with Thelen’s formulation, variable power coalitions continue to condition the evolution of social security systems, even after their

How Do Advanced Political Economies Differ?  9

institutionalization. Above all, as with other literatures reviewed here, this welfare state typology distinguishes a variegated group of countries that foster more equality, curtail markets, and spend more, from a substantially Anglo-Saxon one that favours limited intervention, low taxing and spending, and self-reliance. Another contribution to distinguishing collaborative from liberal political economies is made by students of formal institutions. Arend Lijphart divides “consensus” from “majoritarian” democracies, a dichotomy that largely parallels those made by the literatures discussed above. It is based on ten features of each polity, including its executive structure, electoral and party systems, interest group behaviour, and extent of constitutional centralization.20 Regarding interest intermediation, labour is stronger in consensus settings and better able to ensure its seat in consensual policymaking forums. Lijphart’s approach to party systems, particularly the number of “issue dimensions” that exist in partisan conflict, is of most interest for this study. Partisan conflict in consensus democracies involves more dimensions of contention among parties, and more parties, than is the case in majoritarian settings.21 Socio-economic conflict, which focuses on class-related concerns such as redistribution, social policy, and the size of the public sector, divides parties in both kinds of democracies. In consensus democracies, however, it is more likely to be supplemented by inter-party fissures along other dimensions, including religion, culture and ethnicity, and urbanrural divides. Consensus democracies emerge in countries historically burdened by more non-class divisions, and their greater resort to collaboration is intended to accommodate this reality. Consensus decisionmaking reduces the amount of policy modification that accompanies changes in government, and is also consistent with generally greater commitments to social expenditures, redistribution, and larger governments.22 Herbert Kitschelt has developed a similar typology. In LMEs, partisan conflict focuses primarily on “distributive issues of property and income that divide occupational groups, sectors, and classes.” In most CMEs, by contrast, parties are divided more by religion, culture, and post-material values; here, economic issues are less prominent, and parties are less divided regarding them.23 Unlike LMEs, moreover, most CMEs lack a strong market-oriented liberal party, capable of credibly promoting a curtailment of social spending and redistribution. Welfare state retrenchment is less likely in these CMEs.24 The literatures discussed in this section all distinguish two types of political economy, termed here “collaborative” and “liberal.” Two of the

10  Comparing Quebec and Ontario

“sites” identified frequently in these writings as differentiating these types also clearly separate Ontario from Quebec, as will be documented in chapter 2. Accordingly, they form the basis for two of the causal mechanisms highlighted in this study. First, interests in collaborative settings are better organized than they are in liberal political economies and are more likely than their liberal counterparts to cooperate to solve problems. In collaborative contexts, the balance of power between these interests is also less advantageous to business at the expense of labour and other social constituencies. In the qualitative case comparisons presented in chapters 3 to 6 the impact of the “cooperative relations” and “balance of power” aspects of this distinction are not distinguished analytically; one of our cases (Quebec) is more collaborative and has stronger non-business interests than the other. But the statistical analyses presented in chapters 7 and 8 allow us to evaluate the relative importance of each aspect separately. The second site is the party system. Competition between political parties in collaborative political economies is less dominated by economic-redistributive issues and will display less disagreement between major parties on the merits of redistribution; unlike liberal party systems, collaborative ones also are less likely to be dominated by, or even to include, a major party that advocates a strongly market-oriented agenda. Consistent with Thelen’s cautions, the extent to which a country’s institutions embody collaborative or liberal mechanisms at these sites is not absolute or unchanging; institutions shift with the balance of power among interests. “Collaborative” and “liberal” are ideal types, with the institutions of any empirical case being situated along a continuum between them. Nevertheless, where two cases differ significantly along this continuum, I anticipate differences in policymaking and in policy outcomes. Policy development in more collaborative settings will involve greater cooperation among actors and less partisan polarization. Regarding outcomes, more collaborative political economies will foster larger, more universalist, and more redistributive welfare states than more liberal ones, and have higher long-term levels of taxing and spending. The Role of the State Many political economists contend that states, often ignored by the scholarship discussed above, play an important but highly variable role in fostering growth in advanced economies. A more conventional literature had ignored these dissimilarities.25 In a still-influential early1960s account, Alexander Gerschenkron argued that late industrializing countries could not afford to follow Britain, the first industrializer,

How Do Advanced Political Economies Differ?  11

by allowing market forces to foster economic modernization. Late industrializers could develop economically only with the assistance of substantial state intervention.26 Later authors often attribute state intervention to longer-term impediments to modernization. For instance, France’s historically greater intervention owed much, according to Badie and Birnbaum, to the fact that, unlike Britain, it had to overcome the “rigidity [and] fragmentation associated with feudalism.”27 Colin Crouch traces distinctive trajectories in relations between the state and organized interests in Europe to variable experiences in addressing church-state relations during the nineteenth century and in modifying the role of pre-industrial guilds. Alongside a market-oriented AngloSaxon model, he identified a northern European pattern in collaborative political economies, and a third, to be found in France, Italy, Portugal, and Spain, where the state acquired a capacity for significant intervention in economy and society.28 In Europe, intervention is now usually attributed to the latter group of countries. Other than in France, however, this role is typically seen to consist more in “compensating” those who could lose from economic change, rather than in fostering success.29 Among advanced economies, forward-looking state intervention is now most commonly identified with East Asian countries.30 Hall and Soskice’s VoC typology made no room for a category of advanced economies that is typified by dirigisme, although Hall had authored an influential 1980s comparative study of British and French policy that attributed a high level of intervention to the French state.31 Relying largely on recent research on France, Vivien Schmidt nevertheless argues that a third category should be added to the VoC framework, for “state-enhanced capitalist” political economies, which would include countries where intervention persists. For Schmidt, “although France has moved quite far away from the ideal-typical state capitalism of the post-war years until the early 1980s …, it retains certain distinguishing characteristics that continue to differentiate it from Germany … and Britain.”32 Proponents of VoC respond that state intervention should be seen as a characteristic of some non-liberal cases, without adding a separate category.33 The insights of other comparative political economists, such as Richard Whitley and Bruno Amable, favour this option.34 This approach, which treats state intervention as a variable attribute of particular cases, is consistent with the disaggregated approach to CPE discussed earlier and is also open to the possibility of gradual change in this pattern as power shifts among interests. This is the view adopted here.

12  Comparing Quebec and Ontario

The site of the third causal mechanism whose impact is evaluated in this study is the state. States vary considerably in the degree to which they assume a prominent role in developing and steering economic growth. A large scholarly literature suggests, specifically, that in some advanced political economies, the state acquired a capacity to intervene substantially in economic development, seeking to overcome historical impediments to growth; elsewhere, the state is much less active. CPE scholarship does not offer as firm a basis for inferring a connection between the mechanisms discussed in the preceding section and economic intervention. But it does suggest that intervention is more likely with collaborative institutions than with liberal ones. We have seen that VoC scholars see state direction as an example of the coordination that characterizes CMEs. Conversely, in view of their preference for an arm’s-length relationship with economic actors, Whitley questions whether states in liberal political economies can conduct a directive economic policy. His typology of capitalist models identifies the state as intervening “considerably” in Scandinavian and Germanic states, where collaboration is central; this is less than the “high” intervention of post-war France or contemporary South Korea, but still far from the Anglo-Saxon pattern. Amable finds much variation in state intervention among non-liberal countries but considers it to be important in all of them. One form of the corporatism found in small European countries by Katzenstein also assigns an important economic role to the state.35 Accordingly, an additional feature of the first two causal mechanisms discussed above is that concerted intermediation and lowpolarization partisanship are very likely to support significant state intervention in the economy. Pluralist interests and economically polarized partisanship will have the opposite effect of favouring laissez-faire. When Do Ideas Matter? Since the 1990s, many political scientists have stressed the importance of ideas in public policy.36 A concern with ideas has antecedents that can be traced back at least to the study of political culture during the 1960s. In reasserting the importance of culture and beliefs, the new current has launched what some see as a major challenge to political science, “problematiz[ing] mainstream ideas and destabliz[ing] conventional thinking about individuals and groups.”37 In some guises, it seeks to provide a comprehensive explanation of political life in terms

How Do Advanced Political Economies Differ?  13

of norms and cognition, apparently tracing all causal influences to these foundations.38 The latter does not, however, represent the mainstream or “messy centre” perspective in contemporary political science.39 Most of the approach’s advocates instead venture explanations that integrate ideational factors with others that concern institutions and interests, the typical focus of CPE and of the typologies discussed in the previous two sections. The ideational approach to political economy is more recent than these others, less developed, and, in the words of one advocate, more “variegated”;40 it has not provided accounts that distinguish advanced political economies systematically in the manner of the literatures discussed earlier. The approach taken here, then, is to treat it as a complement to the latter, not a substitute. Dietrich Rueschemeyer indicates how this might be done: “The research results that we can more commonly expect derive from reasoned causal explorations of the impact of ideas in one or a few complex cases and are valid only in limited domains, often of unknown extension.” In his preferred “multidimensional” approach, which examines ideas in conjunction with institutions and interests, “the impact of ideas must always be seen in the context of other factors shaping the outcome … It is the way ideas are grounded in groups, organizations, and institutions and the attendant relations of communications and influence that is of decisive importance for their creation, their maintenance, and their impact in society.”41 This helps solve what is widely seen as a major problem: determining when and how ideas matter. “It eases at least to some extent the peculiar difficulties of ascertaining the incidence and meaning of ideas as it tells a little more precisely where to look and as the record of ideas is likely to be better preserved in the context of groups, organizations and institutions.”42 Consistent with this view, this study identifies relevant ideas and assesses their impact in conjunction with the non-ideational causal mechanisms discussed earlier in this chapter. Reflecting its more nascent and diverse quality, ideational political economy scholarship does not offer a general account of ideas that have a variable impact on economic and social policy. A familiarity with the jurisdictions that are the focus of this study nevertheless suggests nationalism as an idea complex that is very likely to be present in Quebec, while almost entirely absent in Ontario. Nationalism receives considerable attention among ideational political scientists. Greenfield

14  Comparing Quebec and Ontario

and Eastwood define nationalism as a belief system that divides the world into internally homogeneous but externally distinct peoples and that claims political sovereignty on their behalf.43 They contend that “national identity is the central identity in the modern world.”44 Other scholars are more cautious, exploring nationalism’s impact in limited and contextual enquiries of the kind advocated by Rueschemeyer. Of most direct relevance to the present enquiry, Béland and Lecours examine the relationship between nationalism and welfare state development in three sub-state settings: Quebec, Scotland, and Flanders. They conclude that “under most circumstances, nationalism and social policy are closely related.”45 Sub-national governments use social policies to promote regional nationalism. Nevertheless, they caution, “the consequences of sub-state nationalism for social policy development are variable, and the presence of strong nationalist movements does not necessarily favour an erosion of welfare at the state or sub-state level.”46 Nor does it necessarily favour welfare state expansion. Nationalism’s impact depends on other causal factors present in each case.47 Where a sub-state region is richer than the rest of the country, and the ideological balance there tilts to the right, as in Flanders, nationalists may seek to restrict the welfare state. In Quebec, poorer than English Canada, nationalism is often associated with welfare state expansion. This contingent quality suggests that nationalism’s impact on policy is typical of what John L. Campbell terms “public sentiments,” a type of idea that shapes the normative frameworks entertained by actors but is “nonoutcome oriented”; public sentiments are an “underlying assumption in the background” rather than a “concept or theory in the foreground” of public debates.48 The fourth causal mechanism examined in this book pertains to the ideational setting of policymaking. Where nationalism is present, it may affect economic and social policy, but its specific impact will depend on its relationship to other mechanisms present in each case. For this study, these consist of the three mechanisms identified earlier. The literature on nationalism and policymaking does not offer precise accounts of how this relationship might proceed. But we can anticipate two possibilities. First, nationalism may have an indirect and diachronic impact by promoting the emergence of other mechanisms, in the interest intermediation and party systems, and within the state, that promote specific economic and social policy outcomes. Nationalism may also be affected by these other mechanisms; the relationship among ideas, institutions, and interests historically is likely to be interactive, consistent with Rueschemeyer’s

How Do Advanced Political Economies Differ?  15

“multidimensional” approach. Second, its impact may also be direct and synchronic, as agents within these settings make use of nationalist sentiments to justify their preferences. If, as has been suggested, it is a “non-outcome oriented” “public sentiment,” nationalism’s influence is most likely to proceed along the former (indirect) path. Globalization and Post-Industrialism Globalization particularly concerns scholars who wonder whether variety will persist. Scholars usually define globalization in economic terms. It refers to increased integration among national economies since the 1970s in several specific senses: a rise in international trade as a share of countries’ GDPs; the associated internationalization of production by multinational corporations (MNCs); and heightened international capital flows, including both portfolio and foreign direct investment (FDI).49 Michael Mann argues that globalization also has ideological, political, and military components.50 But it is the economic variant that I focus on in this study. For globalization scholars, the main pressures now facing advanced capitalist societies impinge on domestic decision-makers from their international environment. An alternative perspective contends that the main pressures are instead socio-economic and internal, summarized by the term post-industrialism. The latter consists of several interlinked trends, including a shift of employment from manufacturing to services, where productivity growth is slower; population aging, and resulting cost pressures on social programs; increased female employment, linked to changes in family structure; and, often, increased reliance on immigration to meet labour market needs in a context of declining fertility.51 In this book, globalization and post-industrialism refer to the common set of international and socio-economic changes that impinge upon policymaking during the period studied. The goal, in this light, is to determine whether distinctive policymaking processes and outcomes emerged or persisted in Ontario and Quebec in spite of these shared pressures. That globalization and post-industrialism have, in fact, been experienced in broadly similar ways by the two provinces will be documented in chapter 2. There is in fact much debate among globalization and postindustrialism scholars about what their consequences are. Globalization perspectives, which are more numerous, receive more attention here. The most commonly discussed view is that globalization portends

16  Comparing Quebec and Ontario

a “race to the bottom” among countries, as each seeks to secure its economic survival by scaling back economic and social policy measures that impede market forces and undermine national competitiveness. Economic openness exposes more sectors to foreign competition, requiring that they face no greater burden, in the form of taxes and regulations, than their international rivals. Governments respond to this imperative by curtailing social outlays and economic interventions, cutting taxes, and implementing market-oriented regulatory changes. Similarly, ever-faster global capital flows encourage business-friendly reforms to attract investment.52 A rival perspective proposes the opposite conclusion: globalization and post-industrialism induce “compensatory” policy expansion. This may happen automatically, as pre-existing entitlements attract more beneficiaries in the context of more volatile job markets and population aging; governments may also intentionally expand programs because of rising demand from voters. The latter argument has antecedents in a landmark 1978 article by David Cameron, and in Peter Katzenstein’s subsequent study of corporatism.53 A third account, more popular than either of the above, echoes claims associated with the typologies discussed in the first section of this chapter: globalization and post-industrialism sustain or reinforce preexisting differences among political economies. For Hall and Soskice, globalization induces CMEs and LMEs to strengthen their established institutional advantage by, respectively, enhancing coordination among firms or, in contrast, stripping away impediments to competitive, market-based adjustment.54 For Esping-Andersen, post-industrialism poses distinctive challenges for each welfare state regime. For liberal ones, the main problem is their tendency to generate greater poverty and social exclusion; Christian democratic regimes are constrained by mounting unemployment and an inability to adjust to changing gender roles; social democratic Scandinavia is threatened by the welfare state’s rising cost.55 Geoffrey Garrett and Duane Swank, among others, also detect a bifurcation in countries’ responses, with “social” European political economies less likely to engage in retrenchment than already parsimonious Anglo-Saxon ones.56 Yet this view is not endorsed by most scholarship either. Current research offers disparate accounts of globalization’s impact, finding it to be contradictory, variable across policy fields, and often outweighed by domestic factors. Concentrating on how the distinctive interests of vulnerable social constituencies and of fearful investors jointly condition

How Do Advanced Political Economies Differ?  17

government actions, for instance, Burgoon finds that low wage competition from poorer countries leads to compensatory expansion in active labour market measures, but has more negative implications for pensions and health spending, and uncertain ones for unemployment benefits; in any case, domestic factors are generally more important than international ones. Hicks and Zorn see globalization’s impact as “complex,” with trade openness and financial liberalization tending to impede market-oriented retrenchment, while FDI encourages it; only where welfare states grew “immoderately” is there evidence of strong pressures for curtailment. Brady, Beckfield, and Seeleib-Kaiser also are sceptical of globalization’s impact, arguing that it influences the welfare state in contradictory ways; they find no evidence to support the typology-inspired bifurcation perspective outlined above. Summarizing much scholarship on globalization and redistribution, Brune and Garrett conclude that there is no consensus on their relationship. Two articles that extend their analysis into the 2000s point in different directions: Busemeyer finds some support for the “race to the bottom” view, reporting that changes in trade openness are negatively associated with public spending levels. For Jensen, however, this negative association exists only for LMEs; consistent with Hall and Soskice’s prediction, globalization still does not undermine social spending in CMEs.57 These mixed results suggest a need for caution in considering the impact of globalization and post-industrialism. Current scholarship offers only modest support for the view that they will diminish pre-existing policy variations. While there is also only mixed support for claims that differences will instead be enhanced, there are strong grounds for believing that domestic influences will remain most important. Accordingly, to the extent that institutions in the jurisdictions studied have distinctive attributes in relation to the four mechanisms discussed above, I expect divergent outcomes between them, even in the face of a shared experience of globalization and post-industrialism. Sector Variations and the Need for Multiple Cases The scholarly literature alerts us to the unique qualities of individual policy sectors. This book therefore examines the state’s economic and social policy roles in four distinctive sectors. This reduces the risk that research results will reflect only the specific circumstances of a particular policy domain and also allows for the formulation of more precise research hypotheses. The sectors encompass the main commonly

18  Comparing Quebec and Ontario

identified economic and social policy roles of government: macroeconomic and microeconomic, in relation to production, as well as income security transfers and social services, in connection with the welfare state. Regarding macroeconomic policy, the chosen focus (in chapter 3) is budgeting, including the overall level of taxation and expenditure, as well as the use of different revenue sources, with particular attention to the relative use of taxes on mobile and immobile assets and income, and to the progressivity of the personal income tax.58 The focus for the microeconomic enquiry in chapter 6 is government interventions to enhance growth and employment. Economic development measures may seek to assist dynamic and innovative sectors, where growth prospects are judged to be greatest or, conversely, attempt to alleviate distress in high-unemployment regions. Canadian provinces administer a range of income security transfers, for the most part directed at their nonelderly residents; these include social assistance and, in recent years, tax-delivered income supplements. These are examined in chapter 4.59 The provinces are responsible for most in-kind social services in Canada. Health insurance is by far the most expensive of these; it has received more recent scholarly attention than most Canadian policy domains and also involves a complex federal–provincial relationship.60 Chapter 5 instead examines developments in childcare and related family measures, such as parental leave. This sector is becoming increasingly import in affluent countries; because Canada’s federal government has failed to address this field enduringly, it has been left largely to the provinces to do so. Each of these fields now is the focus of ample comparative scholarship. Recent scholarship on the political economy of taxation in advanced economies focuses on several points. (1) Welfare states are now the main component of budgets; countries with ample ones therefore have higher taxes than those that do not. Recent trends offer little reason to believe that the more generous social provision found in collaborative political economies is not financially sustainable. Some observers concluded a decade or more ago that generous welfare states were accumulating untenable debt levels, but budgetary consolidation after 2000 alleviated some of this concern.61 The gap between high- and low-tax jurisdictions is likely to persist. (2) But this gap is unlikely to be the same across all revenue sources; it is particularly unlikely to exist in relation to taxes on capital. Global competition has not led to a “race to the bottom” in capital taxation, but it caused almost all affluent nations to adjust

How Do Advanced Political Economies Differ?  19

these taxes in a “neoliberal” direction. Business taxes were, in any case, not higher in high-spending countries even before the globalization era. The rates for capital taxes are subject to domestic pressures that impede change; nevertheless, they are converging towards the middle of their pre-existing range.62 (3) High-spending nations must instead tax relatively immobile labour and consumers, rather than capital, at higher levels. Moreover, a preference for taxing the most immobile assets will lead them to meet their additional revenue needs more from regressive taxes than from progressive ones, that is, from taxes whose incidence falls as income rises. In what is referred to as a “paradox,” generous and redistributive welfare states are financed more regressively than liberal ones. This is most true where corporatist institutions exist.63 Scholarship on this question nevertheless presupposes more certainty about which taxes have the most regressive incidence than may be warranted, a point I return to in chapter 3. (4) In spite of this uncertainty, the available scholarship allows us to affirm that total redistribution (including benefits as well as income taxes) is higher in collaborative nations than in liberal ones; this is especially true for Scandinavia.64 Some globalization theorists are particularly sceptical of the state’s future role in economic development. International trade agreements now preclude some once-common interventions. Kemen points to a substantial decline in public investment by OECD nations between 1980 and 2004; the extent of the drop nevertheless varies considerably, as does the current level of spending in different countries. Other scholars argue that some states retain substantial capacity to promote development. Boix contends that in relation to “supply side” policies, including infrastructure and support for public and private investment, political parties can still affect their domestic economies. Mosley finds no evidence that financial markets punish greater public investment with much higher interest rates; and Garrett determines that industrial subsidies are not negatively affected by a country’s exposure to trade or capital flows.65 There is also much discussion of conditions that favour innovative and technology-rich industries. While VoC authors suggest that radical innovation is much more characteristic of AngloSaxon LMEs than of European CMEs, others disagree. Boyer, Whitley, and Breznitz all argue that collaborative and state-interventionist settings foster distinctive patterns of innovation; Zackary Taylor disputes the VoC claim that LMEs have an advantage in innovation too, and stresses the contribution of government policies.66 Kenworthy contends that institutionally “incoherent” political economies, those that are

20  Comparing Quebec and Ontario

neither clearly LMEs nor CMEs, do not experience weaker economic and employment growth.67 Laissez-faire liberalism may not, then, be a precondition for future economic success. The most elaborate recent typologies of economic growth strategies reflect this diversity. Strategies differ across countries in (1) their sheer magnitude – the volume of financial and bureaucratic resources that different states devote to growth policies. Whitley and Breznitz suggest that they also vary in other ways: (2) they may be directive in seeking to promote specific sectors, technologies, or firms in the private sector; (3) and the state administration may be more or less centralized, that is, largely predisposed to direct policy from the centre of executive decision-making. As Breznitz stresses, however, the trend in all jurisdictions regarding the last two features appears to be towards less direction and to decentralized, sector- or region-specific agencies.68 Research on income security for the non-elderly, which encompasses social assistance and supplementation benefits, asks whether these measures have been curtailed. There is a debate about how best to measure this. What is still the most common approach (1) uses expenditure data. Others prefer (2) measures of program adequacy made possible by recent advances in data, such as the Luxembourg Income Study (LIS).69 Either way, the general pattern is clear. There is much evidence of benefit cuts, but redistribution among families remained about the same between 1980 and 2000. Kenworthy and Pontusson postulate that vulnerable families experienced rising unemployment during these years, which allowed them to draw benefits more frequently. In determining redistribution, more frequent usage roughly offset declining benefit generosity.70 Inequality in final incomes nevertheless has grown, reflecting a comparable increase in market income inequality. There is little evidence of convergence among countries in the size or impact of income security measures, which continue to be conditioned primarily by domestic factors, such as pre-existing generosity and political partisanship.71 Two recent trends also now receive attention: (3) first, many governments now use income security to foster employment. Variety again is the norm. Three countries studied by Dingeldey promote labour market “activation,” using punitive “workfare” or skillsenhancing “enabling” measures. But Britain emphasizes the former while Denmark concentrates on the latter, while Germany is a mixed case. Drawing on a broader sample, Huo, Nelson, and Stephens similarly find that social democratic governments favour retraining as a route to re-employment, in contrast to workfare-style coercion in liberal

How Do Advanced Political Economies Differ?  21

settings and limited activation in Christian democratic.72 (4) The second trend concerns tax and transfer benefits for families, including single mothers. Changes here also have a labour market focus, as they seek to help women reconcile child-rearing with employment. These payments increased in most affluent countries between 1980 and 2000, though to substantially different levels. Poverty among women is lowered significantly by higher family benefits; it is lowest in the Nordic countries and highest in the least-generous Anglo-Saxon ones.73 Childcare services have expanded rapidly since the early 1990s. Unlike income security, the overall trajectory of change therefore is upwards in the context of post-industrial pressures. But as with other policies considered here, it is also highly variable. Along with (1) overall spending levels, childcare provision varies in terms of whether (2) coverage has moved from needs-testing for poor families to universality; (3) public sector delivery has replaced private, especially forprofit, provision; and (4) parental fees are used to finance the service. Countries also differ in the extent to which they focus on childcare for children under three or emphasize preschool children between three and six; measures for the latter are especially likely to have an “early learning” focus.74 Esping-Andersen claims that variations generally reflect differences among his social democratic, Christian democratic, and liberal welfare state categories. Other scholars see a more complex pattern. Scandinavia has gone furthest towards universal, publicly funded day care and early learning services, but France and Belgium have also moved in this direction. Southern European countries, in contrast, have done least to expand care for children under three, continuing to rely on traditional maternal care. In Anglo-Saxon liberal countries, public provision for children under three often remains confined to programs for the needy; where childcare has expanded significantly in these countries, such as the United States, it consists mainly of private services for which parents receive varying degrees of public support.75 There is a strong inverse association between the provision of public childcare services and maternal poverty, especially for single mothers.76 As with income security, inter-country variations are associated with domestic institutions, established welfare state patterns, and, usually, partisanship; unlike the other sectors considered here, however, it is also often found to be influenced by the political mobilization of women in more collaborative political economies.77 Previous sections of this chapter addressed the institutional bases of policy variation. We now expect undertakings to be greater in

22  Comparing Quebec and Ontario

collaborative environments, and where states are more interventionist, than in liberal ones. In light of this section, chapter 2 will, however, go beyond these general differences to formulate additional hypotheses relevant to each policy sector. In collaborative milieus, we expect overall taxation levels, as well as spending, to be higher, but not taxes on capital; governments will consequently make greater use of regressive taxes. They nevertheless will redistribute more overall. In statist contexts, economic development policy will generally expend more than in liberal ones; it also will be more directive (to sectors, regions, and technologies) and centralized than in liberal political economies, though these qualities are probably declining everywhere. Income security for the non-elderly should be more ample both in aggregate spending and in observed impact on inequality and poverty in collaborative political economies; it is likely also to take a more “enhancing” than “workfare” approach to encouraging employment, and to do more to help families. Childcare provision also should receive more funds and move further in the direction of universal access and public administration of services, at less direct cost to parents. Combining Qualitative and Quantitative Methods There is now much debate in political science about qualitative research methods. King, Keohane, and Verba’s 1994 book, Designing Social Inquiry, often has served as a textbook on this topic. It argues that the methodologies of quantitative and qualitative research are fundamentally the same and entail making inferences from the data under investigation to a larger “domain of inference.”78 Causation is said to connote the dependent variable outcomes of specific independent variables. The authors “defin[e] causality in terms of a causal effect: the mean causal effect is the difference between the systematic component of a dependent variable when the causal variable takes on two different values.”79 Much of the book consists of advice to qualitative scholars that is framed in terms of concepts habitually used in quantitative research: the need to avoid multicollinearity, selection bias, and endogeneity; and the value of increasing the number of empirical observations, avoiding excess selection of cases based on values of the dependent variable, and so forth. This framework, often termed positivist, is now strongly critiqued by other methodologists who sometimes characterize their own approach as involving a realist philosophy of science. Rather than identifying

How Do Advanced Political Economies Differ?  23

“effects of causes,” they argue, the fundamental goal of qualitative research is to detect “causes of effects.” For them, research that fails to take this approach does not explain outcomes, even though it may conform to King, Keohane, and Verba’s definition of causation.80 Moreover, qualitative researchers should be cautious about generalizing their findings too broadly and may not even be primarily interested in this goal.81 Three concepts are central to this alternative understanding of qualitative research: causal mechanisms, process-tracing, and typological theories. Causal mechanisms are “processes through which agents with causal capacities operate, but only in specific contexts or conditions, to transfer energy, information, or matter to other entities. In so doing, the causal agent changes the affected entity’s characteristics, capabilities, or propensities in ways that persist until subsequent causal mechanisms act upon it.”82 Mechanisms differ from the “general laws” sought in a positivist framework by being smaller in scale, linking causes and effects that are more proximate in time and space. The impact of a mechanism is context-specific, depending on prior conditions in a particular setting and on its interaction with other mechanisms.83 Outcomes for different cases may diverge because of the presence of different configurations of mechanisms in each. Process-tracing combines insights about the multiple mechanisms that are relevant to a case in a complete explanation of its outcome. “The process-tracing method attempts to identify the intervening causal process – the causal chain and causal mechanism – between an independent variable (or variables) and the outcome of the dependent variable.”84 In effect, multiple and variously configured causal relationships are substituted for the singular and comprehensive accounts of the relation between independent and dependent variables in positivist methodology. Process-tracing is often chronological and can therefore resemble historical narrative; its plausibility depends on its ability to provide a rich and fine-grained account of how events unfold. Unlike purely descriptive historical narratives, however, process-tracing aspires to generalization. It draws attention to how the mechanisms, which may be present in a similar or different configuration in different cases, combine to shape the outcome. George and Bennett argue that typological theories are especially helpful in attempting to make such generalizations. These theories “seek to identify the various causal mechanisms and pathways that link the independent variables of each ‘type,’ or cell in a typology, with its outcome.”85 The impact of each

24  Comparing Quebec and Ontario

mechanism depends on how it interacts with others. Therefore, typologies can be developed to identify the range of possible concatenations of mechanisms relevant to a dependent variable and to document their divergent consequences for that variable. Independent variables shape dependent ones differently, depending on the configuration of mechanisms that mediate between them. This new approach to qualitative methods has received critical scrutiny. A leading scholar questions whether it represents a viable scientific alternative to statistical research. Another documents ambiguities in how “causal mechanism” is defined and questions the realist methodology.86 But the vocabulary described above is now widely used in qualitative research in political science. Its sensitivity to the possibility that cases that differ in important ways may respond variously to common pressures also makes it suitable for the present study. The vocabulary of mechanisms and process-tracing therefore is used in chapters 3 to 6 of this study. A quantitative logic is adopted in chapters 7 and 8. Qualitative research methodologists are almost unanimous in advocating that qualitative and quantitative research be combined where possible.87 Regression-based analysis is the subject of a distinct methodological literature and involves technical questions that are addressed separately in chapter 7. The use of quantitative research in this study can help address a frequently cited weakness of qualitative work: only with great difficulty can process-tracing evaluate more than a few possibly-relevant mechanisms. It is therefore susceptible to the problem, well known in statistical research, of omitted-variable bias.88 The regression models presented in chapters 7 and 8 include many more variables than can reasonably be measured in process-tracing narratives; these are used to determine whether observed policy differences between Ontario and Quebec remain significant in the face of control variables that measure the influence of many potentially alternative causes. If the inter-provincial variations survive this test, the likelihood that the findings in chapters 3 to 6 are affected by omitted-variable bias is much reduced. A Typology of Causal Mechanisms The three institutional mechanisms identified in this chapter all emerged from extant CPE typologies. This facilitates the development of one for use here. As research on collaborative and liberal political economies makes clear, settings of the former type feature both concerted interest

How Do Advanced Political Economies Differ?  25

intermediation and a party system that is not highly polarized about economic-redistributive concerns. Accordingly, I expect these two mechanisms to be present together. Similarly, cases that feature pluralist interest systems will also likely have more economically polarized party systems. I rely on prior knowledge of the Ontario and Quebec policy settings in proposing a typology for all four mechanisms identified in this chapter, rather than undertaking the needless exercise of specifying all hypothetical combinations of these mechanisms in a complete “property space.” Such a use of “Bayesian” prior knowledge is recommended by several qualitative methodologists in this context.89 Accordingly, the typology has two cells. In one, collaborative interest and party systems combine with an interventionist state and a nationalist ideational context. In the other, liberal interest and partisan settings are conjoined to a liberal, laissez-faire state and an absence of provincelevel collective identity. As was stressed earlier in this chapter, these categories are “ideal types”; real-world cases can reflect them only imperfectly. Chapter 2 presents evidence that the mechanisms present in Quebec’s political economy manifest significant elements of the first type, though they also have liberal features; Quebec’s political economy can therefore be characterized as “mixed.” In contrast, Ontario’s political economy comes close to the liberal ideal type. The processtracing evidence presented in chapters 3 to 6 documents that these distinctive concatenations of mechanisms often resulted in very different policymaking dynamics and outcomes in Ontario and Quebec. This is true in spite of the fact that both provinces have experienced the effects of globalization and post-industrialism, and in broadly similar ways. The connections hypothesized to exist for each ideal type between each mechanism and our four policy sectors are adumbrated in figure 1.1. The figure indicates causal links identified in this chapter. I summarize them briefly here. Chapter 2 details the emergence and particular features of each mechanism in Ontario and Quebec and ends by specifying the hypotheses that will be tested subsequently. The CPE scholarship reviewed above makes clear that collaborative interest intermediation and low-polarization partnership can each be expected to have specific consequences for policymaking and outcome in the first three policy areas identified in the figure. Each mechanism is anticipated to cause a greater commitment to social assistance and income transfers and to childcare and related family measures, and to higher long-term levels of taxation and revenues. Beyond these general tendencies, the more detailed discussion in the third-to-last section of

26  Comparing Quebec and Ontario Figure 1.1. Causal Mechanisms and Policy Sectors Ideational

Institutional

Policy

Mechanism

Mechanisms

Sector

Intermediation of economic & social interests

Social assistance / transfers

(concerted/pluralist) Child policy Nationalism (present/absent)

Party system (low/high economic polarization)

State intervention (high/low)

= direct causal pathways

Budgetary policy Economic development policy

= indirect causal pathways

this chapter identified specific outcomes for each sector that are more likely in the presence of these interest and party systems. These specific formulations are the basis for the hypotheses in chapter 2. Conversely, the presence of a pluralist system and of an economically polarized party system favours weaker commitments in the income transfer, childcare, and budgeting sectors. A strong state bureaucracy, our third mechanism, favours greater commitment to economic development policy, though the tendency to steer economic activity from the centre is likely to have attenuated in recent years. Laissez-faire bureaucracies will have the opposite impact. This association is, we have seen, strongly supported by extant CPE scholarship. The latter is less conclusive about the relationship between our first two mechanisms and economic development policy. It nevertheless indicates the plausibility of hypothesizing that collaborative

How Do Advanced Political Economies Differ?  27

interest-intermediation and less-polarized party systems also are much more likely to promote economic intervention than are their liberal alternatives. Current scholarship offers only general guidance about the impact of ideas on economic and social policy. Moreover, measuring the causal impact of ideas is particularly challenging. I nevertheless anticipate that nationalism will strongly distinguish the Ontario and Quebec policy settings. Measuring its impact will be made more tractable by assessing it in the context of the other mechanisms examined here. I hypothesize that nationalism’s effect is most likely to be indirect, fostering mechanisms that exercise a direct policy impact. Conversely, the near-total absence of collective identity in Ontario impeded the emergence there of more ample province-level interest organizations and bureaucratic ambitions and may have affected its partisan landscape. Nationalist ideas may also have had a direct impact in Quebec, a possibility that will be explored in the case studies presented between chapters 3 and 6. The primarily indirect nature of the anticipated causal link between nationalism and the four dependent variables is indicated with a dotted line in the figure, in contrast with the solid lines used to indicate direct causal links between the institutional mechanisms and policy outcomes.

Chapter Two

Typing Provinces: The Political Economies of Ontario and Quebec

A typology of two models of advanced political economies was presented in chapter 1, one liberal, another collaborative and statist. These are expected to respond in specific – and different – ways to globalization and post-industrialism. The main contention of this book is that the political-economic institutions of the two Canadian provinces examined here differ in ways that reflect this distinction. On this basis, the present study tests hypotheses about policy variations between Ontario and Quebec in four policy fields. The purpose of this chapter is to justify this “typing” of these provinces and to present preliminary evidence about variations between them. Quebec and Ontario are not paradigmatic cases of collaborative and pluralist political economies. All political economies are sui generis. Characterizing institutional differences requires particular care for these jurisdictions, conditioned by their shared membership in the Canadian federation. Political-economic institutions in Quebec and Ontario, as elsewhere, also change over time. But such peculiarities do not vitiate the usefulness of typological distinctions in CPE and welfare state research and, it is argued below, are compatible with formulating and testing theoretically informed hypotheses about the cases studied here. The main features of the Quebec and Ontario political economies can be summarized briefly: Quebec’s institutions are hybrid and changed much more than Ontario’s between the Second World War and the 1980s. Yet Quebec’s political economy now includes ample features of the kind associated with collaborative and statist political economies in relation to each mechanism identified in table 2.1 – interest representation, the party system, and the directive role of the state. These

Typing Provinces  29 Figure 2.1. Federal and Provincial Revenues as % of All Revenues, 1961–2009

60

%

50

Provincial revenues

40

Federal transfers to provinces

30

Net federal revenues 1960

1970

1980

year

1990

2000

2010

Sources: Statistics Canada, CANSIM, tables 3840023 (provincial revenues, 1961–80), 3840024 (local revenues, 1961–80), 3840004 (federal revenues, 1961–80) and 3850001 (all revenues, 1981–2009). Note: Reported federal transfer payments are net of provincial transfers to Ottawa. Provincial revenues include those for local governments. Transfers between provincial and local governments are subtracted from this combined total.

features subsist alongside others that resemble the predominantly pluralist ones of Anglo-Saxon settings and, with qualifications, of Ontario. These differences between Ontario and Quebec are big enough to warrant testing hypotheses about these jurisdictions’ differential response to globalization and post-industrialism that reflect the distinction between collaborative/statist and liberal milieus. Moreover, Quebec’s political economy has experienced a period of relative stability since the mid-1980s, the period examined in this book, after undergoing rapid and substantial change during the previous quarter-century. The same is true of Ontario, following less dramatic changes. Consequently, the variable impact of these provinces’ contemporary institutions, understood synchronically, not changes in them over time, is our main focus. The two provinces also differ dramatically in the ideational mechanism

30  Comparing Quebec and Ontario Table 2.1. Quebec’s Political-Economic Institutions Interest intermediation

Party system

1945–59

Pluralist; weak labour

1960–84 1985–

Period

State intervention

Province-level nationalism

Multidimensional; one-party dominance

Low

Conservative

Pluralist; strong labour

Multidimensional; low economic polarization

High, growing

Secular, modernizing

Concerted; strong labour

Multidimensional; low economic polarization

High, stable

Secular, modernizing

State intervention

Province-level nationalism

Table 2.2. Ontario’s Political-Economic Institutions Interest intermediation

Party system

1945–59

Pluralist; moderate labour

Multidimensional; oneparty dominance

Low

Low

1960–84

Pluralist; moderate labour

Transitional; one-party dominance

Low

Low

1985–

Pluralist/ contested; moderate labour

Economic-distributive dimension; high economic polarization

Low,unstable

Low/nascent

Period

considered in chapter 1; province-level nationalism is a powerful force in Quebec public life but is absent in Ontario. The contemporary institutional features attributed to each province, and their antecedents in earlier post-war decades, are adumbrated in tables 2.1 and 2.2. The first section below explains the division of powers between Ottawa and the provinces in our four policy fields. By showing that provinces have ample policymaking capacity, it justifies an assumption undergirding this study – that theories developed by comparative scholars who study sovereign states can legitimately be applied to inter-provincial comparisons in Canada. The following section discusses political-economic institutions in Canada and addresses the question of how, within the shared space of this federation, one can identify distinctive institutions for different provinces. The core sections of the chapter then elaborate upon the characterizations of Quebec and Ontario outlined above. The chapter then turns to preliminary evidence about the

Typing Provinces  31

dependent variables (our four policy fields). This is consistent with the account provided in the preceding sections of institutional differences between Quebec and Ontario, which grew after 1960 and were considerable by the mid-1980s; policies diverged similarly during these years. Graphical evidence about the comparative impact of globalization and post-industrialism in the two provinces is then provided; while not identical, their experience of these developments has been similar. This evidence of similarity supports my decision to look elsewhere – to the causal mechanisms addressed in this book – for endogenous explanations of inter-provincial policy divergence. This section also argues that the provinces’ more dissimilar fiscal circumstances are unlikely to account for policy differences. The final section elaborates the hypotheses that are tested in the rest of the book. A Decentralized Federation An index of federalism constructed by Arend Lijphart identified Canada as one of six countries, among thirty-six in his sample, that were most decentralized.1 Yet authority in the Canadian federation may be even more devolved than in Lijphart’s other “federal and decentralized” cases. Ottawa’s share of all government expenditures in Canada is much lower than is Washington’s portion in the United States. On the basis of this and related evidence, Vipond argues that the Canadian federation is much more decentralized than the American.2 Similarly, the sub-national Länder in Germany, another decentralized case, have much less capacity than do Canadian provinces to pursue policies independently of central direction. Federalism in Germany has a strong intra-state aspect, requiring that Länder exercise much of their power through national institutions; the alternative interstate approach, granting more autonomy to the “junior” level of government, exists in Canada.3 Substantial provincial independence extends to each policy domain examined in this study: budgeting, social assistance and other income transfers, childcare, and economic development. The first of these is particularly important; a province’s access to money has implications for everything else. The Constitution Act 1867 grants the federal government almost unlimited fiscal authority, while requiring the provinces to rely primarily on direct taxes. The provinces were assigned most social responsibilities, but these were considered to be modest in nineteenth-century Canada. But during the twentieth century direct

32  Comparing Quebec and Ontario

taxes – personal and corporate income taxes, and levies on consumption and property – became fiscal mainstays. Moreover, social responsibilities became much more important in Canada as it constructed a modern welfare state after 1945. The provinces’ capacity to raise funds from their own resources grew substantially and was complemented by rapid program expansion.4 For the years since 1960 this change is illustrated in figure 2.1. Provincial own-source revenues, combined with those of their municipalities, rose from 38% of combined federal and provincial revenues in 1961 to 57% of this total in 2009. Provincial fiscal resources are further enhanced by transfer payments from Ottawa; over the half-century represented in figure 2.1 these have, on average, added a further 10%–12% to the provincial share of all revenues. What cannot be depicted in the figure is that the terms on which provinces receive these transfers loosened considerably after the 1960s.5 Shared-cost programs launched during the 1950s often required the provinces to comply with detailed federal rules. Those initiated in the 1960s included fewer conditions. Provincial autonomy was further enhanced when, in 1977, Ottawa abandoned arrangements that had made the size of its transfers for health care and post-secondary education conditional on provincial spending levels. Provinces were instead assured of a pre-set transfer level. A similar change was made for social assistance in 1995. The political saliency of health care entailed that Ottawa continues to participate actively in this area. But this is now much less the case for post-secondary education and social assistance. Finally, the autonomy of poorer provinces was substantially increased by the introduction of equalization payments that were designed, without conditions, to raise the fiscal capacity of their governments to the national average. The availability of equalization payments to lowerincome provinces – including Quebec, but not, until 2009–10, Ontario – accounts for most variation among the provinces in their level of federal transfers. Ottawa, by contrast, has seen its relative fiscal position decline precipitously: federal revenues net of funds transferred to the provinces declined from 51% of combined federal and provincial revenues in 1961 to 31% in 2009. As we shall see in comparing budgeting in Ontario and Quebec, these provinces have exercised their new fiscal authority quite differently. Data compiled by Ronald Watts, and reported in table 2.2, for Lijphart’s six “decentralized federations” suggest that the Canadian federal share of all revenues is much lower than for the other countries in

Typing Provinces  33 Table 2.3. Fiscal Federalism, Lijphart’s “Decentralized” Federations, 2000–4

Country

Federal share of revenues before transfers (%)

Federal expenditures after transfers (%)

Intergovernmental transfers as % of provincial revenues

% intergovernmental transfers that are conditional

Unconditional provincialspending as % of all

Australia

75

59

46

 41

33

Germany

65

37

44

 65

34

United States

54

46

26

100

40

Switzerland

40

32

25

 73

50

Belgium

71

38

68

  6

58

Canada

47

37

13

27/65*

59/55

* The two figures in this cell respectively report the share of transfers that are conditional, first assuming that the post-1997 EPF and CHST transfers from Ottawa to the provinces are unconditional, then assuming that they are conditional. In view of the characteristics of these transfers, the first characterization likely is more accurate. Source: Ronald Watts, Comparing Federal Systems, 3rd ed. (Kingston: Queen’s Institute of Intergovernmental Relations, 2008), 102–3, 105, 107.

this category, except for Switzerland (first column). Federal spending after it has made transfer payments to lower governments is at a similar level in Germany and Belgium as in Canada, and again lower in Switzerland (second column). But Canada’s unusual level of decentralization is evident when we consider federal transfer payments. These form a much smaller share of provincial revenues in Canada than for sub-national governments in the other five countries (3rd column); and only in the case of Belgium is the proportion of transfers that Watts terms “conditional” clearly lower (4th column). The final column reports a measure of sub-national government fiscal discretion. It indicates spending by sub-national governments that is not financed by federal conditional grants as a percentage of all government spending.6 By this measure, the fiscal power of Canadian provinces far exceeds that of sub-national governments in the United States, Australia, and Germany, and is also higher than in Switzerland. It is comparable to contemporary Belgium in this respect if the post-1977 federal transfers mentioned above are treated as unconditional grants, as seems reasonable, or modestly less decentralized than Belgium if those transfers are categorized as conditional.

34  Comparing Quebec and Ontario

Provinces also enjoy considerable specific autonomy for each of s­ ocial assistance, childcare, and economic development. Under the Canada Assistance Plan (CAP) of 1966 the federal government covered half the costs of provincial social assistance, including childcare. Most provinces made publicly funded childcare available only to the poor during the post-war years; since this involved a needs-test of the kind specified by CAP, Ottawa shared their costs.7 CAP set very few conditions. Even before its replacement in 1995 by an unconditional transfer, provinces therefore exercised substantial autonomy in social assistance and childcare, and they developed distinctive approaches to their provision.8 During the 1990s, Ottawa created alternative instruments – tax credits directed at poorer families, especially those with children – to help the needy. These innovations mean that Ottawa continues to impinge upon the assistance field. But the provinces are also constitutionally competent to implement tax credits and, as will become clear in chapter 4, the two examined here made very different choices on their use. Ottawa also on several occasions sought to extend its participation in childcare. Yet these efforts mostly failed. Here too, a substantial gap between the commitments of Canada’s two most populous provinces therefore emerged in a context of limited federal involvement. Extensive resort to economic development policies, our fourth field, was not envisaged by the framers of Canada’s 1867 constitution. The provinces again carved out substantial room to pursue distinctive agendas, independent of federal guidance. Their role relies on specific constitutional powers: responsibility for “property and civil rights,” education, and the incorporation of most companies; and ownership of public land, and the related right to collect natural resource royalties and manage resource extraction.9 As in budgeting and social policy, it was mostly after 1945 that the provinces began to challenge Ottawa seriously in this area. In this new setting, provinces pursued very different development strategies. Moreover, to a greater extent than in most other fields where both levels of government are active, Ottawa and the provinces do little to coordinate their economic development measures; mostly, they go their separate ways. Party Systems, Economy, and Political Culture in Canada Canadian provinces therefore now have the constitutional and fiscal capacity to pursue autonomous policies in each field addressed here. Moreover, Canadian politics scholarship gives us good reason to

Typing Provinces  35

anticipate that they will use this capacity to pursue distinct objectives. Three literatures – on the country’s party systems, economic structures, and political culture – are particularly relevant. Frank Underhill’s path-breaking account of Canada’s national party system pointed to a deep vein of regional fragmentation in the country’s politics. Canada’s main national parties “broker” disparate religious, linguistic, and regional interests.10 A party system that divides voters on the basis of social class11 did not form. Ideological parties materialized in the wake of 1920s Progressivism but did not achieve major party status. That national party politics was “about” brokering distinctive sectional interests, not presenting ideologically distinct alternatives, became a hegemonic assumption, reinforcing the dominant position of its Liberal and Conservative Party practitioners.12 Nevertheless, neither was usually able, after the 1950s, to form a government with anything like a regionally balanced caucus. Brokerage was called into question even further by the dramatic results of the 1993 federal election.13 But an alternative model of national politics has yet to crystallize. The centrifugal forces underlying national brokerage also affect the provinces. Chhibber and Kollman note that parties with little or no presence in Ottawa often succeed provincially, and that voters frequently identify with different parties in federal and provincial politics.14 Carty and Stewart draw our attention to the heterogeneity of provincial party systems.15 Parties in some provinces go much further than in others, or in Ottawa, in cleaving voters along ideological lines. In British Columbia, Saskatchewan, and Manitoba, the centre-left New Democratic Party (NDP) confronts a business-aligned rival in a largely two-party partisan space; the NDP has also recently achieved major party status in Nova Scotia. Alberta’s party system has long featured the dominance of a single conservative party. Only in New Brunswick, Prince Edward Island, and Newfoundland, the least populous jurisdictions, is politics still dominated by the Liberals and Progressive Conservatives, historically the main federal parties; only there does brokerage, anchored in clientistic relations with Ottawa, likely persist.16 Partisan alignments are equally distinctive in Quebec and Ontario, as we shall see below. In light of the party systems literature reviewed in chapter 1, we would expect such variations to be associated with similarly pronounced policy differences. A similar expectation is nurtured by scholarship on Canada’s regionally multiform economy. Harold Innis’s “staples” thesis argued that Canada’s economic development was predicated on demand for

36  Comparing Quebec and Ontario

its raw materials in dominant external economies.17 Later scholars emphasized that external asymmetry was complemented by internal inequality after 1867, and by the emergence of distinct economies in Canada’s regions. These reflected natural endowments: some regions have more of the resources sought in foreign markets. But politics also played a role. The post-1878 National Policy fostered industrialization in Southern Ontario and around Montreal, but Western and Atlantic Canada emerged as resource-producing economies.18 The organization of the main economic interests – including the public sector, business, and organized labour – consequently is regionally heterogeneous. The business community is quite differently composed, with distinctive ambitions, across the provinces; and federal-provincial relations are rendered more intractable by diverse provincial interests, reflecting variable prosperity and economic structures.19 Unions are much stronger in some provinces than in others. Canadian scholarship lacks a comprehensive account of how provinces vary in relation to the CPE categories reviewed in chapter 1,20 though Haddow and Klassen proposed some elements of one for the four largest provinces.21 As with the party literature, Canadian political economy scholarship nevertheless points to important variations among provinces in their state’s economic role and in interest intermediation. Students of Canadian political culture struggle to identify distinctive core values that are shared by all parts of the country. Several older statistical studies pointed to important variations in these values across regions and provinces.22 Yet these have been criticized for producing results that are counterintuitive or not robust in the face of new data. Scholars working with qualitative-historical methods seek more enduring inter-provincial variations in the differences of party systems and political-economic institutions treated above, or in provincially distinctive formative “historical events” or settlement patterns.23 These endeavours are far from conclusive, but they are valuable in stressing the likely heterogeneity of political values across Canada. Most observers also agree that the ideational mechanism of interest to us here – province-level nationalism – is clearly present in only one province: Quebec.24 Survey evidence gathered between 1998 and 2010 found that the proportion of respondents that identify with their province first, rather than with Canada as a whole, is highest in Quebec (where about 50% of respondents express this view) and lowest in Ontario (where fewer than 10% do so, only 4% in 2010).25

Typing Provinces  37

So provinces have the capacity to act differently in social and economic policy and are likely to do so because of important variations in their politics, economies, and cultures. The next two sections examine institutional differences between Quebec and Ontario systematically. They suggest that these provinces diverge importantly in terms of each mechanism highlighted in chapter 1: party systems, the economic role of the state, and interest intermediation. These institutions emerged in close relationship with evolving province-level nationalism in Quebec, but not in Ontario. Quebec’s political economy is far more collaborative and statist than Ontario’s, while the latter approximates its liberal and market-oriented alternative. The Quebec Model Before 1960, little was atypical, from a North American viewpoint, about interest intermediation in Quebec, or about the economic role of that province’s state. But Quebec’s very distinctive history as a Frenchspeaking and Catholic society in a predominantly Anglo-Saxon and Protestant country moulded the other mechanisms that concern us here. Its party system cleaved voters between “bleus” and “rouges” constituencies, which differed along multiple dimensions – religious/secular, linguistic, rural/urban, and disposition towards the federal government, as well as regarding class-related economic and redistributive issues. But dissimilarities on the last of these dimensions were muted. Referring to the main pre-1960 parties, Vincent Lemieux noted, “Since 1936 neither … had a policy that [was] at all constant in terms of right and left,” if these terms are used to “represent ideologies and policies designed either to maintain or to reduce the differences between individuals and between groups of a society.”26 As we saw in chapter 1, Lijphart identified party systems of this type, which attenuate economic-distributive polarization while emphasizing other cleavages, as typical of consensus democracies, not the majoritarian ones common in the Anglo-Saxon world. Quebec’s linguistic and religious exceptionality also assured that its political and intellectual elites were preoccupied by what it meant to be French and Catholic in Canada, yielding a conservative and religious nationalism.27 Before 1960, this posed no immediate threat to the constitutional order in Canada. But it assured that most of Quebec’s political class was convinced of the province’s national distinctiveness and of the responsibility of its government to conserve it.

38  Comparing Quebec and Ontario

From the mid-1930s until the eve of its 1960s Quiet Revolution, party politics was dominated by the Union Nationale (UN), a party closely identified with this traditionalist agenda (table 2.4). UN premier Maurice Duplessis aligned his government with the Catholic Church, seeing its continued control of educational and social institutions as effective protection for the province’s faith and language. Ottawa’s efforts to build a modern welfare state during the post-war years were resisted with a dogged defence of provincial jurisdiction. But conservative nationalism, with its emphasis on religious and linguistic preservation, did not motivate the UN administration to challenge big business in Quebec, mainly English-speaking and often foreign.28 Indeed, according to a persuasive interpretation, before 1960 Quebec’s political economy was characterized by a compromise between a church-aligned provincial government, preoccupied with its cultural agenda, and an English-speaking business class, granted economic privileges that were generous even by the market-oriented standards of Anglo-Saxon capitalism.29 The UN regarded unions unfavourably, and Duplessis espoused a strongly pro-business and laissez-faire approach to the economy. Quebec left economic development to the private sector.30 While Ontario had nationalized its hydroelectric system in 1906, most of Quebec’s remained in private hands until 1963, in spite of the province’s considerable potential as a hydroelectric power producer. The 1960s and 1970s were a period of profound change in Quebec; each institutional mechanism examined here was transformed (table 2.1). The advent of Jean Lesage’s Quebec Liberal Party (PLQ) government in 1960 heralded a decline in the church’s political influence and the displacement of conservative nationalism by a secular and modernizing alternative that identified the Quebec state as a vehicle for promoting the well-being of the French-speaking majority. While launched mostly under Lesage, change continued under the UN during its final term in office, the subsequent Liberal government of Robert Bourassa, and that of René Lévesque’s Parti Québécois (PQ) after its first election victory in 1976 (table 2.4). It was promoted by all parties, even as the party system increasingly centred on a fissure between the federalist PLQ and the sovereigntist (separatist) PQ.31 Both parties also were closely aligned with a French-speaking new middle class that emerged in Quebec after the Second World War.32 The primacy of the “national question” in this new partisan divide entailed continued divergence of Quebec’s post-Quiet Revolution party system from Lijphart’s Anglo-Saxon pattern, where conflict centres on

Typing Provinces  39 Table 2.4. Quebec Governments and Premiers, 1944–2010 Governing party

Premier

Period

Union Nationale

Maurice Duplessis

1944–59

Paul Sauvé

1959–60

Antonio Barrette

1960

Liberal

Jean Lesage

1960–6

Union Nationale

Daniel Johnson Sr

1966–8

Jean-Jacques Bertrand

1968–70

Robert Bourassa

1970–6

Liberal Parti Québécois Liberal Parti Québécois

Liberal

René Lévesque

1976–85

Pierre-Marc Johnson

1985

Robert Bourassa

1985–94

Daniel Johnson Jr

1994

Jacques Parizeau

1994–6

Lucien Bouchard

1996–2001

Bernard Landry

2001–3

Jean Charest

2003–10

sharp differences about economic and distributive concerns. Competition between the Quebec Liberals and the PQ since the 1970s has encompassed an important element of this, with the Liberals identified with a more market-oriented perspective and the PQ a more social democratic one.33 But observers of Quebec’s partisan landscape often argue that conflict over sovereignty mutes this difference. For Raymond Hudon a significant economic polarization did open up between the PQ and the Liberals during the 1970s, with the former much more closely aligned with organized labour and the latter with business; by the early 1980s, in the wake of significant budgetary restraint imposed by a PQ government, the difference was much less pronounced.34 In their recent discussion of electoral choice in Quebec, Bélanger and Nadeau argue that a left-right “ideological dimension appears to be less important [in Quebec] than elsewhere. The dimension that explains more about electoral behaviour is that which is linked to Quebec’s political future. The attitude of Quebec voters vis-à-vis federalism and sovereignty ­exercises much greater influence in determining Quebeckers’ electoral

40  Comparing Quebec and Ontario

choices than does the left-right cleavage.”35 Quebec voters are divided by language, age, gender, region, education, income, and religion, as well as by economic-distributive issues.36 The result of the 2007 provincial election appeared, briefly, to portend a more ideological politics, with the sudden rise of the right-wing Action Démocratique du Québec (ADQ) and, to a lesser extent, of the leftish Québec Solidaire (QS). The ADQ’s collapse in the 2008 vote, however, led these authors to conclude that the PQ and PLQ likely will continue to attract most voters, leaving to smaller formations only “the minority of voters who were not in the ideological centre.”37 Modern Quebec has not witnessed the emergence of a successful party firmly committed to a market-oriented, neoliberal agenda.38 Social democratic voters who are federalists, especially if non-francophone, typically support the PLQ and have impeded it from embracing neoliberalism; the sovereigntist PQ has long included politicians who are avowedly right-of-centre on the economy and social spending. Rather than continuing to resist social policy change, post-1960 Quebec governments developed their own welfare state. They assumed direct control of social and educational institutions previously administered by the church, while constraining as much as possible Ottawa’s influence over their social measures. The province established a Ministry of Education, instituted a network of colleges (CÉGEPs), modernized social assistance, introduced universal health insurance, and launched a contributory Quebec Pension Plan (QPP), refusing to have the latter subsumed within Ottawa’s new Canada Pension Plan (CPP). Quebec benefited amply from federal transfers, including equalization payments, but the province’s determination to expand its public sector motivated it to also draw deeply from its own fiscal resources. Ownsource revenues (total provincial revenues minus transfers from Ottawa) rose steeply and steadily, regardless of governing party, during the quarter century after the Quiet Revolution began, doubling from 11% to over 20% of provincial GDP between 1961 and 1985. Total expenditures grew from 12% of GDP in 1961 to 31% in 1981 – a plateau matched but not much exceeded thereafter (figure 2.2, graphs A and B). Provincial transfer payments to persons also grew substantially, doubling from about 1.8% of GDP in 1961 to over 3.5% in 1980 (figure 2.2, graph D). Another radical reorientation transformed the province’s approach to economic development. The 1960s and 1970s witnessed both the expansion of state-owned corporations in strategic sectors and state-led

Typing Provinces  41 Figure 2.2. Select Revenue and Spending Data, 1961 to 2009, PEA Basis* (B) Total expenditures as % of provincial GDP %

10

15

20

25

10 15 20 25 30 35

(A) Own-source revenues as % of provincial GDP %

1960

1970

1980 1990 year Quebec

2000

2010

1960

1970

Ontario

1980 1990 year Quebec

2010

Ontario

(D) Assistance and income transfers as % of provincial GDP %

0

1

.5

2

3

4

1 1.5 2 2.5

(C) Transfers to businesses as % of provincial GDP %

2000

1960

1970

1980 1990 year Quebec

2000

Ontario

2010

1960

1970

1980 1990 year Quebec

2000

2010

Ontario

Source: Statistics Canada, CANSIM, tables 3840004, 3840009, 3840023, 3840024, and 3840031. Data for provincial and local governments, reported separately, are merged in these graphs. The figures are from the Provincial Expenditure Accounts (PEA); see chapter 3. Quebec’s own-source revenues are adjusted downwards in graph A after 1966 to reflect the value of that province’s distinctive income tax abatement arrangement with the federal government. * As reported in CANSIM, the data in graph D include all provincial “transfers to persons.” They were manipulated here to restrict them to only social assistance and related income transfers, the focus of chapter 4. Pre-1981 provincial and municipal transfer payments were summed; workers’ compensation, government pension, and post-secondary education transfers were then subtracted from this total. Post-1980 provincial and municipal transfer payments were summed, and workers’ compensation was subtracted from this total.

efforts to foster Quebec-based and predominantly French-speaking, private entrepreneurship. These are discussed in chapter 6. By the 1980s, these and other state-led initiatives had, as hoped, fostered a sizable indigenous business community in Quebec, which now expressed reservations about state intervention.39 These initiatives therefore have

42  Comparing Quebec and Ontario

attenuated since the mid-1980s but remain important. Provincial business transfers, which quadrupled as a share of provincial GDP between 1961 and 1980, more than doubled again by this measure thereafter (figure 2.2, graph C). Scholarship on Quebec’s political economy since the 1990s stresses that, consistent with literature reviewed in chapter 1, much innovation there now relies on networking relationships that are not susceptible to close central direction. It nevertheless concurs that Quebec’s state continues to play a directive role in this new setting.40 The Quiet Revolution also witnessed substantial growth for organized labour. In 1960, 30% of Quebec workers belonged to unions, compared to 20% in 1945. The increase occurred in the context of post-war industrialization. Unions nevertheless were politically marginalized during the Duplessis years. The PLQ’s return to power in 1960 presaged further growth for the unions, largely because of the new government’s 1964 decision to extend full collective bargaining rights to the public sector. Union density rose to 39% in 1970 and peaked at around 45% in 1990, before declining to about 40% more recently (figure 2.3).41 Comparative inter-provincial data, available since 1976, indicate that significantly more workers have been organized in Quebec than in Ontario since then, and that in most years density in Quebec is higher than in any other province. Labour’s new strength was not initially accompanied by a departure from the adversarial industrial relations style that had long prevailed in Quebec, as in the rest of North America. Union power therefore entailed a substantial increase in strike activity. During the 1970s this was aggravated by increasing antagonism between the PLQ and the union moment, highlighted by a “common front” strike in 1972. The antipathy was intensified by the unions’ association with the sovereigntist movement during the 1970s, though they usually stopped short of openly championing Quebec independence.42 The number of persondays of work lost due to strikes rose from 200,000 in 1960 to 1.4 million in 1970 and 6.4 million in 1976; it remained very high, at 4.1 million, in 1980, before falling to 1.1 million in 1985. Labour disruptions peaked between 1975 and 1980; during five of these six years, more days were lost to work stoppages in Quebec than in Ontario, in spite of the latter’s much larger workforce. The 1976 figure was four times greater than Ontario’s.43 This intense industrial conflict helped convince the PQ government to try to change the fractious culture. It launched numerous ad hoc “summit” meetings with business and labour leaders to build confidence

Typing Provinces  43 Figure 2.3. Union Members as % of Workforce, 1976–2010*

25

30

35

40

45

%

1970

1980

1990 year Quebec

2000

2010

Ontario

Source: Statistics Canada, CANSIM tables 2790025 (1976–95) and 2820078 (1997–2010). * Available data on union density in Canada come from two sources, for 1976–95 and for 1997–2010. The reported national level of unionization differs little between these sources between 1995 and 1997, but the discrepancy is quite large for some provinces. To remedy this, reported data from the earlier series have been adjusted here. For each province, the change in the reported density level is calculated for 1993–5 (old data) and for 1997–9 (new data). These figures are averaged. A new figure is then imputed for 1995 that differs from the reported 1997 figure by this average. A figure is imputed for 1996 that is midway between the new 1995 figure and the 1997 one. Figures for each year before 1995 are then adjusted by as much as the 1995 figure was. The result of this change is that Quebec’s reported density is adjusted upwards by 2.51% for each year between 1976 and 1995, while Ontario’s is adjusted downwards by 1.4% for each of these years. Data for the other eight provinces are used in the regressions reported in chapters 7 and 8. For each of these provinces, the 1976–95 data are adjusted as follows compared to the original figures: NF, -12.79%; PEI, -5.3%; NS, -0.29%; NB, -6.53%; MB: +1.038%; SK: no change; AB: +1.055%; BC: -1.81%.

between them. Initial results were mixed.44 Even in the longer term, the outcome fell far short of the formal coordination often found in Europe. In terms of the foundations of cooperation postulated by the VoC literature, Quebec still approximates the adversarial liberal market

44  Comparing Quebec and Ontario

economy (LME) model: There is little evidence that its firms rely on long-term links with credit-granting institutions (other than the public ones created during the Quiet Revolution) or work with employees to foster skills more than is typical in LMEs; contract bargaining happens mostly at the enterprise level. The early PQ effort instead approximated the strategy of “social pacts” that Martin Rhodes identifies in a number of countries since the 1980s.45 But the PQ’s summits were a significant departure from pluralism and justify the use of the French term concertation (concerted action), commonly used to describe it within Quebec, to characterize this distinctive style of episodic bargaining among leading societal actors.46 Further underlining its specificity, concertation antedated the volatile industrial-relations climate of the late 1970s and early 1980s and has implications at the sector level in areas where big business and organized labour are absent or of secondary importance. For Clinton Archibald, Quebec “corporatism” could be traced to 1930s Catholic social teachings and influenced the Duplessis government, in spite of its antiunion disposition and, very differently, to the state interventionism of the early Quiet Revolution. The PQ’s concertation exercises drew on this legacy.47 Archibald’s definition of corporatism is elastic; he nevertheless underlines that the later turn to concertation had important antecedents. Focusing on developments since the initial PQ summits, Éric Montpetit points to substantial disaggregation in Quebec concertation: much of it occurs in specific policy sectors, rather than at the “macro” level where a broad range of social and economic objectives are addressed.48 The interests involved in this narrower bargaining are sector-specific: farmers’ organizations, food-processing cooperatives, and agriculture bureaucrats in the farm sector; medical associations and the public insurance agency for health care.49 For Montpetit, Quebec is distinctive in hosting many sectors of this kind, where policy results from collaborative decision-making among a finite number of publicly recognized interests. Yet Gilles Bourque has demonstrated that summitlevel concertation also remained important in Quebec after 1990 – in the landmark Socio-Economic Summit of 1996, discussed in later chapters, and in broad industrial, labour market, and regional development collaborations launched by a PLQ government after 1989.50 “Macro”level undertakings therefore remain an important feature of the “Quebec model” of collaboration, alongside sectoral ones. A final element of concertation, and further evidence of its more decentred aspect, is the role of the province’s robust “social economy,” that is, socially oriented,

Typing Provinces  45

community-based enterprises. For Yves Vaillancourt, these actors became part of Quebec concertation during the 1990s, particularly during the 1996 summit, which was much more inclusive than its predecessors of the early 1980s in representing actors other than business and labour.51 Quebec’s distinctively concerted form of interest intermediation therefore includes (1) ad hoc and episodic macro-level bargaining among business, labour, and government about a wide range of social and economic objectives; (2) narrower sector-level bargaining and problem-solving that has a highly variable composition across policy areas; and (3) increasingly includes social economy actors. Yet commentators also stress the mixed nature of Quebec’s political economy. Its coordinative elements are alloyed to market-oriented liberal ones, reflecting the province’s pre-1960 history and its North American location. It is therefore a “hybrid” model, whose contrasting elements raise questions for some authors about its efficiency.52 Peter Graefe raises other questions: concertation is embraced more enthusiastically by the PQ than by the PLQ, especially macro-level summitry. Twice, most recently after Jean Charest was first elected in 2003, the Liberals started on a neoliberal course that, had it not been abandoned, would have jeopardized concertation.53 It is also applied unevenly over time and across fields, and its advantages for less powerful interests can be questioned. Its existence nevertheless is now widely acknowledged. Quebec’s political economy is now distinctive regarding each institutional mechanism identified in table 2.1. First, its party system divides voters on economic and distributive issues. But this cleavage is attenuated by others that relate to culture and identity; disagreement on sovereignty has been foremost among these since 1970. Second, interest intermediation has a mixed quality. Since the 1980s, liberal-pluralist features that reflect the mostly competitive foundations of firm behaviour in Quebec have been mitigated by a distinctive kind of policy collaboration that is termed concertation there and that again approximates institutions in non-Anglo-Saxon nations. And third, after 1960 the Quebec state intervened extensively in the economy, departing radically from laissez-faire. With the emergence of a French-speaking business class, dirigisme retreated. The state nevertheless remains far more active in promoting growth than is habitual in liberal settings. How do these institutional mechanisms relate to changes in table 2.1’s “ideational” mechanism, Quebec nationalism? I argued in chapter 1 that tracing the policy impact of ideas is particularly challenging

46  Comparing Quebec and Ontario

and proposed to do so by identifying their influence within the institutional mechanisms discussed above. The post-1945 mutation of FrenchCanadian nationalism, conservative and religious, into a modernizing Québécois identity, liberal and secular, very probably contributed to each mechanism. A desire for “catching up” (rattrapage) animated the Quebec state’s rapid growth after 1960. Building a modern welfare state and an indigenous entrepreneurial milieu presupposed the existence of a national collectivity – French speaking, as before, but also wholly Quebec-based, materially ambitious and technologically selfconfident – that was new in the post-war era. It was this collectivity that was catching up and in whose interest rapid change was justified.54 We can also identify the impact of the new nationalism on Quebec’s party system: whether it justified a move towards separation from Canada, or only a strengthening of Quebec’s powers within the federation, became the main partisan cleavage, softening others. It is also likely that Quebec concertation owes much to a national identity shared among its participants, however much their contrasting material interests otherwise divide them. It lies beyond the scope of this study to explore these connections further, but it is reasonable to assert an impact for changing Quebec nationalism on the emergence of the three institutional mechanisms that are our main focus; there may also be reciprocal effects.55 If the case studies reported in chapters 3 to 6 identify a major influence for these institutions on policy outcomes, this therefore also will constitute evidence of an indirect impact for Quebec nationalism. Whether the explicit use of nationalist ideation by policy participants has an additional direct effect will also be investigated there. The Ontario Model Students of Ontario politics from the origins of Upper Canada in 1791 stress its conservatism. This is attributed, variously, to the ideology of its original settlers, Loyalist refugees from the American Revolution; to the self-interest of its initial elites; and to pervasive clientism in an agricultural economy.56 But by 1867 successful governments in Ontario practised a blend of conservatism and reform, a pattern that predominated for more than a century thereafter. Nineteenth-century immigration gave Ontario a diverse population – American, British, or Irish in origin; Anglican, Roman Catholic, or “dissenting” Protestant in faith. Regions with distinct identities emerged – urban versus rural, but also the southwest, settled mainly by Americans; and the mostly

Typing Provinces  47 Table 2.5. Ontario Governments and Premiers, 1943–2010 Governing party

Premier

Period

Progressive Conservative

George Drew

1943–8

Thomas L. Kennedy

1948–9

Leslie Frost

1949–61

John Robarts

1961–71

Bill Davis

1971–85

Liberal

Frank Millar

1985

David Peterson

1985–90

New Democratic Party

Bob Rae

1990–5

Progressive Conservative

Mike Harris

1995–2002

Ernie Eves

2002–3

Dalton McGuinty

2003–10

Liberal

British-settled east. Reformism seriously challenged conservatism in this setting once it established a moderate profile.57 By the 1860s success went to political coalitions that brokered multiple interests, bridging the gap between conservatives and reformists. Ontario’s post-Confederation party system emerged in this context. Until 1985 the province experienced long periods of one-party dominance, culminating with a 42-year era of Progressive Conservative (PC) rule (table 2.5). These dynasties shared a reputation as middle-of-the-road brokers who balanced many interests and, in particular, displayed a conservative tendency to maintain the confidence of big business and middle-class voters with a reformist proclivity in social policy and public regulation.58 Yet the period of PC dominance after the Second World War did not mix reform and conservatism equally. Ontario was a reluctant participant in Ottawa’s post-war plans to build a welfare state, though it stopped short of blocking them. After 1970, this market-favouring tendency grew stronger. One-party dominance was sustained by governments’ ability to convince voters that they were more competent than their opponents and could more effectively balance the province’s diverse interests; ideological differences with the main opposition party (the Conservatives at the outset, the Liberals later) on economic-distributive issues were not consistent or pronounced.59 The Co-operative Commonwealth

48  Comparing Quebec and Ontario

Federation / NDP tried to break this mould, after its emergence in the 1930s, but it remained a third party. Interest group politics before 1985 largely matched the Anglo-Saxon pluralist norm. Writing in 1980, James MacKenzie noted “how relatively underdeveloped, in formal access [to Cabinet] the interest group system in Ontario remains. It appears self-selecting and incremental.”60 Also consistent with pluralism, access was unequal; business groups were most knowledgeable and had greater resources.61 A decade later Henry Jacek concluded that “the usual form of interest group activity in Ontario is pluralist,” though more formal approaches existed in some sectors.62 Organized interests approached Ontario governments differently, reflecting their unequal influence. Again, business associations were most effective, “us[ing] a conservative style that involves meeting quietly behind closed doors with the premier, cabinet ministers, and senior bureaucrats.”63 Yet scholars noted another aspect of this informal and unequal system, one that resonated with brokerage partisanship. For Sid Noel, an imperative to “balance interests” was part of Ontario political culture, with “the corollary that all legitimate interests were entitled to be included in the process of balancing.”64 Haddow and Klassen termed this feature of Ontario associational life “informal bargaining,” which “softened the competitiveness” of interest intermediation.65 Nor is this inconsistent with pluralism. Colin Crouch notes that interest representation in pluralist Britain historically included “informal, personal, ‘gentlemanly’ arrangements … which enjoined a certain restraint on the maximization of immediate self-interest for the sake of maintaining a wider unity” that eventually included organized labour.66 But the latter’s influence could not match business’s, a circumstance reinforced by the province’s modest union density – narrowly exceeding 30% at its zenith between 1985 and 1995 (figure 2.3). The expansion of Ontario’s state after the Second World War was conditioned by this landscape. It increased spending substantially at a time when welfare state expansion was expected by voters throughout capitalist democracies. But, reflecting the specific ideological balance struck by the PCs, arguably more “conservative” than “progressive,” and perhaps also business’s greater influence, Ontario’s public sector remained smaller than most. Between the 1950s and 1970s, Ontario’s PCs resisted all major federal social policy initiatives that required provincial participation, often proposing private sector alternatives: this was true for public hospital insurance, medical care insurance, the Canada Pension Plan, 1960s social assistance reform, and an income

Typing Provinces  49

security one in the next decade.67 It acceded to change only reluctantly. Ontario’s own-source revenues and expenditures as a share of its GDP swelled considerably during the 1960s, but rapid growth ended in the early 1970s (figure 2.2, graphs A and B). Own-source revenues thereafter rose at a slower pace; expenditures dipped for a few years, before resuming their expansion, again more gradually. Transfers to persons climbed moderately throughout the quarter-century after 1961, other than for an ephemeral spike during the late 1960s (graph C). A comparison of Ontario’s own-source revenue / GDP ratio to those of other provinces underlines its modest commitments, especially after 1970. Unlike expenditure data, these are not affected directly by the different volumes of federal transfers that provinces receive. Ontario’s ratio was 90% of the ten-province average in 1961 and 97% in 1971. Reflecting the province’s increasing parsimony after that, it fell to 88% of the national average in 1985. By contrast, Quebec’s ratio was 103% of the ten-province average in 1961, rose to 106% in 1971, and to 113% in 1985. In the last of these years, Quebec’s ratio was the highest among the ten provinces, Ontario’s the lowest.68 That the Ontario PCs moved firmly in a market-oriented direction towards the end of their reign is also suggested by the party’s choice of Frank Miller as leader in 1985.69 The new party system that emerged thereafter, much more polarized on economic-distributive concerns and more competitive, was anticipated by these earlier trends. In retrospect, they presaged a transition from brokerage to greater polarization. Ontario promoted economic development before the 1980s, but this typically consisted of subsidizing infrastructure, especially transportation, a practice already well-established before Confederation. It seldom intervened directly by privileging sectors or firms with investment assistance. This market-oriented stance partly reflected the fact that for many decades after Confederation, the federal government was thought to have addressed Ontario’s development needs. In the wake of Ottawa’s National Policy of 1879 a sizable manufacturing sector emerged in southern Ontario, protected by the policy’s tariffs.70 The province was not entirely passive. There were significant interventions between 1897 and 1900, when it decided to impose a “manufacturing condition” on the export of saw logs and pulp and, abortively, of nickel and copper; and in 1906, when it created a public hydroelectric utility, the eventual Ontario Hydro. Yet these decisions responded to the felt needs of the province’s leading business interests, not a dirigiste disposition to guide economic development. During the 1960s and 1970s,

50  Comparing Quebec and Ontario

governments in many Anglo-Saxon countries that relied historically on laissez-faire began to experiment with greater intervention.71 This also happened in Ontario. But its stance remained broadly market-oriented. In 1985, Richard Bird described it as “relatively noninterventionist” and predicted that it would “continue to scatter some funds across the province, especially in the name of small business, and get involved in the occasional high-profile high-tech venture.”72 K.J. Rea agreed that the province preferred free markets and attributed this partly to a “neoconservative” turn in its government’s thinking since the 1970s. For Robert Finbow, Ontario’s commitments in this field were much more modest than Quebec’s.73 In 1985, the PCs lost power to the Ontario Liberals, led by David Peterson, who were displaced, in turn, by Bob Rae’s NDP between 1990 and 1995. Mike Harris guided the PCs back to power in 1995 (table 2.5). Courchene and Telmer referred to this era as “Ontario’s Quiet Revolution” by analogy with Quebec’s earlier transformation.74 The changes in Ontario were not, in fact, as fundamental and seldom endured. Change nevertheless touched each institutional mechanism of interest to us here. For a time, the province experimented with greater economic intervention, which was linked to an effort to shift interest intermediation in a more collaborative direction. But the most immediately evident alteration, and probably the most lasting, affected the party system. The end of the Tory “dynasty” in 1985 heralded a more competitive partisan landscape. It also marked the emergence of a strong economicdistributive partisan cleavage. The Peterson Liberals were widely judged to have moved Ontario to the left. For its first two years in office, this shift was abetted by the government’s reliance on a formal accord with the NDP. A severe recession dampened the Rae government’s enthusiasm to continue in this direction after 1991, but the NDP nevertheless stressed social democratic themes throughout their five years in power and, in spite of imposing significant wage restraint on the public sector, did not reverse the state’s expansion.75 When the PCs returned to power, they replaced their erstwhile pragmatism, however qualified, with an approach “in which conviction became the watchword.”76 The conviction was neoliberal. The party’s detailed 1995 election program presaged significant spending and income tax cuts. To assess the import of these ideological oscillations it helps to compare Ontario’s spending and revenues with the ten-province average since 1985.77 This evidence confirms a major difference between the stance of the 1995– 2003 PC governments and that of its Liberal and NDP predecessors and

Typing Provinces  51

successors. The latter expanded government significantly. The intervening Tory years appear as an interregnum when growth halted, or reversed modestly, not as an era of pronounced contraction. The contrast nevertheless is striking: own-source revenues as a share of GDP grew from 88% to 93% of the ten-province mean between 1985 and 1990. After dipping during the 1990s, the Ontario figure was again 93% of that average when the PCs left power in 2003. It resumed its upper climb under McGuinty, reaching 99% in 2009. Total expenditures rose from 71% to 81% of the ten-province average from 1985 to 1995, when Harris came to power. They edged downwards to 79% in 2003, before rising again, to 90%, in 2009.78 These figures suggest a broader interpretation of the Peterson and Rae governments: they affected a “re-normalization,” in pan-Canadian terms, in the size of Ontario’s state, after its post-1970 contraction. The Harris and Eves Conservatives were distinctive, in this light, in resisting this change. In any case, the programmatic gap between the governing Liberals and Tim Hudak’s market-oriented PCs remained strong in 2010. Polarization in Ontario’s party system on economic-distributive concerns was likely to persist. It is less evident that efforts to coordinate interests more formally, and link them to greater economic intervention, had an enduring impact. These changes germinated during the Peterson Liberal years and intensified under Rae’s NDP, only to be abandoned under Harris. The results of these experiments probably testify to the durability of pluralism in Ontario’s interest intermediation system and of laissez-faire in its economy. An important impetus for Peterson’s initiatives was concern that Ontario firms were unprepared for the more competitive global marketplace of the late 1980s. This prospect was regarded with particular foreboding because Ottawa was negotiating a comprehensive free trade agreement with the United States, one that the Ontario Liberals worried might jeopardize the province’s manufacturers. Ontario governments of every partisan stripe thereafter openly questioned whether Ottawa’s economic and fiscal policies were serving the province’s interests.79 Peterson launched a private-sector Premier’s Council to advise him on Ontario’s economic future. This and other experiments in collaborative decision-making during the Peterson and Rae years are discussed later, especially in chapter 6. For our present purpose it is enough to point out that all of them were quickly abandoned when the PCs returned to power in 1995.80 Under Harris, interest group politics did not return to the “softer” pluralism, open to diverse interests,

52  Comparing Quebec and Ontario

that existed before 1985. Observers noted that the Harris government consulted meaningfully only with interests that it saw as supportive, especially in the business community. Writing in 1997, Jacek argued that “the mould for stable relations between Ontario interest groups and the Ontario government is now broken.”81 The Liberal government that came to power in 2003 was more cautious than its 1980s predecessor. It professed a desire to consult widely, but it avoided formalized bargaining with business, labour, and other leading interests. It was equally reticent about wide-ranging strategies for economic renewal. There may be room in Ontario for collaborative policy deliberation,82 but probably on a more modest scale and in more informal settings than was attempted after 1985. Ontario’s contemporary political economy is liberal in relation to the three mechanisms discussed here. Of these, first, its party system went through the most important adjustment during the 1980s. If it once was a brokerage system dominated by a single party that bridged reformist and conservative currents, this was already less true by the 1970s. Since 1985, Ontario has instead had a competitive system where the parties divide sharply on economic-distributive issues, a pattern associated with liberal polities by Lijphart and Kitschelt. Second, interest intermediation, historically pluralist, was also disrupted for a time, as governments experimented with collaborative forums of a kind typically found in corporatist nations. Yet pluralism, perhaps tinted by a perceived responsibility to consult widely, remains the norm. Third, the state’s economic role typically has been limited; governments prefer to rely on market signals to guide adjustment. Ontario governments certainly involve themselves in the economy, but interventions usually are of moderate ambition. Finally, evidence of a province-level collective identity – an equivalent to Quebec nationalism – is almost entirely lacking for Ontario. The province’s governments became more concerned about Ottawa’s responsiveness to its needs in the 1980s, a concern that may be shared by Ontario residents. What is lacking is any significant sense of provincial distinctiveness.83 The Policy Consequences of Institutional Divergence The institutional settings of policymaking in Ontario and Quebec differ significantly; distinctions are now much more pronounced than several decades ago. Once featuring a similar mix of multidimensional cleavages and one-party dominance, as in Quebec, Ontario’s party

Typing Provinces  53

system has been competitive and sharply divided along the economicdistributional axis since 1985. The prominence of the national question in party competition in Quebec means that interparty cleavages remain multiple; economic-distributional issues divide the main parties less sharply. During the Quiet Revolution, Quebec’s state developed an extensive capacity for economic intervention. This later attenuated and never displaced liberal features of the political economy, but it remains pronounced. In Ontario, a market-oriented stance has long prevailed, interrupted only haltingly by greater ambitions. During the 1980s Quebec moved from largely pluralist interest intermediation to a distinctive style widely referred to there as concertation. Ontario’s halting steps in the direction of high-level corporatist consultation and bargaining during the late 1980s and early 1990s were abandoned after mid-decade. Province-level nationalism contributed importantly to each of these mechanisms in Quebec, but there is no evidence of an equivalent phenomenon in Ontario. In general, Quebec’s political economy now possesses important features similar to the coordinated and statist ones in non-liberal political economies, but these are alloyed to elements that more closely resemble those of a market-oriented political economy. In Ontario, liberal features clearly predominate, though they too underwent specific, albeit less radical, changes. If institutions affect policy in the manner suggested by the scholarship reviewed in chapter 1, we expect a similar pattern here: Ontario and Quebec policy should be less distinctive in the earlier post-war years, when their institutions differed less. Policy differences should become more pronounced as institutional distinctions did between the 1960s and 1980s. By then, the provinces would be making quite different uses of the new opportunities opened up for them by the decentralization of power from Ottawa after 1960. Whether such policy differences were considerable after 1990 is the central question examined in this study and is the focus of the next six chapters. Data that are available continuously for three of our four policy domains since 1960 suggest that policy differences were indeed smaller in the early 1960s and became much more pronounced by 1985.84 For budgeting and economic development these data, presented in graphs A to C of figure 2.2, indicate that policy diverged importantly between 1960 and the mid-1980s. A more complex pattern for social assistance and related transfers is indicated by graph D.85 These graphs offer provisional evidence about the hypotheses tested in this study, especially for the years preceding those that are the main focus of our attention.

54  Comparing Quebec and Ontario

Graphs A and B report all own-source revenues and total current expenditures for the Ontario and Quebec governments between 1961 and 2009. Figures are calculated as a percentage of provincial GDP.86 The estimated value of Quebec’s distinctive income tax abatement from Ottawa, which began in 1966, is subtracted from the Quebec figures.87 The literatures reviewed in chapter 1 propose that collaborative institutions give rise to higher long-term levels of taxing and spending than liberal ones. These graphs show that Quebec diverged from Ontario in this way after 1970, that the difference was substantial by the 1980s, and that it remained sizable thereafter. Quebec taxed about as much as Ontario, and spent only modestly more, during the 1960s. But a steep upward climb in both provinces during the 1960s continued only in Quebec during the subsequent decade. Ontario revenue and expenditure effort fell briefly after 1970. When own-source revenue resumed its upward climb after 1975, it started from a much lower level than in Quebec. Ontario’s expenditures witnessed a smaller post-1970 dip but then climbed more slowly than Quebec’s. After 1985, provincial expenditures as a share of GDP rose and fell in close parallel in the two provinces, tracking changes in the business cycle (graph B), but with Quebec’s spending persistently much higher. The gap in own-source revenues reached a level in 1980 that persisted until around 1995. This gap was smaller than for expenditures, in part because Quebec receives much higher transfer payments from Ottawa, but also because it was willing to accumulate a much larger debt (see below). A further widening of the revenue gap after 2000, with Quebec’s revenues rising while Ontario’s were stable (graph A), reflects an effort by the former province to alleviate this burden. But it did not erode its much higher commitment to spending. The pattern suggested for economic development policy by graph C is equally noteworthy. It charts each province’s expenditures on transfers to business enterprises as a share of provincial GDP, one measure of spending effort on economic development. (Others are discussed in chapters 6 and 7.) Having trailed Quebec during the 1960s, when both jurisdictions nevertheless expended little, Ontario’s outlays briefly matched its eastern neighbour’s in the mid-1970s. But thereafter, their commitments diverged dramatically. In 2009, Ontario’s spending effort was not much higher than three decades earlier. In contrast, transfers to businesses by the Quebec government, already almost twice those in Ontario in 1980, more than doubled from that level by 2009. The Ontario-Quebec gap was clearly evident by 1985.

Typing Provinces  55

Graph D reports the provinces’ transfers to persons; these include provincial and local social assistance payments and provincial tax benefits but exclude workers’ compensation. Quebec already spent more in this area during the 1960s. The gap nevertheless rose considerably during the 1970s and 1980s. In this field, unlike the others examined in this volume, however, the gap was eliminated by a dramatic surge in Ontario’s assistance spending between the late 1980s and the mid-1990s. As we will see in chapter 4, this partly reflected the severity of Ontario’s post-1990 recession; but it also was caused by the swing to the political left in the province’s now-charged partisan setting during these years. When the pendulum swung to the right in 1995, Ontario’s spending plummeted, again falling below Quebec’s. The gap nevertheless was not restored to its post-1970 levels. The Impact of Globalization and Post-Industrialism The previous section offered provisional evidence that a divergence of political-economic institutions coincided with greater variation between Ontario and Quebec in policy outcomes during the years before those examined in this study. But might these policy differences instead reflect differences in how these provinces experienced globalization and post-industrialism? Figures 2.4 and 2.5 represent graphically the impact of globalization and post-industrialism in Ontario and Quebec. They suggest that both developments were experienced in similar ways by the two provinces. This reduces the likelihood that policy varies between them because they have experienced these pressures differently. Regressions presented in chapters 7 and 8 test this possibility more formally. Trade openness, defined as the sum of the value of a country’s exports and its imports, calculated as a percentage of GDP, is the most commonly used measure of globalization. Because provinces trade with other countries and with other provinces, separate measures of trade openness are reported in the first two graphs of figure 2.4 for international and inter-provincial trade. These trade data are our only available indicators for economic globalization. Province-level data are not available for stocks and flows of portfolio or foreign direct investment (FDI).88 The first four graphs in figure 2.5 report Ontario and Quebec data for leading indicators of post-industrialism: employment outside of the manufacturing, resource, and agricultural sectors (graph A), the share of provincial population sixty-five or over (B), immigrants

56  Comparing Quebec and Ontario Figure 2.4. Trade and Economic Variables, 1961/1981 to 2010* (A) Internaonal trade as % of provincial GDP

(B) Inter-provincial trade as % of provincial GDP %

40

60

80

100

30 35 40 45 50 55

%

1980

1990

2000

2010

1980

1990

Quebec

2000

2010

year

year Ontario

Quebec

(C) Rao of Quebec to Ontario GDP / per capita

Ontario

(D) Growth in GDP per capita %

-1

.8

0

1

.85

2

3

.9

%

1960

.75 1960

1980

year

2000

2020

1970

1980 1990 2000 year Quebec Ontario

2010

Sources: Statistics Canada, CANSIM, table 38400002 (trade), table 3840015 (GDP, 1961–80), table 3840013 (GDP, 1981–2010), table 510026 (population, 1961–70), table 510001 (population, 1971–2010). * Trade (either domestic or inter-provincial) = (total exports + total imports) / GDP.

per capita (C), and the share of all labour market participants that are female (D). Graph E in that table reports the provincial unemployment rate; both globalization and post-industrialism are often expected to exacerbate joblessness. The impact of these two phenomena on policy is likely to be mediated in part by their effect on economic prosperity. Graphs C and D in figure 2.4 therefore report Quebec’s GDP per capita as a percentage of Ontario’s, and each province’s year-to-year rate of economic growth. Ontario and Quebec have different trade profiles: the former trades more with other countries, the latter with other provinces. The combined value of all trade (not shown) is somewhat greater for Ontario, as a share of GDP. Yet graphs A and B suggest that trade openness has changed little for either province since 1981; shifts in the importance of

Typing Provinces  57 Figure 2.5. Post-Industrial Society Variables, 1961 or later to 2010* (A) % of workers in post-industrial employment

(B) % of populaon over age 64 %

1960

6

65

8

70

75

80

85

10 12 14 16

%

1970

1980 1990 year Quebec

2000

2010

1960

Ontario

1970

1980 1990 year Quebec

2000

2010

Ontario

(D) % of labour force that is female

(C) Immigrants as % of provincial populaon

%

0

35

.5

40

1

45

1.5

2

50

%

1960

1970

1980 1990 year Quebec

2000

2010

Ontario

1970

1980

1990 year Quebec

2000

2010

Ontario

(E) Unemployment rate

0

5

10

15

%

1960

1970

1980 1990 year Quebec

2000

2010

Ontario

Sources: Statistics Canada, CANSIM, table 2810015 (unemployment, and employment by sector and by gender, 1961–75), table 2820008 (unemployment, and employment by sector and by gender, 1976–2010), table 510026 (age), table 510008 (immigration, 1961–70), table 510004 (immigration, 1971–2010). * Post-industrial employment = 100 minus the combined employment share for forestry, mining and manufacturing. Because agricultural employment is not reported for all years, it is excluded. Aged population = population over 64 years old / total population. Immigrants p.c. = immigrants / population. Female labour market share = female employment / total employment.

58  Comparing Quebec and Ontario

each kind of trade, moreover, have usually proceeded in parallel. The ratio of international trade to provincial GDP was not much higher in either jurisdiction in 2010 than in 1981; the substantial swings in intervening years closely tracked shifts in the business cycle. The value of Quebec’s international trade also converged somewhat with Ontario’s after 2000. Both provinces experienced a precipitous decline in the value of their inter-provincial trade, relative to GDP, during the 1980s and little change in this ratio since then. These provinces’ overall trade exposure did not increase by much after 1980, and their international and domestic trade both evolved similarly. The graphs in figure 2.5 suggest that the impact of post-industrialism also has not been dissimilar between Quebec and Ontario. Both provinces experienced a substantial shift of employment from primary and secondary sectors towards services since the early 1960s (graph A). This change followed an almost identical path. Graphs B and D reveal different trajectories for population aging and labour market feminization. Yet in the burdens these represent for the state’s taxing and spending capacities, these trends probably offset: Quebec’s population has aged more rapidly, challenging more severely its ability to finance services. On the other hand, Quebec also experienced a faster increase in female labour market participation after the mid-1970s, and its disadvantage compared to Ontario disappeared by 2010. This counteracted the effect of population aging by increasing potential employment in the working-age population. Ontario has consistently attracted more immigrants than Quebec (graph C), in proportion to its population; on the other hand, the overall trend in its settlement of immigrants is very similar to Quebec’s; the population share of immigrants was about 50% higher in both provinces in 2010 than in 1961. Quebec for many years consistently suffered from higher unemployment than Ontario (graph E), yet this figure tracked parallel paths in the two provinces. As with some other measures reported in figures 2.4 and 2.5, both immigration and unemployment levels have converged in recent years. If postindustrialism has significantly shifted the challenges facing advanced political economies in recent decades, this has not affected Ontario and Quebec very differently. Ontario has long enjoyed a higher standard of living than Quebec. Graph C in figure 2.4 confirms that Ontario’s GDP per capita is higher than Quebec’s, but this advantage has declined since 1960. Graph D does not suggest much year-to-year variation in the two province’s growth rate. Ontario’s prosperity advantage nevertheless is now

Typing Provinces  59

smaller: Quebec’s GDP per capita was 75% of Ontario’s in 1961; it rose to 84% in 1980 and to 87% in 2010. If Quebec experiences any disadvantage (or benefit) in pursuing desired objectives in the fields discussed in this volume due to its more modest affluence, this difference is much smaller than it was half a century ago. If globalization and post-industrialism have been experienced in broadly similar ways in Quebec and Ontario, we might nevertheless expect their policies to be affected differently by distinctive features of their taxing and spending capacities. The most important of these are graphed in figure 2.6. Quebec receives equalization payments from the federal government, while Ontario did not until 2009–10. Quebec therefore has more access to revenues that it did not raise from its own taxes (graph A). Second, as noted earlier, the surge in post–Quiet Revolution spending in Quebec resulted in its accumulating a much higher volume of debt, relative to GDP, than Ontario. This debt ratio has declined since the mid-1990s, but remains high; graph B reports the resulting discrepancy in debt servicing charges for the two provinces. In contrast to federal transfers, excess debt is a constraint on spending in Quebec that is less pressing in Ontario. It has been argued that more generous spending in Quebec than Ontario mostly reflects the former’s greater access to federal transfer payments.89 Regression-based evidence is provided in chapter 7 that

Figure 2.6. Fiscal Variables, 1961–2009, PEA Basis (A) Federal transfer payments as % of provincial GDP

(B) Interest on public debt as % of provincial GDP %

0

1

2

2

4

3

4

6

5

8

%

1960

1970

1980 1990 year Quebec

2000

Ontario

2010

1960

1970

1980 1990 year Quebec

2000

2010

Ontario

Sources: Statistics Canada, CANSIM table 3840023 (federal transfers, 1961–80), table 3840024 (debt charges, 1961–80), table 3840004 (federal transfers and debt charges, 1981–2009). Federal transfers to Quebec are adjusted upwards to reflect the value of that province’s distinctive tax abatement arrangement with Ottawa.

60  Comparing Quebec and Ontario

these commitments are higher in Quebec, even when this advantage is controlled for statistically. At this point, it may suffice to point out that Quebec’s much greater expenditure and own-source revenue “effort,” illustrated in figure 2.2, has not diminished since 1981 in spite of a substantial reduction in this advantage: Quebec’s federal transfers were 249% of Ontario’s in that year, relative to GDP; after rising briefly, they fell back to 252% of Ontario’s receipts in 1995 and to 177% in 2009.90 The regression results reported later also control for the impact of debt charges. Yet it is already evident from our graphs that Quebec’s spending premium was not eroded by its much-higher debt charges; that the latter now are declining (graph B) largely reflects the province’s willingness in recent years to increase further its already relatively high tax levels. Formulating Hypotheses We have seen preliminary evidence that outcomes in policy fields examined in this volume diverged between Quebec and Ontario after the 1960s, in parallel with the increased dissimilarity of their political economies. The preceding section suggests, additionally, that policy variations are unlikely to be caused by globalization and post-industrialism. Therefore they likely have endogenous causes. I now identify the hypotheses about post-1990 policy differences that are tested in this book. The first group relate to the causal mechanisms that underlie policymaking. The other four groups address outcomes for each policy field. Each hypothesis relates to a specific insight from chapter 1, identified below with a page reference in parentheses, about the policy consequences of the typological distinction between liberal, market-oriented political economies, on the one hand, and coordinative and statist ones on the other. This chapter has argued that the Quebec and Ontario political economies differ importantly on this central distinction in comparative political economy. The differences are not absolute; in particular, Quebec’s political economy embodies a complex mix of coordinative, statist, and market-oriented features. This mixture nevertheless sets it apart from liberal Ontario sufficiently to justify testing hypotheses about differences between them that reflect these core distinctions in the comparative political economy literature. 1a. In all four fields, policymaking will involve much more collaboration between the state and non-governmental interests in

Typing Provinces  61

Quebec than in Ontario; non-business interests also will be more powerful in the former province (10). 1b. In all four fields, policymaking and outcomes will vary much less between governments of different partisan stripes in Quebec than in Ontario; market-oriented parties of the centre-right also will be less influential in Quebec (10). 1c. State actors will be predisposed to intervene in the economy significantly more in Quebec than in Ontario because of a greater pre-existing capacity to do so (12). 1d. The impact of Quebec nationalism will be indirect in all fields. Policies will not be discussed and formulated mainly in relation to explicit province-level “national” objectives (14). 2a. Overall taxation and expenditures levels will be significantly higher in Quebec than in Ontario (18). 2b. Quebec will not make greater use than Ontario of taxes on capital (19). 2c. For other taxes, Quebec will rely more on regressive taxes than on progressive ones to finance its greater expenditures (19). 2d. Overall redistribution, including transfers and taxes, nevertheless will be greater in Quebec than in Ontario (19). 3a. Quebec will devote significantly more financial and bureaucratic resources to economic development than will Ontario (20). 3b. Quebec’s economic development policies will steer investment to particular sectors, regions, and technologies more than Ontario’s. But this will be less true at the end of the period studied than at its beginning (20). 3c. Quebec’s economic development policies will be more centralized than Ontario’s, but this also will become less true between the beginning and end of the period studied (20). 4a. Aggregate spending on income security for the non-elderly, and the level of program coverage, will be significantly higher in Quebec than in Ontario (20). 4b. Income security programs for the non-elderly will redistribute significantly more in Quebec than in Ontario (20). 4c. In encouraging employment, Quebec’s income security programs will differ from Ontario’s in being more focused on “enhancement” than on punitive “workfare” objectives (20). 4d. Quebec’s income security programs will provide significantly more financial support to families with children than will Ontario’s (21).

62  Comparing Quebec and Ontario

5a. Expenditures on childcare services will be significantly higher in Quebec than in Ontario (21). 5b. Quebec will move significantly further than Ontario in the direction of universal provision of childcare services (i.e., offering this service independently of parental income) (21). 5c. The proportion of children in a non-profit childcare service, funded by government, will be significantly higher in Quebec than in Ontario (21). 5d. The cost of childcare expenses to parents will be significantly lower in Quebec than in Ontario (21).

Chapter Three

Budgeting: Why Some Tax and Spend More Than Others, and How

This chapter compares budgeting in Ontario and Quebec. It begins with outcomes – their overall levels of expenditure and own-source revenue, the allocation of the latter among tax types, and their distributional consequences. Does the evidence on these topics corroborate the hypotheses about budget policy outcomes presented in chapter 2? Figures offered in the first section below strongly support the most important of these (2a): overall own-source taxing and spending levels are significantly higher in Quebec than in Ontario. Quebec’s state was already markedly larger than Ontario’s in 1990, and the disparity did not abate over the next twenty years. Greater tentativeness is required about the two provinces’ use of taxes on business and of progressive and regressive taxes, the focus of the second and third hypotheses. Shortcomings in available data, and uncertainty about whom to assign these taxes to, require caution in these areas. Nevertheless, it is plausible to conclude that effective rates of business taxation were similar in the two provinces (consistent with 2b). Even adopting favourable conjectures, however, the evidence is partly inconsistent with the hypothesis (2c) that Quebec would use mainly regressive taxes, not progressive ones, to finance its greater spending: Quebec relied on the progressive personal income tax much more than Ontario, though the other two revenue sources that it used more than Ontario, consumption and payroll taxes, are commonly considered to be regressive. Finally, the fourth section establishes that Quebec redistributed more through the personal income tax (which is consistent with 2d); redistribution by transfer payments is addressed in chapter 8. Evidence offered here on each of these points is presented in graphic or tabular form. A more formal test, using regression, is presented in chapters 7 and 8.

64  Comparing Quebec and Ontario

The first of these findings has an evident relevance for the next three chapters. Because Quebec spends more than Ontario overall, it is more likely, ceteris paribus, to fund new initiatives in any particular field. Differences in budgeting therefore have direct implications for our accounts of why outcomes differ for income transfers, child-related services, and economic development policy. But those outcomes also are affected by our identified causal mechanisms in ways that are specific to each of these sectors. It is these sector-specific manifestations that will be the focus of chapters 4 to 6. In its fifth and sixth sections, the heart of the chapter, I turn from outcomes to the processes that led to them. Comparative process tracing suggests that Quebec’s substantially larger “tax state” was shaped by policymaking dynamics that are strikingly different from those in Ontario. Yet nationalist ideas played little evident direct role in fostering this outcome (consistent with 1d). Indeed, arguments about the putatively dire consequences of its high tax levels for Quebec’s future, sometimes expressed in nationalist terms, have at least as often been used there to recommend reductions. In contrast, policymaking in Ontario and Quebec varied significantly in respect to our two institutional mechanisms. First, setting budgetary goals, especially managing the province’s deficit, involved much more dialogue with societal interests, business and labour in particular, in Quebec than in Ontario (hypothesis 1a). Quebec did not develop fully corporatist instruments in this area, such as permanent formal bodies to allow societal and governmental actors to negotiate budgets. Its governments nevertheless made frequent use of ad hoc gatherings, referred to as “summits,” “forums,” or with other terms, to do so. These often were important for gaining acquiescence to the government’s fiscal plans. This pattern reflected the “concerted” style of interest intermediation described in chapter 2. In contrast, little bargaining of this kind occurred in Ontario. When governments there did seek to negotiate budgetary goals with societal actors, moreover, this effort aborted in the face of the sharp polarization that characterizes interest group culture in Ontario on appropriate taxing and spending levels. Second, budget policy was shaped by very different partisan landscapes (1b). Ontario’s Progressive Conservatives (PCs) usually advocated reducing taxing and spending sharply, while this stance was absent from the discourse of the province’s Liberals and its New Democratic Party (NDP). The Liberals became far more cautious about expanding revenues after returning to power in 2003; the comparative

Budgeting 65

scholarship reviewed in chapter 1 anticipated this outcome in a partisan setting that is sharply divided on economic-distributive lines and that includes a neoliberal party. Yet even thereafter, overall taxing and spending levels sharply divided the governing Liberals from the PCs. There were partisan differences in Quebec, but they were smaller and far less enduring. When it returned to power in 2003, the Quebec Liberal Party (PLQ) initially sought to curtail Quebec’s public sector significantly, echoing a similar undertaking when it governed earlier after 1985. As with its previous effort, however, the PLQ abandoned this goal in the face of vociferous resistance from organized labour and social constituencies. The Liberals remained more concerned than their Parti Québécois (PQ) rivals to restrain the state, but the divide was much less pronounced than in Ontario. Overall Revenues and Expenditures That Quebec spends and taxes much more than Ontario was already clear from evidence introduced in chapter 2. Data derived from the Provincial Economic Accounts (PEA) showed that the gap between the provinces’ expenditure-to-GDP ratio, already substantial in 1990, remained so thereafter (see figure 2.2, graph B, from the previous chapter). Quebec financed part of this spending premium without higher taxes, as it received larger transfer payments from Ottawa, though this advantage diminished somewhat after the 1990s (figure 2.6, graph A). Another very important part of this premium nevertheless was financed by much higher own-source revenues, relative to GDP, than in Ontario. Indeed, this revenue “effort” gap increased during the two decades of greatest interest to us (figure 2.2, graph A). These differences remain substantial, even after own-source revenues attributed to Quebec are adjusted downwards and federal transfers to it correspondingly upwards, to account for the special income tax abatement that it has received from Ottawa since 1966.1 To evaluate the robustness of these findings, figure 3.1 presents a parallel set of graphs of Ontario’s and Quebec’s finances, now drawing upon Statistics Canada’s Financial Management System (FMS). The PEA and the FMS are the main alternative sources for data on provincial government finance. FMS figures are for the government’s fiscal year, which ends on 31 March and are organized by functional categories. PEA statistics derive from the national income and expenditure accounts and are based on accrual accounting methods. The FMS is more

66  Comparing Quebec and Ontario Figure 3.1. Overall Revenue and Spending, 1965–2008, FMS basis (A) Own-source revenues as % of provincial GDP

(B) Total expenditures as % of provincial GDP %

10

15

20

15

25

20

30

25

35

30

%

1960

1970

1990 1980 year Quebec

2000

2010

1970

Ontario

1980 1990 year Quebec

(C) Federal transfer payments as % of provincial GDP

2000

2010

Ontario

(D) Interest on the public debt as % of provincial GDP %

2

4

6

8

2 2.5 3 3.5 4 4.5

%

1960

1960

1970

1980 1990 year Quebec

2000

Ontario

2010

1960

1970

1980 1990 year Quebec

2000

2010

Ontario

Source: For 1965–87, Statistics Canada, Public Finance Historical Data, 1965/66– 1991/92; for 1988–2008, Statistics Canada, CANSIM, table 3850001. Quebec’s ownsource revenues are adjusted downward and federal transfers to it upward to reflect its unique tax-abatement arrangement with Ottawa.

detailed, while the PEA reflects “a broader definition of the government sector.”2 Each reporting systems is widely adopted. I therefore use both wherever possible here and in later chapters. The FMS data presented in figure 3.1 tell substantially the same story as the PEA evidence. Provincial government expenditures are far higher as a share of GDP in Quebec. The gap in 2008, around 10% of GDP, was about the same as it was in 1980 (graph B). Federal transfers account for a part of the difference (graph C), but there is again evidence that Quebec’s advantage in this respect has diminished over time. Conversely, the gap between the provinces’ own-source revenues, about 6% in 2008, has grown during this period. This suggests that the proportion of the expenditure gap that is accounted for by higher ownsource revenues on Quebec’s part rose over these two decades, while the share explained by federal transfers fell.

Budgeting 67 Table 3.1. How Does Quebec Finance Its Higher Expenditures (%)? Financial Management System (FMS) Year

Own-source revenues

Federal transfers

Provincial Economic Accounts (PEA)

Deficit

Own-source revenues

Federal transfers

Difference

1988–9

43

33

24

31

43

25

1990–1

31

47

22

41

45

13

1992–3

54

50

-4

45

45

11

1994–5

41

45

15

42

48

10

1996–7

42

44

14

37

39

25

1998–9

56

54

-9

51

39

9

2000–1

62

47

-8

53

35

12

2002–3

51

36

14

51

26

22

2004–5

56

40

4

54

29

17

2006–7

65

30

5

67

31

2

2008–9

58

32

10

80

31

-12

Source: Statistics Canada, CANSIM, tables 3850001 and 3840004. FMS figures are for the fiscal year; PEA ones are for the second of the calendar years identified in the first column. Quebec’s own-source revenues are adjusted downward in the same manner as in figure 3.1. Note: Figures report the percentage of the difference between the two provinces’ expenditure-to-GDP ratios that reflects differences in own-source revenues, federal transfers and deficits (for the FMS), or other source (for the PEA). The frequently large discrepancies between the deficits reported from the FMS and the “difference” figures from the PEA reflect these surveys’ different methodologies (see note 3).

Table 3.1 documents this point, using figures from both the FMS and the PEA for every other year since 1988 to document the share of the Quebec-Ontario spending gap that can be explained by different revenue-raising effort, differential access to federal transfer payments, and budget balances (for the FMS) or all other factors (for the PEA).3 While not identical, the two data sources provide similar evidence about the rising importance of own-source revenues, and the declining significance of federal transfers, in accounting for Quebec’s higher spending. These two categories accounted for about equal parts of Quebec’s spending premium before 1995. But own-source revenues were between 40% and 100% more important than transfers in this respect

68  Comparing Quebec and Ontario

after 2005. The gap was largest in the last two reported years. One can interpret Quebec’s frequent willingness to run higher deficits than Ontario as manifesting a willingness to finance more spending from higher future own-source revenues. (Indicated in the FMS data by a positive figure in the table’s third column, deficits effectively are a charge on future taxpayers.) In this perspective, higher current or future ownsource revenues for Quebec now account for about two-thirds of the Quebec-Ontario expenditure gap. Even net of its advantage of having greater access to federal largesse, then, Quebec spends and taxes much more than Ontario, and this gap increased during the 1990s and 2000s. A “Level Playing Field” for Business? Comparative research detects a clear convergence in the taxes that affluent nations charge to business, though the latter’s overall fiscal burden may not have declined by much. Higher-spending countries therefore finance their additional outlays from less internationally mobile revenue sources, such as employees and consumers. As with non-business levies, discussed in the next section, however, coming to conclusions about whether the tax burden is shifting to immobile revenue sources depends importantly on which taxes are considered to be borne, in the final instance, by these sources. Yet as Kesselman and Cheung emphasize, the ultimate incidence of many taxes is disputed by scholars.4 One option is to view all taxes charged to business as borne by it. At the other end of a wide spectrum of opinion, some argue that firms’ international mobility now allows them to pass on all charges to employees and consumers. In this discussion, taxes paid by firms are grouped into four categories: the corporate income tax, levied on profits; payroll taxes, usually based on a firm’s wage bill; property taxes paid by companies; and a miscellaneous category that includes capital taxes, mining and logging taxes, and natural resource taxes and licences (termed “resources and capital” below).5 Data for property taxes do not distinguish those charged to businesses from those paid by residential owners; firms probably pay about 40% of all property taxes, the share assigned to them here.6 I do not consider the implications of both of the above interpretive options for all four tax categories. The view that the incidence of all business taxation ultimately resides elsewhere is predominant only for payroll taxes. Kesselman and Cheung argue that even in this case it might be questioned, at least when the taxes are levied by provinces. Overall tax levels will therefore be compared between Quebec and Ontario with two alternative

Budgeting 69 Figure 3.2. Taxes Paid by Business, % of GDP, 1988–2008 % Ontario

0

2

4

6

Quebec

1990

1995

2000

2005

Corporate income Business property

2010 year

1990

1995

2000

2005

2010

Resources & capital Payroll

Note: 40% of all property tax receipts are attributed to businesses here; see note 6. Source: Statistics Canada, CANSIM, tables 3850001, 3840006, and 384007. Also see note 5.

scenarios in mind, which appear to represent “middle ground” options: in the first or “progressive” case, all business taxes are borne by firms; in the “regressive” alternative, most consistent with mainstream thinking, payroll taxes are not borne by business, but the other three categories are, at least to the extent that they differ from rates in other provinces and countries.7 As the graphs make clear, these scenarios yield very different results when making comparisons. Corporate income taxes do not represent the majority of the business tax burden in either province. Figure 3.2 indicates that their levels, relative to GDP, were similar in Ontario and Quebec between 1988 and 2008. Resource and capital taxes were noticeably higher in Quebec during these years but were counterbalanced by property taxes, which are higher in Ontario. Only when we consider payroll taxes does a clear gap open between Quebec and Ontario. Both provinces use such taxes to pay for health care, workers’ compensation, and, in Quebec’s case, workplace training, but these charges collect much greater revenue in Quebec than in Ontario.

70  Comparing Quebec and Ontario Figure 3.3. Comparing Combined Business Tax Levels, 1988–2008 (A) Business taxes as % of provincial GDP % (payroll taxes included)

(B) Business taxes as % of provincial GDP (payroll taxes excluded)

4

2.5

4.5 5

3

3.5

5.5 6

4

6.5

%

1990

1995

2000 year Quebec

2005

2010

1990

Ontario

1995

2000 year

Quebec

2005

2010

Ontario

Sources: See figure 3.2.

The implications of this pattern for our comparison are illustrated in figure 3.3. In the “progressive” scenario (graph A), Quebec’s combined business taxes are much higher than Ontario’s. But as was noted above, scholarship prefers the “regressive” scenario (graph B): payroll taxes are not borne by capital, though other business taxes are. In this case, overall business tax levels in the two provinces, as a share of GDP, have not been very different. As was surmised above, in this mainstream view Quebec does not obtain its additional own-source revenues from business. The Mix of Progressive and Regressive Taxes Comparative scholarship also informs us of an important “paradox”: nations that spend more meet these costs from more regressive taxes, even when choosing among non-business revenue sources. Yet here again the question of who ultimately pays taxes is not easily resolved. Personal income taxes are almost universally regarded as having a progressive incidence, though there is disagreement about by how much. But a common view that property taxes are regressive with respect to income has been challenged recently; moreover, these taxes probably are progressive in relation to wealth.8 Even for consumption taxes and payroll taxes paid by employees, conventionally seen as regressive, there is recent Canadian evidence that this may not always be so.9 I nevertheless again proceed, in considering the four main types of nonbusiness taxes, by adopting this literature’s mainstream view: personal income taxes have a progressive incidence, the situation is mixed for residential property taxes, depending in part on whether one considers them in relation to income or wealth; and payroll and consumption

Budgeting 71 Figure 3.4. Comparing Levels for Non-Business Taxes, 1981–2008 (A) Personal income tax revenue, % of provincial GDP

(B) Residental property tax revenue, % of provincial GDP % 3.5

(includes health premiums)

4

1.5

2

5

2.5

6

3

7

%

1980

1990

year

Quebec

2000

2010

1980

Ontario

1990

year

Quebec

(C) Consumpon taxes as % of provincial GDP

2000

2010

Ontario

(D) Payroll taxes as % of provincial GDP %

3

.5

1

4

1.5 2

5

2.5 3

6

%

1980

1990

year

Quebec

2000 Ontario

2010

1980

1990

year

Quebec

2000

2010

Ontario

Source: For 1981–7, Statistics Canada, Public Finance Historical Data, 1965/66– 1991/92; for 1988–2008, Statistics Canada, CANSIM, tables 3850001, 3840006, and 3840007. Note: Personal income tax revenues for Quebec, reported in graph C, exclude the value of Quebec’s distinctive income tax abatement from Ottawa. For graph B, 60% of all property tax receipts are attributed to residential taxpayers; see fn. 6.

taxes are regressive. Almost all provincial payroll taxes are, in fact, charged to businesses;10 they therefore are relevant in this analysis only in the “regressive” scenario described above, that is, assuming that they are passed on to workers in the form of lower wages. From this vantage point, figure 3.4 provides evidence in favour of our hypothesis that Quebec will rely more on regressive taxes, but only in relation to three of the four main tax types.11 Quebec clearly raises significantly more revenue, relative to its GDP, from consumption taxes and (as we have already seen) payroll charges, the most regressive categories. It derives relatively less revenue from residential property taxes than Ontario, a result that need not be inconsistent with our expectations, since these taxes may be viewed as progressive. Yet the evidence

72  Comparing Quebec and Ontario Table 3.2. Revenue Shares for Four Main Tax Types (% of GDP) 1988

2008

Quebec

Ontario

Difference

Personal income

6.1

5.4

+0.7

Residential property

1.9

2.6

-0.5

Consumption

5.4

4.6

+0.8

Payroll (“regressive”)

2.6

1.0

+1.6

Quebec

Ontario

Difference

6.2

5.0

+1.2

2.1

2.4

-0.3

5.2

4.3

+0.9

2.5

1.4

+1.1

on the personal income tax (in addition to health premiums paid by individuals) is very inconsistent with the hypothesis. Quebec derives far more revenue than Ontario in relative terms from this progressive tax. Table 3.2 highlights the extent to which Quebec’s own-source revenue “premium” relies on each of these tax types by reporting the difference between the GDP share represented by it for Quebec and for Ontario around the beginning and at the end of the period of our study. The case for the hypothesis that Quebec finances its larger state with regressive taxes is strongest in 1988, when consumption and payroll taxes absorbed 2.4% more of provincial GDP in Quebec than in Ontario. The net combined share for the progressive income tax and the more contestable property taxes, by contrast, was only 0.2% higher in Quebec. But the balance was different twenty years later. In 2008, the two regressive tax types represented a combined 2.0% more of provincial GDP in Quebec; personal income and residential property taxes were 0.9% higher. The data presented in this and the preceding sections offer plausible grounds for concluding that Quebec avoids using business taxes more than Ontario and that it makes particularly heavy use of the tax types that are most commonly considered to be regressive: consumption taxes and payroll taxes. Even with favourable assumptions about tax incidence, however, Quebec clearly also relies more than Ontario on the progressive personal income tax. As we shall see in the next section, the degree of progressivity for this tax also differs significantly between the two provinces. Fiscal Redistribution: The Role of Income Taxes The reverse side of the “paradox” of welfare state financing referred to in chapter 1 is that although generous welfare states make

Budgeting 73

disproportionate use of regressive revenues, they redistribute more than liberal ones overall, that is, when one considers the combined impact of transfer programs and of taxes. The latter pattern has been documented in income inequality studies. Only personal income taxes typically are included in the tax component of these calculations for redistribution.12 Survey-based evidence presented in chapter 8 will show that Quebec reduces inequality significantly more than Ontario through personal income taxes. In the meantime, figure 3.5 illustrates Figure 3.5. Personal Income Taxes for a Family of Four, Net of Credits and Deductions, 1993–2010 (A) Net PIT for family of 4, income = $30 k.

(B) Net PIT for family of 4, income = $75 k. (to 2000, $

or $80 k. (from 2001)

1990

1995

2000 year Quebec

2005

2010

Ontario

4000

-500

0

6000

500 1000 1500

8000 10000

$

1990

1995

2000 year Quebec

2005

2010

Ontario

(C) Net PIT for family of 4, income = $200 k. 20000 25000 30000 35000

$

1990

1995

2000 year Quebec

2005

2010

Ontario

Source: Canadian Tax Foundation, Finances of the Nation, annually, for 1995–2010; Canadian Tax Foundation, The National Finances, annually, for 1992–3. As indicated, the net tax level reported in graph B is for a different family income after 2000, because of a change in figures reported in this report. Note: Income is earned by a two-earner family of four with children six and twelve years old. The income level is not adjusted for inflation. Because the income tax brackets are not adjusted for inflation, this figure is useful for comparing tax levels between the two provinces, as it is here, but not over time. The generally downward slope of five of the six lines in these graphs therefore may not indicate that taxes actually declined, relative to an inflation-adjusted measure of income.

74  Comparing Quebec and Ontario

how Quebec achieves this outcome using available administrative data. While the lowest-income family represented there (graph A) now pays about as much provincial income tax, net of transfer payments, as a similar family in Ontario, tax levels are much higher for middle- and upper-income families. For the most affluent (graph C) the gap has grown considerably since the early 1990s. Quebec spends much more than Ontario relative to its GDP. The gap is smaller for own-source revenues but is sizable there too. Although Quebec’s revenues are not higher from all sources, they are for three of the largest. The redistributive impact of the personal income tax is also greater. Quebec’s budgetary outcomes therefore are distinctive. I argue below that this reflects an equally atypical policymaking process, compared to liberal settings, that features social dialogue and moderate partisan polarization. Quebec: Sustaining a Large Tax State Quebec already taxed and spent more than Ontario in 1990. Explaining Quebec’s distinctive outcomes since 1990 therefore requires an account of the mechanisms that allowed it to sustain these unusually high budgetary outcomes during the subsequent two decades. The most striking feature of budget policymaking in Quebec is that neither of the province’s major parties fundamentally challenged its high revenue/expenditure equilibrium while in power. The Action démocratique de Québec (ADQ), the main party of the right for most of this period, contested this state of affairs but remained in opposition and had little policy impact. When the PLQ was elected in 2003, it committed to reducing the size of Quebec’s state, suggesting a desire to reduce taxing and spending significantly. Yet in the wake of the many obstacles it encountered in pursuing this goal, the Liberals largely abandoned it. Quebec’s proclivity for concertation also helped sustain its large tax state, but its relevance varied between PQ and Liberal governments. The PQ administration elected in 1994 relied on an elaborate SocioEconomic Summit in 1996, whose social policy impact is discussed in later chapters, to reach consensus with non-governmental constituencies about eliminating the provincial deficit. It used another consultation before revising income taxes. Collaboration was more limited under Liberal governments and often done in conjunction with annual pre-budget consultations that also occur elsewhere in Canada. These

Budgeting 75

nevertheless occasionally took on considerable prominence, helping the Liberals reduce the intense conflict that its policy goals sometimes occasioned – usually at the cost of compromising the latter. We now turn to a chronology of the key developments in this field between 1990 and 2010. That Liberal budgetary policy after 1990 would avoid radical changes in either overall tax levels or their incidence was already signalled by its approach to simplifying the income tax in 1988–9, a change induced largely by earlier reforms in Ottawa and Washington.13 Quebec’s reform lowered its revenues by about $1 billion annually and reduced the number of brackets from sixteen to five. This change, particularly advantageous to higher earners, nevertheless was counterbalanced by the transformation of many tax deductions into credits, which favoured those with lower incomes.The Liberals also reformed property taxes in 1990, as they looked for new revenue sources. They transferred a number of services to municipalities; in exchange, local governments could increase property taxes, especially for businesses.14 Business associations, led by the Conseil du patronat du Québec (CPQ), opposed the reform. By 1992 it was evident that firms, not residential ratepayers, were indeed absorbing most tax increases.15 These nevertheless remained lower than in Ontario. The Liberals’ other initiatives between 1990 and 1994 focused mainly on achieving two goals without, again, alienating any constituency unduly. First, it decided to move quickly to match Ottawa’s introduction of the Goods and Services Tax (GST), a value-added tax, with a broadly similar reform of its own. Second, it had to manage the province’s finances through a recession, preventing the deficit from rising excessively, a goal that was achieved with a mix of moderate spending restraint and tax increases. The new sales tax’s much broader base allowed the province to lower its rate, without losing revenue (see table 3.3 for the various stages of this change).16 A tax of this kind had long been advocated by Quebec business, especially the CPQ; value-added charges were likely to result in a major tax saving for firms. In the form that the reform took in Quebec, however, this was much less true: to compensate for these anticipated revenue losses, the province increased the corporate income tax rate by 2% in 1992 (table 3.4). A training tax credit for firms introduced in 1990 had also been counterbalanced with increases – in the capital tax and in the employer payroll tax to finance health services (tables 3.5 and 3.6).17 Liberal tax policy displayed no particular favouritism towards business.

76  Comparing Quebec and Ontario Table 3.3. Retail Sales Tax Rates (%), 1990–2010 Year

Quebec

Ontario

1990

9.0

8.0

1991

8.0

:

1992

4.0/8.0

:

: 1995 : 1998 : 2010

:

:

6.5

:

:

:

7.5

:

:

:

8.5

8.0

Sources: Canadian Tax Foundation, Finances of the Nation, annually, for 1995–2010; Canadian Tax Foundation, The National Finances, annually, for 1992–4; Canadian Tax Foundation, Provincial and Municipal Finances, annually, 1990–1. Note: Quebec charged a lower rate for most goods and for real estate between 1992 and 1994. Each province exempts some products and services, which have changed considerably over time.

The Liberals’ approach to containing the deficit during the recession also was middling. It drew criticism from the unions, concerned to protect public services, and business, anxious to see deeper spending cuts and to lighten business taxes.18 The 1990, 1991, and 1992 budgets vaunted the government’s restraint, but nevertheless projected spending growth that exceeded inflation – at rates of 6.2%, 6.9%, and 5.8%, respectively. Only in 1993, in the face of stubbornly sluggish growth, was more severe restraint imposed – spending was anticipated to grow by only 0.9%. In 1994, with an election approaching, the target was 1.7%.19 The government then projected a deficit of $4.9 billion and did not anticipate a balanced budget until 1998–9. To meet these targets, it sought to restrain public sector wages. Targets were also set for reducing public sector employment through attrition. In most years, restraint was agreed upon between the government and the unions, albeit after protracted negotiations. Even the CPQ sometimes supported the government’s decision to avoid more confrontation with the unions by dismissing permanent employees. Blais

Budgeting 77 Table 3.4. Corporate Income Tax Rates (%), 1990–2010 Small businesses

Large businesses

Year

Quebec

Ontario

Quebec

Ontario

1990

3.5

10.0

6.3/15.0

14.5/15.5

1991

:

:

6.9/16.3

:

1992

5.8

9.5

8.9/16.3

:

1993

:

:

:

13.5/15.5

: 1997

:

:

:

:

5.9

:

9.2/16.7

:

1998

:

9.2

9.1/16.7

:

1999

7.5

8.5

:

:

2000

9.0

7.3

9.0/16.5

12.8/14.8

2001

:

6.4

:

11.8/13.6

2002

:

6.0

:

11.0/12.5

2003

8.9

5.5

8.9/16.3

:

2004

:

:

:

12.0/14.0

: 2006

:

:

:

:

8.0

:

9.9/16.3

:

2007

:

:

9.9

:

2008

:

:

11.4

:

2009

:

:

11.9

:

2010

8.0

5.0

11.9

11.0/13.0

Sources: Canadian Tax Foundation, Finances of the Nation, annually, for 1995–2010; Canadian Tax Foundation, The National Finances, annually, for 1992–4; Canadian Tax Foundation, Provincial and Municipal Finances, annually, 1990–1. Note: Quebec charged a higher rate for “passive” (investment) income for large firms until 2007; Ontario charges a lower rate for manufacturing and production firms. Some reported rates, during years when the rate changed in the middle of the year, are averages for that year.

and Vaillancourt plausibly saw these negotiations as evidencing Quebec’s more collaborative decision-making culture.20 Only towards the end of the Liberal term did the unions adopt a more resolutely uncooperative stance, no doubt hoping for a better deal from the PQ when it

78  Comparing Quebec and Ontario Table 3.5. Capital Tax Rates (%), 1990–2011 Year

Quebec

Ontario

1990

0.5

0.3

1991

0.6

:

:

:

0.5

:

:

:

: 2006 : 2008

0.4

0.2

2009

0.2

:

2010

0.1

0.1

2011

  0

  0

Sources: Canadian Tax Foundation, Finances of the Nation, annually, for 1995–2011; Canadian Tax Foundation, The National Finances, annually, for 1992–4; Canadian Tax Foundation, Provincial and Municipal Finances, annually, 1990–1. Table 3.6. Maximum Employer Payroll Tax Rates (%), 1990– 2010 Year

Quebec

Ontario

1990

3.50

1.95

1991

3.75

:

:

:

:

1995

4.26

:

:

:

:

2010

4.26

1.95

Sources: Canadian Tax Foundation, Finances of the Nation, annually, for 1995–2010; Canadian Tax Foundation, The National Finances, annually, for 1992–4; Canadian Tax Foundation, Provincial and Municipal Finances, annually, 1990–1. Note: Firms with small payrolls receive exemptions or are charged lower rates.

came to power.21 The Liberals also increased personal income tax rates on higher income earners in 1993 to control the deficit. The pre-electoral 1994 budget reversed a part of these increases. On several occasions during the early 1990s the Liberals discussed introducing user fees for

Budgeting 79

services, especially for health care.22 In the face of loud protests from social policy groups and the unions, they did not proceed. In February 1993 the Liberals attempted a broad budget consultation. Launched with a policy document that the unions denounced as neoliberal, it achieved little. Its diverse participants presented radically different views.23 Budget policy between 1990 and 1994 therefore was not shaped by social dialogue, but it revealed a clear desire to avoid polarization. The Liberals managed budgets in a recession by restraining but not drastically cutting spending, moderately increasing revenues from a number of sources, and negotiating wage restraint with public sector unions. Business and labour, for opposing reasons, criticized this approach; that they could play a more constructive and joint role in managing the budget became clear when the PQ came to power in 1994. The Liberal record between 1990 and 1994 nevertheless revealed no clear desire to curtail the size of the Quebec state or to favour business, as one might expect of a centre-right government in a more polarized setting. The PQ government that came to power in 1994 also pursued a middling course. This again involved a mix of moderate spending cuts and tax increases, rather than drastic resort to either, with the tax burden shared between businesses and individuals. Once the budget was balanced the PQ turned its attention to a blend of tax cuts and spending restoration. With these commitments firmly in place by the turn of the millennium, it would be hard to disagree with observers of Quebec budgetary policy who suggested then that there was no fundamental difference between the province’s two main parties regarding the content of budgetary policy.24 But the PQ pursued these objectives in a different process: not alienating major constituencies was an evident, but often implicit, parameter of Liberal policy before 1994. In contrast, the PQ embarked on more formalized concertation exercises. Continuity was evident in the PQ’s first budget, in May 1995, though the new government was reluctant to inflict pain in the face of an imminent sovereignty referendum.25 It froze program spending, which required important cuts in health and education outlays. Another sales tax reform brought it closer to the design of the federal GST and promised major savings to firms, but this benefit for employers was offset by increases in the capital tax and in the employer payroll tax. Firms also were subject to a new 1% refundable training tax on their payrolls. Yet individuals were also expected to pay more, mostly though more rigorous monitoring of tax evasion. The 1996 and 1997 budgets were designed to eliminate the deficit by 2000, an objective agreed upon at the March 1996 summit (see below). Spending restraint now was severe:

80  Comparing Quebec and Ontario

for the first time in many years, expenditures were set to decline, respectively at rates of 3.3% and 0.6%.26 These budgets also saved money by transferring costs to municipalities, mimicking an earlier Liberal strategy. Personal income tax revenues were increased by lowering the basic threshold for the minimum income tax and by curtailing several credits. Business tax receipts were raised by delaying some GST-related advantages promised in 1996 for larger firms. There would again be tighter rule enforcement. An important reform of taxes for individuals implemented in January 1998 increased the provincial sales tax rate from 6.5% to 7.5%. In exchange, personal income taxes were cut and the number of brackets reduced from five to three. Fulfilling a longstanding business demand, and a more recent Liberal one, the PQ also passed legislation that required the government to move towards a balanced budget, though the obligation was subject to exceptions. A balanced budget was achieved in 1999, a year ahead of schedule, mainly because of robust economic growth and a restoration by Ottawa of some transfer payments that were cut earlier in the decade. The 1999 and 2000 budgets therefore set more relaxed targets. After a further decline of 1.2% in 1998, they respectively expanded outlays by 2.8% and 3.4%.27 The priorities for renewed spending were health care and education, areas that the Liberals also had protected.28 The PQ also made major new commitments to economic development, allocating funds to research and development, investment and job creation (see chapter 6). The Liberal opposition complained that the PQ was not reducing taxes, yet the PQ was now also committed to this goal.29 A reform of business taxes in 1998 promised important benefits for small firms: savings from a reconfigured employer payroll tax would more than offset increases in the corporate tax rate for small businesses. The 1999 budget announced a major consultation on personal income taxes. Implemented over three years starting in 2000, the resulting reforms reduced the rate for each tax bracket, increased thresholds, and promised to fully index the latter. The advantages of tax relief, like the pain of the preceding increases, were to be shared broadly, and the fiscal room to manoeuvre opened up by the balanced budget similarly was apportioned between spending increases and tax cuts.30 Concertation played an important role in these initiatives. Business and labour leaders had signalled their willingness to move beyond antithetical positions in 1989 during a Forum pour l’emploi.31 Quebec unions subsequently argued that a societal consultation was the best way to overhaul the province’s tax priorities.32 The PQ announced in

Budgeting 81

1995 that it would convene a Socio-Economic Summit to seek agreement with business, labour, and social advocacy leaders about a balanced budget. The government stressed its determination to not compromise social peace, contrasting its fiscal strategy explicitly with the one then being pursued in Ontario.33 The summit’s potential was evident at the first of its two sessions in March 1996. For the first time Quebec unions accepted the objective of balancing the budget. Business obtained a commitment to the balanced budget legislation discussed above. The meeting struck a Commission sur la fiscalité et le financement des services public to prepare tax reform proposals; business and labour economists dominated its deliberations.34 Released at the summit’s second meeting in October, its report included ideas that were implemented, wholly or in part, over the next four years, a debt frequently acknowledged by the government:35 Overall tax levels, it argued, should not be reduced until the budget was balanced, but employer payroll taxes should fall, with corporate income taxes rising by a similar amount (anticipating the 1998 business tax reform); consumption taxes should increase, and the provincial sales tax should be integrated with the federal GST (presaging the sales tax changes of 1997 and 1998); and tax credits and deductions should be cut (as also happened in 1997). The commission proposed a temporary $240 million “social solidarity contribution,” which was rejected by the government, but re-emerged and was agreed upon as a temporary $250 million “anti-poverty” levy on employers, proposed by a leading business participant. Another large summit, devoted to youth, helped convince the PQ to restore a substantial sum to the education sector in 2000.36 Not all of the commission’s proposals were implemented; some were contested by business and labour leaders, in spite of their organizations’ involvement with it. They continued to make divergent pronouncements about budgets. But the steps taken to balance the budget during the late 1990s usually occasioned only pro forma objections, in part, no doubt, because they were implicated in the changes. In this climate the PQ, like its Liberal predecessors, was also able to reach periodic agreements with public sector unions about the pay freezes and staffing reductions required to curtail expenditures.37 The PQ’s remaining budgets before leaving office followed the same pattern: more spending was restored and taxes cut, with the latter roughly balanced between individuals and businesses. The 2001 and 2002 budgets respectively authorized expenditure growth of 3.4% and

82  Comparing Quebec and Ontario

1.7%, with the priority areas of health, social services, and education absorbing almost 90% of these increases.38 A further major reduction in personal income taxes began in 2001. Rates were cut and new credits were introduced, while full indexation of brackets was accelerated. Another adjustment in 2002 benefited income tax payers who made little use of the system’s credits. That Quebec’s income tax levels were much higher than Ontario’s partly motivated these cuts, though the difference remained significant, even in their wake. Business tax reductions included a major cut in the capital tax, which was accompanied by many new or enhanced credits or holidays for firms that invested or employed workers in specific sectors or in outlying regions.39 Liberal critique of PQ budgets again revealed the limited differences between these parties. The official opposition demanded more tax cuts, now that the province could afford them, but also pressed for more spending on health, the most expensive component of the budget.40 Business and labour expectations also differed modestly; a journalist’s account of their views in 2001 noted how similar they were.41 The contrast between the parties sharpened temporarily before the 2003 election. The PQ released an interim budget in March that promised to increase spending by 5.8% and to enrich the regionally focused corporate tax breaks introduced earlier.42 The Liberals instead promised deep personal income tax cuts and the curtailment of business tax credits, matched by reductions in general business tax rates. Yet, consistent with the pattern established after earlier changes in government, fiscal policy in Quebec again did not shift dramatically after 2003, for several reasons. First, the Liberal election platform did not promise radical change in all areas: there would be more spending increases for health and education, which accounted for over 60% of the budget.43 Second, the new government quickly realized that the outgoing administration’s fiscal forecast had been much too optimistic. Tax cuts therefore would have to be scaled back. Efforts to reduce the size of the Quebec state, third, wilted in the face of stiff opposition from unions and social activists. Fourth, after 2005 Liberal concerns to restrain the province’s debt tempered fear that taxes were too high. Not long thereafter, fifth, the Liberals’ initial desire to disengage the state from the economy softened considerably, and they introduced an array of business tax credits to replace those eliminated earlier. With the onset of the financial crisis in 2008, finally, they abandoned, for its duration, their goals of balanced budgets and restraint.

Budgeting 83

The PLQ’s June 2003 budget did not yet reveal the extent of this retreat because the first stage of personal income tax cuts was not due until 2004.44 As promised, it reduced business tax credits, eliminating many regional and sectoral ones favoured by the PQ. The Liberals expected to garner a further $700 million from higher returns from Quebec’s many public enterprises, but it also cancelled the remaining reductions in the capital tax legislated by the PQ. Spending was projected to rise by 3.8%, which was 2% less than the PQ had promised.45 But the remaining budgets in the PLQ’s first term parted radically with their 2003 program, hewing more closely to the established pattern in Quebec of sustaining the province’s ample spending with a mix of measures that avoided antagonizing leading societal interests. There were small deficits in the Liberals’ first three budgets.46 They also made limited progress in cutting personal income taxes: general rates fell by only $220 million in 2004; the figure rose to the promised $1 billion only if one included benefits from the new Soutien aux enfants tax credit (see chapter 4), most of whose beneficiaries paid no tax, and a credit for the working poor. This was a far cry from the middle-class tax relief that the Liberals had envisaged. The 2005 budget added $300 million in personal income tax cuts, but there were no more of these in 2006. Spending rose at rates consistent with those set by the PQ: a projected 2.9% in the fiscal year beginning in 2004, 3.6% in 2005, and 3.9% in 2006.47 Most incremental funds went to health and education, consistent with the PQ’s priorities. After first suspending the PQ’s capital tax reductions, the Liberals resumed them in 2005. The corporate income tax rate for small firms also fell, but the rate for large firms would rise (offset by a reduction in the federal tax). Business observers did not think that, on balance, their provincial taxes were declining, though small firms were benefiting at the expense of larger ones.48 In spite of intense polarization between the Liberals and the union and social movements early in their first term, there were other signs of continuity. The PLQ again relied on attrition to reduce staffing levels. Public sector salary negotiations were fractious, but unions negotiated pay increases, sometimes leaving the government complaining that these precluded tax cuts.49 There was again more continuity than change after the release in October 2005 of Pour un Québec lucide, a manifesto by twelve prominent Quebeckers. It argued that reducing the province’s accumulated debt was now necessary.50 The ensuing debate on the viability of “the Quebec model” provides the most striking evidence for a direct impact of

84  Comparing Quebec and Ontario

nationalist ideation on Quebec budget policy during our period. This appeal for a smaller state quickly evoked a riposte from labour and social activists, who argued that Quebec’s more expansive welfare state was a key feature of its nationhood.51 But it was the former view, and its contention that Quebec’s large state in fact threatens national wellbeing, that impressed the mainstream parties. The Liberals’ response nevertheless was measured. In the manifesto’s wake, the 2006 budget launched a fonds des générations, designed to accumulate investment returns to pay down the debt.52 In his throne speech that year, Liberal Premier Charest justified it by asserting that “to the national question, we respond with the nation’s wealth.”53 The Liberals made much less use than the PQ of concertation. But they organized an important meeting of this kind, a Forum des générations, in October 2004. It did not shape specific fiscal initiatives, but it did help defuse the confrontations that plagued the Liberals’ first year in power. Many forum participants urged Premier Charest to abandon his promise of deep income tax cuts, and he responded that he might do so.54 As we saw above, the commitment did indeed disappear for the next few years. Much less formalized than under the PQ, consensus-management nevertheless was an important implicit parameter of Liberal budget policy after 2003, as it had been during their previous stint in power. In March 2007 the Liberals resuscitated their commitment to broad income tax cuts, but only after Ottawa substantially increased its transfer payments to the province. The federal largesse materialized during a provincial election campaign that returned the Liberals to power with a minority government. The ADQ formed the official opposition but returned to small-party status after another vote in December 2008, which restored the Liberals to majority standing and the PQ to the official opposition. The tax cuts were ample, reducing revenues from all taxpayers by $950 million.55 But with much more money available than four years earlier, they were no longer controversial. The budget also included $1.5 billion in new funds for health and education and promised to phase out the capital tax. After $100 million was added to meet some PQ priorities, the PQ supported the budget. Union opposition to the tax cuts softened once it was clear that there would also be more spending.56 Other initiatives also revealed little polarization. Increases of 1% in the sales tax were announced in both 2009 and 2010.57 The PQ objected, arguing that these were inappropriate in a slowgrowing economy, but they could hardly claim to oppose the increases

Budgeting 85

in principle: they criticized the Liberals earlier for not raising the sales tax after Ottawa cut its GST in 2006. More money was added to the fonds des générations. The PQ had promised the same during the 2007 campaign.58 After 2008, budgets returned to a priority that the PLQ rejected earlier but that was long championed by the PQ: investment tax credits, especially for disadvantaged regions (see chapter 6). A task force recommended their use to stimulate investment, particularly in such regions. In contrast, another report recommended that the government abandon these credits and instead reduce business taxes. That the Liberals were moving away from the latter position, close to the one they favoured in 2003, was evident from their responses to the reports: two Liberal ministers stressed the value of tax credits for remote regions and recommended them over general tax cuts.59 The 2008 and 2009 budgets accordingly increased these business tax credits.60 The Liberals also now embraced deficit financing to fight the economic downturn. The government recorded a $1.3 billion deficit in 2008–9, and anticipated shortfalls ballooned to $4.5 billion by 2010. It envisaged eliminating the deficit only in 2013–14. The balanced budget legislation, passed in 1996, had to be amended to accommodate this change.61 At the beginning of the crisis the PQ demanded that more be done to stimulate growth. By 2010 it was in the incongruous position of echoing the ADQ in demanding a speedy end to deficits.62 In fact, the Liberals avoided the most neoliberal ideas promoted by the ADQ and others. We have seen that they refused to cut social spending or implement broad tax cuts for business. They also rejected partly privatizing Hydro-Québec, and controversial proposals from a report on health reform, such as allowing parallel public and private systems.63 Only in one area would the PLQ risk confrontation: increasing user fees. The 2010 budget announced increases for many then-frozen smaller fees.64 Sensing the issue’s sensitivity, the Liberals nevertheless also launched their first major budget consultation since 2004, which ended with a large gathering at Lévis in January 2010. Business representatives were ambivalent about higher fees, hoping instead for major spending cuts; unions and social activists strongly disagreed.65 But the Liberals pushed ahead with major increases. Most controversially, they announced an annual health services fee that would reach $200 in 2012 and a $25 fee for each of the first ten visits per year to a health facility. Post-secondary tuition would rise, starting in 2012, as would HydroQuébec’s charges after 2014. The resulting storm of opposition was the

86  Comparing Quebec and Ontario

greatest faced by the Liberals since 2003–4. In its wake, the $25-per-visit charge was abandoned.66 The tuition increases would also face vociferous resistance in 2012. This was the biggest departure from a consensual approach to budgeting during the two decades examined here: the Liberals raised fees significantly in the face of clear evidence of strong opposition from non-business interests. Yet even this exception to the rule that accommodation of major societal interests is an important feature of Quebec budgeting is partial.67 The PQ’s position on user fees was not radically different from the Liberals’. PQ leader Pauline Marois initially called for more discussion of fee increases, and only as the issue became more heated did she appear to move towards outright opposition. The PQ had itself considered raising fees instead of taxes while in power.68 One must also keep in mind the broader context in which the Liberals chose this option: their unwillingness to consider radical reductions in program spending, the route championed by the ADQ, conservative journalists, and sometimes by business groups. Finally, if the user fee issue is a partial exception, it also proves the rule: the protests that it occasioned led to a retreat from a major budget commitment in one area and later, regarding tuition, to near-paralysis in another. In summary, the general pattern for budget policy in Quebec between 1990 and 2010 is clear: both major parties broadly accepted the province’s high spending commitments. They nevertheless sought to restrain spending and later to reduce the province’s high accumulated debt, while protecting high-priority social and economic development objectives, and to distribute the required tax burden between individuals and firms. The turn towards raising consumption and user charges, and lowering income taxes, did not, in a longer time frame, sharply divide the parties. To succeed, moreover, budget policy required a degree of acquiescence from leading business, labour, and social activist interests. Consensus-building therefore was important for both major parties, though pursued differently by each. Ontario: Contested Taxes, Disputed Spending The size of the public sector and the volume of revenues required to sustain it were much more contested among leading parties in Ontario than in Quebec. The PCs championed a neoliberal agenda that evoked the merits of less government and lower taxes, and competed with Liberals and New Democrats who did not share this viewpoint. These

Budgeting 87

perspectives diverged fairly consistently during our period, regardless of which party was in power. As Kitschelt’s account of the preconditions for retrenchment anticipates, moreover, the PCs’ rivals were affected by the PCs’ agenda:69 confronted with the manifest popularity of tax-cutting by PC Premier Harris, the Liberals were more circumspect about raising taxes and expanding services after they acceded to office in 2003 than they had been between 1985 and 1990. There was little cooperation with societal interests in this divided landscape, again sharply distinguishing the Ontario case from Quebec. After coming to power in 1990, the NDP experimented with “corporatist” bargaining among business, labour, and social advocacy leaders. This failed in the budgeting field, as in many others, undermined by the inability of interests to compromise antithetical views. The PC government between 1995 and 2003 famously argued that it had consulted voters “on election day” and needed no other mandate to implement its detailed program of spending and tax cuts in the face of vociferous opposition. The post-2003 Liberal administration advertised widely its desire to consult, but rarely went beyond the highly circumscribed prebudgetary exercises now common in Canada. Budgetary outcomes consequently differed between PC and non-PC governments. That revenue and expenditure levels as a share of GDP fell under the PCs between 1995 and 2003, while rising during the preceding and succeeding Liberal and NDP years, is evident from table 3.7 (rows 2 and 4). The table shows a similar variation among these periods for Quebec (rows 7 and 9) and for the average of the other eight provinces (rows 12 and 14): expenditures and own-revenues fell between 1995 and 2003, and rose (or fell by less) earlier and later. The difference between the PC period and the average of the other two nevertheless is much more pronounced for expenditures – almost twice as large – in Ontario (row 3) than in Quebec (row 8) or the other provinces (row 13). It is also larger for own-source revenues, though the discrepancy with Quebec, especially, is smaller in this case (compare rows 5 with 10 and 15). If we construct an index of the distinctiveness of the 1995–2003 period by summing these two figures for Ontario, (row 3 + row 5) and compare this figure with equivalent ones for Quebec (row 8 + row 10) and the other provinces (row 13 + row 15), the difference is large: Ontario’s index (9.4) is 47% higher than Quebec’s (6.4) and 68% higher than the other provinces’ (3.6). For all provinces, the dramatic transfer payment cuts announced by Ottawa in 1995 suppressed expenditures, but spending change in Ontario was more distinctive over the next

88  Comparing Quebec and Ontario Table 3.7. Spending and Revenue Change (%), 1985–2010 Row

Province

1985–95

1995–2003

2003–9

Liberal / NDP

PC

Liberal

Ontario Party in power ∆ in GDP/capita/year

+4.8

+4.3

+1.8

2

∆ in spending/GDP

+3.1

-2.9

+3.7

3

A+C/2-B

1

4

∆ in own-source revenues / GDP

5

A+C/2-B

+6.3 +2.3

-1.6

+0.6 +3.1

Quebec Party in power

Liberal (to 1994)

PQ (from 1994)

Liberal

∆ in GDP/capita/year

+5.3

+6.2

+2.7

7

∆ in spending/GDP

+0.4

-2.1

+2.5

8

A+C/2-B

6

9

∆ in own-source revenues / GDP

10

A+C/2-B

+3.6 +2.4

-0.5

+2.1 +2.8

8-province mean 11

∆ in GDP/capita/year

+4.7

+5.2

+4.7

12

∆ in spending/GDP

-0.2

-3.1

+0.5

13

A+C/2-B

14

∆ in own-source revenues / GDP

15

A+C/2-B

+3.3 +2.1

-1.8

-1.2 +2.3

Sources: Statistics Canada, CANSIM, tables 3840023 and 3840024, for spending and revenue data; table 3840015 for GDP data; table 510001 for population data. Note: Figures reported in rows 3, 5, 8, 10, 13, and 15 indicate the difference between change in expenditures and own-source revenues during the first and third periods, minus the change in the second period. (Change in first and third periods are summed and divided by 2, and change in second period is subtracted from the result.)

eight years compared to the other periods. The greater relative shrinkage of Ontario’s state in these years cannot be explained by higher growth there after 1995, an influence that might, ceteris paribus, induce spending and taxes to decline relative to GDP, compared to more recessionary periods (compare row 1 with 6 and 11).70 There is, then, statistical evidence for an impact of partisan polarization on Ontario budget outcomes.

Budgeting 89

This is also clear when we turn to tracing the process of policymaking between 1990 and 2010. When the NDP arrived in power in 1990, Ontario had entered a very deep recession that promised to plunge its budget into a massive deficit. Moreover, the outgoing Liberals had increased spending and own-source revenues considerably during their five years in power, from 19.7% to 21.2% of GDP for the former, and 16.6% to 19.1% for the latter.71 There was a widespread belief in Ontario that both taxes and spending had gone up rapidly under the Liberals. The NDP therefore would face considerable opposition if it increased spending further to fulfil its expansive election commitments or to stimulate the recessionary economy. This nevertheless is what it did. The 1991 budget more than tripled the deficit. Many commentators saw Ontario as unique among federal and provincial governments that year in not prioritizing deficit control. Important new sums were allocated to social assistance, housing, pay equity, and public works.72 Capital spending increased massively, funding public transit, assistance to small firms, research and technology development, etc. Operating expenditures were to rise by 11.9% and capital spending by 34%. Despite the budget’s stimulating intent, taxes also went up an estimated $1 billion per year. Capital taxes on banks and charges on insurance and mining companies increased. Personal income taxes rose for high earners but were reduced for those with low incomes. Several consumption taxes also went up.73 A slower than expected recovery inflated the 1991–2 deficit to $10.9 billion (from $3 billion in 1990–1). In its 1992 and 1993 budgets, the NDP tried to prevent it from growing further.74 Personal income taxes increased from 53% to 58% of the basic federal rate. The highincome surtax was extended to many more taxpayers, and the rate increased for the highest earners. The retail sales tax was applied to more items; some user fees rose. Having raised business taxes significantly in 1991, the government now relied less on them. Corporate tax rates fell for small business and for manufacturing and processing firms (table 3.4); these firms also benefited from an increased capital costs allowance. But other charges rose: the capital tax on banks was raised again, and a surtax eliminated the small business tax cut for higher-earning firms. In 1993, the NDP introduced a minimum corporate income tax. But the stubborn deficits gradually eroded the NDP’s willingness to spend. It continued to trumpet its capital outlays, but this budget actually fell after its 1991 explosion.75 Cuts became dramatic in 1993. Growth in operating costs slowed to 5.2% in 1992, then fell by 4.3%.76 An Expenditure Control Plan would reduce these costs by more than

90  Comparing Quebec and Ontario

10%, eliminate ministries, and lay off 5,000 public servants. More controversially, a Social Contract was proposed to public sector unions. In exchange for agreeing to $2 billion in wage cuts, the unions would save an estimated 20,000 to 40,000 additional public servant jobs. If the unions refused to cooperate, wage cuts would be legislated. The NDP’s 1994 budget, its least controversial, cut payroll taxes for small firms that created jobs, and offered more restraint.77 The NDP’s budgetary stance in 1990 was decidedly left-of-centre: it pursued a vigorous counter-cyclical policy when other governments in North America were not doing so. It also raised taxes substantially, concentrating increases on affluent individuals and businesses. These priorities changed substantially by 1995, when they more closely resembled the balanced approach that typified Quebec governments during the 1990s, regardless of their partisan stripe. The focus now was on containing deficits with a mix of spending cuts and tax increases. The latter burden now fell mostly on individuals. But NDP preferences in 1995 still were far removed from those of the PCs, who came to power then, as we shall see below. NDP budgets encountered vociferous hostility. The PCs raised an emphatically neoliberal challenge: Ontario needed much lower taxes and spending, the opposite of what the NDP offered in its early budgets, and still far removed from its later approach to deficit reduction. The Liberals also emphasized restraint, though not always as ardently or plausibly in view of their own prior record.78 Business criticism often closely resembled the PCs’. The NDP’s later budgets received some praise for reining in spending, but the government still was criticized for raising taxes, even if business was largely spared increases after 1991, and for failing to cut more dramatically.79 In contrast, the party’s sometime allies in the labour movement and among social advocates strongly endorsed its early tax-and-spending measures, underlining the degree of polarization in Ontario political debate. But the unions became as negative as business – though for opposing reasons – once the Social Contract was launched; they denounced the NDP for imposing changes in public sector labour contracts, hurting vulnerable Ontarians and not raising taxes on business further.80 By 1995, in a climate that could only be described as poisonous, the NDP and its now-mixed approach to deficit reduction had few friends. The Social Contract was the NDP’s foremost attempt to collaborate, and its most graphic failure. Public sector unions only very reluctantly negotiated on how to implement the cuts; they disputed the premise

Budgeting 91

that $2 billion had to be saved from wage costs.81 Rather than building trust, the exercise worsened the NDP’s already souring relationship with the unions. The other major effort of this kind was the Fair Tax Commission, mandated to consult widely with Ontarians before proposing changes in the tax burden. By the time it reported in December 1993, the government was low in opinion polls. The NDP was unable to act on its recommendations, which focused on enhancing the tax system’s progressivity and would in any case have been opposed by its many critics.82 In one way, Conservative budgets after 1995 evolved in parallel to the NDP’s after 1990: launched from an ideologically distinctive starting point, the new government’s budgets moderated during its first term in power. But the Tories’ initial preferences contrasted radically with the NDP’s, and their goals remained very different later. The PCs’ 1995 election platform, The Common Sense Revolution, promised to cut personal income taxes by 30%, reduce some business taxes, and cut 20% from “non-priority” expenditures.83 An initial round of $1.9 billion in spending cuts included a 21.6% reduction in social assistance rates, freezing business grants and loans, ending the NDP’s job creation program, capping pay equity settlements, and deferring or cutting most capital spending.84 A second round reduced transfers to municipalities, universities, school boards, and hospitals by $3.5 billion for the next fiscal year, and a further $2.5 billion over the subsequent two.85 Tax cuts began with the first PC budget in May 1996. Half of the 30% cut in the personal income tax was implemented then, the rest by 1998. By then, provincial taxes had fallen from 58.0% to 40.5% of the basic federal rate. The government exempted much more business income from the employer payroll tax; other changes also benefited firms.86 The remaining budgets of the PCs’ first term were less dramatic. Economic growth had now picked up, reducing the need for restraint. Moreover, the original cuts had affected the health and education sectors, which the 1995 platform had labelled “priority” areas. Opinion polls now showed that Tory support was suffering as a result of this apparent breaking of a promise.87 So health cuts announced earlier were postponed in 1997, and significant new sums were added to both areas by 1999.88 Ottawa’s partial restoration of transfer payments that were massively cut in 1995 also helped. Adjusted for inflation, combined funding for health and education fell by 4.4% between 1995–6 and 1997–8 but was then projected to rise 20.4% by 1999–2000. By contrast, spending in all other areas fell by 10.9% during the first two years

92  Comparing Quebec and Ontario

of the PCs’ first term and was projected to fall by 8.9% more during the last two.89 The 1997 and 1998 budgets added new reductions, now mostly for business. The Tories persisted with tax cuts in the face of mounting pressure from otherwise supportive business interests to eliminate the deficit instead. Attainment of the latter objective was postponed until 2000–1. The corporate income tax rate for small firms was reduced (table 3.4). After the PCs had slashed direct business grants earlier, a number of tax credits were now created or enriched for firms, and exemptions were extended to particular sectors from the capital tax and other charges. A reform of the province’s property tax system, in conjunction with a municipal service realignment, entailed higher rates for some taxpayers, lower for others. The education portion of this tax was then reduced by 20%.90 But the government’s foremost tax measure after 1996 was a promise to cut provincial income taxes by another 20%, which became the centrepiece of the PCs’ successful re-election campaign in 1999.91 So tax cuts were again the main focus of PC budgets during their second term. The second round of personal income tax cuts was to be completed in four years; the 2000 budget added a $200 lump sum “rebate” to every taxpayer. Other reductions again focused on business: a series of cuts to corporate income tax rates saw most fall by 3% by 2003 (table 3.4), and further reductions were promised for later. The capital gains tax was reduced, and eliminated for some, and taxes on mining companies fell by half. The PCs also planned to phase out the capital tax.92 With such large sums devoted to tax cuts, and smaller ones to debt reduction once the budget was balanced in 2000, there was no room for spending increases outside of the health field, where the PCs were now determined to protect themselves against criticism, and even here increases were modest. Health spending, adjusted for inflation, rose by 21.4% during the Conservatives’ second term (about 5% per year), while all other expenditures were virtually frozen – climbing by only 0.3% during that four-year period.93 Outside of the priority areas of health and, briefly during the first term, education, spending fell or was frozen for the eight years of PC government. Even for health, outlays rose modestly except between 1997 and 1999. Reducing taxes – for individuals and for firms – was the main preoccupation. While in Quebec deficits were eliminated during the 1990s with a combination of tax increases and spending cuts, deficit elimination relied entirely on the latter in Ontario, and in the face of

Budgeting 93

repeated and substantial reductions in the former. The objective of PC budget policy, as the party made very clear, was a government that spent and taxed much less than it had in 1995.94 Budget politics remained highly polarized under the Tories. Yet their policy was far more successful politically than the NDP’s, garnering widespread support from business and the loyalty of voters. The only major reservation for business and financial interests was that the focus on tax cuts delayed a balanced budget until 2000.95 By contrast, organized labour and social activists implacably opposed the PCs; but this did not impede their comfortable re-election in 1999, suggesting that these interests had modest influence in Ontario public life. Both opposition parties criticized the spending cuts relentlessly. For the NDP, reversing service cuts was a persistent demand.96 Under Dalton McGuinty’s leadership, the Liberals were more tentative, opposing tax cuts until they were in place, then generally promising not to reverse them. During the 1999 campaign, McGuinty “made a firm commitment not to raise taxes,” including those cut by the PCs since 1995. In 2003, the Liberals promised “to freeze taxes for individuals and small businesses,” though much of the income tax cut for large firms would be rescinded, and a tax credit for private schools would be cancelled.97 To underscore his fiscal prudence, McGuinty supported PCinitiated legislation that required a referendum if a tax was increased without compensating cuts elsewhere, and another measure that subjected ministers to fines if the budget was not balanced.98 The Liberals’ many spending commitments would have to be funded from the fiscal proceeds of future growth. While they tempered their criticisms, the Liberals’ fundamental opposition to the Tories’ priories nevertheless prefigured another major realignment of budget strategy when they came to power. Beyond pro-forma annual pre-budget consultations, the PCs engaged in little formal dialogue with non-governmental interests about their budgets. To repeat an observation cited in chapter 2, moreover, the preexisting “mould” for interest group relations in Ontario was “broken” under the Tories.99 The level of antagonism between the government and its opponents left little room for discussion. For the PCs, meaningful consultation usually consisted of informal interaction with business and conservative groups that broadly shared their objectives,100 but such formalized consultations as occurred generally did not impress their participants. For instance, an unusually extensive pre-budget consultation in 2001–2 was tightly scripted by the government, with

94  Comparing Quebec and Ontario

meetings in different cities pre-assigned different themes; their utility was questioned even by a typically Tory-friendly anti-tax group.101 It became evident very soon after the Liberals returned to power in 2003 that Ontario budgeting policy was again experiencing a substantial shift. The constraint that the Liberals imposed on themselves by promising to not raise most taxes was amplified, once they were in power, when they learned that the budget was in deficit. Rather than abandon their spending ambitions to eliminate the shortfall, however, they argued that they now had no choice but to violate the tax commitment. Beyond returning the main corporate income tax rate for large firms to 14.0% from 12.5%, a promised increase, the 2004 budget therefore also introduced health premiums for individual taxpayers. The premiums were expected to raise $2.5 billion, effectively reversing about one-quarter of the Tories’ income tax cuts. The Liberals ended the requirement that ministers be fined if the budget was not balanced, after the fines were paid on this occasion. Several consumption taxes were raised, and user fees increased.102 Municipalities also were allowed to raise commercial property tax rates, after a six-year freeze, and electricity prices were increased, violating another election promise.103 The Liberals were as willing as the PCs to eliminate deficits only gradually, but for very different reasons. While the Conservatives had privileged tax cuts, the Liberals trumpeted renewed spending. The 2004 budget increased health spending by $2.2 billion, though coverage was ended for several services; education expenditures went up by $800 million as the new government implemented caps on classroom size.104 Health and education outlays continued to rise amply in the remaining budgets of the Liberals’ first mandate. They also funded the Ontario Child Benefit and uploaded Ontario Disability Benefit costs from the municipalities (see chapter 4). In 2005, the Liberals began to add considerably to infrastructure spending, especially for transportation. And a green technology initiative was launched in 2007 (chapter 6). Other than a 2007 reduction in the provincially administered education portion of the business property tax, these budgets contrasted sharply with the Tories’ in not introducing major tax cuts.105 Economic growth allowed the Liberals to balance their books in 2007, even though they raised expenditures substantially. After climbing by only 7.2% under the Conservatives, or 0.9% per year (and falling as a share of GDP; see table 3.7, row 2), inflation-adjusted total expenditures rose by 21.1%, or 5.3% per year, between 2003–4 and 2007–8. While total

Budgeting 95

revenues rose by 2.1% per year under the Tories in the face of significant tax cuts, they went up by 7.9% per annum during the Liberals’ first term. The PCs now argued that spending was “out of control,” while the NDP continued to complain that it was inadequate.106 For a time after their re-election in 2007, the Liberals sought to sustain their now-balanced budget, but this was no longer possible once the fiscal consequences of the 2008 financial crisis became clear. The Liberals now hoped to eliminate a suddenly re-emerged and massive deficit only very gradually, relying on economic growth, spending limits that did not require major program cuts, and a continued commitment to no major tax increases. Their distinctive preferences – far from the PCs’ choice of combining deep tax and spending cuts in adverse circumstances – were still very evident. Continuity with the pre-crisis period was evident in the 2008 and 2009 budgets,107 which accelerated previously announced reductions in the capital and employer property taxes. More saliently, the province harmonized its sales tax with the federal GST; taxpayers were compensated with a 1% rate reduction for the lowest personal income tax bracket. The Liberals also reversed an important earlier decision by proposing to cut the highest corporate income tax rate (table 3.4). A new green economy fund was launched, and additional sums were allocated to training, infrastructure, and the electricity grid (chapter 6). New funds also were devoted to services for the elderly, social housing, and, as usual, education and health. The province would “upload” municipal Ontario Works and court costs (chapter 4). Total expenditures continued to rise rapidly – by 9.4% per year, adjusted for inflation – between 2007–8 and 2009–10.108 Only in October 2009 did the government acknowledge that the crisis was driving its budget back into a deep deficit – reaching $21.3 billion for 2009–10. It announced a slowdown in some outlays.109 The 2010 budget froze salaries for non-unionized public servants and promised to do the same for unionized ones. Future increases in health spending would be smaller. There would be no tax increases; the budget would not be balanced again until 2017–18. Yet even now, the Liberals sometimes spent more. In January they announced funding for all-day kindergarten, at an annual cost of $1.2 billion. Later in the year, with the 2010–11 deficit still at $18.7 billion, they announced a reduction for hydroelectric rates.110 Projected spending growth slowed, but only to 4.3%.111 Even in the face of one of the most severe economic downturns ever experienced in Ontario, then, the Liberals promised no significant

96  Comparing Quebec and Ontario

reductions in the quality of public programs and were willing to spend more in priority areas. Under John Tory’s leadership between 2004 and 2009 the Conservatives sometimes appeared less firmly committed to cutting taxes and spending.112 But when Tim Hudak became PC leader in 2009, the party’s pre-existing preferences again were very evident. Media commentators noted the parallels between Hudak’s views and those of Mike Harris.113 Hudak consistently demanded that the Liberals make cuts, arguing, for instance, that it should fight its deficit in 2010 by reopening public sector labour contracts to impose wage restraint.114 Having now settled back into its traditional role as Ontario’s third party, the NDP was equally unswerving in insisting on more spending to alleviate poverty and other social maladies.115 Partisan polarization was alive and well during the McGuinty years. Ontario’s non-governmental interests also remained sharply divided after 2003, and the Liberals dealt with them in classically pluralist terms. Business groups complained loudly when the new government rolled back part of the PCs’ corporate income tax cut. They were happier when the Liberals later reversed this decision, cut other business taxes, and harmonized its sales tax with Ottawa’s, in a move that reduced the tax burden on firms. But they were now concerned about government spending and the deficit, perceived to be excessive. Organized labour, in contrast, consistently demanded higher spending and complained noisily when the Liberals identified public sector wages as a target for cost savings in 2010.116 The Liberals advertised their willingness to consult, but this was restricted largely to ad hoc meetings with non-governmental organizations, and to the annual pre-budget consultations that most observers do not identify as a significant occasion to influence policy.117 To summarize, Ontario budgets between 1990 and 2010 differed considerably, depending on whether the PCs or their opponents governed. When they left power in 1985 after forty-two years, the PCs bequeathed the lowest levels of total expenditure and of own-source revenue, as a share of GDP, among all provinces. Spending and taxes subsequently rose rapidly under the Liberals, and during the early years of the NDP administration. In the face of growing demands to slash spending, the NDP preferred to manage its deficits with a combination of smaller tax increases and expenditure cuts. The approach of the subsequent PC government was dramatically different. It cut personal income taxes deeply and, especially during its second term, lightened businesses’ tax load considerably. These cuts may have reduced the government’s revenue base by $13 billion to $15 billion.118 In spite of their commitment

Budgeting 97

not to raise most taxes – a promise broken in their first budget – the post-2003 Liberal government renewed rapid spending growth. After the 2008 crisis it tolerated high deficits to avoid major program cuts. Fighting deficits was never the main objective of Ontario governments, but the alternative goals it was subordinated too – cutting taxes or improving programs – divided the PCs from their opponents. Finally, reflecting the province’s pluralist system of interest intermediation, Ontario governments made little meaningful use of formal collaboration with non-governmental actors. Such interests often found their typically antithetical views ignored; this was especially true of labour and social activists under the PCs. Why Some Tax and Spend More Than Others, and How Quebeckers pay much higher provincial taxes and have far larger sums expended on them than Ontarians do. This finding is consistent with our foremost hypothesis (2a) about budget outcomes. Accounting for this difference was the main focus of this chapter, which offered parallel tracings of the budget process in Ontario and Quebec. These narratives asked whether the mechanisms shaping policymaking in Quebec and Ontario differ importantly, and whether these differences explain their distinct outcomes. I hypothesized that Quebec’s higher spending and taxation reflect (1b) the fact that its major political parties are much less divided than are Ontario’s on economic-distributive questions and, consistent with this, that it lacks an electorally successful neoliberal party. Moreover (1a), I surmised that Quebec’s distinctive outcome reflects the fact that successful policymaking there requires governments to collaborate with non-governmental interests. This requirement would be absent from pluralist Ontario, where governments are at greater liberty to depart radically from pre-existing policies in the face of intensive non-governmental opposition. The evidence presented in the preceding two sections corroborates these claims, though with qualifications. Both governing parties in Quebec sought to avoid tax cuts that would defund public programs significantly. Both were willing to incur deficits and reduce them only gradually using a blend of tax increases and moderate spending cuts. Market-oriented beliefs have advocates in these parties, especially the Liberals. After the Liberals returned to power in 2003 they favoured significant retrenchment. But they desisted. An important reason was the capacity of non-governmental interests to impose very high political costs on governments that pursue policies they find unacceptable.

98  Comparing Quebec and Ontario

Accordingly, concertation with these interests is important in Quebec budgeting, though as an explicit tool it is much more important for the PQ. For Liberals, obtaining the acquiescence of leading interests often is done more informally, but it is done nonetheless. Finally, as hypothesized, there is little evidence that nationalist ideation played an important direct role in convincing political actors in Quebec to sustain a relatively large tax state (1d); indeed, it caused some to recommend the opposite. Ontario differed strikingly. Its Conservatives embraced a neoliberal discourse that led them to cut taxes and spending severely on behalf of an explicitly market-oriented ideology. Their NDP and Liberal opponents championed a larger and more active government and were willing to increase revenues rapidly to sustain one. The Liberals’ eagerness was tempered after 2003 by their realization that the Tory cuts had been popular. Revenues and expenditures nevertheless rose quickly thereafter, and spending was not restrained sufficiently after the onset of the financial crisis to forestall a very sizable deficit. In a sharply polarized polity, with business on the one hand, and labour and social advocacy groups on the other, offering radically opposing prescriptions, there was little room for agreement. Governments avoided dialogue. Yet it was non-business interests that consequently were most likely to be ignored, as they typically were by PC governments. This is consistent with what CPE scholarship tells us about the hegemonic position of business in pluralist political economies. Beyond differences in overall revenue and expenditure levels, CPE scholars detect variations in countries’ use of different taxes. Those with more expansive welfare states do not fund them from additional charges on highly mobile capital, instead relying more on regressive non-business taxes. Evidence presented above supported some of our hypotheses on these matters, but not all; moreover, interpretation of the available data depends on contestable assumptions about the ultimate incidence of taxes. But on the most likely assumptions, Quebec does not tax business more than Ontario (2b). Quebec also makes greater use of consumption and payroll taxes, commonly judged to be regressive (2c). Its lesser reliance on property taxes has ambiguous implications for this hypothesis, as this tax has different distributive implications in relation to wealth and income. But Quebec also clearly makes greater use of the progressive personal income tax, contrary to the hypothesis. Finally, Quebec’s income tax system is much more redistributive than Ontario’s (consistent with 2d).

Chapter Four

Social Assistance and Transfers: Redistributing, but Differently

Social assistance and child-related transfer payments are the leading income security programs available to provinces for lowering poverty and inequality. They are interrelated, and change in each affects not only overall levels of redistribution, but also its apportionment among cohorts of the population. This chapter examines policy in these fields in Ontario and Quebec between 1990 and 2010. My primary focus is on the policymaking process. Consistent with the hypotheses set forth at the end of chapter 2, I argue here that there was much greater partisan polarization in Ontario than in Quebec (hypothesis 1b). There was also more concertation in Quebec than in Ontario (1a), but this was less consequential for social assistance in the former province than for child benefits. Moreover, its overall importance in Quebec was less than for the other policy fields discussed in this volume; this hypothesis therefore receives only partial and uneven support here. Nationalist ideology, a possible additional mechanism in Quebec, did not discernibly shape the positions of its societal actors or parties in these fields (consistent with 1d).1 The case narratives presented below also report my findings for the two policy outcome hypotheses that are most susceptible to qualitative treatment: a greater focus on employability was central to policy change in both provinces during this period, but only Ontario turned towards mandatory “workfare” (consistent with 4c). Moreover, child benefits reform was a much greater preoccupation, and the benefits were much more ample, in Quebec than in Ontario (4d). The chapter’s final section presents evidence about spending levels in the two provinces (hypothesis 4a), a subject examined more formally, with regressions, in chapter 7. It also reviews the most commonly used measures

100  Comparing Quebec and Ontario

of program adequacy (relevant to 4b). But our main evidence regarding this hypothesis, which posits that Quebec redistributes more than Ontario, consists of micro-data on inequality- and poverty-reduction; it is presented in chapter 8. With respect to the policy process, the case is clearest for partisanship: social assistance was deeply contested in Ontario between Liberal and NDP governments from 1985 to 1995, and their PC successor from 1995 to 2003. The former strove to set benefits at levels sufficient to meet need and to use non-coercive methods to encourage recipients to seek work. In contrast, the PCs cut benefits substantially for employable persons and implemented mandatory inducements to return to work. Benefits first rose dramatically during the Liberal-NDP era, then plummeted, other than for disabled persons, under the PCs. The Liberals returned to power in 2003 initially chastened by the PC era. But they eventually took a first step towards child benefits reform; in their second term, the McGuinty Liberals continued, albeit hesitantly, to move away from the PC legacy. The partisan landscape was much less polarized in Quebec. The two main parties implemented similar assistance policies, which involved a gradual increase in work incentives and opportunities. They never took the form of “workfare” arrangements championed by Ontario’s PCs but sometimes imposed penalties on those who refused to enrol in employability measures. When penalties were abolished in 2004, moreover, this was done by the Liberals, not the centre-left PQ. Short-term fluctuations in assistance benefit levels over the years also were modest. Regarding child benefits, similarly, the initial income-tested measure was introduced by a PQ government in 1997, but it was substantially expanded later with the support of social policy advocates by the centre-right Liberals. “Left” and “right” were not, then, good predictors of who would introduce the most generous measures in Quebec. Interest group politics regarding social assistance was strongly pluralist and polarized in Ontario. Some advocacy groups adopted a confrontational approach and were excluded from policy deliberations. Less radical reformers were willing to cooperate with governments. Yet these interests too were side lined when the PCs were in power. Their involvement was greater under the Liberals and NDP but was never more than ad hoc; it had little evident impact. The origin of Ontario’s child tax credit reform in 2009 is a clear and important departure from this pattern, as non-governmental advocates were important

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in promoting it. But this was an exception that reflected the unusual makeup of advocacy on that issue and may not be repeated. The societal setting was complex in Quebec and differed importantly between social assistance and child benefits. Social assistance advocates were outspoken and relatively well-organized; they were antagonistic towards governments of both parties. Efforts to foster concertation were unstable and achieved little. Yet the richness of Quebec’s associative system, the importance of social actors within it, and the premium that it places on consensus had important consequences. More militant advocates were not nearly as isolated in Quebec as in Ontario; they were regarded with sympathy by mainstream actors – such as feminists, churches, and unions. In this setting, governments were loath to pursue policies or adopt a discourse that might be judged overtly hostile to assistance clients. Social assistance policymaking in Quebec did not reflect concerted decision-making, but collaborative norms there nevertheless constrained governments from pursuing more than incremental cuts in benefits, in contrast with Ontario. Quebec’s adoption of child income supplements in 1997 also did not result from concertation. Once this measure was in place, however, non-governmental interest became important. Mainstream interests, including feminists, family policy advocates, and researchers, now demanded an enrichment of its benefits for the needy, as well as a return to the universal payments that existed before 1997. This mobilization and the dialogue that resulted from it informed the Liberals’ major expansion of child supplements in 2004. Overall, the politics of child benefits very much illustrated the sensitivity of Quebec governments to non-governmental advocacy when the latter attracted broad support. Quebec: Two Worlds of Redistributive Politics It was already clear during the 1980s that the conventional left-right cleavage is a poor predictor of assistance reforms in Quebec.2 Ever since the province consolidated its assistance legislation in 1969, employable individuals under the age of thirty had received much lower benefits than older beneficiaries – about $150/month compared to $420/ month for the latter cohort in 1984.3 Despite protests from advocacy groups, the PQ refused to change this before leaving power in 1985, but it introduced voluntary employability measures that qualified youths for benefits nearer the higher rate. The PQ also introduced work and

102  Comparing Quebec and Ontario

4

6

8

10

12

Figure 4.1. Assistance Recipients as % of Provincial Population, 1980–2009

1980

1990 Quebec

year

2000

2010

Ontario

Sources: For caseloads, 1980–2003, HRDC, Social Security Statistics, Canada and the Provinces, 1978–79 to 2002–03, tables 361 and 435. For 2004–5, NCW, Welfare Incomes 2005 (Ottawa: NCW, 2006), fact sheet #9. For 2006–9, Institut de la statistique du Québec, Tableau statistique canadien (Quebec: ISQ, 2010), 31. For population estimates, Statistics Canada, CANSIM, table 510001.

employability incentives for other recipients during the early 1980s, hoping to stymie a worrying upward trend in the province’s assistance caseload.4 In March 1986, 10.3% of Quebec’s population received social assistance, higher than in any other province; the comparable share in Ontario was 5.1% (see figure 4.1). Despite the higher caseload, benefit levels were not higher than in Ontario.5 It was not, then, a radical departure when the PQ’s Liberal successors announced their intention to replace the 1969 law with one that introduced a clear distinction between clients who were and were not available for work, and that provided incentives for them to move to the former category and enhance their employability. Indeed, the Liberals portrayed their reforms as potentially more generous than PQ policy; they abolished the lower benefits reserved for individuals under thirty.6 In the face of strenuous opposition from welfare advocates,

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Bill 37, the reform legislation, was not passed until December 1988, or implemented for new clients until August 1990. In the meantime the Liberals nevertheless reduced Quebec’s caseload substantially by increasing surveillance. In 1986 they launched an intensive campaign of impromptu visits to clients’ homes by inspectors. The agents quickly earned the derisive sobriquet “boubou-macouttes,” after André Bourbeau, the income security minister between 1988 and 1994. In its first six months, the government claimed, the visits removed almost 11,000 cases from the roles, about 20% of the clients visited. Quebec’s caseload declined markedly between 1986 and 1989, at a time when most other provinces saw little change.7 Bill 37 did not, as critics claimed, introduce “workfare,” as this term is usually defined: working or enrolling in employability measures was not made a condition for receiving benefits. The legislation instead used financial incentives to encourage clients to enrol in work-related programs. Basic rates were lower than under the preceding legislation for most recipients who refused to participate in employment measures, and they went up for clients who agreed. But other innovations – for instance, a deduction for most shared accommodation – eroded this advantage.8 A few subsequent changes before the Liberals left office in 1994 softened Bill 37’s impact, by granting some exemptions to the shared-accommodation deduction, expanding benefits for disabled persons, and offering extra help to single mothers.9 But most later adjustments tightened the law’s provisions, including an increase in employability incentives, an enhancement in the powers of inspectors (now labelled “super boubou-macouttes”), penalties for recipients who declared themselves available for work but then refused a job offer, and a requirement that claimants pick up their cheques.10 Opposition to these changes was not confined to social assistance advocacy groups, although these – led by the Front commun des personnes assistées sociales du Québec (FCPASQ) – were prominent. Its activists occupied ministerial offices and attempted to overwhelm administrators with appeals.11 Quebec’s feminist movement, including the Fédération des femmes de Québec (FFQ) and groups that focused on the needs of single mothers and of disadvantaged women, denounced Liberal policy. Organizations that champion “social rights,” a distinctive feature of advocacy in Quebec, protested; so did church leaders. The City of Montreal opposed Bill 37. Quebec unions, including the FTQ, CSN, and CEQ federations, were vociferous in opposing what they saw as the bill’s coercive work-related features. Reticence

104  Comparing Quebec and Ontario

extended to officers of the Quebec National Assembly who, for instance, questioned the propriety of systematic home inspections.12 In this fractious setting, efforts to link government and non-governmental advocates in concerted policymaking, almost a necessity in Quebec, were bound to fail. The Liberals created a Commission consultatif sur la sécurité du revenu for this purpose in April 1991. Sensing that they were having no impact, many advocacy groups withdrew in September 1992, effectively ending this experiment with concertation in the assistance field.13 This antagonism nevertheless amounted to a sizable if uncoordinated campaign that received continuous media attention. It delayed Bill 37 and may also have softened it. The legislation did not reduce the adequacy of basic benefits for most recipients and raised them considerably for some.14 By contrast, its employment-related penalties for the first time denied full benefits to non-compliant recipients. It is hard to evaluate the impact of these offsetting features, but while some recipients no doubt experienced a fall in income, it probably was not substantial in most cases. The legislation also did not reduce the province’s caseload, which began to rise again in 1990, just as Bill 37, clearly designed to reduce it, came into effect. Driven by the deep early-1990s recession, it rose from 550,000 to over 800,000 in 1996.15 The PQ’s return to power in 1994 did not shift assistance policy substantially. The new administration initially reversed some cuts and ended the requirement that claimants pick up their cheques. But in mid-1995, in the face of continued caseload growth, the PQ responded, as the Liberals had, with more curtailments. New anti-fraud procedures were introduced; beneficiaries who refused to participate in an employment program were penalized further.16 In November the Cabinet was divided over the advisability of more cuts. In the dispute’s wake, the penalty for failure to accept a job offer was increased, and bonuses paid to employment measure participants were reduced. Applicants under thirty had to prove that they had seriously sought employment, and attend a meeting at which they would be offered further schooling.17 Plans for a more comprehensive reform were outlined in December 1996. As with the Liberals’ reforms, they were delayed by opposition. The new legislation (Bill 182) was not enacted until June 1998. By then, the province’s economy was growing, and the caseload was declining. In this more relaxed atmosphere, the bill included a mix of cuts and increases. Many of the latter were added late in the reform process, under the influence of a group of backbench PQ MNAs.18 All focused

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on employability, now the leitmotif of Quebec’s assistance regime. Recipients younger than twenty-five would follow a parcours vers l’emploi, designed to enhance their employability. Non-compliance would result in a penalty. Implementation of this measure was delayed until 2000 to mollify opposition. Claimants could also be penalized for failing to pay their rent. The main enhancements were an adjustment to asset and income allowances that increased some beneficiaries’ income, and a $500 bonus for those who found a job. Claimants judged unable to work acquired a new status in the legislation, and their benefits sometimes rose.19 Other PQ initiatives before leaving power in 2003 again focused mostly on employability. In a striking reflection of Quebec’s concerted policymaking norms, business and labour representatives agreed at the October 1996 Socio-Economic Summit to a $250 million Anti-Poverty Fund to mollify protests from social groups upset that the government would not promise to eliminate poverty. The three-year fund was financed by temporary increases in payroll deductions and corporate taxes. It was renewed at a reduced level in 2000, now funded from general government revenues.20 During the period examined here, Quebec business organizations, including the Conseil du Patronat, generally approved of the employment focus of new assistance policies but expressed concern that jobs may not exist for recipients seeking work.21 The PQ also launched Solidarité Jeunesse, a voluntary re-employment program for young recipients, and suspended a controversial deduction for sharing accommodation. In response to an aggressive campaign by poverty rights groups (see below), it finally announced a plan to eliminate poverty in Quebec and it passed legislation in December 2002 that promised to reduce it by half within a decade.22 The PQ’s dealings with non-governmental interests largely mirrored the Liberals’. Collaboration with non-governmental actors again failed. A Conférence permanente sur la sécurité du revenu replaced the defunct commission in December 1994, but leading advocacy groups abandoned it a year later.23 Actors who played a leading role in condemning Bill 37 did the same for the PQ’s Bill 182. It was attacked by the FCPASQ and other recipient organizations, the feminist FFQ, church leaders, the main labour federations, and “social rights” organizations.24 In the late 1990s, activists converged in a Collectif pour une loi sur l’élimination de la pauvreté, committed to forcing the government to eliminate penury. Following the now-established pattern, leading anti-poverty groups refused to participate in a consultation set

106  Comparing Quebec and Ontario

up by the government to address this demand.25 The PQ nevertheless was more responsive than the Liberals to these voices, all central to the province’s robust social advocacy network. This was manifest in its sensitivity to the anti-poverty campaign. Along with the caseload downturn, this contributed to these demands’ bearing some fruit. But relations with non-governmental actors were always tense. Overall, like their predecessors’, PQ policies introduced incremental changes to steer more claimants towards work in the face of intense resistance that went well beyond the community of social assistance recipients. Despite the crescendo of opposition – perhaps because of it – changes in assistance introduced by the PQ between 1994 and 2003 again did not reduce the adequacy of basic benefits appreciably for most families. For those subject to them, the PQ’s enhancement of the penalties first introduced by the Liberals for non-compliance nevertheless caused a loss of income. Moreover, single employable persons now experienced a decline in benefit adequacy.26 While planning Bill 182, the PQ also embarked on a reform of child benefits that transformed Quebec’s income security system for poorer families. It replaced the universal allowances and bonuses, which will be discussed in chapter 5, with an income-tested benefit that concentrated support on low-income families, whether or not they received social assistance. Thus, the purpose of the change was commonly identified as “taking children off of welfare.”27 Assistance benefits for adults would now be calculated independently of the number of their children. These changes initially evoked little response from social groups that engaged so intensively with social assistance policy. They originated in a distinctive context and would have very different long-term consequences. The initial PQ reform was a significant improvement for low-income families with children. Once enriched by the Liberals in the mid-2000s, Quebec was endowed with a generous measure that offered benefits much more broadly. A resulting dual pattern of policy change in Quebec – incrementally restrictive for assistance, far more expansive for child benefits – produced a system that by 2010 was much more munificent to families with children than to others. Several factors contributed to the initial PQ child benefits reform. First, it helped launch its childcare expansion in a constrained budgetary context (see chapter 5): by selectivizing universal child allowances, it could protect their value for disadvantaged people, even while withdrawing them from more comfortable families. Money saved by ending benefits for higher earners, meanwhile, helped fund more childcare.

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Second, the reform was consistent with a move towards income-testing that Ottawa had embarked upon with its 1993 Child Tax Credit, and extended in 1998 with a new National Child Benefit Supplement (NCBS). The latter permitted provinces to “claw back” their own transfers to low-income families by the amount of the NCBS; they were expected to redirect the savings to other child-related measures.28 By offering benefits on equal terms to assistance recipients and the working poor, third, the new benefit reduced impediments to the former cohort returning to employment.29 Largely for this reason, fourth, income-testing had long been popular with policy experts seeking ways to achieve redistribution while minimizing market distortions. In April 1995 the PQ government struck a committee, co-chaired by psychologist Camil Bouchard and economist Pierre Fortin, to examine options for assistance reform. It split, its members submitting separate reports, but they concurred on the value of removing child benefits from social assistance and extending them on equal terms to all of the poor. Moreover, the idea of an income-tested child benefit, separate from social assistance, had considerable support among officials at the province’s Income Security Ministry.30 By contrast, the merits of income-testing child benefits received little attention outside of government before the PQ reform, but the latter then attracted increasing public criticism. The opposition Liberals never reconciled themselves to the end of universal family allowances. The Montreal-based Institute for Research on Public Policy (IRPP) was another leading source of dissent. The PQ claimed that 95% of Quebec families were better off with the new benefit. IRPP researchers countered that 72% actually were worse off. They advocated a return to universal allowances, and organizations committed to promoting family life agreed.31 A distinctive critique emerged among Quebec feminists. The FFQ did not at the outset reject the income-tested reform, though it was sceptical that it in fact raised the incomes of most poor families.32 But by 2000, feminists noted that the government’s definition of the cost of raising children had not been updated since 1993. On the basis of that definition, the PQ “clawed back” the federal NCBS from low-income families after its 1998 introduction. Claiming that the remaining sums sufficed to cover child-rearing costs, it reduced its child transfer by the amount of Ottawa’s increased support. In 2001 Quebec’s own outlays therefore had fallen to $540 million from $770 million in 1998.33 On behalf of a single-parents’ group, economist Ruth Rose argued that even poorer

108  Comparing Quebec and Ontario

households were now worse off than before the PQ came to power. She recommended a substantial increase in income-tested benefits for the less well-off, alongside a reintroduction of universal allowances. This proposal was later endorsed by the FFQ and other groups. Now challenged by constituencies that were important allies of its childcare reform, the PQ abandoned the “claw back.”34 But comprehensive reform awaited another change in government. It was not immediately clear what direction Liberal assistance policy would take after the party returned to power in 2003. During the 1998 election campaign, Jean Charest, the new Liberal leader, had sounded a strongly neoliberal note, advocating substantial reductions in Quebec’s assistance caseload. In the run-up to the 2003 vote, in contrast, the Liberals demanded that the PQ do more to help the needy – views that nevertheless were greeted with scepticism in the press.35 In the months after coming to power, the Liberals seemed to commit to the former course. But by 2006 this neoliberal thrust largely had been spent. The familiar pattern of limited partisan polarization on assistance issues in Quebec, and of incremental policy change in a strained non-governmental context, reasserted itself. The Liberals initially promised major cuts in assistance as part of a larger ambitious plan to reduce the size of the public sector. A new program launched in July 2003, Place à l’emploi, sought to enhance the willingness of assistance clients to return to work; non-compliant recipients would be penalized more severely than before. This initiative predictably encountered intense opposition. Because of the extent of the new government’s ambitions to shrink the size of the Quebec state, the resistance extended well beyond organizations whose primary concern was social assistance to include other social groups and the province’s unions.36 As in the previous decade, this broad and interconnected quality contributed to the protest’s potency. In the face of considerable dissent within its own caucus, the government abandoned much of its ambition to “re-engineer” the Quebec state. In December 2003 it forsook an initial goal of reducing the assistance caseload by 25,000 beneficiaries.37 The following April, it released its anti-poverty plan, as required by the December 2002 anti-poverty law. Most prominently, it promised a minimum assistance income and renounced the use of financial penalties. But the government remained committed to increasing inducements to participate in employment measures by introducing a new Prime au travail tax credit. It also planned to reduce benefits for recipients

Social Assistance and Transfers  109

who lived with their parents and considered allowing benefit cheques to be seized from those who did not pay their rent.38 In the face of more protests and a decline in the government’s standing in polls, legislation to give effect to these changes was delayed until 2005. By then, the rent-seizure idea had been dropped. The Liberal budget of that year reduced by half an earlier projection of the savings anticipated from assistance benefits. The government also began to index rates to inflation, a practice that the PQ had not followed. Because the indexing was only partial initially, incomes nevertheless declined somewhat over the next few years for those who did not benefit from enhanced child benefits (discussed below).39 By 2006, with another election looming, the Liberals’ focus had turned from punitive measures to mending fences, if possible, with the social and labour communities. Employability measures for young and disabled claimants were expanded; recipients regained access to free medications (abolished by the PQ in 1997).40 That the Liberals had substantially repositioned themselves was clear during the 2007 and 2008 election campaigns, when they attacked proposals from the ADQ, which echoed the Liberals’ own earlier curtailment promises – to the point of mimicking the Liberals’ 2003 undertaking to cut 25,000 recipients from the caseload.41 The Liberals launched their most ambitious employability measure in March 2008. The Pacte pour l’emploi was designed to reduce the assistance caseload by 50,000 by providing claimants with enriched bonuses and credits for finding work, and offering training and job opportunities. The Pacte was expanded twelve months later with the onset of an economic crisis. In the face of the latter, fees for many services were raised in March 2010 (see chapter 3). The government introduced a “Solidarity” tax credit to compensate low-income earners for the resulting increase in their cost of living.42 In 2006, in an atmosphere that was now much calmer, a Comité consultatif de lutte contre la pauvreté was launched. A governmentappointed body, it offered more stable and constructive links to nongovernmental actors than had earlier consultation bodies, from which anti-poverty organizations habitually walked out. Yet it also managed to avoid appearing to be a patronage-ridden tool of the government. It recommended the full indexation of assistance benefits against inflation, an idea implemented by the Liberals in 2009; higher transportation subsidies; and the abolition of categories within the assistance system. While not embraced by anti-poverty organizations like the FCPASQ or the newer Collectif pour un Québec sans pauvreté, the Comité appeared

110  Comparing Quebec and Ontario

to earn their respect and offered the Liberals a bridge to opinion in this milieu that they lacked in 2003.43 The Pacte pour l’emploi resulted from concertation of a more traditional kind, for Quebec. Employer organizations agreed that participating firms would pay almost half of the program’s costs in exchange for the wage subsidies and enhanced skills that its clients would bring to them; union leaders also endorsed the plan. As it began to prepare for its second Anti-Poverty Plan in 2009, finally, the Liberals undertook extensive consultations.44 Yet none of these efforts to foster harmony altered the essentially fraught relationship between Quebec governments – of either party – and reform advocates. A modest second plan, released in June 2010, was roundly rejected by anti-poverty and feminist groups. When a press leak indicated that the Liberals were considering reclassifying recipients with children between the ages of two and five as “available for work,” which would reduce their benefits, a wave of opposition ensued, and the idea vanished.45 The Charest Liberals’ goals for child benefits were, at the outset, as ambiguous as their social assistance plans. During the 2003 campaign Charest argued that cutting taxes was the best way to help families with child-related expenses.46 After the vote, the same constituencies pressed for benefits reform as had while the PQ was in power – the IRPP and family groups repeating their support for a return to universal allowances, and feminist and single parents’ groups stressing the merits of Rose’s proposal of an allowance that would combine enhanced selective and universal elements.47 As was the case during the 1990s child benefits reform, assistance advocacy groups were largely silent. Only in March 2004, now in full retreat from much of their early marketoriented rhetoric, did the Liberals signal that a major child benefits reform was in the offing, one that would broadly reflect Rose’s model. Predictably, Rose, the FFQ, and the single parents’ group greeted the announcement enthusiastically.48 The Liberals had not only abandoned their neoliberal turn in this area but had replaced it with an innovation that went far towards addressing a leading preoccupation of groups that were central to Quebec’s substantial social advocacy network. Quebec’s partisan landscape again failed to reflect a polarized left-right schema of a kind that is evident in Ontario. The new benefit, called Soutien aux enfants, was unveiled later that month, and represented a sizable new commitment, though part of its cost was defrayed by eliminating some child tax and family deductions. Loss of the deductions meant that most high-income families

Social Assistance and Transfers  111

derived no net advantage, even though they now received an allowance that had been denied to them by the PQ’s income-tested measure. But the new benefit raised the incomes of most middle-income families and represented a substantial gain for families with low incomes. A single parent with two children and an annual income of $25,000 in 2004 gained over $2,000; she would be $1,000 better off if her income was $45,000. For a couple with two children earning $50,000, the new allowance increased disposable income by $700; the advantage fell to $100 if their annual income was $90,000.49 There is ample evidence, reflected in the tables and figures presented at the end of this chapter, of the Liberal reform’s substantial impact on low-income families with children in Quebec, especially those headed by a single parent. It very likely explains the fact that total welfare incomes rose for single-parent-headed families in Quebec, even as it fell for assistance beneficiaries without children (figure 4.2). Needless to say, the childless derived no advantage from the reform. In its wake, assistance advocacy groups, rarely sources of praise, sometimes acknowledged that the improved child benefits had helped single parent families substantially.50 Soutien aux enfants was popular. After initial rejection of it as a public relations gesture proved untenable, the PQ abandoned its objections. During the 2007 and 2008 election campaigns discussion of child benefits instead focused on the ADQ’s avowedly natalist proposal to create a very generous universal family allowance that would restore extra support for larger families and the defunct universal “baby bonus.” Since the ADQ was much less consistent in its support for the province’s now-large childcare network, these debates again allowed the Liberals to portray themselves as defenders of a progressive status quo – one that combined widely available and low-cost childcare with significant financial help to parents.51 By 2010, activists increasingly focused on the particular needs of the childless. Reform advocacy turned away from child-rearing costs to address the perceived need for social housing, measures for the elderly poor, a higher minimum wage, and abolition of categories in the assistance system – a demand that employable recipients receive the same basic benefits as disabled ones.52 In summary, regarding social assistance and child benefits, ideological differences between Quebec’s governing parties were of little consequence during the two decades examined here. Neither the Liberals nor the PQ introduced dramatic changes in assistance legislation; both curtailed assistance benefits gradually while offering enhanced

112  Comparing Quebec and Ontario Figure 4.2. Total Welfare Incomes as % of Poverty Rate, Using LICO and MBM Methodologies for Two Family Types, 1986–2009 (A) Single mother, 1 child; LICO poverty line

(B) Single employable; LICO poverty line %

1985

20

30

40

50

55 60 65 70 75 80

60

%

1990

1995 2000 year Quebec

2005

2010

1985

1990

Ontario

1995 2000 year Quebec

2010

Ontario

(D) Single employable; MBM poverty line %

2000

45

80

85

50

90

55

60

95 100

(C) Single mother, 1 child; MBM poverty line %

2005

2002

2004 2006 year Quebec

2008

Ontario

2010

2000

2002

2004 2006 year Quebec

2008

2010

Ontario

Source: NCW; see note 14 for NCW data sources. The incomes used to calculate these levels combine social assistance and child benefits.

employability opportunities to recipients. Both parties also introduced important reforms of child benefits, substantially expanding them. Indeed, the most generous change was introduced by the centre-right Liberals, not the broadly social democratic PQ. The pattern for interest intermediation was complex and only partly confirms the hypotheses presented in chapter 2. It also diverged between social assistance and child benefits. The PQ’s 1997 child benefits reform responded to imperatives within government, but its perceived inadequacy gave rise to mobilization among well-positioned research institutions and advocacy interests for a more expansive reform. For a new Liberal government anxious to recover legitimacy after its initial missteps, such a reform was an attractive option. At this stage, Quebec’s normative preference for consensual policymaking clearly played a role. Social assistance policymaking, by contrast, was fractious. Assistance

Social Assistance and Transfers  113

advocates were well organized and prominent, and their views evoked sympathy from other societal actors. Pressure from them nevertheless led to nothing like the child benefits reform. For those without children, the adequacy of assistance incomes probably fell during these years.53 Assistance recipients per se have a much more tenuous standing in Quebec’s potent advocacy milieu than do those whose interests can be addressed from the perspectives of family, children, or gender. Once isolated from these frameworks, as was the case after 1997 and even more so after 2005, improving the lot of assistance-dependent poor Québécois is not a political imperative. The sympathy that assistance advocates attracted probably helped forestall cuts of the kind that occurred in Ontario, but it stimulated no major improvements. Quebec’s partiality to policy consensus and concerted policy outcomes clearly does not encompass all interests equally. Ontario: From Employability to Workfare … and Back Again? Returning assistance clients to employment also became a preoccupation in Ontario after 1985. As in the case of early learning concepts discussed in chapter 5, a new ideational current therefore emerged with equal force in both provinces regarding social assistance. The Peterson Liberal government appointed a high-profile committee chaired by George Thompson to propose changes. It consulted extensively, receiving over 1,500 briefs; most were from assistance advocacy groups and others sympathetic to their concerns. They recommended higher benefits. The committee’s September 1988 proposals, driven by a dual imperative to reduce poverty and encourage a return to work, were of two types: first, rates in the system should rise substantially, and work impediments should be eliminated – by relaxing asset and income exemptions and via retraining programs. Second, entirely new income-tested benefits should be created to cover child-rearing costs for low-income families, and to supplement the incomes of the working poor.54 Before the report’s release, the Liberals had already raised rates and eased program access. The caseload rose during the late 1980s, even as the economy prospered, suggesting that these changes were attracting more Ontarians into the system.55 In the report’s wake, the Liberals implemented much of the first part of the Thompson proposals; benefits and exemptions rose again and a new STEP program allowed recipients to earn income and acquire job skills. This was greeted warmly by assistance advocates and the opposition NDP.56 By the time

114  Comparing Quebec and Ontario

the latter came to power in 1990, with the province now headed into a deep recession, the caseload was rising sharply (figure 4.1) and the adequacy of assistance benefits was approaching an all-time high (graphs A and B in figure 4.2). Yet no progress had been made on the more innovative second set of proposals, and this did not change after 1990. Until after 2000, income-tested benefits received little attention from advocacy groups.57 Quebec, where a similar pattern prevailed, nevertheless subsequently introduced a major income-tested child benefit because of the conjuncture that the PQ faced in 1996: a legacy of universal family allowances available for “selectivization,” and a strong incentive to do this, mainly to finance universal childcare. These factors were absent in Ontario; movement towards the use of income-testing for child benefits was delayed until 2007. Until then, debate about income security reform in Ontario remained focused almost exclusively on social assistance – its generosity, ease of access, and expense. In the province’s fragmented and polarized policy setting, a question framed in these terms quickly became highly contested between, on the one hand, assistance advocates and Liberal and NDP governments, and, on the other hand, the province’s PCs and their supporters among small business and low-tax groups, and in the broader public. Between 1990 and 2003 there was little room for compromise between these perspectives. Policy shifted radically from a highly expansive period, already well underway by 1990 and continuing for a time under the NDP. to an equally restrictive one after 1995. Throughout these years, assistance was one of the most prominent and polarizing issues in Ontario. Shortly after coming to power the NDP reiterated its election promise to implement more of Thompson’s recommendations, but, in an indication that this would not happen quickly, its first throne speech made no major social assistance commitments.58 Indeed, two significant new obstacles now meant that comprehensive reform would be very difficult. First, the assistance caseload now skyrocketed in a deepening recession. It climbed from about 590,000 in 1989 to 930,000 two years later and peaked at 1,380,000 in 1994.59 Combined with the benefit increases during these years, this expansion caused costs to explode: from $3.8 billion in 1989–90 to $6.4 billion in 1991–2, and $8.2 billion in 1993–4.60 Second, the federal government’s February 1990 budget included a “cap on CAP” for the three most affluent provinces, including Ontario. Rather than covering half of assistance costs under the Canada

Social Assistance and Transfers  115

Assistance Plan (CAP), as it had since the plan’s inception in 1966, Ottawa would now transfer to these provinces only a sum equal to the previous year’s payment, plus a 5% annual increment. With Ontario’s assistance costs now rising much faster than this amount, the federal contribution fell quickly from 50% to only 28% by 1992.61 In 1991 the NDP announced that, because of these developments, major reform would be delayed. In the meantime it restricted itself to increasing benefits annually, as the Liberals had, and to making adjustments to ease program access. The last benefit increase occurred in 1993, but both this one and that of the preceding year were lower than the rate of inflation – effectively amounting to small cuts.62 The focus of most specific NDP initiatives by 1992, indeed, had shifted towards restraint. The government’s determination to reduce its budgetary deficits was an important motivation for this shift. Another was evidence of a “welfare backlash.” Media accounts appeared of rising hostility to assistance recipiency. Opinion polls and focus groups identified a widespread belief that recipients were receiving benefits fraudulently. Shortly before the 1995 election, a columnist identified the campaign’s “visceral issue” as “welfare and the growing resentment among middle-class voters against those who receive it.”63 The NDP restricted access to the STEP program, reduced income exemptions, and required recipients to charge rent to adult children living at home. It also launched a much-publicized campaign against benefits fraud, hiring 270 inspectors in 1994. Premier Rae made public statements, often resented by members of his own caucus, about the failings of the assistance system and the need to curtail abuse.64 This conservative turn nevertheless had its limits. In a March 1994 fight in the government’s inner Cabinet, its leading social ministers fought off a proposal from Rae and his treasurer to reduce assistance rates for some claimants. Towards the end of its term, according to informed sources, the Cabinet debated a proposal to implement mandatory employability measures – effectively workfare; it was rejected.65 Consequently, enhanced employability, but achieved with voluntary inducements and adequate benefits, remained central to the NDP’s thinking. The party remained committed to introducing a major reform, when feasible. In 1992 the NDP launched jobsOntario training, offering subsidies to firms that employed or trained assistance recipients and those who exhausted their Unemployment Insurance entitlement. Participation was voluntary.66 In July 1993, after more delays, a major reform plan was released, with three components. First, and

116  Comparing Quebec and Ontario

most innovatively, it promised a new income-tested child benefit, available to working poor families, whether or not they received assistance. In effect, this responded to Thompson’s proposal of such a measure, designed to eliminate the penalty faced by families with children who left assistance. The second element would provide a basic assistance income for adults. The third consisted of a bonus for recipients if they returned to work, accompanied by measures to help them acquire skills and jobs. The package also committed the province to assuming responsibility for those parts of the system that were now administered by the municipalities.67 But none of these changes were implemented. Municipalities worried that the costs they were expected to take on in exchange for being freed of assistance might, in the end, represent a greater burden. The plan was curtailed in January 1994. When Ottawa completely froze its contribution to provincial social assistance programs the following month, another delay was announced. A version of the re-employment part of the reform, its third component, that emerged later, was a much-reduced initiative.68 The other parts did not reappear before the NDP left office. For reform advocates, initial impatience with the NDP turned to anger. More radical activists formed an Ontario Coalition against Poverty (OCAP) in 1990, which became a persistent critic, demanding higher benefits and minimum wages, and so forth.69 Yet its views did not find as strong an echo among other, less militant, advocates as its equivalents – such as the FCPASQ – did in Quebec. Feminist organizations were not very active in Ontario assistance debates. Unions sometimes were but usually confined their attention to questions of direct concern to themselves – for instance, whether employability measures for recipients might displace existing workers. Other organizations, such as food banks, pressed for reform.70 But such representations were much less frequent and received less media attention than in Quebec. The NDP also made little use of formal consultation. While the Thompson committee had canvassed widely for views, the NDP confined itself to creating a “Council of Consumers” of recipients, with no evident impact. Had it sought more input, in the charged atmosphere of 1992, it might have heard as much from individuals and business interests openly hostile to expansive reform as from advocates.71 This societal setting – fragmented, thinly populated, and polarized – neither fostered generous reform nor, as we will see, provided a bulwark against retrenchment.

Social Assistance and Transfers  117

The accession of Mike Harris’s Conservatives to power in June 1995 spelled an end to these inhibitions and led to a dramatic policy reversal. During the election campaign, the Tories made clear their desire to cut assistance benefits substantially and to implement workfare – a requirement that able-bodied recipients work or train in exchange for their benefits. These commitments were prominent in the PCs’ Common Sense Revolution (CSR) platform and probably contributed significantly to their election victory.72 After his win, Harris stipulated that fulfilling his promise to cut benefits was his first priority. Reflecting what would become another hallmark of his party’s approach, however, Harris also stipulated that “truly disabled” recipients would be exempt from the reduction. A 22% cut for employable recipients was implemented in July. JobsOntario training was cancelled and a new “snitch line” allowed people to report welfare fraud.73 The cuts initially caused the PCs some embarrassment: new regulations did not, as promised, at first allow employable recipients to “earn back” lost benefits by supplementing them with employment income. This had to be rectified.74 Another new regulation removed many disabled persons from the caseload. This appeared to reflect statements made by Harris and his social services minister after the election that some recipients who were classified as disabled in fact were not. But the change seemed to contradict the PCs’ promise to shield disabled persons from cuts. Under severe criticism, the regulation was reversed. Other than for drug addicts (see below) the PCs subsequently largely avoided restricting access for disabled persons.75 By 2003, for informed observers, a sharp distinction had emerged between employable recipients, whose rates fell substantially in 1995 and who faced workfare requirements, and disabled ones who were exempt from these demands and receiving higher benefits.76 Implementing workfare took longer than cutting benefits. Launched in June 1996 as a pilot project, Ontario Works, as it was called, was based on the principle that all employable recipients would be required to perform community services, train, or undertake a systematic job search in exchange for their benefits. Initially restricted to communitybased and municipal employers, the program was extended to the private sector in 1999. Recipients who declined a work placement would lose three months of benefits for a first refusal, six months for subsequent ones.77 New legislation replaced the existing assistance statutes, extended Ontario Works across the province, and complemented it with

118  Comparing Quebec and Ontario

a separate Ontario Disability Support Program (ODSP) that institutionalized the government’s distinctive treatment of disabled recipients. The Ontario Works Act included provisions to make fraud detection easier, to permit authorities to pay rents directly for negligent recipients, and to place liens on the homes of those who collected benefits for more than twelve months. As we shall see in chapter 5, the PCs did little to extend the availability of subsidized childcare during their time in office. Observers already noted, in 1997, that this made it difficult for many recipients to participate in activation measures.78 The PCs, like their predecessors, had to address the role of municipalities. A report on municipal service realignment recommended that the province assume complete responsibility for assistance – as the NDP had proposed. In January 1997 the government instead announced that municipalities would be expected to cover 50% of all costs for both new programs, but after much protest from local governments it retreated. The municipalities would instead administer both Ontario Works and ODSP, and fund 20% of benefits and 50% of administration.79 Yet municipal involvement complicated workfare. Toronto and Ottawa-Carleton declined to participate in pilot projects, and larger centres were reluctant about many features of Ontario Works.80 Long after its introduction there was much debate about how many recipients were really participating in activation measures. Work or training deemed appropriate by municipal authorities was often in short supply, as was childcare; social services agencies frequently were reluctant to participate. In August 1999, only 5% of Ontario Works clients were working in exchange for their benefits, though many others were engaged in job preparation. But polls consistently showed that workfare was very popular. As a result, neither opposition party made much publicly of its possible deficiencies.81 Indeed, the 1997 legislation was followed by further steps to restrict access: homeless recipients were required to show receipts to receive a shelter allowance, applicants would have to sell a car worth more than $5,000, workfare participants were prevented from unionizing, and teenage mothers were required to enrol in school and parenting programs.82 More restrictions were promised during the 1999 election campaign: drug tests, mandatory literacy programs for those who failed a writing test, and a lifetime ban from benefits for recipients convicted of welfare fraud. The PCs also wanted to reintroduce the “spouse in the house” rule, abolished by Peterson’s Liberals. These measures preoccupied the government through much of its second term. An effort to remove addicts from the caseload was

Social Assistance and Transfers  119

challenged by the province’s human rights commissioner. Drug testing was finally introduced on a very small scale in 2002. The “spouse” rule was blocked in the same year by the Ontario Court of Appeal.83 The PCs introduced a small tax credit in 1997 to cover childcare costs. It later was expanded and the requirement that it be spent on childcare was dropped, effectively turning it into the PCs’ one noteworthy expansion of transfer payments to poor Ontarians. But it covered children only up to the age of five, and the later extensions were funded entirely by Ottawa’s NCBS (discussed above). Since Ontario “clawed back” the NCBS from assistance recipients, its benefits were restricted to the working poor.84 Compared to Quebec’s child benefits, it was very modest. On the eve of the 2003 election, Ernie Eves, the new premier, effectively promised to end the claw back. This idea was included in the party’s campaign platform but was not reiterated in PC press releases, and it received little media attention. If the proposal indicated that the Conservatives would have been less restrictive had they been re-elected in 2003, this possibility was not highlighted by the party, which instead focused on its ongoing efforts to eliminate welfare fraud.85 It is hard to imagine a more polarized partisan and societal setting than that into which workfare was introduced in 1996. Polls showed that the initiative was favoured by a substantial majority of the province’s residents. The business community also strongly supported the savings that resulted from benefit cuts and sometimes supported workfare’s extension to the private sector.86 But the reforms evoked harsh criticism from OCAP and other assistance-rights groups, and from some municipal officials and politicians. Because workfare had the potential to displace paid employees, the labour movement also opposed it strenuously. Especially during the administration’s early years, its policies met with loud and frequent protests.87 Yet this campaign did not shift public opinion and did not benefit from the involvement of other groups that might have had the potential to do so. In this atmosphere, concertation played no role in policymaking. To recapitulate, between the late 1980s and early 2000s, Ontario assistance policy was strongly conditioned by the preferences of governing parties. The caseload rose sharply at the end of the Peterson Liberal era and the beginning of the NDP administration and fell equally drastically after 1995 under the PCs. The business cycle, falling in the former context and rising in the latter, clearly contributed to this pattern. But as figure 4.1 indicates, the variations were much more pronounced in Ontario than in Quebec; it is probable that changes in access to

120  Comparing Quebec and Ontario

assistance – expansive in the first period, restrictive in the second – very much exaggerated these cyclical trends in Ontario. Measures of benefit adequacy show the same pattern for employable recipients: a decisive upswing for a few years beginning in the late 1980s, and an equally severe and rapid fall after 1995.88 This change contributed to the caseloads’ gyrations – first drawing clients into the system, later driving them out. For almost four years after the Liberals returned to power under Dalton McGuinty this pattern of severe partisan swings was interrupted. Only towards the end of their first term did they begin to depart clearly from the Harris legacy. In 2003, the Liberals promised “to make workfare work,” not to abandon it.89 The principle of mandatory participation in work or training was maintained, though now implemented with much less determination. Some restrictions nevertheless ended in 2004: the lifetime welfare fraud ban and the PCs’ effort to reintroduce the “spouse in the house” rule. Also, earned income limits rose; recipients would not have to liquidate educational savings plans; and they would no longer have liens placed on their homes. Some of the changes followed a review of the assistance system by Deb Matthews, a Liberal MPP.90 The Liberals also began raising assistance benefits annually; rates had been frozen at the levels to which the PCs reduced them in 1995. Yet the increases were modest. Adjusted for inflation, benefits for many recipients may have been slightly lower in 2007 than in 2003.91 The Liberals confronted other issues: OCAP successfully campaigned to increase the number of recipients who received a special diet allowance, and it asked doctors to complete the required form for any beneficiary who requested it. The government responded by requiring doctors to specify more precisely the qualifying medical condition.92 Other adjustments made it easier for Ontario Works and ODSP clients to earn income. Disabled clients, for instance, now received a bonus during months when they worked and for taking a new job, kept more of their earnings, received help with childcare, and continued to receive in-kind benefits for a time after finding employment. In early 2007, however, few observers believed that the Liberals had done much to alleviate poverty since returning to power.93 The Ontario Child Benefit (OCB) announced in the March 2007 budget therefore was a major departure. It extended a tax credit to lowincome Ontario families with children under eighteen, whether or not they included employed persons. Its maximum annual value in 2007 was $250 per child, which rose to $1,100 with the 2009 budget.94 The

Social Assistance and Transfers  121

new benefit incorporated the PCs’ childcare tax credit, discussed above, and two other special allowances. It represented both more and less than the elimination of the NCBS “claw back” that Eves had promised in 2003: more in that it offered benefits to employed parents as well as those receiving assistance; less because, as explained below, assistance beneficiaries with children would not see their incomes rise by the full $1,100 per child.95 The non-governmental policy setting, highly polarized during the PC era, had shifted after 2003, facilitating the Liberals’ decision to proceed with the OCB. The Ontario branch of Campaign 2000 gained visibility for its anti-poverty campaign.96 The Metcalfe Foundation and the Income Security Advocacy Centre, among others, also emerged as respected purveyors of research and advice on poverty reduction. These actors adopted a more moderate tone than was customary for groups like OCAP. They concluded that advocating substantial increases in assistance benefits was no longer feasible in light of the popularity of Harris’s cuts. Echoing the neglected second focus of the 1988 Thompson Report, they concentrated on measures that would cover the employed as well as those on assistance and that addressed specific causes of need (such as child-rearing) that attracted public sympathy, using instruments (such as tax credits) acceptable to voters and experts alike. The focus shifted to using tax transfers as an alternative to assistance, a change that had occurred in Quebec a decade earlier. The Toronto Star newspaper also adopted this stance in an anti-poverty campaign that it launched in January 2007.97 Strikingly, it also attracted support in the business community. Don Drummond, the TD Bank’s chief economist, addressed low income in public statements.98 A large number of business leaders joined the Toronto City Summit Alliance at this time, a civic-minded organization mobilized by local businessman David Pecaut in 2002.99 The alliance’s Modernizing Income Security for Working Age Adults (MISWAA) proposal, released in 2006, closely anticipated the OCB. Pecaut lobbied intensively for MISWAA prior to the March 2007 budget, and the alliance released an open letter to the premier, signed by business leaders and others, urging its adoption.100 Influences within the government also contributed importantly to the OCB. Interviewed bureaucrats within the Social Services Ministry had worked on models for a tax-delivered child benefit for a number of years. Premier McGuinty also had signalled to senior officials that attacking poverty was now a focus for his government.

122  Comparing Quebec and Ontario Table 4.1. Child Benefits in Ontario and Quebec, 2011 Quebec Program

Ontario: Employed

Ontario: Ontario Works

Soutien aux enfants Ontario Child Benefit Ontario Child Benefit

Single, 1 child

$2,976

$1,100

$764

Single, 2 children

$4,078

$2,200

$1,860

$32,856

$20,000

$20,000

$2,204

$1,100

$1,052

Turning point Couple, 1 child Couple, 2 children Turning point Tax back rate Minimum benefit – single, 1 child

$3,306

$2,200

$2,148

$44,788

$20,000

$20,000

4%

8%

8%

$928

NA

NA

Sources: Quebec, Régie des Rentes Québec, “Montant et paiement du Soutien aux enfants,” www.rrq.gouv.qc.ca/fr/programmes/soutien_enfants/paiement/Pages/montant. aspx. Ontario Ministry of Children and Youth Services, “How Much Will I Receive?,” www.children.gov.on.ca/htdocs/English/topics/financialhelp/ocb/howmuch.aspx. Ontario: Income Security Advocacy Centre, “Fact Sheet: Update,” June 2009. Note: Figures in the first, second, fourth, and fifth rows report maximum benefits for which the family categories were eligible.

The OCB was a major innovation, but it would not do as much as Quebec’s Soutien aux enfants to reduce poverty and inequality. First, as the first two columns of data in table 4.1 indicate,101 maximum benefits under Quebec’s program are considerably higher than are the OCB’s. An employed one-parent / one-child family in Quebec receives almost three times as much as its Ontario equivalent. For two of the other categories in the table, the benefit is twice as high. Second, Ontario families that collect social assistance do not see their incomes rise by the full value of the OCB because the “Basic Needs” component of their assistance benefit was reduced in 2009. The net increase for Ontario Works recipients is indicated in the third column. The reduction was greatest for single parents, further disadvantaging that category in Ontario. Third, Quebec extends benefits to far more families. Its “turning point” (the income at which benefits begin to be reduced from the maximum) is much higher than Ontario’s. Conversely, the “tax back” rate (the rate at which benefits are reduced for each dollar increase in income above

Social Assistance and Transfers  123

the turning point) is twice as high in Ontario. Quebec’s child benefit also has a minimum payment, regardless of income. During the autumn 2007 election campaign, the Liberals nevertheless identified poverty reduction as a priority. Their platform stated that if re-elected they would “build a comprehensive poverty reduction strategy around the Ontario Child Benefit.”102 It promised better indicators for measuring poverty but made no specific new commitments. After the election, Premier McGuinty quickly struck a Cabinet committee to conduct the strategy.103 Non-governmental activists also now had a higher profile. According to one observer “in Toronto, the anti-poverty movement [was] stronger and more united than it [had] been in decades.”104 But with the OCB’s implementation, business leaders no longer played a visible role. In response to the Liberals’ promise of poverty reduction targets, mainstream groups formed a “25 in 5 Network,” promoting a 25% reduction within five years as the appropriate goal.105 But further developments from the strategy emerged very slowly. It is therefore unlikely that social reform advocates witnessed a real improvement in their traditionally secondary policy role after 2003. It is instead probable that the coalition that helped shape the OCB was an exception to the social policymaking norm in Ontario, not a permanent change in it. Only in December 2008 did the government specify its poverty indicators and targets. It endorsed the network’s “25 in 5” mark, though only for children, and it cautioned that meeting the goal would require “federal investments and a growing economy.”106 Legislation introduced the following February required the government to report annually on poverty levels but again included no new income transfer initiatives. In 2009 the Liberals appointed a council of non-governmental experts and activists to report on the appropriate scope for an assistance reform.107 The council’s June 2010 report went much further, arguing that reform should focus on expanding non-assistance transfers and services, such as an expanded OCB and a benefit to cover housing costs, and these would be available regardless of the employment status of the recipient. Finally, in November 2010, three years after the strategy’s launch, the Liberals appointed yet another assistance review committee, specifying that it should make recommendations eighteen months later.108 In spite of their new focus on poverty, then, the Liberals took modest steps after 2007. They did assume full financial responsibility for ODSP, relieving the municipalities of their share of its costs. In 2008, Premier

124  Comparing Quebec and Ontario

McGuinty made the same commitment regarding Ontario Works, but implementation was delayed.109 Only after considerable pressure did the Liberals abandon a decision to replace the special diet allowance – which was being received by many claimants for whom it was not intended. In December 2010 the government announced that the allowance would remain in place during the assistance review but that access would be curtailed.110 The tentativeness of the McGuinty government’s departure from the Harris legacy is evidenced by measures of welfare income adequacy. These nevertheless also indicate that the sharp decline in the welfare incomes of non-disabled Ontarians ended under the Liberals; those for families with children probably improved.111 The latter result no doubt owes much to the expansion of federal child tax benefits during these years but also reflects the introduction of the OCB. In this setting of modest change, partisan polarization was much less manifest. Nevertheless, PC leader Tim Hudak questioned the advisability of the province accepting full financial responsibility for Ontario Works and proposed that new arrivals in the province be ineligible for assistance for one year.112 Their stress on fiscal restraint also made it unlikely that a future PC government would pursue any expensive recommendations that might emerge from the Liberals’ social assistance commission. In summary, strong partisan disagreement between the PCs and the other main parties characterized this policy field in Ontario throughout the 1990–2010 period. Polarization attenuated briefly after 2003, but by 2010 a Liberal government was again moving in a direction that differed sharply from the legacies of the preceding PC administration. Stymied by the evident popularity of the Harris assistance cuts, the Liberals never sought to simply reverse them. But their preference for an alternative course was reflected in incremental improvements after 2003. The child benefits reform was a more radical departure. Judged more likely to be impervious to a PC-encouraged welfare backlash than improvements in assistance, the OCB went well beyond anything considered by the Conservatives while they were in power. These policy developments also unfolded in a highly fractious, pluralist societal setting. For much of our period, there was no common ground between a laissez-faire preference for sharp cuts in assistance and the position of welfare activists, who championed very ambitious reforms. The OCB emerged in a setting that departed from this scenario – backed by moderate reform advocates, relying on non-governmental experts, and with some support from Ontario business. But the limited influence of this constituency’s subsequent policy report recommendations does

Social Assistance and Transfers  125

not indicate that it has acquired an ongoing influence. Fragmentation and polarization therefore probably will remain the norm. Distinctive Causes, Different Outcomes Social assistance and child benefits in Quebec and Ontario changed substantially after 1990, but this happened very differently in the two provinces in response to different mechanisms. First, Ontario assistance policy was very much affected by partisan differences, which, along with the dramatic short-term shifts in benefits associated with them, were largely absent in Quebec. Second, concertation played a larger role in policymaking in Quebec than in Ontario, though its impact there was greatest for child benefits; even in that field it became important only after an initial reform was in place. Policy outcomes evolved in a manner that we would expect in light of these distinctive influences. Benefits and program access were cut substantially during the PC era in Ontario, after expanding dramatically under the Liberals and NDP. The McGuinty Liberals only partly reversed these changes. This is consistent with Kitschelt’s insight, discussed in chapter 1, about the durability of welfare state retrenchment in the presence of a strong neoliberal party. Retrenchment also occurred in Quebec but was more incremental and modest, impeded by the province’s more consensual policy milieu and the absence of a governing neoliberal party. Punitive “workfare” measures were never introduced in Quebec but were in Ontario. Moreover, Quebec substantially increased support for families with children, helping to reduce poverty for these families. Movement to improve child benefits in Ontario was later and more modest. What does available evidence tell us about our first two hypotheses regarding policy outcomes in these fields – that Quebec would spend more on them (4a) and that it redistributes more with them (4b)? The best data on program expenditures were presented in figure 2.2, graph D, which reported spending only for social assistance and related income transfers, our focus here. In contrast, the data presented in figure 4.3 do not distinguish these outlays from spending on non-health social services, such as the children’s services discussed in chapter 5. They are presented here because they derive from alternative data sources and therefore offer alternative evidence about comparative spending levels. Other than a brief period during the early 1990s in the figure 2.2 graph, both graphs show that Quebec’s spending relative to GDP was always higher than Ontario’s.

126  Comparing Quebec and Ontario Figure 4.3. Assistance and Related Service Spending as % of Provincial GDP (A) 1970-1987

(B) 1988-2008 %

1970

1975

1980 year Quebec

1985 Ontario

1990

2.5 3

1

2

3

3.5 4

4

4.5 5

5

%

1990

1995

2000 2005 year Ontario Quebec

2010

Sources: For graph A, HRDC, Social Security Statistics: Canada and Provinces, 1970– 71 to 1994–95. For graph B, Statistics Canada, CANSIM database, table 3850001. Note: Most HRDC figures reported in graph A represent the provincial share of costs under the cost-shared Canada Assistance Plan, and under the provinces’ other assistance programs. These do not distinguish cash and in-kind benefits. Although the FMS data used for graph B report separate figures for “assistance” and “services,” these do not, in fact, clearly distinguish cash-benefits from in-kind ones, as non-assistance transfer payments evidently are included in the latter category. I therefore sum these figures and report the aggregate numbers.

That Quebec spends more does not mean that its programs are more adequate: higher expenditures may simply reflect greater need there, a distinct possibility in view of the fact that it is a poorer province than Ontario. The most commonly cited evidence for the adequacy of assistance and related transfers in Canada was prepared by the National Council of Welfare (NCW) and is presented in figure 4.2. The NCW evaluated the adequacy of “welfare incomes,” that is, the income available to a family that relies entirely on social assistance and child benefits. NCW figures are available for (1) a single mother with one child, (2) a two-parent family with two children, (3) a single employable person and (4) a disabled person. Two caveats are required when considering these figures. First, calculations reflect the benefits that provincial regulations stipulate for these clients. They presuppose that clients receive benefits for the entire year, are not subject to the myriad provincial deductions for assets, earned income, and so forth, and are not cut off benefits because of a perceived lack of work effort. Since they are not based on surveys or administrative files, they cannot address the possibility that provinces vary in how frequently they withhold the stipulated incomes for

Social Assistance and Transfers  127

these reasons, or that eligible families may differ across provinces in their willingness to claim benefits. Second, the NCW has long used Statistics Canada’s Low-Income Cut-Off (LICO) to assess income adequacy; the LICO defines a family’s income as low if it spends 20% more of it on necessities than does the average family. This only very imperfectly takes into consideration the fact that the cost of living varies across Canada: an adequate income is set at a higher level in larger metropolitan centres.113 Since the cost of living in fact varies considerably among communities of the same size, this is a major simplification. Despite these shortcomings, LICO-based measures are the longestavailable data series on assistance program adequacy. Their evidence for single mothers with one child and for single employable persons, for Quebec and Ontario, is reproduced in parts A and B of figure 4.2. Consistent with hypothesis 1b regarding the impact of partisanship on policy outcomes, for Quebec these indicate that benefit adequacy for single mothers was broadly stable between 1986 and the early 2000s, when it rose noticeably. Until then, there was no substantial variation over time, though adequacy increased during the early 1990s before receding after 1994. If one excepts the anomalous figure for 1990, benefits for single employable persons also experienced no major short-term fluctuations once the Liberals increased them in 1989, though there was a discernible downward trend after the early 1990s. In Ontario, by contrast, partisan influences are evident: adequacy for single mothers rose dramatically in the late 1980s under the Peterson Liberals, peaked under the NDP, then plummeted after 1995; it continued to decline more gradually during the rest of the PC era, before rising somewhat under McGuinty. The variations are less dramatic between the late 1980s and late 1990s for Ontario single employable claimants, but the overall pattern, and its evident connection to partisan influences, is similar. For two-parent / two-child families, the evidence (not shown here) resembles that for single mothers. But another aspect of the LICO-based calculations is not at all consistent with one of our key hypotheses (4b): that Quebec would redistribute more than Ontario. For the two family categories included in figure 4.2, as well as for two-parent / two-child families, the graphs indicate that the adequacy of welfare incomes did not differ much between Ontario and Quebec after 2000, and they were much higher in Ontario before 2000. The LICO-based calculations also indicate that benefits remain much more adequate for disabled persons in Ontario.

128  Comparing Quebec and Ontario

The latter finding is less surprising in view of the relative protection that we found disability benefits, set at a high level during the LiberalNDP years, received from the PCs’ dramatic cuts.114 But for the first three client categories other available measures suggest, in contrast, that benefits are now more adequate in Quebec, especially for families with children. One such measure, commonly used in international comparative research, gauges benefits as a percentage of median family income. A family is defined as poor if its income falls below 50% of this level. Calculations based on this measure (not shown) suggest that by 2008 welfare incomes were about 10% more adequate in Quebec than in Ontario for single-mother families and for two-parent / two-child families. The gap was about 5% for employable persons. By this measure, Quebec’s welfare incomes have been more adequate than Ontario’s since the mid-1990s for all three of these categories.115 A similar pattern is revealed by the market-based measure (MBM), which is based on a broader measure of family expenses than is the LICO, uses a cost-of-living calculation that is sensitive to actual differences in these costs among municipalities, and that was updated in 2010. It appears to be superior to the LICO as a tool for inter-provincial comparisons,116 but it has been applied to welfare incomes only since 2000. An MBM-based comparison of adequacy in Quebec and Ontario since then for single mothers and employable persons is presented in parts C and D of figure 4.2. Quebec’s benefits were 11% more adequate than Ontario’s in 2009 for single-mother families and (not shown) 7% more so for two-parent / two-child families. The gap was 4% for employable individuals, whose incomes nevertheless are shown to have become significantly less adequate in both provinces. These results, like those based on the 50% poverty line, indicate that welfare incomes as defined by the NCW – the income of families that relied entirely on social assistance and child benefit payments – were more adequate by 2008 or 2009 for families with children in Quebec than in Ontario. The difference existed in spite of Ontario’s OCB, but it should be noted that the latter benefit was not available at its maximum level for a full year until 2010. Yet these data reflect only part of Quebec’s advantage in reducing poverty for families with children. Some of those lifted out of poverty there would never have qualified for assistance – for instance, if family members were employed at low wages. For them, measures of income adequacy of the kind prepared by the NCW, which calculate incomes for those who have no employment income, are of no use in tracking

Social Assistance and Transfers  129 Figure 4.4. Income of Median Recipient, 1993–2008 (B) Assistance income, median beneficiary Thousand $

1.5 2.0 2.5 3.0 3.5

6.5 7.0 7.5 8.0 8.5 9.0

(A) Child benefits, median beneficiary Thousand $

1990

1995

2000 year Quebec

2005 Ontario

2010

1990

1995

2000 year Quebec

2005

2010

Ontario

Source: Statistics Canada, CANSIM, table 2020407; the data are derived from the Survey of Labour and Income Dynamics.

well-being. Yet, especially after 2005, their incomes and their chances of avoiding poverty were raised significantly by Quebec’s child benefits. The fact that Quebec’s assistance caseload continued to decline during the 2000s (figure 4.1) suggests that the proportion of low-income Quebec families in this situation increased during those years, an outcome that the child benefits reform, with its built-in work incentives, was designed to foster. Figure 4.4 illustrates a consequence of the new Quebec measures, showing that the income received by the median recipient of child benefits has been much higher in Quebec than in Ontario since 1993, and this gap grew dramatically in 2005 when Quebec enhanced its benefit. Since 1997 median assistance income has in contrast been consistently lower in Quebec than in Ontario. To recapitulate, our findings in this chapter support most of the hypotheses presented in chapter 2, but there are important qualifications and limitations. Partisanship caused much more policy variation in Ontario than in Quebec. Regarding policymaking, this is our most emphatic finding (hypothesis 1b). Concertation was less evident for policymaking about income support in Quebec than in all other fields examined in this book, but its collaborative norms were important. Its initial child benefits reform did not react to societal actors, but the substantial expansion in 2004 responded to well-placed policy advocates. Lobbying by assistance advocacy groups was less consequential but, aided by mainstream sympathizers, it probably attenuated

130  Comparing Quebec and Ontario

retrenchment pressures in Quebec, unlike Ontario (1a). Other than briefly in the context of the OCB’s creation, non-governmental actors did not contributed constructively to policy development in Ontario. We have also uncovered strong evidence in favour of two of our hypotheses about policy outcomes in this area. Both provinces emphasized employability far more than before. But only in Ontario did this take the form of mandatory “workfare” programs. Quebec, by contrast, abandoned financial penalties for non-participating clients and emphasized voluntary employment measures (4c). Quebec’s child benefits also provided greater support than did Ontario’s (4d). Other than for a brief period during the early 1990s, moreover, Quebec spent more than Ontario on assistance and income transfers (4a). But the spending gap is less dramatic than for the other policy fields examined in this study. As we shall see in chapter 7, in addition, the Ontario-Quebec difference for the data that were graphed in figure 2.2 is seldom statistically significant in the face of the many controls that are included in the regression results presented there. The results presented above also offer a first comparison of redistributive outcomes (4b), but this evidence is equally provisional. Near the end of the period studied, benefits probably were higher in Quebec for families with children. But they were more adequate for disabled individuals in Ontario and had become less adequate in both provinces for employable individuals (4b). In general, the surmise that Quebec’s policies would be more ample than Ontario’s is borne out for families with children. The evidence is far less compelling for the childless. The question of how our provinces compare on redistribution is taken up more systematically in chapter 8.

Chapter Five

Childcare and Early Learning: Can the Residual Mould Be Broken?

This chapter compares childcare and early learning policy in Quebec and Ontario. This field includes the provision of care for children before they are old enough to attend school and to older children before and after the regular school day; and pedagogically oriented services and the extension of access to kindergarten for children under the age of six. Provincial maternal and parental leave and public services to assist parenting are also discussed here, though they receive less attention, as they have in policy debates. Income supplementation for families, examined in chapter 4, is addressed briefly when it illuminates specific policy choices.1 Provincial childcare and early learning policy (hereinafter “childcare”) after 1990 was strongly shaped by prior initiatives of the federal government. With its Canada Assistance Plan (CAP) of 1966, Ottawa agreed to share the cost of provincial childcare on a needs-tested basis. This test was used to establish a family’s eligibility for social assistance; federal cost-sharing was therefore largely restricted to childcare costs that a province incurred in relation to assistance recipients. By the 1970s, in CAP’s wake, the provinces were funding childcare services, but only along these highly selectivist, liberal lines. In spite of this shared starting point, Quebec and Ontario diverged radically during the 1990s. Quebec broke with the liberal pattern, committing itself to providing universal childcare with only modest charges to parents, as well as to maternity and paternity leave benefits that exceeded those made available by Ottawa under its Employment Insurance (EI) Act. The latter commitment was implemented only much later, and the former has never been fully realized. Quebec nevertheless now provides publicly funded childcare to a far larger proportion of its

132  Comparing Quebec and Ontario

children than does any other province, including Ontario, and offers parents more generous parental leaves. Childcare policy in Ontario, by contrast, has departed only hesitantly and modestly from the residual, liberal mould; promises of comprehensive reform, made early in the period examined here, did not materialize. The province embarked on a kindergarten reform after 2007 that broke with selectivity in an important area, but there was no reason to expect this step to be followed soon by a more comprehensive move towards universality. There was also little discussion of parental benefits. Quebec’s childcare services have diverged from Ontario’s in each way that was hypothesized in chapter 2: (5a) they are more expansive and expensive, (5b) they have moved much further in the direction of universal provision, (5c) the share of children for whom non-profit public provision exists is larger, and (5d) parental fees usually are much lower. What accounts for these differences? This chapter highlights two causal mechanisms: interest intermediation arrangements, and party systems. First, the former (hypothesis 1a): since the 1970s childcare providers in Quebec have been more firmly rooted in their communities, more tightly linked with each other, and considered more important as social entrepreneurs than their Ontario counterparts. Quebec’s feminist movement, a crucial champion of reform, is also prominent in social policy debates. As was argued in chapter 2, the concerted style of policymaking that reached maturity in Quebec during the 1980s and 1990s, while assigning a central role to business and labour, also had a disaggregated quality, granting a pivotal place to other actors, including those connected to the social economy. In the childcare field, pro-reform social actors used this role during pivotal summit-level concertation exercises during the mid-1990s to push forward their agenda. They could rely on substantial support from the province’s relatively strong labour movement, a bond that was strengthened by the latter’s early success in organizing many childcare workers. While the political climate in Quebec has not subsequently always been so advantageous, the movement’s established position, and the importance of the 1997 reforms for many Quebec families, precluded significant retreat. None of these preconditions prevailed in Ontario. Childcare providers lacked the same foundations in community life there and were not well organized at the provincial level; feminists in Ontario also lack anything like Quebec’s Fédération des femmes du Québec (FFQ). The leading proponents of childcare were advocacy groups, rather than well-organized provider organizations, and often had to conduct themselves in

Childcare and Early Learning  133

an oppositional, even “conflictual” manner,2 in the face of sceptical or hostile governments. They could not count on access to key policymaking forums in a province where adversarial and pluralist norms still prevail regarding interest representation. When childcare advocates saw political allies come to power, they did so in straightened economic circumstances and in a polarized political climate that was unpropitious for reform. Finally, reform advocacy in Ontario was impeded by the prominent role of municipalities in financing and delivery of childcare there, which made it more difficult to concentrate lobbying in one venue. Pressure for reform relied crucially on the influence of expert opinion that stressed the importance for early childhood development of care that was pedagogically rich. Expert opinion of a similar kind emerged in Quebec3 but acted there to complement, not substitute for, potent societal champions of reform. Second, in both provinces, support for childcare varied among political parties, but only in Ontario did a major party advocate a broadly neoliberal ideology, which caused it to oppose major extensions of childcare and to reverse reforms implemented by preceding governments (hypothesis 1b). Ontario consequently did not experience the “ratchet-like” progression of reform that was observable in Quebec. In the latter, reform proceeded unevenly but was not stopped or reversed. In Ontario, a period of embryonic expansion was reversed after a change in government in 1995, and slow reform recommenced only after another such change in 2003. Quebec’s 1997 reform was introduced by a Parti Québécois (PQ) government and remained commonly identified with that party. But the PQ’s main rival, the Quebec Liberals (or PLQ), did not oppose the fundamentals of the reform at that time. During the 2003 election campaign, the Liberals promised to reconsider important elements of it, and once in power, they did slow growth of the new childcare system and granted a larger role to for-profit and unregulated providers. But they did not fundamentally question the system: they implemented its parental leave component and substantially enriched the child tax benefits that had accompanied the 1997 legislation. In Ontario, universalist childcare reform was most closely identified with the province’s New Democratic Party (NDP), which nevertheless has only governed the province once. The Ontario Liberal Party also promoted childcare, though usually more cautiously, and a Liberal government sponsored the 2009 kindergarten reform. The Ontario Progressive Conservatives (PCs), on the other hand, did not support major extensions of childcare

134  Comparing Quebec and Ontario

after 1990. When in government, they curtailed government funding of childcare spaces and favoured the use of informal provision. How much did nationalism contribute directly to Quebec’s distinctive outcomes? A preoccupation that is sometimes observable in Quebec discussions of family policy can reasonably be seen as reflecting nationalism: attention to the province’s birth rate. Yet this focus was strongest before 1990 when the main proposed remedy was transfer payments to families, especially larger ones. The 1997 reform, rather than reinforcing these measures, abandoned them as part of its financing strategy for childcare, and it also substantially reconfigured the tax transfer system for families, focusing on need, not family size. Childcare reformers focused much more on other goals: gender equality and labour market participation. Natalism’s contribution to Quebec’s reform, and that of direct nationalist advocacy more generally, therefore was modest. In its most explicit manifestations, this concern undergirded a rival agenda for family policy, one that had to be supplanted before the move to universal childcare could proceed (hypothesis 1d). Quebec: Creating and Consolidating Path-Breaking Reform Public support for childcare began in Quebec during the 1970s. A Liberal government agreed to subsidize childcare costs for needy parents in 1974; indirect support for childcare operators was extended to both non-profit and for-profit centres.4 Before coming to power in 1976, the PQ promised universal childcare, but it took further incremental steps only in the selectivist direction charted by the Liberals. The PQ introduced direct grants to centres while maintaining indirect payments to qualifying parents. The first childcare legislation, in 1979, extended coverage to family-based providers (those located in a home, not a centre). These became the third major type of childcare operator in Quebec, alongside non-profit and for-profit centres. A fourth type also emerged, providing school-based care for children over the age of four before and after the teaching day. Unlike the other components of the system, which were overseen by the Social Affairs Ministry, school-based centres were administered by the Education Ministry. For-profit centres still qualified for indirect funding under the new legislation, but the new direct subsidies were reserved for non-profit ones. An office was also created within Social Affairs to oversee childcare. But support for childcare continued to be selective, focusing on families in receipt of social assistance and, after 1988, the working poor,5 in spite of major

Childcare and Early Learning  135

policy reviews launched by both PQ (in 1984) and Liberal (in 1988–9) governments. Both parties acknowledged the incapacity of the existing supply to meet demand, but neither went beyond occasional increases in the number of subsidized spaces. A Liberal promise in 1988 to significantly expand childcare spending was curtailed when Ottawa failed to implement an anticipated major expansion of its own childcare outlays.6 The Liberals did permit for-profit centres to receive direct operating grants for the first time, a decision opposed by the PQ. The main parties continued thereafter to disagree about the appropriate role of for-profit operators. Otherwise, their choices differed little and left Quebec with a limited system. In 1992, publicly funded and regulated childcare spaces existed for 6.8% of Quebec children under the age of thirteen, compared to 8.1% in Ontario and 7.5% for Canada as a whole. Quebec spent $122 on childcare for each child in that age group, compared to $232 – almost double – in Ontario.7 Quebec’s commitment to public childcare fell below the national average. Yet Quebec was distinctive in another area: it made generous financial transfers to families. Natalist arguments – a desire to raise the province’s birth rate – were a primary justification. This preference again was shared by the major parties. Quebec introduced a universal family allowance in 1967; explicitly designed to encourage larger families, its payments rose with the birth order of each child. It was expanded by the Liberals in 1974, and again by the PQ in 1979 and 1981.8 During the 1981 election campaign both parties made natalist arguments in favour of increasing financial support for families. A PQ green paper, released in 1984, highlighted the province’s declining birth rate and discussed further tax-based assistance. This trend culminated in 1988 when the Liberals implemented a “bébe bonus,” a one-time flat-rate payment to all families that had a newborn. The payment was made once for a first or second child, but in much larger amounts and in three (later five) annual instalments for a third or subsequent one; here again, natalist justifications were used explicitly.9 At this point, Quebec’s spending on transfers to families was substantial: in 1993, the average family received $320 from the provincial universal allowance; 19% of families benefited from the “bébe bonus,” receiving an average of $990. Another allowance created by the Liberals in 1989 paid an average of $320 to the 43% of families that had a child under the age of six.10 No other province provided anything like these levels of financial support to families. This natalism came under increasing attack from the non-profit childcare sector and feminists. Both had long been committed to universal

136  Comparing Quebec and Ontario

childcare. Non-profit operators were well organized, with an active provincial association, the Concertaction inter-régionale des garderies du Québec (CIRGQ), which now repeatedly attacked the Liberals’ transferbased policies and their failure to commit to a major childcare reform.11 The FFQ, Quebec’s main feminist organization, also demanded universal childcare. A government advisory council, the Conseil du statut de la femme (CSF), was another frequent critic of natalism and advocated an extended parental leave policy to complement expanded childcare.12 The childcare movement was a major force by the 1990s, having gained considerable legitimacy as an important example of non-profit, community-based social action. From its origins in 1960s community activism, childcare providers prided themselves on responding to community needs, an anchorage that was ensured by the fact that parents typically assumed a majority of positions on their supervisory boards of directors. Jane Jenson observes that by the 1990s Quebec was fertile ground for community-based mobilization of this type. The childcare movement in particular “was traversed by a dense network of community groups, agencies, projects and popular initiatives whose political project was and remains to provide services ‘differently.’”13 Community organizations were highly regarded by the union movement, especially the Confédération des syndicats nationaux (CSN), and by feminist groups. They were also encouraged, for Jenson, by other distinctive community structures in Quebec, such as its network of health and social service centres (CLSCs).14 That parental control was a crucial source of legitimacy for non-profit providers, representing clear evidence of their anchorage in communities, is evidenced by government’s response to it: the 1979 childcare legislation stipulated a majority-parent board as a requirement for operators to be categorized as non-profit centres and to receive direct grants. The Liberals’ 1988 reform specified preferential funding for parent-administered centres.15 Non-profit childcare also gained credibility for another reason: it was an example of the now-popular idea of a “social economy,” that is, of non-profit, socially oriented forms of entrepreneurship that, according to its advocates, were increasingly important as sources of employment and creativity in Quebec. Universal childcare rose to the top of a PQ government’s agenda in 1996 in the context of two concertation exercises that granted a significant voice to social groups. For Jenson, “these ideas had an influence … in large part because of Quebec’s structure of representation that had long included a role for ‘social partners’ (labour and business) and that

Childcare and Early Learning  137

by the mid-1990s had been forced to include other social movements.”16 The 1996 exercises nevertheless had important antecedents. Social organizations used their participation in an economic summit convened by the PQ in 1985 to advocate universal childcare. The Liberals, back in power later that year, struck a consultative committee on childcare with a wide representation; its 1987 report argued for substantial expansion. Just before leaving office in 1994, the PLQ also launched a wideranging consultation with social groups about childcare and other family policies.17 Advocacy of childcare reform was enhanced by the fact that Quebec unions, an essential pillar of concertation, were now organizing childcare workers, reinforcing their support for their movement. The CSN made significant inroads among non-profit centres; the Centrale de l’enseignement du Québec (CEQ), the province’s main teachers’ union, represented workers in school-based facilities. In 1993 and 1994, the CSN launched a wave of strikes, demanding sizable pay increases. These actions contributed to a growing perception that childcare was in need of considerable reform, requiring the injection of much more money.18 Childcare also benefited from the increasing attention of academic specialists. The December 1992 “Bouchard Report,” commissioned by the Liberals, stressed the importance of protection and stimulus for child development. It did not specifically propose a universal childcare program, but it recommended that two- to four-year-olds be offered better “settings and programmes to enhance their cognitive, affective and social development.” Significantly, it also urged that government “support settings and programmes that are run by parents themselves, especially in areas where they are most needed.”19 The Liberals’ immediate response was to continue increasing financial transfers to parents, rather than expanding pedagogically rich services to children. But in its dying days, the government began to discuss the value of early learning. An official at its Secrétariat à la famille observed that “there is now a much greater recognition of the importance of early interventions.”20 The Liberals promised more funding for childcare, though they preferred increasing childcare tax deductions over raising direct subsidies to childcare providers. It is difficult to gauge the extent of the shift in their thinking, but it is clear that the Liberals began to warm to the possibility of expanding childcare considerably before leaving power. The interplay of elements described above – a robust childcare movement, widely seen as an important part of the social economy, linked to

138  Comparing Quebec and Ontario

influential labour federations and able to draw upon expert opinion, a policymaking context where concertation is important, and a party system in which partisan differences on social issues are moderate – was evident between the PQ’s return to power in September 1994 and Premier Lucien Bouchard’s announcement of his government’s new family policy on 31 October 1996. The foundations were laid for Quebec’s commitment to universal childcare during these months. Deliberations centred on two particularly ambitious collaborative exercises. The Estates-General on Education ran from January 1995 until October 1996; it focused on the reform of schooling. And the two-stage SocioEconomic Summit in 1996 included the province’s business and labour leaders in discussions of its economy, especially its deficit. To underscore that the summit would not ignore social issues, it included a Working Group on the Social Economy, chaired by Nancy Neamtan, a prominent representative of this sector. Neamtan used her role to stress the importance of social entrepreneurship, including non-profit childcare.21 Two contrasting views of early learning emerged at the estatesgeneral, but both advocated substantial extension of public provision. This provided a basis for their reconciliation in an expansionary reform. Labour federations were prominent on each side. A coalition of education-sector organizations wanted kindergarten (maternelle) made available to more children and asked that the administration of all childcare services be transferred to the Education Ministry. The coalition’s most assertive member, the CEQ, wanted kindergarten for all five-year-olds for a full day, rather than the existing half-day. It proposed that it be introduced for half a day for all four-year-olds; childcare would be available in schools for the other half-day.22 On the other side CIRGQ, speaking for non-profit operators, argued that four-year-olds were best served in well-financed childcare centres. The CSN, representing many workers in non-profit centres, supported this view. It favoured the status quo for kindergarten: half a day for all fiveyear-olds and for at-risk four-year-olds. A CIRGQ document stressed the importance of the parental-board structure of non-profit centres for ensuring responsiveness.23 To strengthen their contention that childcare centres were a pedagogically suitable option, CIRGQ and the CSN advocated that non-profit centres be reconfigured as integrated “centres de services à la petite enfance”; these would combine educationally rich childcare with additional services for parents; they would also monitor family-based childcare providers and assist them in enriching their care. CIRGQ had developed a model of this kind in 1995.24

Childcare and Early Learning  139

That the PQ planned to address elements of both perspectives became clear during 1996, but it was also evident that the minister who assumed responsibility for both childcare and the Education Ministry in February, Pauline Marois, was particularly sympathetic to parentsupervised, non-profit childcare. In May she announced a moratorium on funding new for-profit centres and referred specifically to the importance of community-based childcare for the social economy.25 In October, in concluding the estates-general, Marois indicated that she had accepted the CIRGQ concept of a Centre de la petite enfance (or CPE), which would include non-profit childcare facilities, with majority-parent boards of directors, and provide pedagogic services to parents and to children under five. CIRGQ had now developed a detailed design for CPEs, which was submitted to the summit’s Working Group on the Social Economy. Reflecting the first reform agenda discussed above, in contrast, Marois also announced that kindergarten would be extended to a full day for five-year-olds and that schools would acquire a consolidated responsibility for childcare for five- to twelveyear-old children. There would be no expansion of kindergarten for four-year-olds.26 The massive scope of the impending reform became clear a week later, when Premier Bouchard announced it at the Socio-Economic Summit. It was now revealed that the CPEs would be overseen by a new Family Ministry. Bouchard promised that childcare services would be available to all children under five by 2001. Non-needy parents would pay $5 per day per child. In addition to delivering services to parents, CPEs would supervise family-based operators, as the CIRGQ model envisaged. In this initial plan, for-profit operators were not eligible to receive the government assistance needed to offer childcare for $5/day. All funded spaces would be located either in non-profit centres, reconfigured as CPEs, or in family-based care. To participate, for-profit centres would have to convert into CPEs. School-based centres were not initially included, but they became eligible in September 1998.27 The new family policy included two other elements: one was an enhanced parental leave program. Since it was not implemented until 2006, it is discussed below. The other was an overhaul of the transfer payments to families that Quebec had developed since the 1970s; it was discussed in chapter 4. Its significance for this discussion is that it spelt the end of the natalism that underlay earlier family transfers. The “bébé bonus” and the universal and supplementary allowances were terminated. In their place a single income-tested family benefit was created that targeted low-income families rather than larger families.28 This reconfiguration

140  Comparing Quebec and Ontario

resulted in substantial savings, which were used to help finance the new childcare reform. Bouchard also made clear that the rationale for the new family policy was not natalist; he emphasized its role in helping women balance work and family responsibilities, the developmental advantages for children, and social economy arguments about employment creation. At the summit, he declared that “women are the winners from this reform. It has been women’s groups that for many years have been demanding concrete mechanisms to balance the roles of mother and of participant in the labour market.”29 These themes were repeated in press releases from the Premier’s Office, one of which also noted the anticipated 15,000 new jobs that would result for the “social economy,” and also in a statement by Bouchard when a white paper was released. References to Quebec’s birth rate were entirely absent from these six statements.30 In general, it received very little attention as the reform was discussed in 1996 and 1997. The reform reconciled the competing agendas that were represented in the concertation exercises. The CEQ, CSN, and CIRGQ all broadly endorsed it, with reservations, as did Ms Neamtan.31 The feminist FFQ pointed to what it saw as its inadequacies but later made its overall support clear during legislative committee hearings.32 Business and opposition Liberal responses suggest that the reform also achieved acquiescence from the summit’s market-oriented participants. Jocelyne Tougas argues that Quebec business neither supported nor opposed the childcare reform and that this “tacit approval” may have reflected their acceptance of its educational goals.33 In fact, the Conseil du patronat du Québec (CPQ), the leading big business association, occasionally signalled its interest in family policy during the early 1990s. A 1991 CPQ colloquium on women in the workplace advocated childcare facilities in firms. Although the CPQ’s president also expressed concern about excessively long maternity leaves, the organization used its 1992 response to the Quebec Liberals’ Allaire Report to support Quebec assuming responsibility for family policy; otherwise it would not be able to reform maternity leaves properly.34 Interviewed immediately after the Socio-Economic Summit, the presidents of Quebec’s three main organizations of large and medium-sized firms – the CPQ, the Chambre de commerce du Québec, and the Alliance des manufacturiers et des exportateurs du Québec – spoke positively of its results, though without referring specifically to family policy.35 In succeeding months,

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the CPQ’s primary complaint was the initial stipulation that for-profit centres could not participate in the $5/day reform. The PQ abandoned this position in 1997, granting existing for-profit centres the right to receive the subsides, although the moratorium on funding new for-profit operators remained. When the government reached a tentative agreement along these lines with for-profit operators, the CPQ approved, its president arguing that “the adjustment will assure wider availability of childcare services at very little cost to the government.”36 It gave no indication of a principled objection to the childcare reform. The PQ lifted the moratorium on funding new for-profit centres in 2002.37 At the summit, Liberal childcare critic Geoffrey Kelley signalled his general approval of the family policy. Like the CPQ, the Liberals’ main concern was the exclusion of for-profit centres. At legislative committee hearings in June, Kelley supported the recent agreement with these centres. When the childcare reform received final approval in the National Assembly, he raised no substantial objections.38 The PQ remained in power for six years after the reform. As table 5.1 indicates, Quebec’s childcare system expanded rapidly during this period. The number of spaces for younger children available at $5/day doubled between 1998 and 2003. Spaces in school-based centres, for children between five and twelve (not shown in the table), also rose steeply, from 92,700 in 1998 to 141,977 in 2004.39 As had been envisaged, less-expensive family-based care expanded faster than CPEs, in spite of the anxiety sometimes expressed by advocates about its quality. Demand nevertheless rose much faster than anticipated, outpacing supply, and many parents could not find a subsidized space. The original plan to eliminate for-profit centres was abandoned, but forprofit spaces did not grow appreciably and fell from 29% to 15% as a share of all spaces for pre-school children by 2003. The PQ’s preferred model of parental control predominated, achieved either through the oversight of CPEs by majority-parent boards, or through the CPEs’ supervisory and servicing role in relation to family-based care. Costs climbed rapidly. Financial pressures were exacerbated by the unions, which continued to organize workers in non-profit centres. Substantial funds were required to end strikes in 1999 and 2002. Rising costs and the unions’ evident influence stimulated protests from the opposition parties.40 But by 2003, the childcare network was entrenched, possessing a large clientele and acquiring an important symbolic standing in Quebec.41

142  Comparing Quebec and Ontario Table 5.1. Pre-School Age Childcare Spaces in Quebec Subsidized childcare spaces CPEs

Family-based For-profit centres

Total

Non-subsidized spaces

Total

1998

36,606

21,761

23,935

82,304

N/A

N/A

2000

44,735

44,882

24,936

114,553

N/A

N/A

2003

63,339

75,355

24,740

163,434

1,620

165,054

2005

72,057

87,192

30,131

189,380

2,457

191,837

2007

75,934

88,645

34,027

198,606

4,538

203,144

2009

77,894

91,582

36,377

205,823

6,954

212,777

2011

82,671

91,607

40,526

214,804

17,824

232,628

Sources: For 1998 and 2000, Jocelyn Tougas, La Restructuration des services éducatifs et de garde à l’enfance au Québec: Les cinq premières années (Toronto: Childcare Resource and Research Unit, 2002), 5; for later years, Familles et Ainés Québec, “Création de places en services de garde,” http://www.mfa.gouv.qc.ca/fr/services-degarde/portrait/places/Pages/index.aspx. Note: The table reports figures for childcare spaces under the jurisdiction of the Family Ministry, which are for children under five. School-based spaces, administered by the Education Ministry, are not included; these offer before- and after-school care for children between five and twelve.

Did Quebec’s childcare policy change significantly after the Liberals returned to power in 2003? For Jane Jenson, writing in 2006, the Liberals departed sharply from the path set by the PQ, motivated by a neoliberal preference for markets. In contrast, Alan Noël argues that after initially considering major curtailments, the PLQ accommodated itself to the status quo ante in the face of considerable opposition.42 The evidence favours the latter view. Liberal initiatives diverged only moderately from the PQ’s but shifted the system’s emphasis in important ways. If these trends were to continue for a prolonged period, they might result in a qualitative departure from a non-profit, parent-oriented, and public model of universal childcare, but such a departure had not occurred by 2010. The rest of this section considers the main Liberal changes that could be judged to reflect a neoliberal turn, but it will be argued that this was not the case. It then discusses other issues addressed by the Liberals that, quite the contrary, helped consummate the PQ reform. What potentially neoliberal changes were considered by the Liberals? First, and most visibly, they raised the per diem for non-needy parents

Childcare and Early Learning  143

from $5 to $7 per child in 2004. The PQ had considered such an increase as early as 2001, so it does not appear to be a radical departure. The Liberals initially considered much larger increases,43 but at the end of 2010 this option had not been pursued. Second, the PQ had ended the moratorium on providing direct subsidies to new for-profit centres, but the Liberals were much more enthusiastic about pursuing this course. As table 5.1 indicates, the number of subsidized for-profit childcare spaces rose by about two-thirds between 2003 and 2011. Yet as a share of all subsidized spaces, for-profit ones rose only modestly during this period, from 15% to 19%, because spaces in CPEs and in family childcare operations also continued to rise; about two-thirds of new subsidized spaces created by the Liberals by 2011 belonged to these two categories, much preferred by the PQ. Third, a potentially bigger departure is reflected in data for “non-subsidized spaces” in table 5.1. This requires some explanation. While for-profit centres increased their supply of spaces after 2003, they did not expand fast enough to meet ever-rising demand. Waiting lists persisted. Consequently, the Liberals took steps to allow more parents to use tax credits to pay for care in facilities that did not qualify for direct subsidies under the $7/day program. A 2009 amendment ensured that parents with incomes under $125,000 could, using tax receipts from non-qualifying operators, reduce their costs to the $7 rate.44 But non-qualifying operators differed in an important way from qualifying ones, even for-profit centres: they were not subject to government regulations that, for instance, specify the pedagogic quality of their care.45 As the table indicates, the number of spaces funded in this indirect way was very small in 2003 and remained modest in 2009, then increased substantially. Spaces in unregulated facilities represented over half of all those created between 2009 and 2011. If this trend continued, Quebec would eventually have a childcare system that is generously funded but for which there is little assurance of quality.46 The Association québécoise des CPEs (AQCPE, a successor organization to the CIRGQ) stressed the measure’s potentially negative longterm consequences.47 Fourth, in 2005–6, the Liberals wanted to strip the roughly 900 CPEs of their responsibility to oversee family-based providers. The task would be taken over by 130 new bureaux coordonnateurs (or “BCs”). The AQCPE complained vociferously, arguing that CPEs were best positioned to help family day cares with pedagogical services. Eliminating this function would create a “two-tier” system, with family-based care becoming an inferior service. The government eventually increased the number of BCs to 163, and responsibility for

144  Comparing Quebec and Ontario

almost all of these was assigned to a CPE; this largely ended the dispute with the AQCPE, though it still opposed the change.48 In 2009 the government again tried to separate the BC function from the CPEs and again relented.49 Fifth, after 2000, Quebec unions, especially the Centrale des syndicats du Québec (CSQ), began to organize family-based childcare providers. The Liberals responded in 2003 with legislation that declared these workers ineligible to unionize. Here again, however, they were following in the footsteps of the PQ, which took the same position in 2001.50 The union challenged the law in court, winning a favourable ruling. Rather than appealing, the government offered a hybrid status for the family care providers, which granted them most but not all of the rights of union members. The workers approved an agreement on this basis in 2010.51 In several areas, by contrast, the Liberals strengthened the 1997 reform. First, the 1997 white paper promised a parental leave program with more generous benefits than those available from federal EI. But negotiations with Ottawa to have most of the required money transferred from the EI fund to the province reached an impasse. The PQ passed enabling legislation in 2001, with Liberal support, but implementation would not proceed without the EI funds. Eight months later it launched a legal challenge, arguing that Ottawa lacked the authority to withhold the money. During the 2003 election campaign, the Liberals promised to push ahead with the plan. The Quebec Court of Appeal later accepted Quebec’s argument. Renewed negotiations with Ottawa led to an agreement on the transfer, and the program commenced in 2006. The Liberals did not change the benefits stipulated in the 2001 legislation, which offered parents a combination of maternal and sharedparental leaves in two options: either a total of forty weeks at 75% of earnings; or a total of fifty weeks, with half of these compensated at 70%, and the other half at 55% of earnings. A few more weeks were available for fathers only. In contrast, EI offered fifty weeks of combined-parental leave at 55% of earnings.52 As with childcare, enhanced parental leave was much more popular than originally anticipated, especially as Quebec was experiencing a “mini-baby boom” by 2008 – to which childcare was widely seen as having contributed. By 2010, payroll deductions to support the plan had been increased repeatedly. The Liberals rejected proposals from the third-party Action Démocratique du Québec (ADQ) and small business groups to curtail benefits.53 Second, and equally importantly, in 2005 the Liberals restored the universality of family benefits that the PQ had eliminated and substantially

Childcare and Early Learning  145

increased their value (see chapter 4). Third, legislation was passed in 2010 to rectify evident shortcomings in the childcare system. The Liberals’ decision to expand the role of for-profit and unregulated providers had contributed to these problems, which became a major political liability for them. Liberal ministers were accused of being open to lobbying by for-profit operators, especially those that made contributions to their party. A Liberal minister was forced to resign after widespread suspicion that he and his family had benefited from the granting of licenses for for-profit operations.54 The new legislation created a process for attributing licences, one that was controlled by regional committees and no longer subject to ministerial interference. The number of licences that an operator could possess would not in the future exceed five, to prevent the development of chains. It further penalized operators that charged parents illegal extra fees; more modest steps were taken to limit an emergent resale market in for-profit permits; and the Family Ministry tripled the number of inspectors at its disposal to identify illegal operations or those that were not providing adequate pedagogy. The legislation was drafted after significant consultation with the childcare sector, and the AQCPE approved of it, though it was sceptical about whether it would achieve its stated objectives.55 Overall, the Liberals departed from PQ policy in several areas: they favoured more for-profit care, slower system growth, and greater emphasis on transfer payments to families. Some innovations, especially the public funding of unregulated care, had the long-term potential to undermine the 1997 reform, but Liberal policy mostly sustained and even strengthened public and universal childcare. The number of nonprofit and family-based childcare spaces rose appreciably after 2003, complemented by full implementation of generous parental leave and important improvements in family benefits. Only the ADQ, reduced to minor party status in 2008, offered a still-natalist critique of childcare.56 In contrast, when the Liberals launched a spending restraint exercise in 2009 (chapter 3), the Family Ministry avoided major cuts or another increase in the per diem fee. The Liberals made much less use of formal concertation after 2003 than had the PQ, but their policies did not proceed without important – albeit sometimes acrimonious – consultations with key social actors. In the examples discussed above, conflict was followed almost always by compromise with affected childcare and union interests. The CPQ business association departed from a consensual approach to childcare in 2003, advocating the replacement of direct subsidies by flat-rate parental allowances, but it too

146  Comparing Quebec and Ontario

subsequently returned to an acceptance, at least implicit, of Quebec’s ample childcare.57 In summary, both mechanisms hypothesized to be important for childcare reform in Quebec in chapter 2 – concerted interest intermediation and moderately polarized parties – contributed in the anticipated way to its implementation and consolidation. Concertation, which now encompassed social economy actors more actively than during the 1980s, was decisive for the reform’s launch in 1997. The substantial legitimacy that was attached to childcare operators, and the depth of their support from other key societal actors in Quebec, especially unions and feminist groups, helped sustain and deepen the initial reform subsequently. In addition, partisan polarization on childcare was modest in Quebec. The Liberals accepted the original reform and even anticipated many of its key elements before 1994; while they curtailed some components after returning to office in 2003, they eventually left it largely intact, even strengthening it in important ways. Ontario: A Contested Policy in a Competitive Polity Ontario differed sharply from Quebec regarding both mechanisms of interest to us here: childcare policymaking featured a fragmented and pluralist societal setting and considerable partisan polarization between the PCs and their Liberal and NDP rivals. Uniquely among the Canadian provinces, childcare in Ontario is administered by municipalities, which must also cover 20% of its cost. As elsewhere, CAP required that services be needs-tested to qualify for federal cost-sharing, with the result that, during the 1980s, public funding of childcare was focused on low-income families, though some municipalities provided the service more broadly. Toronto particularly stood out in this respect, as Rianne Mahon documents.58 This municipal role nevertheless contributed to the fragmentation of the societal milieu for policymaking. A Day Care Action Group, created during the 1970s, was Toronto-based; the Toronto Coalition for Better Childcare was an influential voice after 1990.59 When a provincial organization, the Ontario Coalition for Better Child Care (OCBCC), formed in 1981 to promote universal childcare in the province, it became the leading source of organized pressure for reform. But these advocacy groups did not emerge from among childcare providers themselves. Although non-profit operators frequently join the OCBCC and its municipal equivalents, the latter are not provider organizations. The

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OCBCC “brought together representatives of a wide range of forces, from feminist groups …, individual unions, and student associations, to mainstream elements, such as the Association of Early Childhood Educators of Ontario and the Ontario Welfare Council.”60 In Ontario, the promotion of childcare reform therefore acquired the flavour of interest group advocacy – one voice in a characteristically fragmented, fractious, and pluralist policy setting; the OCBCC’s opponents in this contest were traditional family-values organizations and, above all, the Association of Day Care Operators of Ontario (ADCO), which spoke for for-profit operators.61 Conspicuously absent were provider-sponsored childcare organizations, such as CIRGQ in Quebec. Nor could Ontario reformers draw upon the considerable standing that their Quebec counterparts possessed as representatives of communitybased mobilization and entrepreneurship. Non-profit providers in Ontario often take pride in their community base and usually have boards of directors on which parents form a majority, but there is no legislative requirement that this be the case.62 Reform advocacy in Ontario seldom referred to non-profit childcare operators as agents of community or parental control. Indeed, the most ambitious reform proposals to receive government attention instead favoured the expansion of services in the province’s public schools, widely valued as purveyors of a vital service on a universal basis. This approach was notably favoured by expert opinion. Yet in the education system considerable government direction, albeit mediated by school boards, is the norm; it is much less likely to be a venue where community or parent groups can exercise effective control. Ontario’s political parties also were sharply divided on childcare.63 The NDP was strongly identified with a preference for universal and non-profit care. Leading reform groups were close to the party before it came to power in 1990 and some of their spokespersons assumed positions in the administration thereafter.64 Ontario’s Liberals were more cautious, especially after 2003; they nevertheless expanded publicly funded care and pedagogy for pre-school-age children and expressed a clear preference for non-profit provision. The position of Ontario’s PCs was very different. They had governed for forty-two uninterrupted years after 1943. In spite of a death-bed conversion to the merits of moving beyond a selectivist approach to childcare in the months before losing the 1985 election,65 they left their Liberal successors with a limited, needs-based regime. Their disposition towards non-selective childcare after 1995 can fairly be characterized as hostile.

148  Comparing Quebec and Ontario

The role of pluralist interest intermediation and of party polarization was already evident before 1990. The Liberals came to power in 1985 committed to expansion.66 They said they would prefer a universal system, but its high cost meant that they would not pursue it without federal help. When this failed to materialize, they restricted themselves to incremental improvements. Nevertheless, the number of subsidized childcare spaces, and the funds expended on them, doubled during the Liberals’ five years in office.67 They also introduced several innovations. Some subsidies were made available directly to childcare providers for the first time. The government wanted to do this for both non-profit and existing for-profit operators, but could not extend coverage to the latter because the costs were not shareable under CAP. A moratorium was placed on extending any funds to new for-profit centres. In addition, in 1987 the government stipulated that all newly constructed schools must include a childcare service, a rule that resulted in a significant increase in school-based childcare.68 In 1989, finally, the Liberals committed themselves to an important expansion of kindergarten, inspired in part by a report on the province’s education system by journalist George Radwanski. All schools would be required to offer half-day kindergarten for five-year-olds by 1992 (most already did), and for four-year-olds by 1994. Where space permitted, funds would be available to introduce full-day kindergarten for five-year-olds. The eventual objective was to complement these services with school-based childcare, but no funds were allocated to this goal.69 Full-day kindergarten for five-year-olds did not develop in most schools. Nevertheless, this idea of a “seamless” day of education and care for four- and five-year-olds subsequently became a cornerstone of reform ambitions in Ontario. Interest group responses to these measures revealed the level of polarization on childcare. The OCBCC and many unions denounced the Liberals’ willingness to offer direct grants to existing for-profit operators; the coalition also demanded that the government make more funds available to finance the conversion of for-profit centres into nonprofit ones. By contrast, the ADCO complained that the government’s failure to make direct grants available to for-profit operators, and to fund new ones at all, put them at a disadvantage.70 The policies of the NDP after it came to power in September 1990 emerged in this contested terrain. In its early years, the NDP sided with the OCBCC and unions on the subject of for-profit childcare – to such an extent that it arguably undermined its ability to expand childcare

Childcare and Early Learning  149

subsidies significantly, a putative central goal of its own policies as well as those of the OCBCC. By 1993, moreover, the government’s dire fiscal situation precluded any further significant reform. One of the largest childcare commitments made by the NDP was a December 1991 allocation of $75 million to the conversion of for-profit centres into non-profit ones, an OCBCC demand.71 As critics noted, the move created no new subsidized spaces, but it underlined the NDP’s very close relationship with the coalition. Responding to another demand of reformers, including the unions, the NDP spent $30 million to raise wages in non-profit centres. Ontario childcare workers now had the highest wages in Canada.72 The initiative nevertheless increased the subsidy disadvantage already experienced by for-profit providers, evoking an angry response from the ADCO, whose advocacy of forprofit childcare increasingly was echoed by PC critics. Here too, they noted, increased spending translated into no new childcare spaces. The NDP did increase subsidies, but the numbers fell far short of its repeated advocacy of universal access and, inconsistent with this goal, reserved most new spending for needy families. The number of subsidized spaces was increased by 5,000 in February 1991.73 JobsOntario Training, launched in May 1992, was expected to create 20,000 temporary childcare spaces for its unemployed and social assistance clientele. The province committed to funding 100% of their costs, thereby saving the municipalities their usual 20% share, but the severe fiscal restraint exercise that the government embarked upon in 1993 meant that only 14,000 were created.74 Only in 1994 did the NDP release a long-promised plan to comprehensively reform childcare. Again consistent with an OCBCC model, it envisaged the province paying regulated non-profit providers directly for all childcare spaces. It would then recover about half of the program’s costs from non-needy parents, whose fees would be determined by an income test. But the NDP also made it clear that it could not now afford to implement the reform, and it was then withdrawn.75 Science-based advocacy of improved pedagogy for young children gained a higher profile in Ontario with the release of the report of an NDP-appointed Royal Commission on Learning in January 1995. Like the earlier Radwanski Report, it recommended that school-based early learning programs be created for three-year-olds. The NDP responded by resuscitating a plan considered in 1993 to extend kindergarten for four- and five-year-olds, now usually available for a half day, to a full day by 2000; this would be combined in a “seamless day” with beforeand after-school childcare, echoing the Liberals’ earlier advocacy of

150  Comparing Quebec and Ontario

this goal.76 But with the NDP within a few months of certain election defeat, little was done to implement this agenda, and the PCs quickly cancelled these plans when they came to power. Falling so far short of its objectives, the NDP was criticized severely by 1995. The party’s relationship with the OCBCC was never tranquil while it was in office, in spite of its early efforts to implement parts its agenda. Perhaps for this reason, and because of the obvious polarization of opinion about childcare in Ontario, the NDP made little use of formal concertation in the childcare field during its five years in power. The one undertaking of this kind, consultations conducted during the spring and summer of 1992, did not inform subsequent policy.77 At the end of the NDP era, an OCBCC spokesperson noted that the NDP had increased childcare spending considerably in the province but had done much less to expand the province’s supply of subsidized childcare spaces.78 Yet reformers’ own priorities – especially regarding the desirability of eliminating for-profit provision – clearly had contributed significantly to this outcome. It is hard to imagine a more radical shift in priorities than what accompanied the coming to power of Mike Harris’s PCs in June 1995. However haltingly, the Liberals and NDP had promoted more widely accessible non-profit childcare. By contrast, the PCs substantially reduced government financing and invited for-profit operators to provide service on equal terms. By 1997, they embarked on an even more radical departure, extending funds to unlicensed care-providers on terms that were sometimes more favourable than those available to licensed ones. The government never replaced all existing childcare subsidies with “vouchers,” to be spent on whatever service a parent chose and could afford, although this idea was actively considered in its early days.79 But in 1999 it did take an important step in that direction. Harris dismissed expert opinion on the merit of school-based early learning, calling the royal commission’s support for it “expensive and silly,” and, even “the stupidest recommendation I’ve ever heard.”80 Finally, the PCs had little use for formal consultation with non-governmental actors. PC priorities were reflected in numerous changes introduced during their first two years in office. 1. Funding for the conversion of for-profit centres into non-profit ones was ended. 2. The stipulation that new schools include a childcare centre was abolished, ending what had probably been the largest source of growth in regulated childcare spaces since the late 1980s.

Childcare and Early Learning  151

3. Budgets for capital spending in childcare operations were abandoned or reduced.81 4. JobsOntario Training was cancelled. The 14,000 childcare subsidies created under its auspices would continue only if municipalities covered 20% of their cost; the province would not continue the 100% funding provided by the NDP. By July 1996 at least 2,500 of the spaces, possibly many more, had been terminated; local governments did not want to assume this additional expense.82 5. Wage subsidies for workers in non-profit centres were cancelled, largely reversing the income gains that these workers achieved under the NDP. Consistent with an ADCO preference, the muchreduced subsidies for non-profit providers were now comparable to those available to for-profit operators. Money saved on wage subsidies was used to create an anticipated 12,000 new subsidized spaces.83 This is the one clear instance of Conservative policy expanding the supply of fee subsidies – effectively at the expense of childcare workers. 6. Consistent with another ADCO demand, the moratorium on subsidies to new for-profit providers (those created since 1987) ended.84 7. A 1996 PC report recommended that childcare regulations be relaxed, proposing that the permissible ratio of children to care workers increase, home-based operators be inspected less often, and licensing occur less frequently. These changes were not legislated. The PCs nevertheless were criticized for paying insufficient attention to ensuring that licensed operators complied with the province’s Day Nurseries Act.85 8. As part of a service realignment with municipalities, the latter were required to assume additional childcare costs. An initial proposal stipulated that local governments would assume 50% of them. When this encountered vociferous opposition, even from conservative municipalities, the PCs returned the municipal share to 20%. But local governments now had to cover this share of all program costs, not just of fee subsidies, as was the case before.86 Two policies announced in May 1997 extended provincial funds to unregulated providers for the first time and even encouraged their use. First, a childcare tax credit was offered to low-income working families. The maximum annual benefit of $400 made it likely that the money would be spent on less expensive unregulated care. This was effectively a form of the “voucher” that the PCs had considered in 1995.

152  Comparing Quebec and Ontario

The credit was mostly funded by Ottawa, which was then introducing its National Child Benefit. It agreed to allow provinces to “claw back” this benefit from social assistance recipients, as long the savings were spent on other child-related measures. Ontario expended most of its savings on its new tax credit. Its maximum value was later raised. But, crucially, the requirement that claimants submit childcare receipts was eliminated, and parents who stayed at home now qualified. This severed any direct connection between the credit and childcare (see chapter 4).87 Second, the province announced its funding formula for the care of the children of Ontario Works participants: local governments would receive the usual 80% cost-sharing if they placed the children in a licensed facility, but the provincial share would be 100% if they used unlicensed providers – an obvious incentive to do the latter.88 It is difficult to assess precisely the overall effect of the PCs’ childcare policies. The government and its critics offered widely different estimates of the number of spaces created between 1995 and 2003. Available data on this question are less reliable for Ontario than for other provinces, perhaps because the municipal role in childcare makes tabulating provincial statistics more difficult. As the notes for table 5.2 indicate, data for Ontario before and after 2003 cannot be compared with confidence. But several conclusions are warranted by evidence from other sources. First, the number of regulated childcare spaces in Ontario probably did rise during these years, but slowly. Data from the National Longitudinal Survey of Children and Youth (NLSCY) indicate that while 19% of parents of pre-school children reported using a “childcare centre” in 1994–5 (presumably a regulated one), the proportion rose modestly, to 22%, in 2002–3. The increase was faster in five other English-speaking provinces and nine times greater (from 25% to 52%) in Quebec.89 Second, the province’s childcare budget fell drastically. Spending on childcare fell by almost 20%, from $542 million in 1995 to $452 million in 2001. It rebounded to $497 million in 2003–4, but the Liberals returned to power in the middle of that fiscal year and may have been responsible for part of the increase.90 Third, because the PCs sought to reduce childcare costs by, for instance, cutting workers’ wages and allowing less-expensive for-profit operators a larger role, it is likely that the number of subsidized spaces declined by much less than did the province’s budget. Of course, the cost-saving measures may have reduced the quality of subsidized spaces. Nevertheless, the volume of subsidies probably also declined. In Toronto the number of subsidized spaces for working families fell to a seven-year

Childcare and Early Learning  153

low in 2002. Other municipalities also curtailed their spending; they were constrained by the increased childcare costs they now faced, by expenses associated with other parts of the province’s municipal realignment, and by the failure of municipal property tax revenues to grow sufficiently after the early-1990s recession.91 Fourth, the use of a new tax credit for families as the main innovation introduced by the PCs, and the special funding arrangement offered to local governments for unlicensed care for Ontario Works clients, provided a fillip to unlicensed and informal care. The impact of this spending on the use of unlicensed care cannot be measured directly. The NLSCY nevertheless offers a clue: the proportion of Ontarians who reported relying on a relative to provide childcare outside of the family home rose by 7% from 1994–5 to 2002–3, while the share that depended on a relative within the home rose by 6%. Both figures are higher than the reported increase in centre-based care. In Quebec, the former figure fell by 6%, while the latter rose by 3%.92 In light of these figures, childcare in Ontario probably moved further away from the agenda preferred by reformers and by expert opinion during the PC era. Funding declined. Fewer parents are likely to have had access to a subsidized space in a regulated facility. More, in contrast, received financial assistance to help defray the costs of unlicensed care. But the latter may not have offered the stimulus that Fraser Mustard and Margaret McCain recommended to Premier Harris in their 1999 “Early Years” report. Their recommendations nevertheless added to the growing body of expert opinion in favour of a different policy approach.93 The sharp partisan divide on childcare ensured that policy would again reverse direction when Dalton McGuinty led the Liberals back to power in 2003. They campaigned that year on a “Best Start” proposal to extend kindergarten for both four- and five-year-olds, now usually available for half a day, to a full day. For childcare, they echoed the NDP in promising to replace the existing needs-test with an income test configured to extend subsidies to many more families. Schools would be the preferred venue for new childcare spaces, to complement kindergarten expansion.94 But after eight years of a PC government whose popularity was based largely on its commitment to low taxes, McGuinty was cautious. He promised $300 million for the early learning reform but stipulated that matching federal funds would be sought and that change would proceed gradually.95 In fact, all Liberal childcare initiatives were financed by Ottawa until 2007; only thereafter did the Liberals commit to more than modest and incremental change.

154  Comparing Quebec and Ontario Table 5.2. Pre-School and School-Age Childcare Spaces in Ontario Number of regulated spaces Non-profit centres

Familybased

For-profit centres

Total

†

120,756

18,143

28,191

167,090

†

1998 (estimates) 2001 (estimates)

Subsidized spaces Number* 73,400

% of total* 44

125,522

18,000

29,613

173,135

N/A

N/A

2003

N/A

N/A

N/A

201,976

N/A

N/A

2004

146,786

19,838

40,345

206,753

103,820

50

2006

161,233

19,748

48,894

229,875

109,813

48

2008

179,071

19,760

57,917

256,748

126,097

49

Source: For years other than 2003, various authors, Early Childhood Education and Care in Canada (Toronto: Child Resource and Research Unit, various years). For 2003, Ministry of Children and Youth Services, Ontario Results-Based Plan Briefing Book, 2010–11 (Ontario, MCYS, 2010), 17. † These figures may not be comparable to those for 2003–8 because of uncertainty about the count for family-based spaces. * Figures for subsidized spaces are cumulative; they represent the total subsidized sometime during the year.

In 2004 the Liberals allotted $58 million to the creation of 4,000 new subsidized childcare spaces and to restoring some capital spending. The funds came from a Multilateral Framework on Early Learning and Child Care (MFELCC) that Ottawa extended to the provinces in 2003. The preceding PC government had been reluctant to spend the money on regulated spaces but eventually accepted the funds when Ottawa refused to allow Ontario to use the money for informal care.96 The Tories may therefore have made a similar commitment in 2004 had they been re-elected. The Liberals’ second initiative more clearly reflected their distinctive agenda: they would proceed with the kindergarten component of their “Best Start” plan: four- and five-year-olds would still receive a half day of schooling, but this would be complemented with school-based childcare for the other half-day. Subsidies would be based on the promised income test. It was hoped that half-day schoolbased programs would eventually be available for children as young as two-and-a-half. Yet, here too, federal money was key. Some funds would come from the MFELCC, but more would flow from a much

Childcare and Early Learning  155

larger national childcare strategy that Ottawa launched in 2004.97 The province affirmed a preference for the non-profit sector, but for-profit operators were not excluded. Yet the new arrangement was already in trouble: the opposition federal Conservative Party shared with its nearnamesake in Ontario an antipathy to childcare; it promised to terminate the federal strategy, if elected, and to replace it with a child tax credit. When they won the January 2006 federal election, they quickly followed through on this promise.98 The Ontario Liberals now put their kindergarten plan on hold. Ottawa was committed to funding the first year of the childcare strategy, worth $252 million to Ontario. At the province’s request, this sum was spread over four years, with the final payment of $63.5 million due in 2009–10.99 With these funds, and those still available from the MFELCC, Ontario continued to expand subsidized spaces, but at a slower pace than originally planned. Only in March 2007, in the face of mounting criticism from the OCBCC and other reform advocates, did the Liberals allocate any new funds of their own to childcare – $25 million in 2007–8 and $50 million for 2008–9.100 By 2008, this combination of provincial and (mostly) federal money had expanded the supply of subsidized spaces moderately, though it still fell far short of demand. As table 5.2 indicates, about 50,000 new regulated spaces were created between 2004 and 2008; there were 24,000 more subsidized spaces. (Unlike the Quebec data reported in table 5.1, this table combines pre-school and school-age spaces.) The growth in overall supply was probably faster than during the PC era, and the rise in subsidies was a sharp departure from the stagnation or decline of that period. Near the end of their first term, however, the Liberals had shown little inclination to implement anything like their 2003 promises unless another government paid for them.This changed as the 2007 election approached; thereafter the Liberals clearly set themselves apart from their predecessors. They reiterated their promise to add a half-day of school-based childcare to the existing half-day of kindergarten for four- and five-yearolds and promised to appoint an “early learning adviser” to advise them on implementation.101 Such “expert” assistance was, parenthetically, the form of non-governmental consultation most preferred by the McGuinty Liberals in the childcare field. Non-governmental actors reported in interviews that they had access to government officials, but the Liberals created few formal mechanisms to channel policy advice. Interaction was ad hoc and had little evident impact on the Liberals’ reforms, which were already formulated when they came to power.

156  Comparing Quebec and Ontario

After the election, Charles Pascal was appointed to provide this advice. His proposals were consistent with those he made to the NDP as the province’s deputy minister of education fifteen years earlier: Ontario should implement a full day of school-based learning available at no charge to all four- and five-year-olds, supplementing it with incometested before- and after-school childcare. Schools should become learning “hubs” for children and parents (an idea mooted by the Liberals in 2003) and provide more services to older children and during the summer. Pascal also recommended extended parental leave to complement these changes.102 But this idea was not picked up by the government, nor was it much discussed in subsequent public debates. The Liberals responded almost immediately with a commitment of $500 million over two years to begin implementing Pascal’s proposals for kindergarten and “wraparound” school-based childcare. The program would start in September 2010. There was no action on the other ideas, including the “hubs” concept.103 Unlike the early-learning commitments of the Liberals’ first term, there was now no expectation of federal money. In March 2010, as the province exhausted its last $63.5 million instalment from the long-defunct federal childcare strategy, the Liberals therefore also picked up the full cost of replacing these funds. Thereafter, it was probably paying for most of the increase in subsidized childcare spaces in Ontario since 2004.104 The kindergarten commitment reflected what was now the clear preference of reform-minded Ontario policymakers, an inclination consistently nurtured by experts, in Radwanski’s report, that of the Royal Commission on Learning, McCain and Mustard’s recommendations, and now Pascal’s. The preference was to locate programs in schools, rather than in community structures like Quebec’s CPEs, and for a strong pedagogic content. Consistent with this strategy, Ontario now transferred responsibility for childcare from Social Services to its Education Ministry. Yet this approach raised problems that the Liberals now had to address. First, in the original plan, teachers would not be present during the non-kindergarten portion of the “seamless” day, replaced by much less expensive early childhood educators (ECEs). Ontario’s teachers’ unions challenged this line of action, and the government relented. A teacher would now remain in the classroom alongside an ECE during the non-kindergarten half-day. To compensate for the added expense, the province raised the required instructor-to-student ratio from 20-to-1 to 26-to-1 for the program, causing observers to complain that the program’s quality was being compromised.105 Second, by removing most

Childcare and Early Learning  157

four- and five-year-olds from their care, the plan threatened non-schoolbased providers, especially as they would now focus more on younger children, for whom care is more expensive; $51 million was added to the childcare budget to address this problem, but the operators remained dissatisfied.106 Third, school boards were reluctant to administer an income test to determine childcare fees, a practice with which they had no experience; they also expected that implementation of this measure would be expensive, and parent fees would be correspondingly high. While places in available day-long kindergarten programs filled quickly during the summer of 2010, few children were enrolled in before- and after-school care. The latter’s cost remained uncertain until shortly before schools opened in September. Most eligible schools therefore did not implement it in 2010–11. Responding to sustained pressure from the OCBCC and for-profit operators, and to reluctant school boards, the government announced in December 2010 that boards could contract out this program to non-school-based operators.107 With these adjustments, the Liberals began implementing their “seamless” kindergarten initiative. But Ontario’s overall childcare system had not broken with a selectivist, liberal approach. It provided learning and care services universally to four- and five-year-olds during the normal school day. But before- and after-school care was subject to an income test, which would not raise the overall volume of subsidies appreciably. Childcare services for younger children, and for older ones outside of regular school hours, continued to be subsidized in a selectivist manner, using the same income test. The reform nevertheless removed an important part of childcare and education from this liberal mould, and provided a model for what could be done with other elements in the future. It nevertheless still faced major challenges. An estimated $1.5 billion per year would have to be found to complete implementation.108 Another obstacle was political, due to the sharp polarization of opinion on childcare between Ontario’s parties. The PCs questioned the affordability and advisability of the reform.109 They announced that they would not cancel the already-popular full-day kindergarten reform if they returned to power, but it remained very possible that they would abolish the before- and after-school care component, much slower to launch, and preclude the model’s extension to other categories of children. In summary, Ontario childcare policy between 1990 and 2010 was shaped by a highly contested societal setting that was not suitable for collaborative decision-making, and by a partisan landscape equally

158  Comparing Quebec and Ontario

polarized about the merits of publicly funded and regulated provision. The leading non-governmental interests, those advocating comprehensive reform and those promoting the interests of non-profit providers, disagreed about all major aspect of policy and became closely aligned with different parties: the Liberals and (above all) the NDP for the former, the PCs for the latter. Disagreement among these parties was strong enough, moreover, to cause sharp reversals in direction after the PCs replaced the NDP in power in 1995 and again when the Liberals displaced the PCs in 2003. The latter transition was initially less dramatic; but by 2010, the McGuinty government had undertaken reforms that were a clear departure from Conservative policy. Surpassing Selectivity vs Contesting It … Sometimes Childcare provision differs substantially between Quebec and Ontario. In the former, substantial strides were taken towards universal care that is available for $7/day per child. This is complemented by a paid parental leave plan that offers more generous benefits than those available to other Canadians from the EI program. Quebec continues to experience an acute shortage of regulated childcare spaces – a shortage that the 1997 reform probably exacerbated because of its impact on the province’s birth rate. In 2010, increased use of unlicensed operations to meet this shortage threatened the system’s ability to assure quality care. But the danger appeared to be modest, and the new regime was well entrenched: Its core publicly-funded and regulated components continued to grow, and there was broad consensus in Quebec society about its importance. Only very recently had Ontario taken an important step towards non-selective and ample provision of childcare and early learning, with a commitment to full-day kindergarten-and-care for four- and five-year-olds. The province had not developed a parental leave measure. Publicly funded care and pedagogy was available to most Ontario children only with a highly restrictive income test. The kindergarten initiative was contested, subject to at least partial reversal. Available data clearly reflect these patterns. Figure 5.1 presents provincial administrative data; figure 5.2 and table 5.3 are based on Statistics Canada surveys. Quebec now spends far more than Ontario on childcare services in relation to the population of children under the age of thirteen (figure 5.1, graph A); regulated spaces are also available for a much larger proportion of this population in Quebec (graph B). Quebec’s advantage continued to grow, especially regarding funding, after

Childcare and Early Learning  159 Figure 5.1. Spending on and Provision for Regulated Childcare, 1992–2010: Administrative Data (A) Childcare dollars/children aged 0–12

(B) Regulated spaces/children aged 0–12

$

0

0

10

20

30

40

500 1000 1500 2000

Spaces

1990

1995

2000 year Quebec

2005

2010

1990

1995

2000 year Quebec

Ontario

2005

2010

Ontario

(D) Percentage centre-based spaces that are non-profit %

(C) Centre-based spaces/children aged 0–5

1990

75

10

15

80

20

85

25

90

30

Spaces

1995

2000 year Quebec

2005 Ontario

2010

1990

1995

2000 year Quebec

2005

2010

Ontario

Source: Human Resources and Skills Development Canada, Public Investments in Early Childhood Education and Care in Canada, 2010 (Gatineau, QC: HRSDC, 2012), 252, 257, 262. Figures are based on provincial administrative data.

the Liberals came to power there. The gap is smaller if we consider only centre-based spaces and only children under 6 (graph C). It must be remembered, of course, that a much larger percentage of this age cohort receives childcare in a family setting in Quebec than in Ontario (compare tables 5.1 and 5.2); these children are excluded from graph C. Yet even by this restrictive criterion, Quebec’s provision exceeded Ontario’s by about 50% in 2010. Finally, a smaller share of all centre-based spaces are in for-profit facilities in Quebec (graph D). If the proportions indicated in graph D also apply specifically to centre-based spaces for children under six, then almost twice as many of them attended a non-profit centre in Quebec in 2010; the gap in non-profit provision was far greater if one adds to these figures the children who receive family-based care.

160  Comparing Quebec and Ontario Figure 5.2. Non-Parental Childcare Provision, 1994–2002: NLSCY Survey Data (A) Percentage of children in non-parental care

(B) Non-parental care, % in daycare centre

%

1994

10

40

20

50

30

60

40

50

70

%

1996

2000

1998 year Quebec

2002

1994

1996

Ontario

1998 year Quebec

2000

2002

Ontario

(C) Percentage of children in main non-parental care full-me

40

45

50

55

60

%

1994

1996

1998 year Quebec

2000

2002

Ontario

Source: Tracey Bushnik, Child Care in Canada (Ottawa: Statistics Canada, 2006), 45, 62, 84. Figures derive from the National Longitudinal Survey of Children and Youth (NLSCY). Figures are for children between the ages of six months and five years.

Table 5.3. Average Household Spending on Day Care Centres, 1998–2002 1998 $ per household

% reporting

2000 $ per household

% reporting

2002 $ per household

% reporting

Quebec

$2,300

53.6

$1,800

58.7

$1,400

64.0

Ontario

$3,500

20.9

$3,200

28.8

$3,600

32.2

Source: Tracey Bushnik, Child Care in Canada (Ottawa: Statistics Canada, 2006), 22. Figures derive from the Survey of Household Spending.

Figure 5.2 tells a similar story. The proportion of young Quebec children in non-parental care was lower than in Ontario before 1998. By 2002, it was 15% higher (graph A). Similarly, the gap in the proportion

Childcare and Early Learning  161

of these children receiving centre-based care grew substantially after 1998 (graph B).110 Quebec children were also much more likely by 2002 to be in their main form of childcare “full time” (at least thirty hours per week). Finally, table 5.3 indicates that Quebec’s reform clearly reduced parental costs. The per household cost of care in Quebec fell from an average of $2,300 in 1998 to $1,400 in 2002; by comparison, it rose very slightly in Ontario over this period, reaching $3,600 in 2002. Proportionately, almost twice as many Quebec families reported such expenses in 2002, confirming their much greater use of childcare. I conclude, then, that Quebec and Ontario childcare differed substantially regarding each of the hypotheses about policy outcomes that were stipulated in chapter 2: (5a) Quebec funds far more spaces with much more money, (5b) it has moved much further in the direction of universal provision, (5c) a larger proportion of its children receive childcare services from a non-profit provider, and (5d) most of their parents pay much lower fees for the service. As was also hypothesized in chapter 2, two causal mechanisms were mainly responsible for these dissimilar paths: (1a) the provinces’ distinctive settings for interest intermediation (collaborative or pluralist) and (1b) their different partisan landscapes (moderately or highly polarized). First, interest intermediation: Quebec’s 1997 reform emerged from two ambitious collaborative policy deliberations in 1996. Earlier consultations helped shape them, and, in their wake, collaborative norms helped consolidate change. A particular feature of these norms by the 1990s was the significance they attributed to community-based organizations. Quebec’s non-profit childcare movement thrived in this setting. The movement’s links to the province’s influential feminists and some of its relatively strong labour federations helped propel its reform agenda to the centre of discussions at the 1996 summits. The new system’s subsequent expansion, in turn, further entrenched the influence of the non-profit community, and of unions that organized many of their workers, helping to consolidate the new childcare regime. The societal milieu in Ontario differed strikingly. In this individualist culture, little premium was attached to community-based activities. Non-profit childcare providers emerged in Ontario, but they lacked significant autonomous provincial organizational capacity. Responsibility for advocating universal childcare devolved to reformist interest groups that drew support from sympathetic constituencies – each of which mobilized opposition in a fractious environment: feminists opposed by “traditional values” social conservatives, unions by business, social planning agencies by conservative researchers, and, of course,

162  Comparing Quebec and Ontario

non-profit childcare providers by for-profit ones. Governments therefore avoided collaborative forums for developing policy. Moreover, the non-profit sector’s political weakness and isolation, compared to Quebec, meant that reformist governments and experts sought a venue for system expansion elsewhere – in a public education system whose ambitions in this regard had been circumscribed in Quebec, but which in Ontario represented the most obvious example of a valued and important institution, capable of delivering services effectively to small children. Ideas – in this case, those of experts – mattered in childcare reform in both of our provinces, but their influence was mediated by very different institutional settings. Party systems also mattered. In Quebec, the main parties did not diverge radically on childcare, though there were differences between them. Universalist reform was launched by a PQ government. Formal concertation exercises also were used more by the PQ than the Liberals. Yet the latter had their share and when faced with resistance after 2003, they consistently took the path of compromise. The Liberals did not reject universalist reform in opposition and expanded it in power. They disagreed with the PQ about the value of for-profit providers. After 2008 they granted a significant role to informal caregivers but also continued to increase the system’s non-commercial segments. Though they expanded funding much more slowly than the PQ, the Liberals protected the Family Ministry’s budget during their 2009 restraint exercise. Parental leave, an important part of the 1997 design, was implemented by the Liberals; legislation was passed to remedy cracks in the childcare system to which the Liberals’ own policies had contributed. Ontario’s parties, in contrast, diverged fundamentally on the merits of widely available, publicly funded and regulated childcare. The Liberals were more cautious than the NDP, but both favoured transcending a selectivist model for childcare, and non-profit delivery. After the Liberals returned to power in 2003, it was evident that pursuit of these goals was impeded by a hesitancy to proceed with expensive initiatives in a province whose voters were thought to favour lower taxes and spending. The lack of a non-governmental setting as facilitative as Quebec’s also impeded change. Ontario’s PCs did not hesitate, even in the face of sustained opposition, to pursue their agenda, anchored in a preference for selectivity, low cost, and informal care.

Chapter Six

Economic Development: Can States Still Intervene?

The public and private sectors are never fully distinct in capitalist political economies. States underwrite private investment, direct it towards strategic sectors and technologies, promote innovations, and, if the public interest is thought to warrant it, directly produce goods and services. Beyond such “anticipatory” goals, focused on maximizing future economic well-being, governments also act “reactively,” minimizing social and political tensions by supporting mature industries that face decline.1 This chapter compares Quebec and Ontario policies in these areas, here termed “economic development policy.”2 Despite its ubiquity, the scholarship reviewed in chapter 1 identifies a wide variation in the extent of state intervention. The state-led growth strategies of post-war France and Japan contrasted sharply with British and American laissez-faire preferences, though not always as much with their practices. But this literature also has dwelt on a second theme since the 1990s: no advanced economy now is directed as firmly as some were during the post-war decades. Intervention is made more difficult by the complexity of innovation in today’s advanced sectors, by the globalization of supply chains, and by international trade regimes. Yet most comparative scholars argue that differences persist. Accordingly, I hypothesized in chapter 2 that (3a) Quebec would expend significantly greater financial and bureaucratic resources on economic development than Ontario between 1990 and 2010. Statistical evidence in the next section supports this contention and shows that this inter-provincial difference did not abate during this period. The case studies that follow support the other two hypotheses about outcomes: (3b) Quebec is more willing to steer investment to specific sectors, firms, and regions; and (3c) its policies entail greater central

164  Comparing Quebec and Ontario

direction of the economy, that is, more decision-making about its development by the premier and the Cabinet. But, consistent with these hypotheses, the Quebec case narrative also detects a reduction in these two features of intervention. Policies became more market-responsive and less centralized during our period than during the Quiet Revolution. Quebec therefore diverges from Ontario less than it did several decades ago. But the Ontario narrative also shows that it remained very different from Quebec in relation to each hypothesis, taking on far more of the laissez-faire colouration that typifies Anglo-Saxon political economies. What processes led to these distinctive outcomes? The two causal mechanisms that were crucial in the three preceding chapters again were vital. First (1b), Quebec’s main parties did not disagree sharply in this field; both endorsed an active economic role for the state, though the Liberals preferred more market-conforming measures than the PQ. In Ontario, in contrast, the PCs were much more reluctant to intervene than their opponents. This preference for free markets strongly circumscribed intervention. The NDP instead espoused intervention of a type that clearly departed from the province’s laissez-faire traditions, but it governed only briefly. The Ontario Liberals, at least after 2003, fell between these positions. Second (1a), policymaking was affected by the provinces’ very different systems of interest intermediation. In Quebec, non-governmental actors often wanted to participate in policymaking and frequently favoured more intervention. Governments there frequently encouraged non-governmental collaboration. In contrast, business and labour fought in Ontario over the merits of activist policies and of collaboration, and business had a very limited tolerance for intervention. In the economic development field, an important role was played by a third mechanism that was not invoked in chapters 3 to 5: (1c) dissimilar traditions of state intervention. In the Quiet Revolution’s wake, Quebec possessed institutions that permitted it to intervene through direct public ownership and subsidizing private investment (chapter 2). When Ontario’s Liberals considered a more ambitious policy in the late 1980s, they had far more modest instruments at their disposal. At the beginning of our period, then, these provinces had long since embarked on different developmental paths. Post-1990 policy was conditioned by these contrasting starting points. This is an example of path dependence, now widely studied in political science: pre-existing differences of disposition and capacity – distinctive levels of financial and

Economic Development  165

bureaucratic resource commitment, and of policy steering and central oversight – contributed importantly to our outcomes. In doing so, the originating differences were reproduced.3 Nationalist ideas (1d) motivated economic intervention in Quebec during the 1960s and 1970s.4 A desire to promote francophone entrepreneurship, even in the face of uncertain short-term economic logic, justified an activist state there, just as a wish to overcome late industrialization earlier encouraged state-led growth elsewhere. But by the 1990s intervention was institutionally embedded, and its initial goal of fostering a French-speaking business class was largely fulfilled. Nationalism now was very much contested as a motivation for intervention. The PQ still sometimes justified policies in nationalist terms, but not the Liberals. By the end of our period even the former party usually relied on economic arguments: state intervention was needed to ensure long-term economic growth. The original nationalist impetus now was disputed and secondary. What Do the Numbers Tell Us? For John Zysman, the capacity of some states to intervene more than others depends on their ability to manipulate access to credit and thereby to funnel investments to preferred sectors. To this, Peter Hall adds the existence of government bureaux with the expertise and mandate required to steer the private sector. Such institutions exist where the state “as a socio-cultural phenomenon” has a mandate to represent society’s “higher” interests. Studies in this field often rely on qualitative evidence to trace the influence of these factors.5 Quebec and Ontario differ in each of these ways. Quebec’s state acquired a nation-building mandate during the Quiet Revolution that legitimized massive interventions. This gave rise to organizations with a capacity to intervene that remained more ample than Ontario’s. Provinces cannot control most commercial lending, as bank regulation is a federal responsibility in Canada, but the Quiet Revolution endowed Quebec with state-controlled or stateinfluenced lending entities that are far larger than Ontario’s. Yet in both provinces, policy also relies crucially on using revenues to subsidize private investment, and state enterprises also are a key part of the policy toolkit in Quebec. Quantitative evidence is available about these variations and is discussed in this section. Qualitative aspects of the Quebec-Ontario difference, including those alluded to in the above paragraph, are highlighted in the next two sections.

166  Comparing Quebec and Ontario Figure 6.1. Economic Development Variables (B) Economic development spending as % of provincial GDP %

0

.5

.5

1

1.5

2

1 1.5 2 2.5

(A) Transfers to businesses as % of provincial GDP %

1960

1970

1980 1990 year Quebec

2000

2010

1960

Ontario

1970

1980 1990 year Quebec

(C) R&D spending as % of provincial GDP

2000

2010

Ontario

1980

1990

year

Quebec

2000 Ontario

2010

10

.05

20

.1

30

.15

40

50

.2

(D) Provincial government business assets as % of provincial GDP %

1980

1990

year

Quebec

2000

2010

Ontario

Sources: Statistics Canada, CANSIM, tables 3840023, 3840024, and 3840004 (graph A); 3850001 (graph B); 3580001 (graph C); 3850016 and 3850031 (graph D). For the years before 1988, data in graph B are from Statistics Canada, Public Finance Historical Data, 1965/66–1991/92.

The graphs in figure 6.1 derive from separate data sources; independently, they highlight the large gap between Quebec and Ontario. Each expresses values as a share of provincial GDP. Graphs A and B provide the best available data from the PEA and FMS (discussed in chapter 3). The former reports the total value of provincial and municipal government transfers to businesses, while the latter indicates provincial and municipal program spending in three areas of economic development: “resource conservation and industrial development,” “regional and economic planning,” and “research establishments.”6 Based on another provincial survey, graph C reports research and development (R&D) spending that is funded by the province. Graph D records the value of assets held by business enterprises that are owned by the provincial government. All four graphs reveal a striking divergence throughout our period. For business transfers (graph A), a core policy tool, the Ontario-Quebec

Economic Development  167

gap, already marked in 1980, expanded rapidly thereafter. The divergence is less dramatic for program spending (graph B), but is still ample; an already-considerable difference in the early 1990s increased noticeably thereafter as spending plummeted in Ontario, while continuing to rise slowly in Quebec. Provincial R&D funding has gyrated in Quebec since the early 2000s, first rising steeply, and then falling at a similar pace (graph C). But it appears to have then stabilized at a level that is still more than 50% higher than in Ontario, relative to GDP. Only regarding the value of provincially owned business assets (graph D) is there evidence of some convergence, from levels that nevertheless differed by a margin of more than 8:1 in 1980. Yet if the value of these assets has declined noticeably in Quebec since the mid-1990s, relative to GDP, indicating some retreat from the use of state enterprises, this decline nevertheless has been moderate. Moreover, since the relative value of Ontario’s business assets also declined during these years, this ratio in fact grew, to 10:1, even as the inter-provincial difference shrank in absolute terms. More evidence is available from budget documents for economic development ministries. These require several caveats. Not all development-relevant programs are administered by them; some are the responsibility of agriculture, natural resources, transportation, or other ministries. Development ministries nevertheless predominate for program spending, while tax credits are overseen by finance ministries. In both provinces, policy formulation occurs largely in these two bureaux. A second limitation is that development ministries have broader responsibilities in some provinces than in others, and these change frequently. Table 6.1 therefore reports spending only for a six-year period when the mandates of Quebec’s Ministère du Développement Économique, de l’Innovation et de l’Exportation (MDEIE) and of the two ministries that shared the same responsibility in Ontario, Economic Development and Trade (EDT) and Research and Innovation (MRI), were similar. These encompassed development and trade promotion (in EDT in Ontario), and innovation (in MRI in Ontario). Expressed in dollars, Quebec’s MDEIE spent 22% more than EDT and MRI combined between 2005/6 and 2010/11. The difference is much larger and rivals the magnitudes observed in figure 6.1, when calculated as a share of provincial GDP; in these terms, Quebec’s ministry spent almost 2.5 times more than its Ontario equivalents. Staffing levels declined gradually after 2005 in Quebec, converging somewhat with Ontario’s. But over the whole period, they were 75% higher in Quebec and remained 35% higher at its end. In population-weighted terms,

168  Comparing Quebec and Ontario Table 6.1. Budgets and Staff Levels for Leading Economic Development Ministries Ministry budget(s) Quebec

Staff Ontario

Quebec

Ontario

0.94

923

482

631

1.12

903

520

801

1.37

834

425

2.60

618

1.05

837

330

3.00

606

1.04

825

584

961

3.01

635

1.04

788

584

772

2.59

633

1.09

852

488

Fiscal year

$ (millions)

% GDP

$ (millions)

% GDP

2005/6

690

2.54

506

2006/7

519

1.83

2007/8

758

2.56

2008/9

789

2009/10

915

2010/11 Average

Sources: Ministère du Développement Économique, de l’Innovation et de l’Exportation, Rapport annuel de gestion, 2006–2007 to 2011–2012; Ministry of Economic Development and Trade, Results-Based Plan Briefing Book, 2007/08 to 2011/12; Ministry of Research and Innovation, Results-Based Plan Briefing Book, 2008/09 to 2011/12. Note: The Ontario figures combine those for its two ministries. MRI was created in 2005; its spending was included with EDT’s in the 2005/6 estimates.

Quebec’s ministerial bureaucracy still was twice as large as Ontario’s in 2010/11. Figures 6.2 and 6.3 also suggest that Quebec assigns a much larger contingent of senior officials to its core economic development ministry. The two figures identify each unit that has a policy-planning (“staff”) or program-administering (“line”) responsibility within these ministries if the unit is administered by an official at the director rank or higher. This encompasses the heads of Directions in Quebec and of Branches in Ontario. By this measure, Quebec’s ministry had sixty such senior officials near the end of the period examined here; Ontario had twenty-eight. Two Innovation Surveys of Canadian firms conducted by Statistics Canada in 2003 and 2005 shed light on whether Quebec enterprises received more provincial assistance than did Ontario’s.7 The 2003 survey asked questions about this of service firms in a number of sectors; the 2005 survey addressed manufacturing firms and reported evidence separately for information and communication technology (ICT) manufacturers. Table 6.2 indicates the percentage of manufacturing firms that reported receiving several types of provincial assistance. For the

Economic Development  169 Figure 6.2. Ministère du Développement Économique, de l’Innovation et de l’Exportation Sous-ministre Politiques Projets Économiques Industries Économiques Majeurs et Stratégiques Sociétés d’État

Secteurs

Recherche, Affaires Innovation et Économiques Science Internationales Citoyen

Affaires Développement des Industries Économiques Métropolitaines

DirectionsGénérale Directions (staff)

Services aux Entreprises et Affaires Territoriales

5 directions

6 directions

Directions (line)

3 directions 6 directions sectoriels

5 directions régionales métropolitaines

Recherce Québec

Export Québec

2 directions

1 direction

6 directions

4 directions

12 directions régionales

Source: Ministry website: http://www.economie.gouv.qc.ca/ministere/le-ministere/ organigramme/consulted 8 August 2014. The information was dated 2014, but a very similar organization existed in 2010. This figure excludes branches that serve its internal administration.

Figure 6.3. Ministry of Economic Development and Innovation Deputy Minister

Divisions

Economic Policy

Strategic Policy

Investment

Branches

3 Branches

2 Branches

4 Branches

Open for Small & Business Medium Enterprises

3 Branches

3 Branches

International Innovation Science & Trade and Research & Marketing Commercial

1 Branch

2 Branches

2 Branches

Source: Ministry telephone directory, http://www.infogo.gov.on.ca/infogo/office.do, accessed July 2012. Note: See note for table 6.1. The Ministry of Economic Development and Innovation was created in 2012 by merging EDT and MRI. The chart for the merged ministry is presented here because it reflects the division-level structure of the separate entities at the end of the period studied. The two divisions on the right belonged to MRI before 2012, while the others were part of EDT. This figure excludes units within the ministry that serve its internal administration.

170  Comparing Quebec and Ontario Table 6.2. Percentage of Manufacturing Business Units That Reported Using Provincial Government Programs

R&D tax credits

Quebec (%)

Ontario (%)

45.3

20.0

R&D grants

7.9

2.4

Venture capital support

2.7

1.1

Tech support and assistance programs

5.4

1.7

Information Training support Other support

5.9

7.4

23.3

7.1

4.1

1.1

Source: Statistics Canada, CANSIM, table 3580115; the data are from the 2005 Innovation Survey, which reports activities between 2002 and 2004.

Table 6.3. Percentage of ICT and Selected Service Business Units That Reported Using Provincial Government R&D Tax Credits

ICT manufacturers

Quebec (%)

Ontario (%)

70.5

40.1

ICT services

50.8

25.7

Management, science, and technology consulting

25.3

5.8

Scientific R&D services

67.7

44.0

Sources: For the first row, same as for table 6.1. For the remaining rows: Statistics Canada, CANSIM, table 3580051; these data are from the 2003 Innovation Survey.

most frequently cited of these, R&D tax credits, table 6.3 identifies the share of firms reporting their use among ICT manufacturers and three categories of service firms examined in the 2003 survey. Table 6.2 again suggests a substantial inter-provincial difference. More than twice as many manufacturers reported benefiting from provincial R&D tax credits in Quebec as in Ontario (45.3% versus 20.0%). Between two and four times as many Quebec firms also reported receiving provincial R&D grants, venture capital support, technical support and assistance, “other support,” and training. Only with respect to receiving “information,” arguably the least ambitious category, did more Ontario firms report provincial help.

Economic Development  171 Table 6.4. Percentage of Innovating Business Units That Reported Collaborative or Cooperative Arrangements Quebec (%)

Ontario (%)

Manufacturers

20.0

22.5

ICT manufacturers

35.1

26.1

ICT services

60.6

53.1

Management, science, and technology consulting

58.4

71.2

Scientific R&D services

83.2

71.1

Sources: For the first two rows, Statistics Canada, CANSIM, table 3580099, from the 2005 Innovation Survey. For the last three rows, Statistics Canada, CANSIM, table 3580049, from the 2003 Innovation Survey.

For each category of high-technology manufacturing and service firms identified in table 6.3, a much larger proportion of Quebec firms again reported receiving provincial R&D tax credits. The inter-provincial gap was ample for all sectors, ranging from nearly 20% to over 30%. In contrast, table 6.4 suggests that Ontario and Quebec firms differ little in their propensity to partner with others in innovation. The secondary literature gives us little reason to expect Quebec firms to collaborate with each other in business activities more than their Ontario counterparts (see chapter 2). In this light, the table’s evidence is not surprising. But we have hypothesized (1a) that Quebec policymaking is more collaborative than Ontario’s. Can an argument that Quebec and Ontario differ in the extent of collaborative policymaking be reconciled with evidence that Quebec firms do not cooperate more than Ontario ones in product or process innovation?8 An affirmative answer is very possible: there may be more collaborative policymaking and implementation in Quebec without firms there cooperating more on their core business plans. A “firm-centred” culture, in Quebec as in Ontario, would discourage this. Because the focus of this book is on policymaking, not firm comportment outside of the policy process, this important question is not examined further here. Quebec: Interventionism at Middle Age Most of the state enterprises that were important for Quebec policy after 1990 emerged during the Quiet Revolution.9 Hydro-Québec acquired

172  Comparing Quebec and Ontario

control of the province’s entire hydroelectrical system after 1962, then massively expanded it. The Société générale de financement (SGF), created in 1962, assumed equity stakes in Quebec firms in order to modernize and consolidate them. The Caisse de dépôt et de placements du Québec was launched in 1965 to manage funds collected for the new Quebec Pension Plan and later assumed responsibility for other public pension schemes. It had a “double mandate” to finance Quebec entrepreneurs while also securing an adequate return for the plan.10 A Société de développement industriel (SDI) focused mainly on loans to small industrial firms. This period also witnessed the emergence of a plethora of state enterprises designed to give the province a stake in sectors that it identified as crucial: SOQUEM (mining), SOQUIP (petrochemicals), REXFOR (forestry), SDBJ (James Bay development), Québecair (an airline), SIDBEC (steel), SOQUIA (agri-foods), and SNA (asbestos).11 By 1990, concertation also was well established. In the 1950s regional actors formed Conseils économique régionaux (CARs) to press for state intervention. The CARs revealed a capacity for self-mobilization among these non-governmental interests. With the Quiet Revolution, the state assumed responsibility for organizing regional concertation, replacing the CARs with Conseils régionaux de développement (CRDs).12 Later, as Quebec’s social partners took their first steps towards province-wide concertation in the early 1980s (chapter 2), the FTQ labour federation founded its Fonds de Solidarité. Along with the CSN union’s smaller Fondaction, created in 1996, the fonds became an important source of venture capital. The union funds relied on very generous tax treatment from the Quebec and federal governments and were expected to reinforce the emerging willingness of unions to collaborate with government and business. Their arrival therefore was yet more evidence of state intervention, but they also indicated labour’s willingness to participate in concertation13 A PQ government also fostered province-wide collaboration by setting up tables de concertation sectorielle to permit firms and unions to network and by reorganizing part of its industry ministry on sector lines. The PLQ administration that came to power in 1985 was the first since the 1960s to consider a radical departure from this activist legacy.14 It commissioned three reports that recommended a turn towards greater laissez-faire, including many privatizations. But the government hesitated. Organized labour denounced the privatization proposals. The reports were endorsed by leading business associations, including the CPQ, but many manufacturers wanted the state to remain active.

Economic Development  173

So the Liberals made smaller changes, including privatization of Québecair and several smaller firms, and curtailment of the SDI’s mandate and funding. But while spending fell noticeably for a time after 1985, it returned to previous levels by the early 1990s.15 After their re-election in 1989, moreover, the Liberals returned to greater activism, under the influence of industry minister Gérard Tremblay, and also to a preference for concertation. The centrepiece of Tremblay’s 1991 industrial policy was the identification of thirteen grappes industriels, or “clusters” in the terminology of Harvard professor Michael Porter. Clusters consisted of industry sectors in which the province was judged to be internationally competitive, or as having the potential to be competitive.16 In one respect, the policy offered nothing new: the industry ministry already had a Direction-Générale for sectors, and the sectors that were assigned separate directions within it mostly were those targeted by the new policy.17 What was novel was the element borrowed from Porter, who argued that successful firms must be close to others in their sector, which allow them to share skilled workers, R&D, information about markets, etc. While vaunting the merits of such cooperation, his theory acknowledged that firms continue to compete in other ways – including, perhaps, for the firm-specific product and process innovations identified in table 6.4. Ambiguity in this matter was matched by the theory’s imprecision about the appropriate role of government. For some authors, it implied a preference for laissez-faire, but Tremblay thought otherwise.18 He distinguished his approach from a strongly interventionist one, and it clearly contrasted with Quebec’s earlier propensity to launch state enterprises in priority sectors. But he also argued that government could help firms establish synergies with others, and with lenders, universities, unions, and so forth. To complement the clusters strategy, the Liberals created two Sociétés Innovatech, in Montreal and in Quebec City,19 which would provide venture capital. Business and labour leaders initially were enthusiastic. The new policy was developed by ministry officials,20 but these leaders already had been discussing the economy for several years in the Forum pour l’emploi (see chapter 3). At a Rendez-vous économique organized by the CPQ, leading business groups and unions agreed on many initiatives that they thought would enhance Quebec’s economy.21 While not specifically endorsing the cluster concept, they showed a proclivity for the concertation that Tremblay argued was a distinctive feature of Quebec’s economic culture.

174  Comparing Quebec and Ontario

A couple of years later, it was clear that the strategy was unfolding unevenly. A key to its success was effective decision-making by the private sector–led tables sectorielles de concertation. But some of them met infrequently and accomplished little.22 Reflecting the ambiguities referred to above, commentators now sometimes debated what clusters policy really amounted to.23 The CPQ’s head, previously enthusiastic, raised reservations, as did other business spokespersons. At another Rendez-vous économique in 1993, business and labour leaders recommended that the government move more slowly, waiting for pilot projects to demonstrate the cluster concept’s potential before developing it further.24 Other criticisms emerged. Laissez-faire commentators rejected the clusters policy as an example of failed state intervention. Some complained that while the clusters idea was championed by the industry ministry, it was not accepted in other important ministries. The PQ argued that the Liberals were neglecting the province’s regions while focusing on thirteen clusters with province-wide mandates.25 In fact, the Liberals announced a new regional policy in 1992, which expanded the network of CRDs to provide regional and non-governmental input.26 A new labour market policy launched yet more committees, led by business and labour. Yet no clear relationship was established between these new forums and the sector strategy’s tables. In spite of their mixed success, the grappes policy signalled the Liberals’ return to intervention, albeit of a more indicative and marketsensitive kind. There were more privatizations – most prominently, of the money-losing SIDBEC and SNA firms – but state enterprises that could contribute to an anticipatory policy were retained. The SGF and the Caisse de dépôts remained active. The former now focused on equity assistance to larger firms and on encouraging foreign investment, while the latter expanded its network of regional investment funds, launched in 1987, which offered venture capital to smaller firms. The Mouvement Desjardins credit union participated in the funds after 1992, while the FTQ’s Fonds would do so in 1996. Hydro-Québec also sustained its established practice of attracting and retaining energy-hungry firms to the province with low electricity rates. The SDI’s mandate was adjusted again, but it remained a major source of loan guarantees to start-up firms.27 The PQ came to power in 1994, but the change in government did not result in a significant change in policy, in spite of the fact that the new PQ industry minister, Daniel Paillé, quickly announced the end

Economic Development  175

of Tremblay’s clusters strategy, that he would instead prioritize the regions and smaller firms, and that the state enterprises would be relied on more.28 While less inhibited about intervention, however, the PQ increased its extent only modestly over the next nine years. It also mirrored its predecessor in encouraging more market sensitivity and decentralization. Several developments soon hinted that change would not be dramatic, First, in 1995 Paillé announced an extensive private sector consultation to discuss a replacement strategy; the invitees to one meeting, it turned out, were from the existing tables sectorielles de concertation, which the industry ministry continued to work with.29 Second, Paillé himself disappeared from the Cabinet in January 1996 when Lucien Bouchard replaced Jacques Parizeau as the PQ premier. His replacement, Bernard Landry, was thought by some observers to regard “clusters” more favourably.30 Third, while quick to disown its predecessor’s policy, the PQ was slow to replace it, and a new policy was delayed several times. Meanwhile, Landry focused on piecemeal measures, especially in high-technology industries, the most important of which targeted the multimedia sector. In 1997 Landry announced a very generous subsidy for multimedia firms. There was additional assistance for firms in designated multimedia “centres,” and generous subsidies were also made available to high-technology firms that co-located.31 A new strategy was released finally in March 1998. It underlined the PQ’s commitment to intervention, but its sector focus and emphasis on decentralization and market sensitivity was consistent with the trend started by the PLQ.32 The centrepiece was an expanded and enriched SGF, within which four state firms were incorporated: REXFOR (forestry), SOQUIP (petrochemicals), SOQUIA (agri-foods), and SOQUEM (mining). This new “super-SGF” received $2 billion extra over the next five years to provide equity financing to large and export-oriented firms. The additional funds were diverted from Hydro-Québec’s earnings. The SGF would acquire only minority holdings in firms, underlining the move towards more market-sensitive and indicative interventions. Its funds were divided into ten separate sectoral units to encourage decentralized and autonomous decision-making. A new Sociétés Innovatech was created for resource regions. The Innovatechs were also limited to acquiring minority stakes; this market focus was reinforced by a predominance of private sector actors on their governing boards. The strategy’s third component was the creation of InvestissementQuébec (IQ) as a “single wicket” for financing. It incorporated the SDI

176  Comparing Quebec and Ontario

and other loan programs. Most IQ financial assistance would consist of loans and loan guarantees. The strategy did not specify a role for concertation, but a PQ regional policy in 1997 launched two networks of local committees consisting of non-governmental and municipal representatives. Centres locaux de développement (CLDs), for economic development, and Centres locaux d’emploi (CLEs), for training, were created – one of each for all of Quebec’s approximately one hundred municipal regions (MRCs). They would work with the seventeen regional CRDs in dispensing a regional development budget.33 Creation of these bodies reflected PQ support for concertation. It also manifested the reciprocal influence of non-governmental interests: delegates to the Socio-Economic Summit in 1996 (discussed in earlier chapters) had strongly emphasized their desire to have more mechanisms for community economic decision-making.34 During its second term it was again clear that the PQ would intervene, but it also gave further evidence of parting ways with Quiet Revolution dirigisme. Moreover, promotion of “clusters” now re-emerged as an explicit goal. PQ policy during these years had three salient features: (1) more measures to stimulate high technology, especially between 1999 and 2001; (2) fostering of growth in the outlying regions, mainly between 2001 and 2003; and (3) an effort to address rising criticism of the state investment enterprises. For high technology, two new bodies, Innovation Québec and Valorisation Recherche Québec, were created.35 They would, respectively, promote scientific research and training, and encourage partnerships between universities and private firms. A new network of Carrefours de la nouvelle économie (CNEs) disseminated to smaller communities the established model of generous tax credits for multimedia and high-technology firms. The budget included additional R&D tax credits for small firms. A Cité du commerce électronique was launched in Montreal.36 The capstone was a science policy released in 2001. With its emphasis on fostering “networks” and “partnerships” to increase R&D, and its lists of priority sectors, the accompanying policy statement showed that the PQ had not moved far from the PLQ’s preoccupation with grappes.37 For the outlying regions, the 2001 budget included a ten-year tax holiday for small manufacturers; additional credits; support for firms that diversified the regions’ economies or expanded resource production; and aid to small and new firms.38 This regional turn culminated with Action concertée de coopération régionale de développement

Economic Development  177

(ACCORD), an ambitious new program that involved non-governmental representatives far more intimately than previously. Announced at a regional summit in 2002, the new program also followed demands for a greater role for concertation by many regional representatives at meetings across the province. There clearly was a reciprocal relationship between non-governmental mobilization and mechanisms for regional input. ACCORD reintroduced an explicit reference to “clusters,” though they were now referred to as filières industrielles. The SGF would negotiate development agreements with new ACCORD committees, which would include local businesspersons, researchers, and representatives from the community-dominated CRDs, in fourteen outlying regions. These committees would identify projects in sectors where a region had distinctive strengths.39 The SGF, now finishing the spending program that began in 1998, would finance the projects.40 Consistent with the ongoing shift towards more market-sensitive approaches, the PQ now insisted that it favoured only investments that were likely to be profitable and where the private sector shared the risk. The now-typical reliance on tax credits and minority equity stakes reinforced this message. Opposition politicians did not disagree with this approach, but there was mounting criticism of state firms, especially the SGF and the Caisse, that were judged to have made decisions that reflected the PQ’s political ambitions more than these market-oriented priorities. Two examples of questioned decisions, both designed to prevent external interests from acquiring a Quebec firm, were the SGF’s involvement in the purchase of Culinar, and the Caisse’s in buying Vidéotron.41 Criticism reached a crescendo when the firms reported losses in the wake of the collapsing market for technology equities. The Caisse’s return was -5% for 2001, while the SGF’s was -4.1%. The Liberals promised major changes.42 Yet change had already begun. The PQ replaced the Caisse’s CEO in September 2002, bringing in one who strongly favoured a profit-oriented investment strategy.43 The PLQ consequently made less dramatic changes after arriving in office than initially seemed likely. Before coming to power, the Liberals promised less intervention. State firms would be reined in as providers of venture capital; there would be more room for private initiative. Yet their accession to government in 2003 again did not lead to decisive change. Commentators noted that the party endorsed the outcome of a regional summit with non-governmental actors shortly before the election, and that its ideas echoed the PQ’s filières industrielles.44 The new government did, in fact,

178  Comparing Quebec and Ontario

initially make major cuts, but within two years, PLQ policy swung strongly back in a more activist direction, confirming Quebec’s established pattern of active intervention. The cuts began with the 2003 budget, which maintained ACCORD but slashed the budget of MDEIE (the economic development ministry) by 20%. Business tax credits also were curtailed. There would be almost no new support for co-location “centres.” The CRDs and CLDs survived, but with smaller budgets.45 The presidents of the SGF and of IQ were replaced. The big state firms saw their mandates curtailed. The SGF would play no role in ACCORD, would have to finance future investments from its existing funds, and would not be allowed to acquire smaller firms. ACCORD would be funded from a new budget within MDEIE. An important regional fund at IQ was replaced with a much smaller one. IQ was to focus more tightly on smaller firms. The Montreal Société Innovatech, the largest, was privatized.46 The Caisse would move further towards focusing on investment returns. Valorisation Recherche Québec was closed.47 These were major changes, and provision of venture capital by state enterprises now fell considerably. Yet even in this early period it was evident that the Liberals would remain very active. Uncomfortable with the predominance of unelected representatives on the CRDs, they nevertheless did not simply abolish them but replaced them with Conférences régionales des élus (CRÉs), a majority of whose members would be elected municipal officials. The previously separate research ministry was merged with MDEIE.48 The Liberals made their first major new spending commitments in 2005: credits for large IT firms and equipment purchases; more R&D credits for smaller firms; and a stock savings plan. Having first constricted venture capital acquisitions, they now were willing to spend again, but primarily by using tax expenditures. The PQ, previously hostile, argued that these measures resembled some they had introduced and that the Liberals had cut.49 Under new mayor Gerard Tremblay, the Liberal industry minister before 1993, Montreal launched a grappes industrielles strategy that became the Montreal part of the unfolding ACCORD. A new economic development strategy was released.50 The full extent of the Liberals’ return to intervention became evident in 2006 and 2007. First, the 2006 budget increased spending substantially: MDEIE’s budget rose by $618 million, or 8%, over several years. It offered more assistance to manufacturers, the regions, and research; and substantial new sums were allocated to the troubled forestry

Economic Development  179

sector.51 Second, a research and innovation strategy was launched with a budget of $888 million over three years. The Liberals had faced mounting criticism from academic researchers and high-technology firms for what was seen as their neglect of this area. IQ was also back in favour and was assigned a growing list of new commitments.52 Finally, a new regional development strategy was announced in 2007 and allocated $825 million over five years. There was new money for regional funds, the CRÉs and CLDs, and the regional ACCORD committees. Concertation, like intervention, clearly was again central to policy in Quebec.53 The PLQ now was praised by proponents of a more activist stance.54 Reduced to minority standing in April 2007, and restored to a majority in December 2008, the Liberals continued along this path. Manufacturers who were struggling because of the high value of the Canadian dollar received new assistance. A Conseil des manufacturiers was launched to engage business, labour, and government in discussions about the sector. The 2008 budget added more measures for manufacturers and IT firms in the regions.55 In the wake of the continuing forestry crisis, Quebec offered more help.56 The Liberals’ main innovation during this period was a green technology strategy, which included funds to help firms develop green products. Prefiguring a much larger collaboration the next year, the province also partnered with the union equity funds, the Caisse, and private firms to launch a clean energy venture capital fund and, promising to help organize firms in the sector.57 The Liberals also now began to implement ACCORD in earnest. Only 26 projects had begun under agreements with ACCORD committees in 2006–7, but the number rose to 159 by 2008–9.58 Liberal interventionism reached its apogee during the global financial crisis. Some new measures were designed to meet immediate needs, while others had a much longer time-horizon. The Liberals increased their reliance on IQ and abandoned their reservations about public venture capital in general and the SGF specifically. In December 2008, a $1 billion program of loans and loan guarantees, later $2 billion, was announced for firms experiencing liquidity problems; IQ would manage it.59 As an indication of how important the union funds had become, the FTQ’s Fonds de Solidarité played a major role in three more schemes launched in 2009, and the CSN’s Fondaction received more generous tax treatment to expedite its growth. The largest of the schemes was a long-term venture capital fund, named Teralys Capital Fund, which would concentrate on IT, life sciences, and green technology firms. It began with contributions from the Caisse, the FTQ’s Fond,

180  Comparing Quebec and Ontario

and IQ. By 2010, it was managing $1.3 billion, including $600 million from the private sector. A second fund, financed by the FTQ Fond and the SGF provided emergency assistance. The third assisted start-ups. The SGF received an injection of $1 billion to permit it to participate in the first of these and to start offering venture capital again.60 In September 2010 the government merged the SGF and IQ, hoping to save $15 million in administrative costs. In view of their recent history, this clearly did not indicate that either firm had become less important to the Liberals. The contrary was true.61 Two other initiatives emerged after the crisis and withstood the budget restraint exercise launched of 2010 (see chapter 3). The research and innovation strategy was renewed with $1.16 billion over three years – $300 million more than in the strategy’s first phase.62 Of potentially greater long-term significance was Plan Nord. The government committed $2.1 billion to infrastructure and venture capital spending over five years to facilitate resource production in northern Quebec. A major new investment program by Hydro-Québec was the plan’s centrepiece. The government’s costs, including road construction and venture capital, would be covered partly by a significant increase in mining royalties, legislated in 2009. The plan would be overseen by the Société du Plan Nord, a new state firm, but individual mining projects would be undertaken by the private sector.63 To summarize, the election of a Liberal government in 2003 was not followed by a significant laissez-faire turn in Quebec’s economic development policy. As it had in 1990, in 2010 (3a) Quebec still deployed substantial resources in this field, consistent with our chapter 2 hypotheses about policy outcomes. The Liberals also did not hesitate (3b) to direct resources to particular sectors, regions, or technologies, or (3c) make decisions in the Premier’s Office or at Cabinet. The government was constantly launching new initiatives of these kinds. But after 2003 there was a continuation of the movement away from dirigisme that had already been evident under the PQ: for instance, less reliance on equity acquisitions by state firms and more on tax assistance to private firms and individuals. The PLQ also no longer identified a fixed set of strategic sectors, as it had in 1991; initiatives now were broader (innovation, manufacturing), emerged piecemeal, in response to newly identified markets (green technology), or changed as circumstances required (forestry). Private participation now was essential (Teralys, Plan Nord), as was private actors’ sharing of investment risks (SGF and IQ

Economic Development  181

investments). Interventionism nevertheless remained pronounced, far more so, as we shall see, than in Ontario. In addition to the support provided for these conclusions by the above narrative, there also is graphical and statistical evidence. Figure 6.2 identifies the main policymaking and policy-implementing units of MDEIE near the end of our period. The ministry retained a sizable professional staff after seven years of PLQ government and also experienced considerable continuity. The third and fourth branches (secteurs) from the left respectively oversee MDEIE’s sector and regional measures and are responsible for most private sector concertation. Analogous units existed in the early 1990s.64 The major change, reflecting the increased focus on promoting research and innovation, was the growth of the branch that oversees measures of this kind, fifth from the left in the figure. Table 6.5 reports the value of assets held by the main state firms that have an economic development mandate. Because labour-sponsored funds depend heavily on public subsidies, they are included. The data suggest four points. First, by the mid-1990s Quebec abandoned several enterprises – an airline, and steel and asbestos firms. None promised to contribute to the province’s economic future. Their privatization reflected the market-sensitive shift that we have observed. Second, public ownership nevertheless remained extensive in 2010, although it had ebbed as a share of Quebec’s GDP (figure 6.1, graph A). The developmental role of the largest state firm, the Caisse de dépôt, is now disputed. It usually acts independently of government, with a mandate to maximize profits. Only $38.6 billion of its assets were within Quebec in 2010. On the other hand, while it has been argued that its day-to-day transactions now are unlikely to stimulate much entrepreneurship in Quebec, we have noted one recent case – the creation of Teralys – where it very likely has.65 Hydro-Québec, the second-largest firm, does not have a broad mandate to foster economic development, but it too can still play a vital role, as in Plan Nord. Third, firms for which development goals are indisputably primary shrank substantially after 2003, in the wake of the PLQ’s attack on venture capital. The value of assets held by the SGF and the main Innovatechs fell by a combined $1.2 billion or 36%. Nevertheless, fourth, the overall availability of such equity rose steeply in these years. The FTQ’s Fonds and the CSN’s Fondaction grew in value by $3.2 billion after 2003, still benefiting from very generous tax assistance. The shift to union-managed equity funds also

182  Comparing Quebec and Ontario Table 6.5. Assets Held by Quebec State Enterprises and Union Funds ($ millions) 1985

1995

2003

2010

Caisse de dépôt

22,502

52,547

89,398

151,742

Hydro-Québec

27,129

46,271

59,078

65,898

SGF

 2,085

 2,252

 2,885

 2,011

–

53

172

284

State enterprises

SEPAQ Innovatech – Québec SDBJ Innovatech – Montréal

–

 5

99

42

 16

 9

17

27

–

62

237

–

SNA (asbestos)

256

28

–

–

SIDBEC (steel)

529

28

–

–

Québecair

144

 1

–

–

N/A

1,600

4,620

7,294

–

–

268

766

Union funds Fond de Solidarité Fondaction

Sources: For 1985 and 1995, Luc Bernier, “Que faire des sociétés d’état aujourd’hui?,” in L’État québécois au XXIe siècle, ed. Robert Bernier (Quebec City: Les Presses de l’Université du Québec, 2004), 107. For 2010, annual reports of the identified firms. 2003 data were accessed from both sources. All data for union funds are from annual reports. Note: SEPAQ = Société des établissements de plein air du Québec, a tourism company. For 1985 and 1995, figures for the SGF include the assets of firms that were integrated with it in 1998.

buttressed the move away from central control of development instruments and reinforced economic collaboration among Quebec’s leading interests – as in the case of Teralys. Table 6.6 turns our attention from asset “stocks” to the annual “flow” of development spending. It reports expenditures that take the form of tax assistance, overseen by the Finance Ministry; of program spending by IQ and MDEIE; and of new investments by the SGF. (Some MDEIE funds go to IQ, creating some duplication between these categories.) The table confirms the decline of equity acquisitions as a development strategy: the SGF’s investments plummeted after 2003. In 2010 these nevertheless had doubled from two years earlier, in the wake of the Liberals’ new crisis initiatives. Spending by IQ and MDEIE reveals no

Economic Development  183 Table 6.6. Economic Development Spending in Quebec, Leading Sources ($ millions)

Tax expenditures: corporations

2000

2002

2004

2006

2008

2010

1,183

1,661

1,586

1,760

2,031

2,368

Tax expenditures: individuals

151

248

182

174

209

265

Authorized financing: IQ

803

1,308

936

860

1,818

884

452

353

360

441

493

636

180

230

176

330

Financial aid: MDEIE Investments: SGF

N/A 585

Sources: Inspired by Laberge, Joanis, and Vaillancourt, Le Québec Économique 2009, ed. M. Joanis and L. Godbout (Quebec City: Les Presses de l’Université Laval, 2009), 310. Some data are from that source for 2004–8; most are updated from ministry and agency annual reports. Reported tax expenditures relate to specific sectors, regions, or technologies and therefore have a clear economic development focus. Figures for corporations pertain to the corporate income tax; those for individuals relate to the personal income tax.67

strong trend but, as we saw, IQ was the main vehicle for the PLQ’s 2008 crisis program. The resilience of development spending under the Liberals is especially evident in relation to tax assistance for investments in strategic sectors and technologies, which increased at the end of the PQ era, and then fell for a few years under the Liberals; but it climbed sharply between 2006 and 2010, more than offsetting the earlier decline in venture capital outlays. What role did nationalism play in sustaining economic intervention in Quebec after 1990? If the mere fact of extensive intervention is understood to imply a nationalist motivation, then the question is tautological and the answer necessarily affirmative.68 But it seems more plausible to use a narrower test: the link to nationalist objectives, such as language preservation, is made explicit by policymakers. In these terms, nationalism was a minor influence. It was far more common for opponents of intervention to attribute such motives to policymakers as a way to discredit them. When Lucien Bouchard once equated criticism of state intervention to an attack on the “Quebec identity,” he earned a sharp rebuke from Stéphane Dion, then a federal minister.69 A broader test would attribute nationalist motivations, even in the absence of explicit reference to them, to interventions that were more “political” than “economic,” that is, unlikely to be profitable or to contribute to economic development. Such motivations were widely thought to have underpinned the Culinar and Vidéotron acquisitions.70 Yet the drift in

184  Comparing Quebec and Ontario

Quebec policy after 1990 was very strongly away from such actions. All governments repeatedly invoked economic rationales for policies. The changes made to the mandates of the Caisse and the SGF after 2003 also made such acquisitions far less likely thereafter. Economic intervention in Quebec now had mostly pragmatic and economic motivations: having acquired a rich array of interventionist tools after 1960 and now used to a model of growth that involved an active state, governments found it sensible to employ them. I return to this question in this chapter’s conclusion, where I evaluate the significance of such evident path dependency for assessing the role of divergent state traditions in distinguishing our two cases. Ontario: “The Unsettling Agenda”71 Ontario began our period with nothing like the dense web of institutions already established in Quebec. Some industrial policies were launched during the 1970s, departing somewhat from a largely laissez-faire post-war norm. Development corporations extended loans to firms in less advantaged areas. But interventions remained very modest around 1980, compared with Quebec’s.72 In 1981, a PC government launched a Board of Industrial Leadership and Development, (BILD) which was criticized as a very modest strategy. Its genuine innovations, designed to promote high technology, were limited and had mixed results. IDEA Corporation, a venture capital fund, was terminated by the PCs’ Liberal successors. More enduringly and effectively, a number of centres were created to promote private sector innovation and to foster research links between firms and universities.73 Other instruments in Ontario at first blush offered government policy tools to equal Quebec’s, but they were not used for this purpose. First, its largest public pension funds, those for its teachers and municipal workers, together rival Quebec’s Caisse in size, but they have been managed with the single goal of maximizing investment returns, not promoting economic development.74 Second, Ontario Hydro, its monopoly electrical utility, was nationalized after 1906. During the 1970s and 1980s it expanded massively by opening many nuclear power plants. This, for some observers, was Ontario’s main economic development policy at the time. By 1990, however, nuclear power was controversial in the wake of major plant accidents abroad. No new nuclear plants were launched in Ontario after 1985.75 The central question now

Economic Development  185

would not be how to include Hydro in a development strategy, but whether to privatize it. Elected in 1985, the Liberals went somewhat further than the Tories. They created a Technology Fund to support business-university links; it launched university-based “centres of excellence” for this purpose. But only in 1989–90 did the fund’s budget even exceed $100 million. Some observers saw it as a mere continuation of BILD.76 The Liberals innovated more clearly in fostering non-governmental collaboration. A Premier’s Council, created for this purpose, represented its constituencies unevenly: it had twelve business members, seven from academia and the professions, and only three from organized labour, along with six ministers. It nevertheless had few precursors as an effort to engage leading economic interests in a dialogue about Ontario’s economic future. The council oversaw the Technology Fund and recommended a more active industrial policy, but it was not clear that the broader business community shared the views of the council’s business members, often seen as endorsing more state intervention than was habitual in Ontario.77 When the NDP arrived in power in 1990, there were no strong policy legacies to draw upon, but many observers now saw a need for greater activism. Ontario had not intervened for large parts of its history because of its prosperity, a result of its long being home to most Canadian manufacturers. The latter relied on policies, but the most important of them, the National Policy tariff regime initiated in 1879, was a federal responsibility. Yet the early-1980s recession devastated many manufacturers. Moreover, the PC government in Ottawa after 1984 favoured free trade and signed a trade agreement with the United States in 1988. Ontario firms would now have to compete in foreign markets.78 Government, it was argued, had a responsibility to help them adjust. Among proponents of this view, shared by many Liberals, the NDP stood out. The party came to power in 1990 with few economic development commitments,79 but then went much further than its predecessors in promoting intervention and business-labour cooperation. In fact, its three most far-reaching undertakings – labour-sponsored investment funds, a massive public investment fund, and a sector strategy – each had a clear Quebec antecedent: respectively, the FTQ’s Fond, the Caisse, and Tremblay’s grappes. Yet there could be no clearer evidence of Ontario’s unpropitiousness for such efforts than their dismal outcomes.

186  Comparing Quebec and Ontario

The first two quickly failed, while the third made real headway but was eliminated quickly after the PCs were elected in 1995. Under new NDP legislation, union-sponsored investment funds would benefit from the same generous tax treatment as in Quebec. The NDP saw the funds as a way to involve workers in the economy; for Premier Bob Rae the idea “puts democracy into the economy. It gives workers a chance to participate.”80 A second goal was to increase the supply of venture capital. Soon, there were more than a dozen such funds, though none of them came close to rivalling in size the FTQ’s Fond. But the Ontario Federation Labour (OFL) and the Canadian Autoworkers’ union (CAW) dismissed them as a shelter for affluent taxpayers. They were not persuaded by the opportunity that the funds represented to extend labour’s role in the economy.81 Most Ontario funds therefore were sponsored by small unions that played little role in overseeing them; in what were termed “rent-a-union” arrangements, these funds actually were created and managed by private managers. Many observers soon condemned them for flooding Ontario’s venture capital market with poorly managed money.82 With little interest from organized labour, they also singularly failed to foster a more collaborative capitalism. The second initiative was a venture capital company, to be funded from Ontario’s six main public pension plans. The Ontario Development Corporation (ODC) would have had $2 billion in assets, more than half those held by Quebec’s Caisse de dépôts.83 But the idea quickly encountered resistance. The main pension funds, including OMERS and Teachers, refused to participate, arguing that venture capital was too risky and that government should not be involved in managing such a large fund. The Toronto Board of Trade also was opposed, arguing that venture capital could be promoted with less government meddling by using tax credits. Moreover, Ontario’s capital markets were larger and far less accustomed to state intervention than were Quebec’s; as the province pulled out of recession, observers believed that the ODC’s target firms no longer faced a dearth of capital. When the fund finally emerged in November 1993, it was minuscule. The PCs cancelled it in 1995.84 The Sector Partnership Fund (SPF), launched in 1992, was more successful. Money went to firms, unions, and other actors within a sector that formed a committee to study its needs and to propose measures to enhance its future success. If the committees developed an approved strategy, and if the private sector was willing to bear part of the cost, government would fund the rest. The SPF was dismissed by the

Economic Development  187

opposition parties and some business observers,85 but it made some progress. By 1995, fifteen sector strategies had been approved, and initiatives were being funded in many of them, and eight more were in progress. Only half of the SPF’s budget had been spent at that point, but other sums were committed by the private sector.86 This outcome suggests that cooperation was possible in Ontario’s historically individualist business culture, at least if the scale of interaction was relatively small (sectors) and flexible (sectors were largely self-identified). But when the PCs cancelled the SPF, while also cutting taxes, major Ontario business associations approved; lower taxes and freer markets were a higher priority for them.87 The most enduring NDP measures were adjustments to older ones, such as its renewal of the centres of excellence, and of grants and loans programs from the existing development corporations and the Technology Fund; during the early-1990s recession, the NDP also saved many firms from bankruptcy.88 By contrast, the three major NDP initiatives discussed above ran afoul of features of Ontario’s political economy. First, in an adversarial industrial relations setting, organized labour would not depart from its traditional role of confronting business in order to participate in sustaining and shaping it. Second, where capital formation relies substantially on private sources that are committed to maximizing profits, and where these sources usually are plentiful, it was hard to justify a large new publicly owned investment fund. Third, adversarialism again, and firms’ individualist culture, militated against efforts to induce firms and unions to cooperate. While the SPF overcame the latter hurdle to a degree, its demise was not much regretted by Ontario business. Relentlessly critical of NDP spending, the PCs promised to intervene much less when they came to power in 1995. Business would benefit from across-the-board tax cuts (see chapter 3) and deregulation. There would also be $200 million less in business grants and subsidies.89 The Tories achieved all of these goals, and also ended the NDP experiments with collaboration. Moreover, they broke up Ontario Hydro and allowed a larger private-sector role in the electricity market. There was, however, another side to Tory policy. Many grant and loan programs were replaced with lucrative tax credits or deductions, which, by the end of the PCs’ first term, evoked criticism from advocates of laissez-faire. When they left power in 2003, the Tories nevertheless had eliminated collaboration and radically reduced program spending. Intervention persisted but was much reduced.

188  Comparing Quebec and Ontario

Two main NDP initiatives – the ODC and the SGF – were ended within months of the PC accession to power. Labour-sponsored funds survived, but they had long since lost any role as vehicles for labour participation in the economy. Viewed as an investment tax credit, on the other hand, they were consistent with the PCs’ preferred approach. Three of seven centres of excellence were closed, and the program’s budget was cut.90 Business grant and loan programs were slashed. The government estimated that spending on them would fall 68% by 1997; in 1998 it calculated that it had exceeded this commitment.91 That many subsidy programs would be replaced by targeted tax assistance soon became clear. The PCs quickly replaced cash payments with tax credits for film and TV productions and allowed cultural organization to offer tax incentives to donors.92 The biggest tax benefits were announced in 1997, including generous new credits for businesssponsored research institutes in universities and hospitals, for computer animation, and for banks that provided venture capital to small firms. There were also major reductions in corporate income, capital, and sales taxes for companies that acquired intellectual property or foreign technology.93 It soon was clear that tax incentives were the centrepiece of the PCs’ approach to economic development, designed to foster high-technology firms without resorting to the grant and loan program they reviled. The PCs created a few such programs, but they were modest. For instance, an Ontario R&D Challenge Fund expended $50 million annually, beginning in 1997, on university-based research; at least one-third of the research’s total budget had to come from the private sector.94 The PCs ended non-governmental collaboration. As well as terminating the SPF, they closed the Premier’s Council; the Ontario Training and Adjustment Board (OTAB), a corporatist-style body that the NDP created to oversee training; and a similarly collaborative health and safety agency.95 They preferred informal consultation with business. The PCs’ one formal undertaking during their first term was the Ontario Jobs and Investment Board (OJIB), headed by a prominent Conservative. Initially intended to draw on the views of “the public, private and notfor-profit sectors, unions, large and small businesses, colleges and universities,”96 OJIB’s members in fact almost all were businesspersons, and none represented a union. After recommending more attention to infrastructure and education, OJIB was disbanded.97 In 1995, the PCs had promised to consider selling parts of Ontario Hydro.98 In the face of union opposition, and of polling evidence that

Economic Development  189

the public did not support privatization, they proceeded cautiously. Hydro was broken into five separate entities.99 The two largest were Ontario Power Generation (OPG), which acquired Hydro’s generation capacity; and Hydro One, which took over the transmission grid. OPG was expected to sell off many of its assets quickly. New supply would come from private firms entering the new electricity market. But in the face of more opposition, OPG sold only one hydroelectric plant and leased one nuclear one. In 2002, Premier Harris announced that Hydro One would be privatized, but Ernie Eves, who soon succeeded him, abandoned this goal. When the PCs left power, most of Ontario’s electricity system was still publicly owned, but the private sector’s share of generation had grown from about 5% in 1995 to around 30%. Yet the broader implication of these changes was to make it highly unlikely that a future Ontario government would use public energy firms as development levers. They now had been assigned the passive roles of generating power from existing installations and of overseeing transmission; new supplies would be developed by private firms. During their second term, the Tories continued to rely on a mix of tax expenditures and modest program spending. There was a generous new exemption from taxes on stock options and capital gains for research workers, and reduced taxes for shareholders in mining and exploration firms. The tax credit for labour-sponsored investment funds was increased for funds invested in scientific R&D. A new centre of excellence was created.100 The main new spending initiative was SuperBuild, which consolidated the province’s public infrastructure budget but also funded some high-technology measures. Eligibility for the film and television tax credits was broadened.101 A priority of PC policy after 2000 was medical and biotechnology research and genomics. The sector’s anticipated centrepiece was the MaRS research complex in Toronto, then under construction. This field attracted assistance from the Challenge Fund, the Investment Trust, and SuperBuild, as well as from Ottawa. The PCs also created a Genomics Institute, and a Cancer Research Institute.102 The Conservatives’ principled opposition to business subsidies, already somewhat frayed, was strained further when Ontario’s automotive sector entered a crisis in 2002. The province’s plants were threatened by the increased willingness of southern U.S. states and Mexico to offer automakers incentives to locate within their borders. The firms requested similar assistance from Ontario. The PCs refused to subsidize

190  Comparing Quebec and Ontario

individual firms directly, but in February 2003 they announced $625 million of aid, available to all auto firms, for R&D and training.103 Many PC measures now involved modest program spending, but the party’s main legacy remained its substantial overall cut in expenditures of this type, compensated partly by increased tax expenditures. The latter consequently attracted criticism from advocates of a more purely laissez-faire policy. A business-backed institute argued that the PC tax credits made Ontario’s tax system too complex and recommended that many be replaced by across-the-board business tax cuts.104 The Tories responded to these and other criticisms by commissioning a task force, and launching a Red Tape Commission and a competitiveness institute. They also promised to study whether tax incentives helped or hindered competitiveness but took no further steps before leaving power.105 How sharply did the PCs turn away from the incipient interventionism of their Liberal and NDP predecessors? It is hard to address this question using spending data. Ontario did not report the cost of its tax expenditures until 2005, and it is difficult to track changes in the level of program spending over time as a result of frequent ministerial reorganizations. Nevertheless, program spending probably fell sharply under the Tories. Their claim to have reduced such outlays by two-thirds during their first term was not disputed by opposition parties. In spite of modest new initiatives after 1999, this did not change much later. As table 6.7 indicates, Ontario’s development ministries expended less than $250 million in each of 1999–2000 and 2001–2. Quebec clearly was spending much more at that time (table 6.6). Moreover, the Liberals’ return to power in 2003 was followed by a doubling in these ministries’ spending and, according to a development official interviewed in 2010, to a gradual restoration of their ability to conduct an effective policy – a capacity that allegedly atrophied under the PCs. Tax expenditures, by contrast, likely grew considerably after 1995. The PCs argued that the many credits they introduced reflected their market-oriented preference for tax cuts and were a less intrusive way to help the private sector. For 2005, two years after the PCs left power, the value of Ontario’s development-related tax expenditures nevertheless was only half what it was in Quebec (tables 6.5 and 6.6), or less than a third if measured as a share of each province’s GDP. The proportions likely were similar in 2003.106 The arrival of a Liberal government in 2003 portended another significant shift in policy. Most dramatically, the value of program spending more than doubled between 2003 and 2006, before levelling off (table 6.7). Even the volume of tax expenditures, the PCs’ preferred tool,

Economic Development  191 Table 6.7. Economic Development Spending in Ontario, Leading Sources ($ millions)

Tax expenditures: corporations Tax expenditures: individuals Budgets of development ministries

1999

2001

2003

2005

2006

2008

2010

NA

NA

NA

849

976

1,121

1,184

NA

NA

NA

74

93

214

77

245

248

283

506

631

618

635

Sources: Tax expenditures: Ministry of Finance, Ontario Economic Outlook and Fiscal Review, Annex: Transparency in Taxation, 2005 (Toronto: Ministry of Finance), 66–7, 81; Ministry of Finance, Ontario Economic Outlook and Fiscal Review, Annex: Transparency in Taxation, 2006, 87–9, 94; Ministry of Finance, Ontario Economic Outlook and Fiscal Review, Annex: Transparency in Taxation, 2008, 51–3, 59–60; Ministry of Finance, Ontario Economic Outlook and Fiscal Review, Annex: Transparency in Taxation, 2010, http://www.fin.gov.on.ca/en/budget/, consulted 8 August 2014. Budgets of development ministries: for 2005, 2006, 2008 and 2010, see table 6.1. For earlier, it is actual figures in Ministry of Finance, Estimates, 2001–02 (Toronto: Ministry of Finance) for Energy, Science and Technology and MED (1999–2000); Ministry of Finance, Estimates, 2003–04 for Enterprise, Opportunity and Innovation and MED (2001–2); Ministry of Finance, Estimates, 2005–6, for MRI and MED (2003–4). Ministry figures are for the fiscal year that begins in the calendar year identified in the first row of the table. The total budgets of these ministries is a broader measure than the “financial aid” that Quebec reports for MDEIE. Ontario does not report a similar figure. Note: Ontario does not identify tax expenditures that serve primarily to promote economic development. A parallel measure to Quebec’s (in table 6.6) was constructed here by summing tax expenditures that promote investments in particular sectors, regions, or technologies. For individuals, these include tax credits for labour-sponsored investment funds, research-oriented funds, and flow-through shares; and the deduction for resource-related expenditures. For corporations, relevant credits are for book publishing, business research institutes, computer animation and special effects, film and television, innovation, interactive media, production services, sound recordings, apprenticeship training, cooperative education, R&D, resources, and manufacturing and processing, along with the credit-union tax reduction. Since a couple of these lack an exclusively sector or technology focus, this measure is broader than Quebec’s.

rose by about 40% between 2005 and 2010. The Liberals also articulated a vision of economic development that departed significantly from the PCs’ laissez-faire preferences. They did little, however, to revive their earlier experiments with non-governmental collaboration. In opposition, the Liberals had complained about the generosity of PC tax breaks for business. In power, they reversed Tory corporate tax cuts (chapter 3), but there were few reductions in the credits. In fact, the Liberals enriched film and TV credits substantially in 2004.107 The next

192  Comparing Quebec and Ontario

year they announced the phasing out of labour-sponsored investment funds. Long since forgotten as a vehicle for collaboration-building, these instead were criticized as encouraging questionable investments.108 Yet the use of credits otherwise rose significantly under the Liberals. The Liberals’ greater support for program spending first was evident in the automotive sector, where they spent without Tory inhibitions. An Automotive Investment Strategy was unveiled in 2004.109 Another fund was created to help university researchers commercialize their discoveries and, later, another to support university research infrastructure. There was also a new centre of excellence.110 But it was with their 2006 budget that the Liberals signalled most clearly that they wished to intervene much more than their PC predecessors. They allocated $1.7 billion over five years to innovation, including generous assistance for university research, a new commercialization program, and additional money for MaRS and research awards. The 2007 budget added support for environmental technologies. The Liberals now drew criticism from big business organizations, which would have preferred tax cuts.111 Liberal program spending now extended to four sectors where the PCs had been inactive. First, Ontario’s forestry industry, like Quebec’s, was in crisis. The province offered money for forestry-related manufacturing, and for firm revitalization.112 Second, the Liberals launched an Advanced Manufacturing Investment Strategy with $500 million to help firms improve their competitiveness. As with other initiatives, the strategy was criticized by the PCs and laissez-faire critics as representing a return to the subsidies that the Tories had curtailed, and as a poor alternative to across-the-board business tax cuts.113 Third, a Mineral Development Strategy aimed to enhance the competitiveness of mining firms. And finally, Ontario farmers received compensation for recent crop losses, and other support.114 In June 2007, facing re-election, the Liberals introduced the most ambitious development measure of their first term. The Next Generation of Jobs Fund committed $650 million to helping firms develop environment-friendly (“clean”) industrial processes and products. During the subsequent campaign, the Liberals promised to increase the fund by $500 million if they were re-elected; the PCs, by contrast, stressed their continued commitment to tax cuts.115 The Liberals fulfilled their promise and committed additional funds to R&D support in an “Innovation Agenda.” Incorporating the expanded fund, the agenda also offered a ten-year corporate tax holiday to firms that commercialized innovations developed at a Canadian

Economic Development  193

university, and introduced an Innovation Tax Credit for smaller firms. The PCs again countered that across-the-board tax cuts were preferable. The government again enriched film and TV production tax credits.116 Support for the auto industry was extended when two North American car makers faced immanent bankruptcy during the 2008 financial crisis. Ontario announced $1.3 billion in loans to Chrysler and General Motors. In this instance, provincial policy was dictated largely by the terms of the U.S. government’s automotive bail out, and of Ottawa’s contribution. Ontario’s share was agreed upon in negotiations with both governments and was intended to provide the province with some assurance that it would remain an important location for auto assembly.117 Two major new initiatives after 2007 suggest that Liberals’ willingness to intervene deepened again during these years. The most important was the Green Energy Act (GEA) of 2009, designed to foster an environmental technologies industry. Firms that produced wind or solar power in the province were assured of access to the electricity grid and obtained long-term price guarantees, which were set much higher than current electricity prices; the difference would be borne by consumers. In exchange, producers would have to source at least 25% of wind project costs, and between 40% and 50% of solar ones, in Ontario. The legislation was expected to create 50,000 new jobs within three years.118 In the act’s wake, the province announced a major power agreement with Samsung Corporation. In exchange for subsidies of $437 million over twenty-five years, the company agreed to manufacture wind turbine and solar panel components in Ontario, and similar contracts were announced with other firms.119 This “clean tech” strategy arguably was the most ambitious economic development policy implemented in Ontario during our period, though much of its cost, as its critics pointed out, would be borne by electricity consumers, not the provincial treasury. Although Quebec also had a green technologies strategy (see above), it was much less generous, lacking the Ontario plan’s long-term price guarantees. Unsurprisingly, in polarized Ontario, the GEA evoked persistent criticism from the PC opposition, which promised to rescind the legislation if it came to power.120 The second major innovation of the Liberals’ second term, its support for mining in the province’s north, also had a Quebec parallel – Premier Charest’s Plan Nord. But here, Ontario’s intervention, in line with our usual expectation, was far more modest than its eastern neighbour’s. Ontario revised its Mining Act in 2009 to facilitate new developments.

194  Comparing Quebec and Ontario

“Open Ontario,” announced the following year, offered preferential hydroelectricity rates to firms that created jobs in the “Ring of Fire” region of the province’s northwest. An additional sum was allocated to training for aboriginal people. Yet it appeared that the measures’ impact might be modest. The Liberals also passed a Far North Act that, according to critics, increased regulatory barriers to new northern mining operations significantly, at least outside the “Ring of Fire.”121 In their first seven years after coming to power, McGuinty’s government increased economic development outlays in the forms of tax expenditures and Development Ministry spending by about 50% (table 6.7).122 By turning more towards program spending by these ministries, moreover, the Liberals privileged an instrument that offered a larger role for public officials to direct interventions. It was precisely to curtail such meddling in the market that the PCs had instead preferred tax expenditures. Liberal policy differed less from the PCs’ regarding private sector collaboration; but there was some divergence here too. Sector business associations that benefited from its more energetic policies had often lobbied for them, and sometimes helped design them. This was true, for instance, for associations in the forestry, high technology, automotive, and film and TV sectors. Such arrangements fit comfortably within a pluralist framework of interest intermediation; they did not extend beyond ad hoc consultation towards an ongoing role for non-governmental actors in policy formulation and implementation. Advocates of laissez-faire policy nevertheless saw them as evidence of influence by vested interests on Liberal policy.123 This concluding discussion, like that for the previous section, summarizes the implications of the above narrative for our dependent-variable hypotheses. The next section compares Quebec and Ontario regarding our causal hypotheses. (3a) Ontario consistently spent modestly on economic development, compared to Quebec, as the statistical evidence in this chapter’s first section and in tables 6.6 and 6.7 makes clear. Partisanship played a greater role in shaping policy in Ontario, but outlays were much lower there than in Quebec, regardless of who was in power. A comparison of Ontario’s core economic development bureaucracy, outlined in figure 6.3, with Quebec’s, presented in figure 6.2, also reveals the former to be much smaller and probably much less able to conduct an activist policy. Ontario did not witness a relaxation, evident in Quebec after the Quiet Revolution, of its state’s disposition to (3b) steer the economy or (3c) guide policies from the executive centre. Yet the reason was simple: such tendencies were never strong in Ontario. In

Economic Development  195

view of the scale of its interventions in 2010, still far more modest than Quebec’s, Ontario could still safely be said to steer and centrally direct its economy much less. Parallel but Very Separate Paths In explaining these contrasting outcomes, this chapter drew attention to three causal mechanisms. First (1b) was the provinces’ dissimilar party systems. Quebec’s main parties both supported an active development role for the state. This role was criticized by conservative third parties, journalistic advocates of laissez-faire, and some mainstream politicians. Moreover, the PLQ’s commitment to intervention was less assured than the PQ’s. But by 2010 the Liberals clearly again supported a robust role for the state, as they launched an ambitious effort to stimulate resource production in the province’s north. In Ontario, the main parties were sharply divided on the merits of intervention, in a manner that comparative scholarship tells us is typical in Anglo-Saxon settings. The PCs championed free markets and non-intervention, a view that set them apart sharply from their Liberal and NDP rivals. In office, the PCs certainly sustained a role for the state, but a much reduced one that relied on relatively non-intrusive tax expenditures, while cutting program spending drastically. Policy also was affected, second, by divergent systems of interest intermediation (1a). In Quebec, there was a feedback relationship between concertation mechanisms created by the government at the regional and provincial level and pressure from diverse societal interests for more involvement. Non-governmental actors often demanded a larger role. For instance, before the Quiet Revolution there were regional committees that encouraged government support; business and labour leaders also embraced concertation during the 1980s as a way to alleviate a very troubled industrial relations climate. Governments of both parties, for their part, often offered the private sector an opportunity to collaborate in policymaking and implementation. The situation in Ontario contrasted strikingly. There was very little collaborative discussion before the Liberals’ Premier’s Council of the late 1980s. Business-labour dialogue under the NDP transpired in a setting of sharp ideological polarization and did not survive the 1995 change of government. Broad-based collaboration was not subsequently resurrected in Ontario. The Tories’ preferred tax expenditures eliminated any need for collaboration: the only decisions to be made were for a

196  Comparing Quebec and Ontario

firm to apply for a credit or deduction, and for tax authorities to assess its eligibility. Third, Quebec’s interventionism reflected the legacies of its Quiet Revolution dirigisme; conversely, Ontario’s market-oriented policies were conditioned by the absence of similar legacies there (1c). Path dependency – the propensity of pre-existing orientations and endowments to perpetuate themselves – was the mechanism through which these contrasting state traditions affected outcomes. Quebec possessed ample development institutions at the beginning of our period. Some were modified later, as dirigisme attenuated, but change was incremental. The development ministry already was organized on regional and sectoral lines in 1990, defining the framework for much subsequent policy, and the province already promoted concertation. The Caisse and the SGF were major sources of equity financing, as they remained; the SGF’s role diminished over time, but union-controlled funds, nascent at that time, grew substantially. The SDI, IQ’s predecessor, already provided loans and guarantees. State enterprises clearly played a smaller role in 2010 than during the 1970s, but Hydro-Québec, the most important of these, was again central to policy. In comparison, Ontario’s armature was very light in 1990, reflecting its laissez-faire post-war stance. Its development ministry was smaller and lacked the regional and sectoral differentiation of Quebec’s, or analogous collaborative forums. This remained the case. Ontario also did not have a wide array of development-oriented state enterprises and equity investors in 1990; this too did not change. The exception, Ontario Hydro, was on the defensive in a province that lacked a broad commitment to intervention. The post1995 Tory government circumscribed its subsequent potential as an instrument for strategic intervention. The impact of nationalism, our ideational mechanism (1d), can be seen in relation to these contrasting institutional legacies. The capacity for intervention that Quebec’s state acquired during the Quiet Revolution was promoted very explicitly by nationalism, but there was no such influence in Ontario. During our period, however, nationalism no longer was the main impetus for Quebec interventionism, which was now instead well established as the appropriate, perhaps necessary, way to promote growth there.

Chapter Seven

Quantitative Evidence (1): Comparing Policy “Effort”

The preceding four chapters offered qualitative accounts of developments in four policy fields in Ontario and Quebec between 1990 and 2010. This chapter and the next supplement them with regression-based evidence. The dependent variable (DV) for calculations reported in this chapter is each province’s policy “effort,” that is, its spending and other measurable program commitments. Calculations are made using data for all ten provinces. Only some outcomes for which hypotheses were offered in chapter 2 can be evaluated in this way; only these are addressed here. Political scientists now advocate multi-method research strategies. This book’s combination of narrative case comparisons and statistical analysis is presented in this spirit.1 The foregoing narratives argued that distinctive institutional mechanisms – regarding party systems, interest intermediation, and state capacities – usually resulted in very different outcomes in our two provinces. Lending additional credence to this claim statistically is not a straightforward matter, because no available quantitative indicator measures any of these mechanisms entirely for Canadian provinces, though some do partly. I return to this point below. Their full impact therefore cannot be estimated by independent variables (IVs) in a regression model. An indirect approach is required, one that relies on using dummy variables for Ontario and Quebec. These allow for the calculation of separate intercept levels for each province, and a determination of whether the difference between their coefficients is statistically significant. In a simple model, a DV would be regressed against the two dummies alone. One could then use a t-test to determine whether the difference between the Ontario and Quebec coefficients is statistically significant. Yet we would still not know why they differ. In the present

198  Comparing Quebec and Ontario

context, discovering this is a process of elimination: we now add IVs to the model to control for the impact of measurable influences on the DV for each province, influences that extant theory suggests are important. If the dummies’ coefficients remain very different in the face of these controls, we conclude that other, still unmeasured influences account for this remaining inter-provincial variation. This is the approach taken here. The results reported below control comprehensively for relevant measureable influences commonly cited in CPE scholarship as impinging on social and economic policy outcomes in affluent nations. One set of variables measures states’ economic and fiscal capacity; two others gauge globalization and postindustrialism, dynamics that, as we saw in chapter 1, are now much studied. A fourth set represents political influences. For most relevant DVs the results presented below show that the difference between Ontario and Quebec policy effort remains statistically significant and substantively meaningful in the presence of these controls. The preceding chapters offered considerable evidence that the three causal mechanisms identified above account for different outcomes in these provinces. I am not aware of plausible alternative explanations to these ones for the differences, or to those controlled for in these regressions. The argument presented here that these mechanisms – partly or wholly “unmeasured” in the regressions – largely explain the remaining difference in the dummy coefficient levels for Ontario and Quebec should therefore be plausible in light of these findings. The next section identifies the IVs and indicates how they are grouped in our regressions; it also elaborates on which aspects of our three causal mechanisms can be measured with IVs and which cannot. The following section identifies the DVs; as with the IVs, the Ontario and Quebec levels for each were presented graphically in earlier chapters. Statistical methodology is then discussed, and the regression results are presented and interpreted. Only for social assistance and income transfers is the evidence presented here for Quebec’s greater policy effort not compelling. I return to this question in chapter 8. Independent Variable Selection and Modelling Explanatory variables are grouped into four categories. The first three measure provincial governments’ economic and fiscal capacity, globalization, and post-industrialism. The fourth set, termed “political” here, measure union density and partisan incumbency. Variables that

Quantitative Evidence (1)  199

measure dollar values are calculated as a share of provincial gross domestic product (GDP). This is the most common approach in CPE research.2 For DVs, it is also the best way to measure “effort,” the degree to which a province is willing to tap its own resources to achieve an outcome.3 Provinces vary considerably in wealth, and in the level of need – poverty, unemployment, and so forth – experienced by their residents. Drawing on a less ample tax base and facing greater policy demands, some observers might expect poorer provinces, ceteris paribus, to tax their residents at higher rates than richer ones, and to spend more on social and economic goals. Others, by contrast, might expect the opposite because poorer provinces have fewer resources. The former expectation is strengthened considerably in Canada because of the equalization payments that Ottawa makes to poorer provinces, including Quebec. Quebec’s higher spending commitments in many areas, compared to Ontario’s, could then be attributed to its access to larger federal transfer payments. To address this possibility, four variables are used here to control for the policy impact of economic and fiscal capacity. These tap GDP per capita (Gdp_pc), per capita growth (Growth), federal transfer payments as a share of provincial GDP (Fedtrans), and the value of annual interest payments made by a province on its debt as a share of GDP (Debtpay).4 These payments are much higher in Quebec than in Ontario (figure 2.6, graph A). As was noted in chapter 3, there are two separate systems for reporting provincial government revenues and expenditures: the Provincial Economic Accounts (PEA), and the Financial Management System (FMS). The regressions presented here use both, where possible, to offer more robust findings. These systems give separate calculations of federal transfer payments and debt servicing costs. The regressions use FMS figures (FedtransF and DebtpayF) if the DV data are from that source. Otherwise PEA data are used (FedtransP and DebtpayP); it is a longer series. Table 7.1 lists the sources for these and all other IVs; it also identifies the graph that presented Ontario and Quebec levels for each variable in earlier chapters. The impact of economic globalization on policy diversity now is a major preoccupation of CPE scholarship. The most widely used measure of its effect is trade openness, the sum of a country’s exports and imports, divided by GDP. For Canadian provinces a measure of each jurisdiction’s international trade (Inttade) can be supplemented with one for its inter-provincial (domestic) trade (Domtrade). An increase in the latter might, like the former, heighten provincial vulnerability to

200  Comparing Quebec and Ontario Table 7.1. Independent Variables Name

Content

Source tables

QC / ON graph

Gdp_pc

Gross domestic product (GDP) per capita

38400013

Figure 2.4, graph C

Growth

Annual change in GDP per capita

38400013

Figure 2.4, graph D

FedtransF

Federal transfer payments as % of GDP, FMS data set

3850001 (1988–2008)

Figure 3.1, graph C

FedtransP

Federal transfer payments as % of GDP, PEA data set

3840004

Figure 2.6, graph A

DebtpayF

Public debt charges as % of GDP, FMS data

3850001 (1988–2008)

Figure 3.1, graph D

DebtpayP

Interest payments on public debt as % of GDP, PEA data

3840004

Figure 2.6, graph B

Inttrade

International imports + exports / GDP

38400002

Figure 2.4, graph A

Domtrade

Domestic imports + exports / GDP

38400002

Figure 2.4, graph B

Postindemp

100 - % of employment in manufacturing, agriculture, and forestry

2820008

Figure 2.5, graph A

Age

% of population over 64

510026

Figure 2.5, graph B

Femaleshare

Female % of employed population

2820008

Figure 2.5, graph D

Unemp

Official unemployment rate

2820008

Figure 2.5, graph E

Immigrant

Immigrants as % of population

510004

Figure 2.5, graph C

Density

% of employed in unions

2790025, 2820078

Figure 2.3

Centre

Liberal Party government (dummy)

Election Almanac

Tables 2.3 and 2.5

Left

NDP / PQ government (dummy)

Election Almanac

Tables 2.3 and 2.5

Right

Conservative government (dummy)

Election Almanac

Tables 2.3 and 2.5

Source tables are from Statistics Canada’s CANSIM database. Additional figures needed in calculating some variables are from tables 510001 (population) and 2820008 (total employment). For FedtransF and DebtpayF for 1981–7, see Statistics Canada, Public Finance Historical Data, 1965/66–1991/92 (Ottawa: Ministry of Industry, Science and Technology, 1992). Election Almanac is at www.electionalmanac.com. Years during which the governing party changed are assigned to the outgoing party.

Quantitative Evidence (1)  201

external pressures. The regressions therefore include both. Other measures of economic globalization in comparative research are not applicable to Canadian provinces (the level of capital controls, determined by the federal government), are not measured at the provincial level (the volume of capital flows), or are not available for provinces for most years (the volume of foreign domestic investment).5 Five measures are used to measure post-industrialism, the main alternative to globalization as a predictor of how current trends affect domestic social and economic policy. Developments associated with post-industrialism include the declining share of industrial employment (Postindemp),6 an aging population (measured here with Age, the percentage of provincial population older than sixty-four), an increase in the female share of the workforce (Femaleshare, female workers as a percentage of all workers), possibly rising unemployment rates (Unemp), and greater immigration (Immigrant, immigrants as a proportion of provincial populations).7 As was noted in chapter 1, available scholarship offers contradictory suggestions about the likely impact of globalization and post-industrialism on policy outcomes: they may erode policy effort, perhaps precipitating a “race to the bottom”; or they may induce states to compensate for the increased vulnerability of citizens by expanding it. Therefore, no directional hypotheses are advanced here about the likely impact of these variables on the DVs. As we saw above, there also is no agreement about the relationship between the varying economic and fiscal capacity of Canadian provinces and policy effort. So, here again, I offer no directional hypotheses. The political variables include a measure of provincial union density (Density), and dummy variables for governing parties. Because available data on unionization levels in Canada changed between 1995 and 1997, this data series has been adjusted to smooth this transition.8 Consistent with common practice in Canadian research, parties are assigned to one of three dummy categories: Centre (Liberal Party), Left (NDP and PQ), and Right (Progressive Conservative).9 The first two are included in regressions, leaving the third as the reference category. I expect higher Density and the presence of Left governments to increase policy effort, as both unions and left parties are closely associated with support for state intervention and redistribution. Since Liberal parties usually are thought to be to the left of Conservative ones in provinces where both remain important, I hypothesize a similarly positive relationship with policy effort for centre parties.

202  Comparing Quebec and Ontario

The first three groups of variables discussed above embody alternative explanations of policy outcomes to the three mechanisms highlighted in this study; they are used as controls. In contrast, the political variables reflect part of the distinction between collaborative and liberal political economies addressed in chapter 1, a contrast that undergirds two of these mechanisms – the party and interest intermediation systems. These political economies differ in how cooperative relations are between actors in each system. Organized interests, above all business and labour, cooperate more in collaborative settings, and partisan polarization on economic-redistributive issues is lower. But, as was pointed out in chapter 1, these political economies also differ in another way: the balance of power among actors. Unions in collaborative settings usually are stronger. Liberal settings, conversely, feature left parties that are less frequently in power, as well as strong right parties with clear neoliberal preferences. Consequently, it was argued there, the distinction between these political economies also partly taps differences in the power resources of societal interests. The political variables described above allow our regressions to capture an important part of this second, balance of power, dimension of the collaborative-liberal distinction. They permit us to measure the impact of differing levels of union density and the effect of distinctive partisan landscapes. But they cannot measure the first, cooperative relations dimension. In comparative scholarship, this dimension is often measured with indices of corporatism and with partisanship variables that track ideological differences between parties. There is no extant measure for corporatism for Canadian provinces; moreover, I have characterized Quebec as diverging from Ontario in relation to a pattern of “concertation” that is not identical to corporatism. There is also no equivalent for Canadian provinces to the Comparative Manifestoes Project, which is used to measure inter-party ideological differences internationally. In light of the above, our main focus will be on two models for each DV: the first includes the control variables, but not the political ones. For these, the impact of our three mechanisms is fully absorbed by the difference between the coefficients for the Quebec and Ontario dummy variables. In statistical terms, this difference remains “unmeasured,” consistent with the logic of fixed effects regression.10 The second model adds the political variables. These models consequently tap the balance of power component of the interest intermediation and partisan mechanisms. With this part no longer absorbed by the difference between the dummy coefficients, that difference should decline. For our

Quantitative Evidence (1)  203

non-economic development policy fields, these two mechanisms were used to explain inter-provincial differences in the preceding chapters. For DVs in these fields, if the difference between the Quebec and Ontario coefficients is significant in the first model, but not in the second, we may conclude that the contrasting levels of policy effort in the two provinces are explained by Quebec’s greater union density and by the different balance of power among its political parties. Nothing would be owed to greater cooperation among its societal actors and less ideological distance between its parties. Conversely, if the coefficient difference does not fall significantly between these two models, we could attribute the entire Quebec-Ontario gap to the contrast in how cooperative their societal and partisan actors are, and not at all to a different balance of power between labour and capital and among parties. As we shall see, most results fall somewhere in between. For economic development DVs, for which our state tradition mechanism is relevant, as well as those for interest intermediation and party systems, differences that remain between the Ontario and Quebec results once the political variables are controlled for represent the combined influence of this state tradition and of a more cooperative societal and partisan setting. When Should We Measure “More or Less”? Dependent Variables For advocates of qualitative methods, the ability of the latter to probe phenomena not easily measured in terms of “more or less,” that is, in relation to greater or smaller quantities of inputs and outputs, is their key advantage. It has been argued here, consistent with this view, that the causal mechanisms that differ between our two cases cannot be measured fully with numbers. The same often is true for policy outcomes. How much effort a government makes in a field, and how adequately, often must be judged qualitatively, not by budget size. This is clearly true, in the present study, regarding our hypotheses about the regional and sector focus of economic development policy (3b) and its centralization (3c). Spending also tells us little about the amount of overall redistribution by taxes and transfer payments (2d), and by income security measures (4b), or about the nature of the latter’s employment focus (4c). If outcomes are to be evaluated in regression research, it is argued, new indicators are needed that are sensitive to these qualitative features. This contention has been advanced most forcefully for social policy, where some such indicators now exist.11 But these are embryonic and can be criticized for relying on subjective judgments

Table 7.2. Dependent Variables Name

Content

Source tables

QC / ON graph

ExpendF

Total expenditures / GDP, FMS data

3850001 (1988–2008)

Figure 3.1, graph B

ExpendP

Total expenditures / GDP, PEA data

3840004

Figure 2.2, graph B

OwnrevF

Own-source revenues / GDP, FMS data

3850001 (1988–2008)

Figure 3.1, graph A

OwnrevP

Own-source revenues / GDP, PEA data

3840004

Figure 2.2, graph A

Businesstax

Business tax revenues / GDP

3850001

Figure 3.3, graph B

Personinctax

Personal income tax revenues / GDP

3850001 (1988–2008)

Figure 3.4, graph A

Propertytax

Property tax revenues / GDP

3850001 (1988–2008)

Figure 3.4, graph B

Consumptax

Consumption tax revenues / GDP

3850001 (1988–2008)

Figure 3.4, graph C

Payrolltax

Payroll tax revenues / GDP

3850001

Figure 3.4, graph D

Businesstrans

Transfers to businesses / GDP

3840004

Figure 2.2, graph C

Micro

Micro-economic spending / GDP

3850001 (1988–2008)

Figure 6.1, graph B

R&Dspend

Spending on R&D / GDP

3580001

Figure 6.1, graph C

Busassets

Provincial government business assets / GDP

3850031

Figure 6.1, graph D

Personstrans

Transfers to persons / GDP

3840004

Figure 2.2, graph D

Assistservice1

Spending on social assistance and services / GDP, 1970–87

HRDC (1994)

Figure 4.3, graph A

Assistservice2

Spending on social assistance and services / GDP, 1988–2008

3850001

Figure 4.3, graph B

Childspend

Childcare spending / 0–12 age group

HRSDC (2012)

Figure 5.1, graph A

Childspace

Regulated childcare / 0–12 age group

HRSDC (2012)

Figure 5.1, graph B

Childnonprofit

% centre-based care that is not-for profit

HRSDC (2012)

Figure 5.1, graph D

Source tables are from Statistics Canada’s CANSIM database. Table 3850001 data begin in 1988. Where variables include 1981–7, figures for these years are from Statistics Canada, Public Finance Historical Data, 1965/66–1991/92 (Ottawa: Ministry of Industry, Science and Technology, 1992). HRDC (1994) is Human Resources Development Canada, Social Security Statistics Canada and Provinces 1970–71 to 1994–95 (Ottawa: Ministry of Supply and Services, 1994). HRSDC (2012) is Human Resources and Skills Development Canada, Public Investment in Early Childhood Education and Care in Canada, 2010 (Gatineau, QC: HRSDC, 2012). Note: OwnrevP and ExpendP combine provincial and local revenue and spending figures, then subtract transfers payments between provincial and local governments. For OwnrevP, federal transfer payments to provinces are then subtracted. Personstrans combines provincial and local transfer payments to persons, then subtracts WCB payments. Businesstrans sums provincial and local transfer payments to businesses. Businesstax sums corporate income taxes, capital taxes, taxes on resources and 40% of property tax revenues; see figure 3.2. Micro combines “resource conservation and industrial development,” “regional and economic planning,” and “research establishments.” Assistservice1 combines totals for the Canada Assistance Plan, provincial income credits, other provincial social assistance, and municipal assistance. Assistservice2 combines “assistance” and “other social services.”

206  Comparing Quebec and Ontario

about the merits of a particular program, and they do not exist for the Canadian provinces. This chapter addresses only hypotheses for which quantitative data plausibly can be used to measure outcomes. Most of the data relate to budgeting and economic development policy, where fiscal statistics are plentiful and where the criticisms outlined above have been less common. For childcare, data are available for both spending levels and other outcome measures. Data are scantiest for spending on social assistance and income transfers. The rest of this section identifies our DVs and indicates which hypotheses they relate to. Table 7.2 identifies the source data and the graphs that presented the levels for each DV for Ontario and Quebec in earlier chapters. The availability of two data series from Statistics Canada is especially important for budgeting. The FMS and the PEA are constructed differently.12 To offer a more robust test of our hypothesis (2a) that overall taxation and revenue levels will be higher in Quebec than in Ontario, I therefore run regressions using spending and tax data from each series. Own-source revenues are used for the latter, to eliminate federal transfer payments from the dependent variable. The four DVs used to test this hypothesis, each measured as a share of GDP, are ExpendF and OwnrevF (from the FMS) and ExpendP and OwnrevP (from the PEA). With six exceptions identified below, the DVs start in 1981. This is justified both substantively and by data availability. The regressions measure the difference between Quebec and Ontario policy in the globalization era, usually thought to have begun around 1980. Province-level data on trade, crucial for measuring globalization, are also available only since 1981. The current PEA series, which includes these trade figures, consequently begins in that year; its most recent figures at the time of writing are for 2009. All regressions for PEA DVs therefore are for 1981–2009. The most recent FMS data series covers 1988 to 2008. An earlier series nevertheless differs only modestly from this one. Regressions with most FMS dependent variables are for 1981–2008. Chapter 3 examined the distribution of revenues among tax sources to evaluate the hypotheses that (2b) Quebec would not tax capital more than Ontario, and (2c) that it would instead rely more than Ontario on more regressive taxes on less mobile assets. Our regressions determine whether these differences exist once we control for the impact of our

Quantitative Evidence (1)  207

IVs on business taxes (Businesstax, which, consistent with our discussion in chapter 3, combines taxes on corporate income, capital and resource taxes, and 40% of all property taxes), payroll taxes (Payrolltax), consumption taxes (Consumpttax), property taxes (Propertytax), and personal income taxes (Personinctax). Businesstax is available only for 1988–2008. Four DVs measure provincial economic development spending (relevant to hypothesis 3a). These include PEA measures of provincial transfer payments to businesses (Businesstrans), a composite measure of three kinds of spending on economic development from the FMS (Micro), data on provincial government R&D spending from a separate Statistics Canada survey (R&Dspend), and the value of business assets owned by provincial governments (Busassets). The best available spending measure for social assistance and income transfers, from the PEA, includes all transfers to persons by provincial and municipal governments, minus workers’ compensation (Personstrans). This is the strongest indicator of whether (hypothesis 4a) Quebec spends more on income security for its non-elderly population. The FMS does not separate provincial spending on income security and in-kind services; moreover, this series only is available since 1988 (Assistservice2, which therefore covers 1988–2008). Another DV is also used here, based on data from Human Resources Development Canada (HRDC), to measure spending on income support and related services for an earlier period, 1970 to 1987 (Assistservice1). A few IVs are not available for the years covered by this DV. The last two of these DVs are a highly inexact measure of assistance and transfer spending effort, as they also include extraneous service expenditures. For childcare, data are available from an HRDC survey. Two series measure provincial expenditures on childcare as a ratio of the population of children under the age of thirteen (Childspend), and the number of childcare spaces subject to provincial regulation, also divided by the zero-to-twelve age group (Childspace). A third measures the percentage of centre-based spaces that are non-profit (Childnonprofit). These DVs allow us to test whether Quebec spends proportionately more on childcare than Ontario (hypothesis 5a), has moved much further towards universal provision (5b), and offers more care on a non-profit basis (5c). Though the childcare variables are available for only eight years between 1992 and 2010, they encompass the period during which Quebec introduced its major reform.

208  Comparing Quebec and Ontario

Methodology This section discusses methodology, the next data presentation; they explain the choices that have been made here and in chapter 8 to obtain the reported regression results. They are a necessary part of the scholarly apparatus for quantitative research. Readers who are interested mainly in the results may wish to skip these sections. A nontechnical summary of the chapter’s findings, and of their relationship to the hypotheses tested in this study, is provided in the last section of this chapter. The data examined here consist of ten panels (the provinces) over twenty-eight or twenty-nine years for our sixteen non-childcare variables; total N usually is 280 or 290. Panel data sets of this type – where T (the temporal dimension) exceeds N (the cross-sectional dimension), and the latter is modest – have properties that differ from those encountered by longitudinal regression in the more typical large-N, small-t setting. Many features of such time-series-cross-sectional (TSCS) data cause such data to depart from the pattern of independent and identical distribution (i.i.d.) that is required for Ordinary Least-Squares (OLS) estimation.13 Datasets of this kind frequently are characterized by heteroscedasticity and causal dependence on the cross-sectional dimension; and annual data on macro-political and macroeconomic phenomena are likely to be serially correlated. Tests indicate that each of these issues arises with the data used here. A modified Wald test was used to determine whether regression models exhibit heteroscedasticity. The null hypothesis of homoscedasticity was rejected for models of all nineteen DVs. Persan’s test for cross-sectional dependence similarly rejected the null of cross-sectional independence for all DVs.14 To maximize efficiency, panel data scholars prefer to pool their data.15 The F-test is the standard tool for evaluating whether one should pool panel data or instead calculate fixed effects (FEs) for each panel. For fitted models of all DVs, the test rejected the null of panel homogeneity at the 1% level. Nathaniel Beck and Jonathan Katz prefer the more forgiving Schwartz criterion for choosing between pooling and FEs. Yet this test also favoured the FE option in all cases; FEs therefore are used in all models reported below. Beck and Katz developed an estimator designed to address the cross-sectional issues discussed above. Panel-corrected standard errors (PCSEs) are robust to heteroscedasticity and causal dependence. Beck

Quantitative Evidence (1)  209

later observed, “By now, most political science articles appear to use our recommended methodology.”16 What has been termed “the new orthodoxy for practitioners” sometimes is challenged. Wilson and Butler note that PCSEs are often used without evidence that scholars have considered alternatives or tested their suitability – shortcomings that are addressed systematically in this section.17 The most common alternative to PCSEs in TSCS research is to use OLS regression with cluster-robust standard errors (SEs). But this estimator performs well only when T is smaller than N.18 “With few clusters,” Angrist and Pischke warn, “we tend to underestimate either the serial correlation … or the intraclass correlation.”19 In our non-childcare regressions, however, N is fixed at 10, and T always is much larger. The cluster-robust approach therefore is inappropriate; I use the PCSE estimator instead. Since PCSEs do not address serial correlation, an additional step is needed for this. Beck and Katz advocate a lagged dependent variable (LDV). The Lagrange Multiplier (LM) test is used to detect serial correlation. When applied to regressions of our DVs against an LDV and the full set of the IVs, it identified persistent serial correlation in seven of our models at the 1% level, and at 5% in another four; only five manifested no serial correlation.20 Negative results for the LM test are particularly problematical for models that include an LDV, because they indicate that a key presupposition of OLS regression – that none of the IVs is correlated with the error term – is violated. An alternative involves using a Prais-Winsten approach, which estimates serial correlation by first-order autocorrelation, or AR(1).21 To determine whether this eliminates serial correlation, a panel-by-panel inspection of regression residuals was performed to identify how many were correlated beyond the first lag. For eleven of the sixteen nonchildcare models, there was no correlation beyond the first lag for 9 or 10 provincial panels. In these cases, there is little basis for concern. In three cases, this is true of fewer than 7 panels: OwnrevP (six), Propertytax (six) and Personstrans (five).22 Here we might worry that the remaining serial correlation will affect results. Yet only 4 of a total of 160 panels showed any correlation beyond the second lag, with no more than 1 such panel for any one model. Our regressions include several variables for each policy field. It is therefore unlikely that our conclusions will be affected unduly by this problem if we eliminate serial correlation up to the first lag. Regressions for our sixteen non-childcare DVs therefore combine PCSEs, AR(1), and FEs. Consistent with Beck and Katz’s advice, a common rho is employed.23

210  Comparing Quebec and Ontario

The childcare variables have a much smaller T than the others: a maximum of eight for each province between 1992 and 2010. The N for regressions is eighty for Childspend and Childspace, seventy-eight for Childnonprofit.24 The presence of missing data between observations makes an AR(1) adjustment unfeasible, as well as an LDV; so, therefore, is the use of PCSEs.25 The cluster-robust estimator therefore is used for these models. Since the cross-sectional dimension exceeds the temporal one for these variables, the main objection to their use mentioned above does not apply here. To ascertain the appropriate specification for regression models, the distribution of each IV was evaluated using histograms; variables were also inspected for outliers. The histograms indicated that a logarithmic transformation was appropriate for Gdp_pc, Growth, both versions of Fedtrans, Inttrade, Domtrade, Unemp, and Immigrant. The histograms supported retention of a linear form for both Debtpay variables, as well as Femaleshare, Postindemp, Age, and Density. In these specifications, no IV included extreme outliers. The number of moderate outliers was consistent with expectations.26 Tests then were performed to determine whether our models were correctly specified, using a link test. This test evaluates whether a DV is properly specified in a model.27 The test selected a logarithmic form of the DV for Micro, Businesstrans, Busassets, Businesstax, Payrolltax, Personstrans, Childspend, and Childspace. It supported a linear form for ExpendF, ExpendP, OwnrevF, OwnrevP, Personinctax, Propertytax, Consumptax, Assistservice1, Assistservice2, and Childnonprofit. Logarithmic and linear data both are relatively easy to interpret. Changes in log variables are calculated as a percentage; changes in linear ones are measured in the variable’s absolute units.28 In one case, R&Dspend, the test instead supported a square root transformation. With these forms for the DVs, link test accepted the null of no misspecification for all models.29 Histograms and outlier tests for each DV confirmed the selected form.30 Two DVs have missing data. Because few data points were available for PEI, regressions for R&Dspend are based on the other nine provinces. Two data points were missing for New Brunswick for Childnonprofit. For all other variables, the data were balanced and complete. There is evidence of multicollinearity in the data. Kennedy mentions .8 or .9 as an unacceptable level of pairwise collinearity.31 By this standard, the data discussed above have few problems. All ninety-one pairwise correlations among the fourteen IVs used with our PEA DVs are below .8; only five exceed .7, and most are much lower.32 Multicollinearity of

Quantitative Evidence (1)  211

a more complex kind – involving simultaneous relationships among all variables – can be measured by a variance inflation factor (VIF), sometimes considered high if it exceeds ten. In regressions for sixteen of our nineteen DVs, two or three IVs have VIFs of over ten, though none exceeds thirteen.33 Multicollinearity does not bias point estimates,34 though it inflates standard errors. Baum comments, “You can safely ignore near-collinearity that does not affect your key parameters. Because near-collinearity inflates standard errors, significant coefficients would become more significant if the sample contained fewer collinear regressors. Most microeconomic variables are interconnected … but that in itself may not be a concern.”35 I therefore proceed with these analyses. More severe collinearity is evident when we consider detrending our regressions. Several variables are temporally trended, a problem that can result in spurious correlations. This can be alleviated by including a time trend (the variable Year) in regressions. But Year is very highly correlated with two others variables, Gdp_pc (at .87) and Femaleshare (at .88). I therefore estimate models that include the complete set of IVs in two separate versions, one with a time trend and one without. Whether temporal variables are non-stationary is a question that concerns univariate time-series researchers. The literature on this problem is less advanced for TSCS data. Beck and Katz argue that TSCS variables are unlikely to be non-stationary, a pattern that might, for instance, be associated with a tendency for them to wander irretrievably away from their means over time. They note that most TSCS variables are percentages, often of GDP; this is true of almost all continuous variables used here. Such variables are bounded by zero and one hundred, and usually vary within a much narrower range; they are unlikely to wander.36 Beck nevertheless proposes an informal test of whether a model might be affected by the inclusion of unit root variables: “whether an autoregression of the residuals on their lags shows a coefficient on the lagged residual term near one.”37 Applied to models for the sixteen nonchildcare DVs used here, and all IVs, this test uncovered no cases where the coefficient of the lagged residual approached one. In only six cases did it exceed .6; the highest was .718.38 Presentation Five models are estimated for each DV. Rising affluence is almost universally adduced as an important influence on public policy; the economic and fiscal capacity IVs therefore are included in all models.39

212  Comparing Quebec and Ontario

The first two models report results controlling (1) for these variables (Gdp_pc, Growth, FedtransP or FedtransF and DebtpayP or DebtpayF) combined with the globalization ones (Inttrade and Domtrade); and (2) with those for post-industrialism (Postindemp, Age, Femaleshare, Unemp, and Immigrant). These models allow us to test the impact of our globalization and post-industrialism IV groups separately. The third model (3) controls for all three of these groups together. The fourth (4) adds the political variables (Density, Left, and Centre). The fifth (5) adds a time trend to the fourth. All models are calculated with FEs, that is, with a dummy variable for each province; Quebec was selected as the reference case, allowing for a ready determination of the difference between the level for its coefficient and that for each other province, including Ontario. Reporting all results for each model would take up an enormous amount of space: ninety-five lengthy columns of data. Our primary concern is the difference between Quebec and Ontario levels for each DV, a difference that equals the level for the Ontario FE. Individual fixed effects consequently are not reported for the other eight provinces. For all models, appendix 7C nevertheless identifies the number of provinces whose FE level is lower or higher than Quebec’s, and in how many cases the difference is statistically significant at the 10% level. As noted earlier, the difference in the level for the Ontario FE between models 3 and 4 is of particular interest. It indicates the disparity between specifications in which the influence of the partisanship and interest intermediation mechanisms is fully absorbed into the Ontario FE (model 3) and where, in contrast, the “balance of power” part of this difference, but not the “cooperative relations” part, is removed from this FE and instead reported in the coefficients for the political IVs (model 4). Results for the Ontario FE for model 3 therefore are reported directly underneath the results for model 4 in our tables. The level of the Ontario FE also is our primary concern for the other three models – which indicate the difference between Quebec and Ontario levels for the DVs if we control only for the fiscal/economic and globalization variables (model 1), for the fiscal/economic and post-industrialism variables (model 2), or indicate the impact of detrending (model 5). I consequently also report results for the Ontario FE for all models and DVs in appendix 7A. For models 3 and 4, the discussion goes beyond statistical significance to explore their substantive meaning: what is the difference, in terms of real world magnitudes, between DV values for Ontario and Quebec, holding constant the influence of all other variables? Finally,

Quantitative Evidence (1)  213

I performed separate calculations that add to models 3 and 4 an interaction term between the Ontario FE and time trends that successively exclude each of the three decades covered by our data. This allows us to determine whether the Ontario-Quebec difference has diminished since the 1980s, as would be anticipated by some globalization and post-industrialism theories. No directional hypotheses were offered here for fiscal and economic capacity, globalization, and post-industrialism variables; statistical significance tests for them therefore are two-tailed. One-tailed results are reported for the Ontario FE and for political variables, for which I have directional hypotheses; for convenience, the same is true for the other eight provinces. Results This section discusses the model 3 and 4 results for each group of DVs. Total revenue and expenditure measures are treated first, followed by results for different revenue sources, economic development, social assistance and related transfers and childcare. Each discussion also refers to Table 7.5, which illustrates the substantive difference between the Ontario and Quebec levels in the raw data and in models 3 and 4. Where they are consequential, these discussions also refer to the detrended model 5, for which Ontario FE results are reported in appendix 7A. These discussions focus on results for the Ontario FE and for the political IVs. This section then addresses the implications of the results for globalization and post-industrialism theories; asks whether the Ontario-Quebec difference has diminished since the 1980s; and evaluates the overall pattern of results for all English Canadian provinces in relation to Quebec’s.

Budget Policy (1): Overall Expenditures and Revenues The coefficients for the Ontario FEs in tables 7.3 and 7.4, as expected, are lower than Quebec’s for all four total revenue and expenditure variables and in both models. The difference is always statistically significant at the 1% level, except for model 4 of OwnrevP, where it is significant at 5%. In the detrended model 5, the results for ExpendF and ExpendP also are significant only at the 5% level (appendix 7A), but in all cases we can be confident that the coefficient for Ontario’s FE is significantly lower than Quebec’s.

214  Comparing Quebec and Ontario

As expected, the shortfall of Ontario’s coefficient compared to Quebec’s, for each DV, is greater for model 3 (table 7.4) than for model 4 (table 7.3). Including the political variables in the latter therefore controls for an important part of the distinctive influences shaping outcomes in the two provinces. The difference falls from 3.0% of GDP Table 7.3. Total Revenue and Expenditure Regressions (Model 4) Dependent variable

OwnrevP (1981–2009)

ExpendP (1981–2009)

OwnrevF (1981–2008)

ExpendF (1981–2008)

LOG Gdp_pc

1.9066* (-1.77)

6.5829*** (-4.97)

-2.1849 (-1.55)

-6.2854*** (-4.07)

LOG Growth

0.0818 (1.26)

-0.3075*** (-4.85)

-0.0920 (-0.97)

-0.4582*** (-4.49)

-0.4570 (-0.79)

4.6299*** (6.57)

LOG FedtranP / LOG FedtranF

-1.1993*** (−2.98)

0.2073 (0.38)

DebtpayP / DebtpayF

1.2227*** (10.62)

1.4272*** (8.12)

1.1522*** (7.55)

1.1715*** (5.91)

LOG Domtrade

1.5871 (1.33)

0.3501 (0.26)

-0.2305 (-0.14)

-0.2603 (-0.14)

LOG Inttrade

0.9171 (1.48)

-1.2122 (-1.48)

0.8834 (1.01)

-1.3133 (-1.17)

LOG Immigrant

0.2379 (1.01)

0.9129*** (3.12)

0.8066** (2.41)

0.9410** (2.10)

LOG Unemp

-0.7236 (-1.18)

0.5678 (0.92)

-1.4117* (-1.82)

-1.0249 (-1.19)

Age

-0.0511 (-0.26)

0.2265 (0.82)

-0.3179 (-1.04)

-0.4594 (-1.36)

Femaleshare

0.1895 (1.33)

0.3701** (1.97)

0.6675*** (3.42)

0.8275*** (3.37)

Postindemp

0.2779*** (3.57)

0.4405*** (4.76)

0.1335 (1.39)

0.4956*** (4.05)

Density

0.1117*** (2.61)

0.1024** (1.76)

0.0940* (1.58)

0.0184 (0.25)

Left

0.1986 (0.85)

0.5987*** (2.75)

0.3969* (1.54)

0.2158 (0.71)

Centre

0.2801 (1.13)

0.3954* (1.52)

0.5924*** (2.33)

-0.0007 (-0.00)

Quantitative Evidence (1)  215 Dependent variable

OwnrevP (1981–2009)

Ontario FE

-1.3850** (-1.68)

_cons

-4.6693 (-1.68)

N r2

290 0.7225

ExpendP (1981–2009) -3.5897*** (-3.45)

OwnrevF (1981–2008) -3.9391*** (-3.62)

ExpendF (1981–2008) -3.8604*** (-2.88)

34.6401*** (2.88)

4.3699 (0.35)

23.5448 (1.59)

290

280

280

0.9221

0.7004

0.8824

z statistics in parentheses * p < 0.10, ** p < 0.05, *** p < 0.01; one-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others. Note: FEs for all other provinces were included in this regression, but results for them are not reported here.

Table 7.4. Ontario FE Results without Political Variables (Model 3) Dependent variable

OwnrevP (1981–2009)

ExpendP (1981–2009)

OwnrevF (1981–2008)

ExpendF (1981–2008)

Ontario FE

-3.0342*** (-5.34)

-5.3489*** (-7.99)

-5.4592*** (-7.34)

-4.1597*** (-4.52)

z statistics in parentheses One-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others. Note 1: Political variables include Density, Left, and Centre; these were excluded from this regression. Note 2: The other provincial FEs and all other IVs reported for model 4 were included in this regression, but results for them are not reported here.

(the units in which the DV is calculated) to 1.4% as one moves from model 3 to model 4 for OwnrevP. There is also a decline from model 3 to model 4 for the other three variables: 5.3% to 3.6% for ExpendP, 5.5% to 3.9% for OwnrevF, and 4.2% to 3.9% for ExpendF. All three political variables are positively associated with spending and revenue effort in all four models, as expected; the relationship is statistically significant in two or three cases for each. The lower levels for the Ontario FE for model 4 (table 7.3) than for model 3

216  Comparing Quebec and Ontario

(table 7.4) reflects the influence of Quebec’s higher unionization levels and its different partisan landscape (above all, a left that governs more often, and the absence of right governments) in raising its outcomes above Ontario’s. But the difference remains statistically and substantively significant, even once these influences are controlled for in model 4; this suggests that the cooperative relations aspect of Quebec political economy also contributed to its distinctive outcomes. The third column of data in table 7.5 translate absolute differences into proportional ones, helping us understand their magnitude. In the raw data, Ontario’s own-source revenues / GDP on average were 21% (OwnrevF) or 23% (OwnrevP) below Quebec’s. Its mean expenditures / GDP were 39% (ExpendF) or 43% (ExpendP) lower. The last two columns of table 7.5 report the percentage shortfall of Ontario’s level for each DV after the regressions. Only in one of eight cases does this difference fall below 10%. For all four DVs, the difference averages 13.25% for model 4 regressions, 20.25% for the model 3 ones.

Budget Policy (2): Revenue Sources Chapter 3 offered uneven support for our hypothesis that Quebec would not rely more than Ontario on progressive taxes on mobile economic actors, concentrating instead on regressive taxes. Consistent with this surmise, there was no evidence that Quebec’s business taxes are higher than Ontario’s, based on the “progressive” scenario for tax incidence. Also as expected, Quebec makes much greater use of consumption and payroll taxes, both regressive in this scenario. Ontario relies much more on property taxes, which is consistent with the hypotheses if we regard these charges as progressive, as they are in relation to wealth. The most emphatic departure from the hypothesis, however, pertained to the progressive personal income tax; Quebec relies on it far more than Ontario. The results presented in tables 7.6 and 7.7 do little to alter this picture. Neither model for LOG Businesstax finds the Ontario FE to be statistically significant. Regressions for Propertytax indicate its level to be significantly higher in Ontario. Conversely, Ontario’s FE is significantly lower than Quebec’s for each regression for Personinctax, LOG Payrolltax, and Consumptax. The proportional differences reported in table 7.5 indicate that other than for LOG Businesstax, where the sign changes between models 3 (table 7.7) and 4 (table 7.6), underlining the

Quantitative Evidence (1)  217 Table 7.5. Difference between Quebec and Ontario DV Levels, Before and After Regressions

Dependent variable

Mean level for variable, raw data (linear) Quebec

Ontario

ExpendF

33.3

OwnrevF ExpendP OwnrevP

Difference (%) Raw data

Model 4

Model 3

24.0

-9.3(-39%)

-3.9(-13%)

-4.2(-14%)

24.6

20.3

-4.3(-21%)

-3.9(-19%)

-5.5(-29%)

29.7

20.7

-9.0(-43%)

-3.6(-14%)

-5.3(-22%)

22.0

17.9

-4.1(-23%)

-1.4(-7%)

-3.0(-16%)

LOG Businesstrans

1.58

0.42

-1.16(-276%)

(-52%)

(-87%)

LOG Micro

1.51

0.67

-.84(-125%)

(-23%)

(-41%)

SQRT R&Dspend

.123

.074

-.049(-66%) -27.2(-206%)

(-88%)

(-100%)

LOG Personstrans

3.27

2.46

-.81(-33%)

(-11%)

(-15%)

Assistservice2

3.23

1.92

-1.31(-68%)

-.55(-21%)

-.64(-25%)

3.17

-1.02(-32%)

-.82(-24%)

-.78(-23%)

717(-228%)

(-141%)

(-64%)

LOG Busassets

Assistservice1 LOG Childspend

40.4

4.19 1032

13.2

315

LOG Childspace

23.8

10.6

-13.2(-125%)

(-116%)

(-36%)

Childnonprofit

85

79

-6(-8%)

-42(-98%)

-4(-5%)

LOG Businesstax

3.09

3.32

.23(7%)

(7%)

(-5%)

Personinctax

6.22

4.60

-1.62(-35%)

-1.9(-44%)

-2.2(-55%)

Propertytax

3.46

4.19

.73(21%)

.83(24%)

.72(21%)

Consumptax

5.06

4.25

-.81(-19%)

-.86(-20%)

-1.(-46%)

Payrolltax

2.55

1.25

-1.3(-104%)

(-63%)

(-89%)

Note: Figures in the second and third columns represent the mean level of the DV in the raw data for our two provinces. The fourth column subtracts the Ontario level from Quebec’s and reports the percentage difference in parentheses. The last two columns report the difference between the Ontario coefficient and the Quebec level after the model 4 and model 3 regressions. When the DV is in log form, this difference equals the Ontario FE and tells us the percentage difference between the Ontario and Quebec levels for that DV. When the DV is linear, these columns first report the Ontario FE’s coefficient, which tells us the difference between Ontario and Quebec in absolute units of the DV. This is then subtracted from the Quebec level in the second column; the reported percentage is for the difference between the remainder and the Quebec figure.

218  Comparing Quebec and Ontario

two provinces’ similarity on this measure, the Quebec-Ontario difference is 20% or greater in both models for all DVs. For Personinctax and LOG Payrolltax, indeed, Quebec’s level is more than 40% higher than Ontario’s in both models, indicating how much more Quebec relies on these charges. The only caveat to this tableau is that the result for Consumptax becomes insignificant in model 5, which adds a time trend to model 4 (see appendix 7A).40 As expected, all three political variables correlate positively with tax effort except in the case of LOG Businesstax. Table 7.6. Revenue Source Regressions (Model 4)

Dependent variable

LOG Businesstax (1988–2008)

LOG Gdp_pc

-0.1158 (-0.68)

LOG Growth

0.0027 (0.33)

Personinctax Propertytax Consumptax LOG Payrolltax (1981–2008) (1981–2008) (1981–2008) (1981-2008) -0.9195** (-2.54)

-1.1622*** (-5.68)

-0.7810* (-1.72)

-0.0772 (-0.53)

-0.1315*** (-4.61)

-0.0418*** (-3.46)

-0.0139 (-0.45)

-0.0207** (-2.08)

-0.4003* (-1.74)

0.1032 (1.49)

LOG FedtranF

-0.0408 (-0.88)

DebtpayF

0.0225 (0.86)

LOG Domtrade

-0.0375 (-0.19)

-0.8799** (-2.18)

-0.6463** (-2.39)

-1.1528* (-1.90)

-0.4527** (-2.54)

LOG Inttrade

0.0921 (1.00)

0.3880 (1.41)

0.1308 (0.94)

-0.0338 (-0.10)

0.0808 (0.96)

LOG Immigrant

0.0363 (1.15)

0.1012 (0.96)

0.1289** (2.37)

-0.1085 (-1.02)

0.0473 (1.44)

-0.5616** (-2.30)

0.3558*** (2.71)

-1.3748*** (-5.39)

0.1063 (1.15)

-0.0591 (-0.81)

0.2099*** (4.06)

-0.2796** (-2.28)

-0.0663** (-1.97)

LOG Unemp Age Femaleshare

-0.2387*** (-2.81) 0.0476 (1.46) -0.0280 (-1.23)

-0.1528 (-0.89) 0.1747*** (3.70)

0.1517*** (2.84)

0.0189 (0.25) 0.0450* (1.82)

0.0854*** (3.06)

0.3659*** (5.63)

0.0174 (0.89)

0.2394*** (3.67)

0.0752*** (3.62)

Postindemp

0.0167* (1.67)

0.0005 (0.02)

-0.0074 (-0.49)

0.0927** (2.38)

0.0220* (1.93)

Density

0.0072 (0.91)

0.0148 (0.84)

0.0081 (1.03)

0.0518*** (2.35)

0.0173*** (2.92)

Quantitative Evidence (1)  219

Dependent variable Left Centre

LOG Businesstax (1988–2008) 0.0442* (1.62) -0.0477** (-1.67)

Personinctax Propertytax Consumptax LOG Payrolltax (1981–2008) (1981–2008) (1981–2008) (1981-2008) 0.1819** (2.16)

0.0285 (0.61)

0.1207 (1.01)

0.0718** (1.65)

0.0606 (0.84)

0.0510 (1.00)

0.1235 (1.26)

0.0529** (1.82) -0.6281*** (-4.91)

Ontario FE

0.0732 (0.51)

-1.9038*** (-5.64)

0.8330*** (4.83)

-0.8552** (-2.08)

_cons

1.6585 (0.79)

11.8192*** (3.08)

10.2376*** (4.98)

3.1417 (0.63)

N

210

280

280

280

r2

0.7744

0.7547

0.8390

0.8161

-2.3784 (−1.63) 280 0.8135

z statistics in parentheses * p < 0.10, ** p < 0.05, *** p < 0.01; one-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others. Note: FEs for all other provinces were included in this regression, but results for them are not reported here. Table 7.7. Ontario FE Results without Political Variables (Model 3) Dependent LOG Businesstax Personinctax Propertytax Consumptax LOG Payrolltax variable (1988–2008) (1981–2008) (1981–2008) (1981–2008) (1981-2008) Ontario FE

-0.0536 (-0.74)

-2.2025*** (-9.36)

0.7244*** (5.47)

-1.5989*** -0.8891*** (-5.75) (-8.90)

z statistics in parentheses One-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others. Note 1: Political variables include Density, Left, and Centre; these were excluded from this regression. Note 2: The other provincial FEs and all other IVs reported for model 4 were included in this regression, but results for them are not reported here.

Economic Development Policy Results for our four economic development variables, reported in tables 7.8 and 7.9, strongly support our expectation that expenditures are higher in Quebec. The Ontario FE is negative and significant in all model 3 results (table 7.9), as it is for the model 4 versions of SQRT

220  Comparing Quebec and Ontario

RDspend, LOG Busassets, and LOG Businesstrans (table 7.8). Only the model 4 result for LOG Micro is not significant. But when a time trend is added to this model, the Ontario FE returns to significance, though only at the 10% level (appendix 7A, model 5). Consequently, we can infer that Quebec’s policy effort is significantly higher than Ontario’s, whether or not the political variables are included in models.41 Because the Quebec-Ontario difference remains statistically significant in the face of the many control variables included in the regression models, moreover, these results confirm that Quebec’s greater intervention is not explained by its being more economically peripheral than Ontario, if this is understood to mean its lower levels of industrialization and Table 7.8. Economic Development Regressions (Model 4) Dependent variable

LOG Businesstrans LOG Micro (1981–2009) (1981–2008)

SQRT RDspend LOG Busassets (1981–2008) (1981–2009)

LOG Gdp_pc

-0.4681 (-1.28)

-0.4350** (-1.97)

0.0128 (0.32)

-0.1716 (-1.10)

LOG Growth

0.0103 (0.53)

-0.0359** (-2.48)

-0.0053** (-2.17)

0.0121 (-1.51)

LOG FedtranP / LOG FedtranF

0.2105* (1.94)

0.0152 (0.98)

0.0247 (0.50)

DebtpayP / DebtpayF

0.0831* (1.82)

-0.0456 (-1.43)

0.0006 (0.11)

0.0409** (2.00)

LOG Domtrade

0.0739 (0.18)

0.0513 (0.19)

0.0239 (0.59)

0.0585 (0.30)

-0.3424* (-1.76)

-0.2984** (-2.12)

-0.0056 (-0.22)

0.1531 (1.24)

LOG Immigrant

0.0916 (1.16)

0.0703 (1.34)

LOG Unemp

0.1299 (0.68)

0.1104 (0.99)

-0.0083 (-0.38)

Age

0.1100 (1.61)

-0.0083 (-0.17)

-0.0102 (-0.99)

Femaleshare

0.0123 (0.26)

0.0502 (1.61)

Postindemp

-0.0069 (-0.28)

-0.0158 (-0.98)

LOG Inttrade

Density

0.0234** (2.09)

0.3850*** (3.78)

0.0139* (1.50)

0.0378*** (3.13)

0.0095* (1.83)

0.0667 (1.02) 0.2214** (2.55) -0.0376 (-0.82) -0.0021 (-0.08)

-0.0011 (-0.38)

-0.0170 (-1.14)

0.0006 (0.36)

0.0078 (1.16)

Quantitative Evidence (1)  221 Dependent variable

LOG Businesstrans LOG Micro (1981–2009) (1981–2008)

SQRT RDspend LOG Busassets (1981–2008) (1981–2009)

Left

0.0259 (0.35)

0.0039 (0.07)

-0.0095 (-1.26)

0.0115 (0.43)

Centre

0.0819 (1.21)

-0.0110 (-0.24)

-0.0013 (-0.13)

0.0380 (0.85)

-0.5231** (-1.94)

-0.2285 (-1.28)

-0.0960*** (-3.29)

2.9483 (0.82)

3.6970 (1.50)

Ontario FE _cons

-0.0500 (-0.13)

-0.8835*** (-7.15) 5.4591*** (3.58)

N

290

280

261

290

r2

0.4136

0.6593

0.6670

0.8708

z statistics in parentheses * p < 0.10, ** p < 0.05, *** p < 0.01; one-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others. Note: FEs for all other provinces were included in this regression, but results for them are not reported here. Table 7.9. Ontario FE Results without Political Variables (Model 3) Dependent variable

LOG Businesstrans (1981–2009)

LOG Micro (1981–2008)

SQRT RDspend (1981–2008)

LOG Busassets (1981–2009)

Ontario FE

-0.8712*** (-4.16)

-0.4134*** (-3.25)

-0.0984*** (-4.60)

-0.9972*** (-9.55)

z statistics in parentheses One-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others. Note 1: Political variables include Density, Left, and Centre; these were excluded from this regression. Note 2: The other provincial FEs and all other IVs reported for model 4 were included in this regression, but results for them are not reported here.

GNP, and higher unemployment. Each of these influences, and many others, is controlled for in the regressions.42 The fifth through eighth rows of table 7.5 highlight the magnitude of these differences. For the three development variables that were regressed in log form, the coefficients for the Ontario FE falls between 52% and 100% below Quebec’s for both models of LOG Busassets and LOG Businesstrans. For LOG Micro, the Ontario FE is 41% below Quebec’s in model 3 and remains 23% lower in model 4.

222  Comparing Quebec and Ontario

Social Assistance and Income Transfers Among our DVs, LOG Personstrans is the best measure of provincial spending on social assistance and related income transfers, the focus of chapter 4. Assistservice1 and Assistservice2 respectively track these expenditures for 1970–87 and 1988–2008 but combine them with some social service outlays that are extraneous to this policy field; Quebec’s childcare spending probably inflates its reported expenditures for the second of these periods. The regression results for these variables offer only qualified support for our hypothesis that Quebec will spend more than Ontario in these areas (tables 7.10 and 7.11). For all three DVs, the model 3 coefficient for Ontario’s FE (table 7.11) is lower than Quebec’s and significant at Table 7.10. Social Assistance and Income Transfers Regressions (Model 4)

Dependent variable

LOG Personstrans (1981–2009)

Assistservice1 (1970–87)

Assistservice2 (1988–2008)

LOG Gdp_pc

-0.3334*** (-2.58)

0.5131*** (3.45)

-1.5969*** (-3.41)

LOG Growth

-0.0196*** (-2.90)

-0.1441*** (-4.52)

-0.0128 (-0.66)

LOG FedtranP / LOG FedtranF

0.0774 (1.62)

0.8998*** (4.14)

0.1662 (1.33)

DebtpayP / DebtpayF

0.0937*** (5.50)

0.0126 (0.22)

0.1100* (1.94)

-0.4930*** (-3.15)

-1.3302*** (-2.84)

LOG Inttrade

0.2158** (2.39)

-0.4740** (-2.15)

LOG Immigrant

0.0190 (0.42)

-0.0475 (-0.45)

0.0534 (0.61)

LOG Unemp

-0.0481 (-0.65)

-0.0634 (-0.46)

-0.1870 (-0.77)

Age

-0.0109 (-0.34)

0.0813 (0.77)

Femaleshare

-0.0223 (-1.09)

LOG Domtrade

Postindemp

0.0585*** (5.39)

Density

0.0020 (0.34)

0.1700* (1.84) -0.0568 (-1.11)

-0.0019 (-0.25)

0.1311*** (4.68) -0.0104 (-0.48)

Quantitative Evidence (1)  223

Dependent variable

LOG Personstrans (1981–2009)

Assistservice1 (1970–87)

Assistservice2 (1988–2008)

Left

0.0256 (0.91)

0.2315*** (2.52)

0.2018** (2.30)

Centre

0.0208 (0.66)

0.0060 (0.08)

0.1965*** (2.48)

-0.1068 (-0.93)

-0.5472** (-1.92)

1.5098 (1.28)

3.4731*** (-2.92)

17.4950*** (3.46)

180

210

Ontario FE _cons N

290

r2

0.5620

0.6701

-0.8157** (-2.18)

0.7938

z statistics in parentheses * p < 0.10, ** p < 0.05, *** p < 0.01; one-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others. Note: FEs for all other provinces were included in this regression, but results for them are not reported here. Table 7.11. Ontario FE Results without Political Variables (Model 3) Dependent variable

LOG Personstrans (1981–2009)

Assistservice1 (1970–87)

Assistservice2 (1988–2008)

Ontario FE

-0.1530** (-1.67)

-0.6407** (-2.20)

-0.7787*** (-3.22)

z statistics in parentheses One-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others. Note 1: Political variables include Density, Left, and Centre; these were excluded from this regression. Note 2: The other provincial FEs and all other IVs reported for model 4 were included in this regression, but results for them are not reported here.

the 5% level or higher. In contrast, the result for LOG Personstrans no longer is significant once the political variables are added in model 4 (table 7.10). Moreover, the coefficient for the Ontario FE, which suggests 15% lower outlays in model 3, reports an 11% difference in model 4 and becomes negligible when a time trend is added to the latter (model 5, appendix 7A). The Quebec-Ontario difference is more robust for the other two variables, where it remains significant at the 5% level, even in model 4. In

224  Comparing Quebec and Ontario

both cases Ontario’s FE level is more than 20% lower than Quebec’s in both models (see table 7.5). Yet even in these cases, the size of this difference is caste into doubt in the detrended model 5 (appendix 7A): The Ontario FE no longer is significantly different than Quebec’s for Assistservice1; and for Assistservice2, it remains so only at the 10% level. We can be confident that when social service outlays are included with these DVs, Quebec’s spending is significantly higher than Ontario’s in models that exclude the political variables. We cannot be confident of this for LOG Personstrans, which focuses more tightly on our core concern with assistance and other income transfers.

Childcare Several measures are available for childcare. But these series commence only in 1992 and are available for only eight years. The resulting small N affects the efficiency of our estimations. As the table 7.12 and 7.13 results indicate, the Ontario FE is lower than Quebec’s for both models of all Table 7.12. Childcare Regressions (Model 4) Dependent variable

LOG Childspend

LOG Childspace

LOG Gdp_pc

1.2852 (1.42)

0.7164*** (2.83)

LOG Growth

-0.0252 (-0.70)

0.0055 (0.37)

L.LOG FedtransP

-0.2618 (-1.10)

-0.1915 (-1.27)

Childnonprofit -6.6415 (-0.83) 1.2917*** (2.68) -5.4168 (-1.31)

L. DebtpayP

0.1097 (0.75)

0.1210* (1.72)

-3.0274* (-1.83)

L.LOG Domtrade

1.6143* (1.83)

0.8024*** (2.88)

-16.3005 (-0.90)

L.LOG Inttrade

0.2890 (1.02)

-0.0210 (-0.18)

0.6103 (0.08)

LOG Immigrant

0.2550 (1.46)

0.1054 (1.44)

-1.7217 (-1.04)

LOG Unemp

0.7871** (2.57)

0.2339*** (4.08)

Age

0.1873** (2.16)

0.0551 (1.53)

-1.6412 (-1.18)

Femaleshare

0.1407 (1.48)

0.0748 (1.36)

-3.3587* (-1.85)

3.8954 (0.56)

Quantitative Evidence (1)  225 Dependent variable Postindemp

LOG Childspend

LOG Childspace

Childnonprofit

0.0326 (0.98)

0.0350** (2.51)

-0.0523 (-1.18)

-0.0476** (-1.87)

0.0378 (0.32)

0.1125** (1.72)

3.0663 (1.13)

Centre

-0.0477 (-0.28)

0.0841* (1.40)

4.3638* (1.30)

Ontario FE

-1.4124* (-1.51)

-1.1557*** (-2.68)

-42.0680*** (-4.09)

_cons

-24.9422** (-2.15)

-13.0983*** (-3.60)

448.5915*** (3.76)

Density Left

N r2

80 0.8751

80 0.8772

0.4259 (0.93) -2.1973*** (-2.44)

78 0.6177

z statistics in parentheses * p < 0.10, ** p < 0.05, *** p < 0.01; one-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others. Note: FEs for all other provinces were included in this regression, but results for them are not reported here. Table 7.13. Ontario FE Results without Political Variables (Model 3) Dependent variable Ontario FE

LOG Childspend

LOG Childspace

Childnonprofit

-0.6447** (-1.76)

-0.3550** (-1.91)

-3.6350 (-0.37)

z statistics in parentheses One-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others. Note 1: Political variables include Density, Left, and Centre; these were excluded from this regression. Note 2: The other provincial FEs and all other IVs reported for model 4 were included in this regression, but results for them are not reported here.

three childcare DVs; the difference is significant at the 5% or 1% level in four cases, and at the 10% level in another. Only the model 3 result for Childnonprofit (table 7.13) is not significant. With this exception, moreover, the Ontario coefficients indicate a substantively much lower policy commitment there than in Quebec: the gap ranges between 36%

226  Comparing Quebec and Ontario

and 141% in fitted models (table 7.5). Contrary to expectations, and to most other results, model 4 regressions indicate a negative association between union Density and each DV, a correlation that is significant for LOG Childspace and Childnonprofit (table 7.12). Largely as a result, the Ontario FE coefficient is larger in model 4 than in model 3 for these DVs, again atypically. Yet when these DVs are regressed against our full set of IVs in a pooled regression (that is, with no fixed effects), the coefficient for union Density is positive in all three cases, as we would anticipate (results not shown). The high collinearity among our IVs when a time trend is added to them is especially likely to affect the efficiency of these childcare regressions because of their small N. Consistent with an approach adopted by Huber and Stephens,43 I drop the variables most highly correlated with the time trend from our model 5 calculations for these DVs. These are Gdp_pc and Femaleshare. With this adjustment, model 5 results (appendix 7A) show the Ontario FE coefficient to be much lower than Quebec’s, significant at 1% for Childnonprofit and LOG Childspace and at 5% for LOG Childpend. When this same approach to modelling the time trend is applied to model 3 for Childnonprofit, moreover, the Ontario FE became significant at 5%; this FE’s coefficient of -14.28 now is 20% below Quebec’s (results not shown). Overall, these results strongly support our surmise that childcare commitments are much greater in Quebec than in Ontario, especially when collinearity and trending are addressed.

Globalization and Post-Industrialism The results reported in the above tables do not suggest that globalization has a strong and consistent influence either in promoting or restricting policy effort. They lend inconsistent support to the “compensation” version of post-industrialism, rather than to its “race to the bottom” alternative. Neither trade variable is significantly related to any overall revenue or expenditure variable (table 7.3). LOG Domtrade correlates negatively with all five revenue sources, a relationship that is statistically significant in four cases (table 7.6), but its influence does not appear to have undermined provincial governments’ overall revenuegenerating capacity. Moreover, LOG Inttrade associates positively with four of five tax types. An opposing pattern is evident for economic development (table 7.8): LOG Domtrade’s impact always is

Quantitative Evidence (1)  227

positive, but not significant; LOG Inttrade’s is thrice negative, twice significantly so. The two trade variables are both significant, but in opposite directions, for LOG Personstrans (table 7.10). They are negatively and significantly related to Assistservice2. For childcare, the only statistically significant results (for LOG Domtrade’s impact on LOG Childspend and LOG Childspace) are positive (table 7.12). Overall the impact of our globalization variables on policy outcomes is inconclusive. The pattern is a bit clearer for post-industrialism. Results for the revenue and expenditure DVs (table 7.3) suggest a positive and significant impact for three: LOG Immigrant, Femaleshare, and Postindemp. For each, all model 4 regressions are positively signed, and three are significant. Though less emphatic, table 7.6 also suggests a generally positive impact for these variables on revenue effort: for each, four of five coefficients are positive; seven of fifteen are statistically significant overall. Coefficients for the other post-industrialism variables, LOG Unemp and Age, are more likely to be negative in these two tables. But the overall revenue and expenditure results show only one significant result – between LOG Unemp and OwnevF. There is little evidence of a strong relationship between post-industrialism and economic development spending (table 7.8). Only three of twenty coefficients are significant, and never more than one for any one IV. Only one of eleven coefficients is significant for four post-industrialism IVs in the social assistance and transfers regressions (table 7.10). But Postindemp is positively associated with LOG Personstrans and Assistservice2 – variables that encompass recent developments. Finally, twelve of fifteen coefficients for post-industrialism variables are positively signed for our childcare regressions (table 7.12), including four of five that are statistically significant. While by no means overwhelming, this evidence suggests a generally positive relationship between post-industrialism and provincial governments’ revenue and expenditure efforts and their social policy spending; but there is no clear relationship to economic development. The first two columns of appendix 7A report the model 1 and 2 results for all Ontario FEs; respectively, they control for the separate impact of the globalization and post-industrialism variables. This allows us to investigate whether differences in policy outcomes reflect the distinctive ways in which these influences affected Ontario and Quebec. The results do not support this view. For twelve of thirteen overall revenue and expenditure, revenue source, and economic development DVs, both models identify the Ontario FE as significantly different from

228  Comparing Quebec and Ontario

Quebec’s. For four social policy DVs, the Ontario-Quebec difference is very significant for one of these models, but not the other. For LOG Personstrans and Childnonprofit, the difference is not significant in model 2 but is for model 1. For LOG Childspend and LOG Childspace the reverse is true. The difference remains significant at the 1% level for both models of Assistanceservice2. As we have seen, the Ontario-Quebec contrast almost always is significant when we combine globalization and post-industrialism influences, in model 3. It is unlikely, then, that variations in outcomes for Quebec and Ontario for our DVs are accounted for by the distinctive impact on these provinces of globalization and post-industrialism, measured separately (as in models 1 and 2) or together (model 3).

Diminishing Differences? If globalization and post-industrialism erode differences, we might expect convergence over time. To test whether Quebec-Ontario differences attenuated after the 1980s, an interaction term between the Ontario FE and Year was added to separate versions of models 3 and 4 for DVs for which there are data since 1981 and for which Quebec’s policy effort is anticipated to be greater. These include the revenue and expenditure, economic development, and social assistance and transfer variables. In each version, one decade for the Year variable was omitted from the interaction. The resulting coefficient for the main Ontario FE tells us whether it differed from Quebec’s during that decade. The sequence of decadal results indicates whether differences lessened over time. Results of these calculations for the Ontario FE are reported in appendix 7B. Overall, they do not indicate an important reduction in the Quebec-Ontario difference for the fiscal and social transfer DVs; they point to a possible lessening of it for economic development. For the four revenue and expenditure variables, the difference fell substantially between the 1980s and 1990s. The graphs of Ontario and Quebec levels for these, presented in chapters 2 and 3, indicate that the latter decade witnessed a noticeable rise in these levels in Ontario, not a fall in Quebec. Consistent with this finding, all Ontario FE coefficients in appendix 7B shrink significantly for the 1990s. Between the 1990s and 2000s, in contrast, this reversed, with all coefficients increasing again and all again significant. The overall pattern suggests a substantially greater propensity to tax and spend in Quebec, interrupted between the very late 1980s and the mid-1990s when Ontario temporarily departed from its more parsimonious ways.

Quantitative Evidence (1)  229

Results for two economic development variables point to some convergence. But all Ontario FE coefficients are negative in all models and always significant at 1% for model 3, so a difference persists and is highly significant when the political variables are absorbed by the fixed effects. For LOG Businesstrans and LOG Micro the Ontario FE coefficient for both models nevertheless shrinks between the 1980s and 1990s and again during the 2000s. Model 4 results are no longer significant in the 2000s. There is no such evidence of convergence for SQRT R&Dspend and LOG Busassets, where coefficients remain significant and large, and grew between the 1990s and 2000s. The gradual turning away from Quiet Revolution dirigisme in Quebec since the 1980s, observed in chapter 6, may have lessened its distinctiveness from Ontario’s more laissez-faire pattern, yet the difference remains very large. There is a mixed pattern for social assistance and transfers. The coefficients for both models of LOG Personstrans shift from negative to positive between the 1980s and 1990s; they are negative again in the 2000s but not statistically significant. For the two Assistservice variables considered together, in contrast, the pattern approximates that reported above for the fiscal variables: There is a decline in significance and (negative) coefficient size between the 1980s and 1990s, coinciding with the explosion of Ontario’s assistance costs that was observed in chapter 4. But the Ontario FE coefficient almost doubled in size between the 1990s and 2000s and was now significant at 1% or 5%. The Ontario-Quebec difference was much larger in the most recent decade than in either earlier one. The latter results likely reflect Quebec’s expansion of both childcare and child benefit expenditures during these years.

Quebec and the Rest I did not advance hypotheses about how outcomes in Ontario and Quebec compare with those in other Canadian provinces. The fixed effects regressions nevertheless report the difference between the FE level for each province and the Quebec reference case. If we surmise that the political economies of Canada’s eight less populous provinces resemble Ontario’s liberal and pluralist model more than Quebec’s more coordinative and statist one, we would anticipate that these FE coefficients also fall below Quebec’s. Appendix 7C reports how many provincial coefficients are lower or higher than Quebec’s for each DV and how many are statistically significant at 10%. It lends rather qualified

230  Comparing Quebec and Ontario

support to this surmise, which would have to be investigated systematically in another study. For the four expenditure and revenue DVs combined, Quebec’s FE level is higher than those for other provinces thirty times, and lower on six occasions, for models 3 and 4. In thirty of thirty-two cases where this difference is significant in model 3, and twenty-five of twentyseven for model 4, Quebec’s FE is higher. One province, Saskatchewan, clearly rivals Quebec as a “high tax and spend” jurisdiction. It accounts for three of four cases where another province’s FE is significantly higher than Quebec’s in these models, and it never is significantly lower. One economic development variable stands out: for LOG Micro, Quebec’s level is below that for most other provinces. This variable, which combines three spending categories from the FMS, may encompass measures that lie outside our desired economic development focus. For the other three DVs, Quebec’s FE is higher than those of seven to nine other provinces for all model 3 and 4 regressions, a difference that always is significant in six or seven cases. Saskatchewan again stands out as rivalling Quebec’s commitments, now joined by Alberta.44 These prairie provinces may continue today to foster economic development actively as they did several decades ago, according to Pratt and Richards, following a path that is different from Quebec’s but equally assertive.45 No province has a significantly higher FE coefficient than Quebec for models 3 or 4 of any of our six social policy DVs. Except for model 4 of LOG Personstrans, most coefficients are significantly lower; fortythree of a total of forty-five FE coefficients are lower than Quebec’s and significant at 10% for the other five assistance and childcare variables. It is in this domain, therefore, especially its social service component, that Quebec’s results stand out most. No other province showed a distinctive pattern for the assistance and transfer measures, and all had lower coefficients than Quebec most of the time. For LOG Childspend and LOG Childspace, Ontario ranked second to Quebec in all four models. Manitoba and Saskatchewan had the highest coefficients for both Childnonprofit regressions, but not significantly higher than Quebec’s. The revenue source DVs indicate that provinces make very uneven use of progressive taxes that apply to more mobile actors. Quebec’s FE is significantly higher than six other provinces’ for Businesstax, all nine others for Personinctax. For Propertytax, it is significantly

Quantitative Evidence (1)  231

higher than four, and significantly lower than four. Ontario’s coefficient for the latter (results not shown) is significantly higher than that for six others. We saw earlier that Ontario’s level for Businesstax is close to Quebec’s in models 3 and 4; it is therefore also often significantly higher than other provinces’. An underlying assumption of much comparative scholarship on the political economy of taxation – that countries tend to align these tax levels, while allowing regressive taxes on less mobile actors to vary – is not borne out for the Canadian provinces. Discussion We begin this section by recapitulating the interpretive framework introduced earlier for our results outside the economic development field: three political variables are used in our regressions (for union density and for left and centre party incumbency). When included in a model, their impact on Quebec-Ontario policy differences is controlled for. Any remaining difference in these provinces’ coefficients reflects other features of the Quebec milieu that make it differ from Ontario. The scholarly evidence presented in chapter 2 suggests that these centre on the “cooperative relations” aspect of Quebec’s interest intermediation and partisan institutions, rather than their “balance of power” one. The former encompasses the greater cooperation among economic actors in Quebec and the lesser polarization between its main political parties. If the political variables are then removed from the model and the regression is run again, we ascertain the extent to which this second, balance of power, aspect of these Quebec-Ontario institutional differences affected the result. If the Ontario and Quebec coefficients are now much closer than before, we conclude that the policy variations owed much to balance of power differences: unions are stronger in Quebec and the partisan setting (a left party more often in power, and an absent right governing party) more favourable there. If the Ontario and Quebec coefficients remain significantly different once these influences are controlled for, we infer that cooperative relations differences also contributed to variations between the Ontario and Quebec policy outcomes. With this in mind, what do the results reported above say? First, Quebec’s policy effort, conditional on the influence of a wide range of independent variables, is higher than Ontario’s for overall revenue and expenditure levels (consistent with hypothesis 2a). For all four total tax

232  Comparing Quebec and Ontario

and spending variables the Ontario coefficient is significantly lower than Quebec’s, whether or not models include the political variables. Both “cooperative relations” and “balance of power” differences between the Quebec and Ontario political economies therefore contributed to Quebec’s higher taxing and spending effort. Moreover, the substantive differences between the two provinces are very large in all cases. Results for the four economic development measures also confirm our expectations (hypothesis 3a). For these, the Quebec-Ontario difference is always statistically significant in the presence of the political variables; only in one case (LOG Micro) is this not the case when the political variables are removed, but this is no longer true in a detrended model. Here again, we can be confident that variations in the political balance of power in our provinces contributed to their different policy outcomes. Since these outcomes remain significantly different, even when the political variables are controlled for in models, we can also infer that some combination of more cooperative relations in Quebec and of its distinctive state tradition also contributed to its greater policy effort. And this difference again is substantively large: for the three DVs that are measured in logs, the Ontario coefficient always was at least 20% below Quebec’s, usually much more. The evidence is less compelling for social assistance and income transfer spending (hypothesis 4a). For the DV that measures these outlays best (LOG Personstrans), Ontario’s coefficient levels are lower than Quebec’s in all models, but the difference is statistically significant only when the political variables are absent. Quebec’s moderate spending premium over Ontario in this case reflects the fact that it has stronger unions and a more favourable configuration of parties. In spite of the limited N for our childcare variables, results again support the surmise that Quebec’s policy effort is much greater than Ontario’s; it spends more in the area (hypothesis 5a) and has moved further towards universal provision (5b) on a non-profit basis (5c). Results for most models were strongly consistent with this interpretation, whether or not the political variables were present; this is also true for the remaining cases once they are detrended. The discussion of tax sources in chapter 3 raised doubts about our supposition that Quebec draws its larger revenues from more regressive taxes (hypothesis 2c). Our results here add to them; in a detrended

Quantitative Evidence (1)  233

model, Quebec’s level for consumption taxes no longer is significantly higher than Ontario’s. Comparing the Ontario and Quebec results to those for other provinces justifies more scepticism. Overall, it is not evident that provinces are less willing to allow levels for their progressive taxes to vary from those set elsewhere than they are for their regressive charges. These results are resilient in the face of controls for globalization and post-industrialism. There was no consistent relationship between trade openness and policy effort. There was support for a positive association between several post-industrialism independent variables and some outcomes, giving some credence to a “compensation” view of their impact. Overall, however, differences between Ontario and Quebec do not disappear when we control for the impact of globalization and postindustrialism, separately or together. These forces are not causing our provinces to converge. There is little evidence, finally, that the large differences in policy effort uncovered here attenuated over the past three decades. There may have been an erosion of the Quebec-Ontario difference for economic development policy but not one that eliminates the chasm that still separates them. For budgeting and social assistance and services, a marked convergence during the 1990s reversed subsequently. Graphical evidence for childcare also suggests continued divergence.

234  Comparing Quebec and Ontario

Appendix 7A: Ontario FE Coefficients for All Models and Dependent Variables Dependent variable

Model 1

2

3

4

5

ExpendF

-2.4790*** (-2.64)

-4.1840*** (−4.84)

-4.1597*** (-4.52)

-3.8604*** (-2.88)

-2.5679** (-1.87)

OwnrevF

-3.5096*** (-4.81)

-5.3026*** (-7.79)

-5.4592*** (-7.34)

-3.9391*** (-3.62)

-4.0637*** (-3.58)

ExpendP

-4.3764*** (-6.38)

-5.4310*** (-8.71)

-5.3489*** (-7.99)

-3.5897*** (-3.45)

-1.8897** (-1.85)

OwnrevP

-2.5203*** (-4.81)

-3.0016*** (-6.04)

-3.0342*** (-5.34)

-1.3850** (-1.68)

-1.8263** (-2.11)

-0.0224 (-0.36)

-0.0536 (-0.74)

-1.8087*** (-8.14)

-2.0202*** (-8.93)

-2.2025*** (-9.36)

-1.9038*** (-5.64)

-1.8470*** (-5.38)

Propertytax

0.8270*** (6.23)

0.8464*** (7.08)

0.7244*** (5.47)

0.8330*** (4.83)

0.8099*** (4.46)

Consumptax

-1.0628*** (-3.73)

-1.3790*** (-5.39)

1.5989*** (-5.75)

-0.8552** (-2.08)

-0.2812 (-0.65)

LOG Payrolltax

-0.7391*** (-7.04)

-0.8012*** (-8.03)

-0.8891*** (-8.90)

-0.6281*** (-4.91)

0.6909*** (-5.25)

LOG Businesstrans

-0.8019*** (-3.98)

-0.9123*** (-4.68)

-0.8712*** (-4.16)

-0.5231** (-1.94)

-0.4955** (-1.80)

LOG Micro

-0.3080*** (-2.58)

-0.4310*** (-3.54)

-0.4134*** (-3.25)

-0.2285 (-1.28)

-0.2443* (-1.30)

SQRT R&Dspend

-0.0549*** (-3.28)

-0.1041*** -0.0984*** (-5.34) (-4.60)

-0.0960*** (-3.29)

-0.0862*** (-2.61)

-0.9972*** (-9.55)

-0.8835*** (-7.15)

-0.7213*** (-5.45)

LOG Businesstax Personinctax

LOG Busassets

0.0201 (0.32)

-0.9671*** -0.9838*** (-12.65) (-10.89)

0.0732 (0.51)

-0.0056 (-0.04)

LOG Personstrans

-0.1786** (-1.95)

-0.0457 (-0.52)

-0.1530** (-1.67)

-0.1068 (-0.93)

Assistservice2

-0.8246*** (-2.90)

−0.5067*** (-2.40)

-0.7787*** (-3.22)

-0.8157** (-2.18)

-0.6242* (-1.51)

Assistservice1

-0.5488*** (-2.54)

-0.6407** (-2.20)

-0.5472** (-1.92)

-0.3749 (-1.22)

0.0052 (0.04)

Quantitative Evidence (1)  235 Model

Dependent variable

1

2

3

4

5

LOG Childspend

-0.1605 (-0.24)

-1.2308*** (-6.78)

-0.6447** (-1.76)

-1.4124* (-1.51)

-1.6404** † (-1.29)

LOG Childspace

-0.1290 (-0.48)

0.6841*** (-5.16)

-0.3550** (-1.91)

-1.1557*** (-2.68)

-0.9608*** † (-2.11)

Childnonprofit

-16.7659** (-1.94)

2.8201 (-0.69)

-3.6350 (-0.37)

-42.0680*** -59.1301*** † (-4.09) (-7.08)

z statistics in parentheses * p < 0.10, ** p < 0.05, *** p < 0.01; one-tailed tests † Model 5 regressions for LOG Childspend, LOG Childspace, and Childnonpofit omitted the LOG gdp_pc and Femaleshare IVs to reduce collinearity.

Appendix 7B: Does the Quebec-Ontario Difference Decline over Time (Measured by Adding Interaction Term and Time Trend to Models 3 and 4)? Period excluded from interaction between Ontario dummy and year 1981–9 Dependent variable

1990–9

2000–8/9

Model 3

4

3

4

3

4

ExpendF

-4.1717*** -3.4686*** -1.8369** -1.0727 (-3.77) (-2.47) (-1.77) (-0.74)

-3.4851*** -3.0100** (-3.65) (-2.12)

OwnrevF

-6.0977*** -4.6754*** -5.1580*** -3.5202*** -5.7126*** -4.0975*** (-6.59) (-3.95) (-6.10) (-2.99) (-7.48) (-3.58)

ExpendP

-4.5640*** -2.3289** -3.4744*** -1.0617 (-6.29) (-2.27) (-4.69) (-0.99)

-4.3732*** -2.0114** (-6.41) (-1.93)

OwnrevP

-3.7092*** -2.1396*** -2.8994*** -1.3229* (-5.86) (-2.54) (-4.24) (-1.41)

-3.6149*** 1.9785** (-6.04) (-2.18)

LOG -0.9604*** -0.5992** -0.9415*** -0.5724** -0.6736*** -0.2726 Businesstrans (-3.81) (-2.00) (-3.81) (-1.88) (-2.82) (-0.91) (Continued)

236  Comparing Quebec and Ontario Appendix 7B. (Continued) Period excluded from interaction between Ontario dummy and year 1981–9 Dependent variable

1990–9

2000–8/9

Model 3

4

3

4

3

-0.4308*** -0.2406 (-2.92) (-1.18)

4

LOG Micro

-0.4800*** -0.2929* (-3.36) (-1.54)

SQRT R&Dspend

-0.0938*** -0.0892*** -0.0897*** -0.0830** -0.0903*** -0.0859*** (-4.07) (-2.71) (-3.55) (-2.32) (-4.15) (-2.58)

LOG Busassets

-0.8790*** -0.7176*** -0.8492*** -0.6512*** -0.9299*** -0.7642*** (-7.83) (-5.32) (-7.44) (-4.58) (-8.78) (-5.72)

LOG -0.2016** -0.1187 Personstrans (-1.97) (-0.96) Assistservice2

N/A

N/A

Assistservice1 -0.6117** (-0.96) (-1.90) (-1.48)

-0.4022*** -0.1847 (-3.13) (-0.96)

-0.0824 (-0.81)

0.0575 (0.58)

0.1320 (1.06)

0.0107 (-0.08)

-0.3645* (-1.30)

-0.3771 (-0.89)

-0.6874*** -0.7420** (-2.74) (-1.78)

N/A

N/A

N/A

N/A

z statistics in parentheses * p < 0.10, ** p < 0.05, *** p < 0.01; one-tailed tests Note 1: Reported results are for models that add an interaction between the Ontario dummy variable and three time variables, each of which excluded one of the periods identified above. All models also included a time trend (year). Note 2: Results for Assistservice1 are for 1981–7 only.

Appendix 7C: Summary of FE Results, for All Provinces and Models

Dependent variable

Provincial coefficients below/ above Quebec’s

Coefficients statistically significant below/above Quebec’s (> 10%)

Model

Model

1

2

3

4

5

1

2

3

4

5

ExpendF

9/0

8/1

8/1

8/1

8/1

9/0

7/1

8/0

7/0

6/0

OwnrevF

9/0

8/1

8/1

8/1

8/1

7/0

8/0

8/1

6/0

6/1

Quantitative Evidence (1)  237

Dependent variable

Provincial coefficients below/ above Quebec’s

Coefficients statistically significant below/above Quebec’s (> 10%)

Model

Model

1

2

3

4

5

1

2

3

4

5

ExpendP

6/3

6/3

6/3

6/3

5/4

6/1

6/0

6/0

5/1

4/2

OwnrevP

9/0

8/1

8/1

8/1

8/1

7/0

8/1

8/1

7/1

6/1

33/3 30/6 30/6 30/6

29/7

Budgeting totals

29/1 29/2 30/2

25/2 22/4

LOG Businesstrans

7/2

7/2

7/2

7/2

7/2

7/0

7/0

7/0

7/1

6/1

LOG Micro

5/4

3/6

4/5

2/7

2/7

2/4

1/4

1/3

0/4

1/4

SQRT R&Dspend

7/1

7/1

7/1

8/0

8/0

7/0

7/0

7/0

7/0

7/0

LOG Busassets

9/0

9/0

9/0

8/1

6/3

8/0

6/0

6/0

6/0

5/0

Eco development totals 28/7 26/9 27/8 25/10 23/12 24/4 21/4 21/3 8/1

7/2

7/2

5/4

6/1

Assistservice1

9/0 N/A 9/0

9/0

8/1

7/0 N/A

7/0

7/0

5/0

Assistservice2

9/0

9/0

9/0

9/0

9/0

9/0

8/0

Assistance / IS totals

9/0 9/0

9/0

26/1 18/0 25/2 25/ 2 22/5

8/0 9/0

6/0

20/5 19/5

LOG Personstrans

22/1 17/0 22/0

4/0

4/0

20/0 17/0

LOG Childspend

9/0

9/0

9/0

9/0

9/0

7/0

9/0

9/0

9/0

9/0

LOG Childspace

9/0

9/0

9/0

9/0

9/0

7/0

8/0

9/0

9/0

7/0

Childnonprofit

7/2

7/2

7/2

7/2

7/2

6/1

6/2

7/0

7/0

7/0

25/2 25/2 25/2 25/2

25/2

Childcare totals

20/1 23/2 25/0

25/0 23/0

LOG Businesstax

7/2

8/1

8/1

7/2

7/2

6/0

7/0

7/1

6/0

6/0

Personinctax

9/0

9/0

9/0

9/0

9/0

9/0

9/0

9/0

9/0

9/0

Propertytax

5/4

4/5

4/5

4/5

4/5

4/4

4/2

4/4

4/4

4/4

Consumptax

5/4

5/4

4/5

4/5

4/5

4/4

4/3

4/3

4/4

4/4

LOG Payrolltax

9/0

9/0

9/0

9/0

9/0

7/0

9/0

9/0

9/0

9/0

Chapter Eight

Quantitative Evidence (2): Comparing Redistributive Outcomes

Does Quebec reduce inequality and poverty more than Ontario? I anticipated in chapter 2 that it would, relying on income security programs (hypothesis 4b) and its overall transfer and income tax regime (2d) to do so. The main potentially redistributive income-based measures in Canadian provinces are social assistance and child-related tax benefits (discussed in chapter 4) and the personal income tax (chapter 3). Province-level micro-data are available for all of these since 1993 from Statistics Canada’s Survey of Labour and Income Dynamics (SLID). The Survey of Consumer Finances (SCF), which preceded SLID, provided province-level statistics from 1980 but only for social assistance. These surveys are the basis for the analysis here, which compares our two provinces’ records for inequality- and poverty-reduction in relation to the three aforementioned measures, and for all transfers and income taxes; the latter metric also encompasses workers’ compensation and miscellaneous other provincial payments. This chapter follows the last in identifying independent variables (IVs) and in model specification. The logic of inquiry for our regressions again involves a process of elimination: to what extent do interprovincial differences sometimes evident in the graphs presented in the next section remain substantively and statistically significant in the face of these controls? Our findings are that where families include children, Quebec’s child benefit reforms during the 1990s and 2000s clearly reduced inequality, and resulted in much more redistribution than in Ontario. This advantage attenuated after 2009, though to a degree that we cannot yet be sure of, when the Ontario Child Benefit (OCB) reached maturity. In contrast, repeated incremental curtailments in Quebec’s social assistance

Quantitative Evidence (2)  239

program meant that it no longer reduced inequality there more than in Ontario, as it did during the 1980s. Moreover, the shift in focus in Quebec from social assistance to child tax benefits that reach far higher into the income structure meant that evidence that Quebec’s tax and transfer regime is more redistributive than Ontario’s is strongest for the Gini coefficient, which calculates inequality across the entire income distribution. It is weaker for another inequality indicator introduced below, the P10/P50 ratio, or for poverty rates; these two measures concentrate on families near the bottom, more likely to benefit from assistance. These variegated outcomes highlight the consequences of the “two worlds” of redistributive politics in Quebec that were featured in in chapter 4. Quebec enhanced child benefits considerably, using broad-based measures whose impact is most likely to be reflected in the Gini measure. In contrast, social assistance, whose benefits concentrate on the bottom of the income distribution, eroded. These findings challenge the views of some recent commentators on Quebec social policy. Pierre Fortin and Alain Nöel, for instance, argue that Quebec’s income security reforms during the 1990s reflected a social democratic turn in the province’s politics, and that in its wake Quebec redistributes much more than other provinces. Similarly, Godbout and St-Cerny propose that Quebec may now be a “paradise for families,” partly because of its child benefits reforms.1 The evidence presented here does show that Quebec redistributes more than Ontario for families with children, especially single-mother families. But this difference is now less than it was before the OCB was implemented. Moreover, as a result of significant long-term retrenchment in its social assistance, Quebec does not now help its disadvantaged more than Ontario if they do not have children. The next section describes the data used in this chapter, and graphs the evolution of inequality- and poverty-reduction in Ontario and Quebec. Subsequent sections discuss methodology and data presentation, report the regression results, and assess their significance. How Much Do Ontario and Quebec Reduce Inequality and Poverty? To calculate how much Ontario and Quebec redistribute, we start with market income, a family’s income before taxes are paid and income transfers are received. Provincial transfers are then added to market income, and provincial income taxes are subtracted. The amount of provincial

240  Comparing Quebec and Ontario

redistribution equals the difference between inequality and poverty levels before and after these adjustments.2 Several caveats must be kept in mind. First, taxes and transfers are not the only redistributive instruments available to provinces. Many in-kind services, from primary education to adult training, job creation and child and health care, indirectly affect inequality. But this impact is hard to calculate and is not measured by the surveys used here.3 The latter also cannot evaluate behavioural effects, that is, the extent to which a tax or transfer affects market inequality.4 The procedures used here nevertheless are widely adopted in welfare state research and account for a large part of redistribution by provinces.5 There also are limitations in the design of the surveys, but these too are not insurmountable. They substantially under-report receipt of some transfer payments, especially social assistance.6 This became less true over time with the SLID, as the survey methodology improved. Not only is the level of redistribution understated, therefore, but comparisons over time are rendered doubtful. Our main concern, however, is with the data’s cross-sectional dimension, not their temporal one – differences between provinces, not between years. This shortcoming is less likely to affect these patterns. Researchers also once found that the SLID seriously under-reported incomes at the very top and bottom of the distribution – thereby understating market inequality. Subsequent adjustments have largely corrected for this problem.7 The data reported below are for unattached individuals and “economic families,” as defined by Statistics Canada.8 An adult-equivalent adjustment (AEA) is made for families, which involves dividing family incomes by the square root of the number of family members. Several other adjustments were made to the data, consistent with the approach described by Heisz.9 The sample also was restricted to families whose “major earner” was below the age of sixty-five; the incomes of elderly families are affected preponderantly by federal pensions and only very secondarily by provincial transfers, so they are excluded. Three measurements of inequality and poverty are used.10 The Gini coefficient, the most popular inequality indicator, varies between zero (perfect equality among all family units) and one hundred (perfect inequality).11 It is based on the entire income distribution and is dominated by its typically thick middle. The P10/P50 ratio, our second measure, reports the income of families in the tenth percentile of the distribution (from the bottom) as a proportion of median (fiftieth percentile) family income. In contrast with the Gini, the P10/P50 focuses

Quantitative Evidence (2)  241

on the bottom of the distribution, highlighting the distance between incomes there and middling ones. Because of their different foci, the Gini and P10/P50 may report very different levels of redistribution for a particular program, depending on whether its benefits reach well into the middle of the income distribution (underscored by the Gini) or concentrate on its bottom (emphasized by the P10/P50). I therefore use both. The third measure, the 50% poverty rate, reports the percentage of individuals who belong to family units whose income is less than half the median family income. Like the P10/P50, it focuses on the bottom of the distribution, but it attends to the proportion of families that fall well below the median, rather than to the distance of a specific family unit from it. Figure 8.1 represents graphically the extent of inequality reduction by social assistance in Ontario and Quebec between 1980 and 1992. Figures 8.2 and 8.3 do the same for this program, and for child benefits, the personal income tax and all provincial measures, since 1993.12 For the same years figure 8.4 tracks poverty reduction for unattached individuals, single mother families, families consisting of two parents and one or more children, and all non-elderly families. The rest of this section examines the redistribution levels illustrated by these graphs in light of the policy developments documented in chapters 3 and 4. Our discussion begins with social assistance, which reduced inequality far more in Quebec than in Ontario during the 1980s, whether income disparity is measured by the Gini or the P10/P50 ratio

Figure 8.1. Inequality Reduction by Provincial Social Assistance, 1980–92 (B) P10/P50 reducon by social assistance

points

points

0

5

50

100 150 200

10 15 20 25 30

(A) Gini reducon by social assistance

1980

1985

year

Quebec

1990 Ontario

1995

1980

1985

year

1990

Quebec

Source: Author’s calculations based on data from the Survey of Consumer Finances (SCF).

Ontario

1995

242  Comparing Quebec and Ontario Figure 8.2. Reduction of Gini-Measured Inequality by Provincial Transfers and Income Taxes, 1993–2010 (B) Gini reducon by child benefits points

1990

0

5

10

10 15 20 25 30 35

(A) Gini reducon by social assistance points

1995

2000 year Quebec

2005

2010

1990

Ontario

1995

2000 year Quebec

2010

Ontario

(D) Gini reducon by all provincial transfers and income taxes points

1990

20

10

30

15

40

20

50

60

25

(C) Gini reducon by personal income taxes points

2005

1995

2000 year Quebec

2005 Ontario

2010

1990

1995

2000 year Quebec

2005

2010

Ontario

Source: Author’s calculations based on data from the Survey of Labour and Income Dynamics (SLID).

(figure 8.1). As was noted in chapter 4, Quebec’s assistance benefits likely were not higher than Ontario’s during these years (figure 4.2). The program’s more redistributive impact in Quebec instead reflected a much higher caseload there: 9.6% of the provincial population in 1987, for instance, compared to 5.4% in Ontario (figure 4.1). The Ontario-Quebec gap in redistribution nevertheless narrowed in the late 1980s, as Quebec curtailed its caseload while the caseload rose in Ontario in the wake of the Thompson Report and the subsequent benefit expansion there. By 1992, the inequality-reduction gap had diminished significantly, though it remained sizable (figure 8.1). The restraint measures implemented by Quebec during these years did not prevent its caseload from rising significantly during the early-1990s recession, but it stopped it from rising nearly as much as in Ontario: Quebec’s

Quantitative Evidence (2)  243 Figure 8.3. Reduction of P10/P50-Measured Inequality by Provincial Transfers and Income Taxes, 1993–2010 (B) P10/P50 reducon by child benefits points

1990

0

10

20

30

40

50 100 150 200 250

(A) P10/P50 reducon by social assistance points

1995

2000 year

Quebec

2005

2010

Quebec

Quebec

2005 Ontario

2005

2010

Ontario

50 100 150 200 250 300

40 30 20

2000 year

2000 year

(D) P10/P50 reducon by all provincial transfers and income tax points

10

1995

1995

Ontario

(C) P10/P50 reducon by personal income tax points

1990

1990

2010

1990

1995

2000 year Quebec

2005

2010

Ontario

Source: Author’s calculations based on data from the Survey of Labour and Income Dynamics (SLID).

caseload peaked at 10% of provincial population in 1993, about the level reached in 1985; Ontario’s plateaued at over 12% in 1992, more than twice its 1985 level (figure 4.1). The ongoing curtailment in Quebec entailed that its redistributive “premium” for assistance abated further in the late 1990s and disappeared entirely by 2002–3, on the basis of the P10/P50 ratio (figure 8.3, graph A), or towards the end of the period examined here, according to the Gini (figure 8.2, graph A). The Harris government’s substantial benefit cuts after 1995 reduced redistribution by assistance in Ontario suddenly and steeply. But the redistributive impact of assistance also fell in Quebec during the late 1990s and early 2000s, if at a more gradual pace, eventually eliminating the gap between its level for this measure and Ontario’s. This convergence cannot be explained by post-recession growth, which was robust in both provinces. It largely reflects two policy

244  Comparing Quebec and Ontario Figure 8.4. Poverty Reduction by Provincial Transfers and Income Taxes, 1993–2010 (A) Poverty reducon, una ached individuals

(B) Poverty reducon, single mother families %

1990

0

-1 -.5

5

0

.5

10

1

15

1.5

%

1995

2005

2000 year Quebec

2010

Ontario

1995

2000 year Quebec

(C) Poverty reducon, 2 parent families %

2005

2010

Ontario

(D) Poverty reducon for all families

0

.5

1

1

2

1.5 2

3

4

2.5

%

0

-1 1990

1990

1995

2000 year Quebec

2005 Ontario

2010

1990

1995

2000 year Quebec

2005

2010

Ontario

Source: Author’s calculations based on data from the Survey of Labour and Income Dynamics (SLID).

changes in Quebec. First, although Quebec’s efforts to curtail its caseload by directing assistance recipients towards employment were slow to bear fruit, they did cause its caseload to turn downwards after the mid-1990s (figure 4.1). Second, Quebec’s two major child benefits reforms had the same effect, by substituting these benefits for a large part of the assistance income previously received by Quebec families with children. We now consider these child benefits: Quebec’s reforms dramatically increased their redistributive effect. The PQ’s 1996 reform selectivized Quebec’s then predominantly universal child benefit regime (chapter 4). The reform’s impact therefore was most evident at the bottom of the income structure, which the P10/P50 ratio is most sensitive to. By 2000, after a period of fluctuation, the new benefit decreased inequality

Quantitative Evidence (2)  245

as measured by this ratio ten-fold as compared to 1995 (figure 8.3, graph B). The Liberals’ 2004 reform, which reintroduced a universal child benefit, as well as enhancing selective ones, had a less dramatic impact on the P10/P50 measure. Predictably, its influence is much more evident with the Gini coefficient, which taps inequality across the entire range of income. Soutien aux enfants doubled the Gini-reducing impact of Quebec child benefits between 2004 and 2005 (figure 8.2, graph B). How do these effects compare with the decline of social assistance’s redistributive impact during these years? This question is pertinent because the new child benefits often displaced assistance income, and they were intended to do so. Because the substantial reduction in assistance’s impact after 1993 coincided with Quebec’s emergence from the early-1990s recession, it partly reflects the effect of this upswing as well as changes in benefit eligibility or generosity. I therefore instead compare assistance’s inequality impact in 2000, when unemployment reached a post-recession trough, at 8.4%, with its impact in 2009, when the unemployment rate was almost identical, at 8.5%. I track changes in inequality reduction by child benefits over the same period, for the Gini, but between 1995 and 2009 for the P10/P50 ratio because, as we saw, the child benefit reforms’ inequality impact according to this measure began earlier. By these measures, overall inequality reduction lost by more in Quebec as a result of the erosion of social assistance than it gained because of the child benefit reforms.13 The difference was modest according to the Gini measure, where the 2004 child benefit reform reached well into the income structure. Child benefits reduced the Gini by 5.5 points more in 2009 than in 2000; the decline in assistance’s impact between these years, at 7.2 points, was only moderately higher. The discrepancy was much larger for the P10/P50 ratio. Child benefits reduced it by 31.6 more points in 2009 than in 1995 (the difference would be much smaller if we compared 2009 and 2000). In contrast, social assistance reduced it by 68.4 points less in 2009 than in 2000. Displacing needs-tested assistance with income-tested child benefits on balance had a negative impact on inequality reduction for the lowest-income families, and it reduced Quebec’s advantage over Ontario for that group. Needless to say, this effect was greatest for unattached individuals and childless couples. Ontario also introduced a major child benefits reform towards the end of our period, the OCB. As was noted in chapter 4, it was much more targeted at low-income families than is Quebec’s benefit. The

246  Comparing Quebec and Ontario

second graphs in figures 8.2 and 8.3 indicate that the OCB considerably reduced the gap between Ontario and Quebec in inequality reduction by child benefits, but because of its structure, this impact was much greater for the P10/P50 ratio than for the Gini. For the latter, the decline was 38%, from 8.7 points in 2008 to 6.5 points in 2010, but the gap remained sizable. For the P10/P50, in contrast, a difference of 20.3 points in 2008 disappeared two years later, once the OCB was fully implemented. But the latter outcome does not necessarily mean that Ontario now helps less-advantaged families with children by as much as Quebec does, for three reasons. First, Quebec’s Soutien aux enfants is received by families with incomes around the median, though at a lower rate than for poorer families (table 4.1); it therefore reduces the P10/P50 ratio by less than it would if it raised the incomes of poorer families by as much, but was not received by median income families. Since the latter is true for the OCB, a similar score for P10/P50 reduction does not mean that it raises the incomes of low-income families as much as Quebec’s benefit. Second, year-to-year variations in inequality reduction as measured by SLID are considerable, especially for the P10/P50 measure, as the graphs in figure 8.3 illustrate. It would therefore be imprudent to rely on data from 2010 alone to conclude that the OntarioQuebec gap in inequality reduction by child benefits according to this measure disappeared in the OCB’s wake. This is particularly the case, third, because of what we know about the Quebec and Ontario child benefit regimes’ generosity. Soutien aux enfants’ maximum support level for the least-advantaged families is much higher than the OCB’s (table 4.1). It therefore should raise their incomes by more. Evidence presented in chapter 3 indicated that the personal income tax reduced inequality more in Quebec than in Ontario. High- and middleincome families pay considerably more income tax to the province in Quebec; in contrast, low-income families pay about the same amount in each province (figure 3.5). The third graph in each of figure 8.2 and 8.3 confirms this pattern. Unlike social assistance and child benefits, moreover, the difference has been substantial and fairly consistent since 1993. Quebec’s income tax reduced Gini-measured inequality by 6.4 more points than did Ontario’s in 1993; the difference was 7.5 points in 2010. Similarly, the Quebec tax reduced the P10/P50 ratio by 12.6 more points in 1993, and by 13.3 more in 2010. We now consider overall redistribution by all provincial transfers and income taxes, reported in graph D of these two figures. This reflects the impact of the measures discussed above, together with workers’

Quantitative Evidence (2)  247

compensation and others. It is evident that the shifts in the impact of social assistance and child benefits detailed above strongly influenced this combined measure after 1993. The decline in overall redistribution in Quebec between 1993 and 2010 according to the Gini was 11.5 points. This was exceeded by the lessening impact of social assistance alone during this period, 21.2 points, and partly compensated by a 6.2 point increase in the effect of child benefits. If we trace change only between 2000 and 2010, the decline in assistance’s impact, 6.5 points, again exceeds the 4.9 points by which all provincial measures became less redistributive. Moreover, the latter figure, combined with the effect of Ontario’s OCB after 2008, and of greater redistribution by assistance in Ontario at the same time, explains most of the decline of Quebec’s inequality-reduction “premium” over Ontario, measured by the Gini, from 11.9 points in 2000 to 8.5 points in 2010.14 It nevertheless remained sizable in the latter year (figure 8.2, graph D). The overall redistributive difference between Ontario and Quebec according to the P10/P50 ratio, on the other hand, disappeared after 2005. Here again, assistance and childcare were crucial: inequality reduction by assistance did not differ much between these provinces after 2002, according to this ratio. It also disappeared, suddenly and dramatically, regarding child benefits, in 2010, in the OCB’s wake. For the reasons indicated above, I believe that the 2010 results for child benefits should be treated with caution. But for overall inequality reduction, the Ontario-Quebec difference disappeared long before that year for P10/ P50 inequality. Therefore, Quebec’s relative redistributive performance was much less impressive by 2010 then it had been a decade or more earlier if we consider the circumstances of the highly disadvantaged families that are highlighted by the P10/P50 ratio. What about poverty reduction? Figure 8.4 depicts the evolving impact of all provincial transfers and income taxes on it for three cohorts (the first three graphs) and all non-elderly family units (the fourth). As we might expect, in light of the foregoing, Quebec differs from Ontario in this respect when families include children, but not otherwise. Graph A suggests no sustained difference between the two provinces’ impact on poverty among unattached individuals. A discernible advantage for Ontario in the mid-1990s quickly disappeared in the wake of Premier Harris’s benefits cuts. Though subject to sizable year-to-year variations, single-mother families (graph B) and those with two parents (graph C), on the other hand, benefited from a continuing rise in poverty alleviation by provincial measures in Quebec that began with the latter’s first child benefit reform in 1996, and continued with the

248  Comparing Quebec and Ontario

second eight years later. Quebec programs had little impact on poverty for either cohort in 1995. In 2010, by contrast, Quebec reduced poverty by about 10%, compared to market income poverty, for single-mother families, and by 3% for two-parent families. This translated into a 2% rate of poverty reduction for all family types (graph D). There was no clear trend in poverty reduction in Ontario for either family cohort that included children between 2000 and 2009; these levels were very low (below 2% for single mothers and near zero for two-parent families) and well below Quebec’s in the latter year. In 2010, this changed suddenly, with poverty reduction reaching almost 6% for single mothers and rivalling Quebec’s levels for two-parent families and for all families. Ontario’s OCB clearly explains much of this abrupt change. The extent of the change reported for 2010 should, again, be regarded as tentative. But it is reasonable to surmise that Ontario closed its previously wide poverty-reduction gap with Quebec somewhat at the end of our period. Methods and Presentation Some readers may wish to skip this discussion of methods and proceed to the discussion of results. As in chapter 7, this chapter’s conclusion provides a non-technical summary. The rest of this chapter evaluates whether inter-provincial variations discussed above persist once we control for the influence of the IVs introduced in chapter 7. Most methodological and presentational choices described in this section parallel those made in that chapter, and for the same reasons. The DVs consist of fourteen inequality- and povertyreduction data series for all ten provinces, derived from the SCF and SLID surveys. The Ontario and Quebec data from each series were presented graphically in figures 8.1 to 8.4. Our inequality- and povertyreduction data again have a temporal dimension (T) larger than the cross-sectional (N), the typical pattern for time-series cross-sectional (TSCS) data sets. For the two SCF-based regressions the total N is 120; for the twelve that use SLID it is 180. There are no missing data. Tests detected heteroscedasticity and cross-section dependence in the data, justifying the use of Beck and Katz’s panel-corrected standard errors (PCSEs) estimator, which is designed to address them.15 Serial correlation again is addressed adequately with a first-order autoregression (AR[1]) correction.16 In models that included all IVs, the Ftest emphatically supported the inclusion of fixed effects (FE) for eleven DVs; to be consistent, FEs are included in all models.17

Quantitative Evidence (2)  249

For the SLID data, both measures of inequality reduction by social assistance and by all provincial programs were found by the link test to be properly specified in logarithmic form; the same was true for the linear form of both measures of inequality reduction by the provincial income tax, and for all four measures of poverty reduction. For the earlier SCF data, a linear form was selected as suitable for inequality reduction according to the Gini coefficient, a log form for the P10/P50 alternative. No form was supported for the two measures of inequality reduction by child benefits.18 I therefore continue with the analysis of these variables in linear form, but regression results for them must be regarded with caution. For regression models involving the twelve SLID-based DVs, the VIF test uncovered only modest multicollinearity.19 Applied to models for all fourteen DVs, Beck’s test for non-stationarity (see chapter 7) identified none that are likely to cause problems. The residuals of regressions of each DV against all IVs were regressed against their lags. In no case did the coefficient on the lagged residuals approach 1, identified by Beck as doubtful; in fact, none exceed .6. The same five models are estimated here for each DV as was the case in chapter 7. I again give most attention to models 3 and 4 where, as explained in chapter 7, the former absorbs both the balance of power and the cooperative relations parts of the difference between Quebec and Ontario partisan and interest intermediation institutions into the FE, while the latter separates out the former for independent measurement. As in chapter 7, results are presented in the next section for model 4, along with the Ontario FE results for that model and, underneath, for model 3. Results are presented in four tables, one each for regressions using the SCF data on social assistance (table 8.1) and, for the subsequent SLID-based regressions, for Gini inequality reduction (table 8.2),  P10/P50 inequality reduction (table 8.3) and poverty reduction (table 8.4). Two other tables offer evidence about the Ontario FE coefficient for all five models (appendix 8A), and the number of provinces whose FE is significantly above or below Quebec’s in each model (appendix 8B). Because of the short time-series available from the surveys, I do not reproduce the last chapter’s use of decadal interaction terms between the time trend and the Ontario FE. Reported statistical significance results are one-tailed for provincial FEs, which I expect will be negative, and for the three political variables, for which I again ventured directional hypotheses. They are two-tailed for all other IVs.

250  Comparing Quebec and Ontario

Results Controlling for the influence of all IVs in the models, including provincial unemployment rates, our regressions indicate that inequality reduction by social assistance was markedly higher in Quebec than in Ontario during the 1980s and early 1990s according to the Gini coefficient (table 8.1, column 1). The Ontario FE coefficient is negative and significant (indicating less inequality reduction than in Quebec) at 10% for model 4 and at 1% in model 3. Model 4 includes the political variables, that is, a measure for union density and dummies for left and centre party governance; these are omitted from model 3. The Ontario coefficient is also negative in both models for the P10/P50 ratio, but in neither is it statistically significant. Even this difference attenuates after 1993 (column 1 of tables 8.2 and 8.3). The Ontario FE for inequality reduction according to the P10/P50 again is not significant in either model. Moreover, in model 4 this FE’s sign turns positive for Ginimeasured inequality reduction. Only in model 3 does Quebec remain more redistributive according to the Gini, significant at the 5% level. The pattern for inequality reduction by child benefits and the personal income tax (columns 2 and 3 of tables 8.3 and 8.4) is more consistent with our hypotheses. The Ontario FE is always negative. The difference from Quebec is significant at 1% or 5% in both child-benefits regression and in both personal income tax ones, whether inequality reduction is measured by the Gini (table 8.2) or the P10/P50 (table 8.3). For three of these four results, the coefficient is substantially higher in model 3 than in model 4, again suggesting that the political variables contributed importantly to Quebec’s redistributive premium. The impact of the political variables, already evident in the results reported above, is most dramatic for overall inequality reduction, whether measured by the Gini (table 8.2, fourth column) or the P10/P50 (table 8.3, fourth column). The results for model 3 indicate that Quebec reduces inequality significantly more than Ontario, though this outcome is more emphatic for the Gini (significant at 1%) than for the P10/P50 (5%). In contrast, the Ontario FE coefficient is not significant in either model 4 regression, which include the political variables, though the coefficient remains negative. The coefficients for the political variables confirm their role in encouraging inequality-reduction. In model 4 for overall Gini reduction, they are significant either at 5% (union Density and Centre party) or 10% (Left party). Only Centre incumbency is significant in the P10/50 ratio regression (at 5%), but the other two variables are positively signed, as expected.

Quantitative Evidence (2)  251 Table 8.1. Inequality-Reduction by Social Assistance, 1980–92 (Model 4) Dependent variable

Gini coefficient

Log P10/P50 ratio

LOG Gdp_pc

-0.0057 (-1.28)

1.2684** (2.09)

LOG Growth

0.0002 (0.76)

-0.0858** (-2.04)

LOG FedtranP

0.0023 (0.87)

1.1650*** (3.32)

DebtpayP

0.0003 (0.41)

0.0641 (0.93)

LOG Domtrade

-0.0150*** (-2.85)

LOG Inttrade

-0.0018 (-0.66)

-0.7618 (-1.15) 0.4764 (1.52)

LOG Immigrant

0.0038** (2.44)

0.6703*** (3.67)

LOG Unemp

0.0074*** (3.91)

1.3361*** (5.22)

Age

0.0014 (0.77)

Femaleshare

-0.0006 (-1.15)

Postindemp

0.0008** (2.35)

Density

0.0004*** (2.81)

-0.0697 (-0.35) -0.2134*** (-3.28) 0.1266*** (2.94) -0.0151 (-0.81)

Left

-0.0005 (-0.62)

-0.1307 (-0.99)

Centre

-0.0016* (-1.62)

-0.2103** (-2.04)

Ontario FE

-0.0054* (-1.50)

0.3832 (-0.88)

_cons

0.0618 (1.25)

N

120

r2

0.8393

-17.7700*** (-2.87) 120 0.8362

z statistics in parentheses * p < 0.10, ** p < 0.05, *** p < 0.01; one-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others.

252  Comparing Quebec and Ontario Ontario FE Results without Political Variables (Model 3) Ontario FE

-0.0088*** (-2.95)

-0.0037 (-0.01)

Note: Other eight provincial FEs are omitted; political variables include Density, Left, and Centre.

Table 8.2. Inequality Reduction Measured by Gini Coefficient, 1993–2010 (Model 4) Dependent variable

LOG social assistance

Child benefits

Income tax

LOG combined provincial

LOG Gdp_pc

-0.2581 (-0.86)

-0.0002 (-0.09)

-0.0011 (-0.52)

-0.1356 (-0.64)

LOG Growth

0.0046 (0.30)

-0.0000 (-0.66)

-0.0001 (-0.77)

-0.0069 (-0.67)

LOG FedtranP

0.0131 (0.16)

-0.0013*** (-3.49)

0.0001 (0.13)

-0.0301 (-0.54)

DebtpayP

-0.0104 (-0.22)

0.0002 (0.52)

0.0346 (1.04)

LOG Domtrade

-0.7358 (-1.63)

-0.0022 (-0.80)

-0.4480 (-1.48)

LOG Inttrade

0.9049*** (4.51)

LOG Immigrant

0.0368 (0.68)

LOG Unemp

1.2742*** (8.24)

0.0004 (1.63) -0.0061*** (-2.96) 0.0014* (1.71)

0.0024** (2.06)

0.5561*** (4.19)

0.0013*** (4.20)

0.0340 (0.89)

0.0002 (0.21)

0.0006 (0.57)

0.4685*** (4.50)

-0.0001 (-0.47)

Age

-0.0253 (-0.56)

0.0001 (0.45)

0.0003 (0.82)

0.0137 (0.44)

Femaleshare

-0.0149 (-0.32)

0.0007*** (3.64)

0.0011*** (3.67)

0.0295 (0.93)

Postindemp

-4.9757*** (-2.76)

0.0145 (1.47)

-0.0428*** (-3.66)

-2.3198* (-1.93)

0.0402** (2.16)

0.0000 (0.15)

-0.0001 (-0.96)

Density Left Centre

-0.0146 (-0.25) 0.1065** (1.87)

0.0240** (2.03)

0.0005* (1.48)

0.0012*** (2.90)

0.0550* (1.49)

0.0004** (1.83)

0.0003 (1.05)

0.0782** (2.23)

Quantitative Evidence (2)  253 Dependent variable

LOG social assistance

Child benefits

Ontario FE

0.2327 (0.71)

-0.0078*** (-4.52)

Income tax -0.0123*** (-5.48)

LOG combined provincial -0.1976 (-0.88)

-1.9144 (-0.45)

-0.0220 (-1.10)

N

180

180

180

180

r2

0.8456

0.604

0.8501

0.8992

_cons

0.0164 (0.54)

-4.0808 (-1.33)

z statistics in parentheses * p < 0.10, ** p < 0.05, *** p < 0.01; one-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others. Ontario FE Results without Political Variables (Model 3) Ontario FE

-0.2928** (-1.70)

-0.0076*** (-6.48)

-0.0110*** (-8.84)

-0.5364*** (-4.72)

Note: Other eight provincial FEs are omitted; political variables include Density, Left, and Centre.

Our attention again is drawn to the importance of the political variables by appendix 8B, which compares inequality reduction in Quebec with all other provinces. It reports the number of provincial coefficients that are negative or positive (signifying, respectively, that provinces redistribute less or more than Quebec, the reference case) in each model for all DVs. It also indicates how many are statistically significant. There is a sharp divide between the model 3 and model 4 results for the two overall inequality DVs. While all nine provincial coefficients are negative and six are significant at the 10% level or higher for Gini-reduction by all provincial programs (sixth row of data) in model 3, only six are negative, and one significant, once political factors are controlled for in model 4. For overall reduction of the P10/P50 ratio (tenth row), six provincial coefficients are negative for model 3, only two in model 4. In comparison with the other eight Canadian provinces, as well as Ontario, then, Quebec only stands out for its level of inequality reduction when the political variables are absent from regression models. It is important to highlight the significance of the discrepancy between the model 3 and 4 results reported above. Because model 4 controls for the impact of the political variables – union density and centre and left party incumbency – on the regression outcomes, it also effectively removes the “balance of power” component of the Ontario-Quebec

254  Comparing Quebec and Ontario Table 8.3. Inequality Reduction Measured by P10/P50 Ratio, 1993–2010 (Model 4) Dependent variable LOG Gdp_pc LOG Growth

LOG social assistance

Child benefits

Income tax

LOG combined provincial

-0.5220 (-1.09)

0.0034 (0.39)

0.0021 (0.34)

-0.1018 (-0.27)

0.0174 (0.60)

-0.0002 (-0.56)

-0.0001 (-0.24)

-0.0029 (-0.14)

LOG FedtranP

-0.1815 (-1.18)

-0.0064*** (-2.66)

0.0022 (1.34)

-0.1042 (-0.95)

DebtpayP

-0.0654 (-0.80)

0.0024* (1.79)

0.0008 (0.76)

-0.0087 (-0.14)

LOG Domtrade

-1.1821 (-1.55)

-0.0095 (-1.01)

-1.0480* (-1.80)

LOG Inttrade LOG Immigrant

1.7076*** (5.48) -0.0432 (-0.49)

LOG Unemp

2.2479*** (9.41)

Age

0.1093* (1.66)

-0.0040 (-0.36) 0.0142*** (2.81)

0.0029 (0.80)

1.2545*** (5.43)

-0.0005 (-0.43)

0.0018 (1.51)

-0.1302* (-1.74)

0.0042 (1.00)

0.0004 (0.15)

-0.0013 (-1.04)

-0.0005 (-0.61)

0.0661 (1.13)

1.3212*** (7.37)

Femaleshare

-0.1290 (-1.53)

0.0021* (1.95)

0.0001 (0.14)

-0.1149* (-1.66)

Postindemp

-3.4846 (-1.13)

0.1109* (1.94)

-0.0237 (-0.66)

-1.6640 (-0.73)

0.0283 (0.83)

-0.0011** (-2.20)

-0.0000 (-0.06)

0.0249 (0.91)

-0.1079 (-1.11)

0.0030* (1.59)

0.0023** (2.06)

0.0676 (1.10)

0.0006 (0.39)

0.0000 (0.03)

0.1424** (2.07)

Density Left Centre Ontario FE

0.1232* (1.29) -0.0480 (-0.08)

-0.0342*** (-3.83)

-0.0144** (-1.95)

-0.0992 (-0.21) -0.4471  (-0.08)

_cons

1.8484 (0.25)

-0.1951* (-1.66)

0.0444 (0.53)

N

180

180

180

r2

0.8243

0.4585

0.5209

180 0.8147

z statistics in parentheses * p < 0.10, ** p < 0.05, *** p < 0.01; one-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others.

Quantitative Evidence (2)  255 Ontario FE Results without Political Variables (Model 3) Ontario FE

-0.2694 (-0.82)

-0.0183*** (-3.06)

-0.0159*** (-4.57)

-0.3819** (-1.65)

Note: Other eight provincial FEs are omitted; political variables include Density, Left, and Centre. Table 8.4. Poverty Reduction for Different Cohorts, 1993–2010 (Model 4) Dependent variable

Unnattached individuals

Single mother

2 parents + children

All families

LOG Gdp_pc

0.0063 (0.27)

-0.0154 (-0.35)

-0.0001 (-0.01)

-0.0025 (-0.22)

LOG Growth

-0.0003 (-0.29)

-0.0036 (-1.57)

0.0001 (0.11)

-0.0006 (-1.11)

LOG FedtranP

0.0099 (1.37)

-0.0007 (-0.05)

-0.0036 (-0.77)

0.0004 (0.12)

DebtpayP

0.0021 (0.60)

0.0026 (0.36)

0.0037 (1.44)

0.0016 (0.83)

LOG Domtrade

0.0114 (0.33)

-0.0448 (-0.75)

-0.0080 (-0.34)

-0.0063 (-0.39)

LOG Inttrade

0.0399** (2.32)

0.0033 (0.12)

-0.0091 (-0.96)

0.0070 (0.98)

-0.0015 (-0.26)

0.0026 (0.28)

-0.0032 (-1.22)

-0.0021 (-0.96)

LOG Unemp

0.0002 (0.02)

-0.0242 (-1.34)

-0.0152* (-1.94)

-0.0051 (-0.99)

Age

0.0015 (0.43)

0.0028 (0.53)

-0.0001 (-0.05)

-0.0004 (-0.32)

Femaleshare

-0.0036 (-0.89)

0.0080 (1.33)

0.0010 (0.42)

0.0012 (0.72)

Postindemp

0.1616 (1.06)

0.0015 (0.01)

0.1423 (1.61)

0.0532 (0.77)

Density

0.0035** (1.83)

0.0016 (0.57)

0.0010 (1.05)

0.0007 (0.99)

0.0238*** (2.55)

0.0018 (0.68)

-0.0001 (-0.04)

0.0179*** (2.37)

-0.0008 (-0.29)

0.0020 (0.95)

LOG Immigrant

Left Centre

-0.0079*** (-2.44) 0.0029 (0.68)

(Continued)

256  Comparing Quebec and Ontario Table 8.4. (Continued) Dependent variable

Unnattached individuals

Ontario FE

Single mother

0.0519** (1.71)

2 parents + children

All families

0.0026 (0.05)

0.0057 (0.32)

0.0054 (0.39)

_cons

-0.4288 (-1.37)

-0.0871 (-0.15)

-0.0948 (-0.42)

-0.0854 (-0.53)

N

180

180

180

180

r2

0.1625

0.2357

0.3386

0.3786

z statistics in parentheses * p < 0.10, ** p < 0.05, *** p < 0.01; one-tailed significance tests for Ontario FEs and political variables; two-tailed tests for all others. Ontario FE Results without Political Variables (Model 3) Ontario FE

0.065 (0.42)

-0.0212 (-0.74)

-0.0130* (-1.34)

-0.0039 (-0.57)

Note: Other eight provincial FEs are omitted; political variables include Density, Left, and Centre.

institutional difference from being absorbed by the Ontario FE coefficient. If, as in this case, the results for this coefficient is very different than for model 3, which omits these variables, allowing this influence to be absorbed, then we know that these variables contribute importantly to the Ontario-Quebec difference. This means that Quebec’s significant “premium” over Ontario in inequality reduction depends largely on the values for these three variables, which reflect Quebec’s much higher level of unionization and the more redistribution-friendly balance among its parties (that is, the greater frequency of left governments there, and the absence of right governments). The much weaker results for the Ontario FE in model 3 tell us, by contrast, that the second component of the Quebec-Ontario institutional difference discussed in chapter 7, the more “cooperative relations” reflected in societal concertation there and in its less polarized party landscape, contributed much less to Quebec’s lowering inequality more than Ontario. The evidence reported in the above paragraph allows us to go further – the “balance of power” influences, and not the “cooperative relations” ones also explain much of the measured difference in inequality-reduction between Quebec and the other eight Canadian provinces. I return to this theme in the next section.

Quantitative Evidence (2)  257

Table 8.4 presents results for poverty-reduction. Unlike the inequalityreduction regressions, these offer no support at all for my chapter 2 hypothesis that Quebec redistributed more than Ontario. For unattached individuals (first column), indeed, the Ontario FE is positive and significant at 5% for model 4, though it becomes insignificant in model 3. The Ontario coefficient again is positively signed, suggesting greater poverty reduction than in Quebec, conditional on the IVs in the model, in model 4 regressions for the other cohorts – single-mother families, two-parent families, and all non-elderly families – though it is never significant. It turns negative in the model 3 versions but is significant (at 10%) only for two-parent families. How can these results be reconciled with the graphic evidence in figure 8.4 that Quebec lowered poverty much more for family cohorts that included children between 2000 and 2009? Part of the answer has to do with the fact that the SLID data series begins in 1993, when Ontario reduced poverty considerably more than Quebec. For single-mother families (figure 8.4, graph B), this remained the case until the late 1990s, when a decline in the wake of Premier Harris’s cuts intersected with rising poverty reduction in Quebec due to its child benefit reforms; the difference narrowed again in 2010 because of Ontario’s OCB. A similar pattern can be discerned for two-parent families and for all non-elderly families (graphs C and D). The statistically insignificant differences between the Ontario and Quebec levels in these regressions for the whole period covered by the SLID reflect this very heterogeneous evolution over time. Appendix 8A reports coefficients for the Ontario FE for all five models of each DV. The model 1, 2, and 5 coefficients do not qualify the patterns described above appreciably.20 Discussion The graphical and regression evidence presented in this chapter offers only very qualified support for my hypothesis that Quebec redistributes more than Ontario. The graphs show that social assistance reduced inequality more in Quebec during the 1980s, a difference that attenuated in the wake of Ontario’s expansion. The difference disappeared after 2000, in spite of severe cuts in Ontario after 1995, because of more gradual restraint in Quebec, combined with the fact that many erstwhile recipients there now substituted child benefits for assistance. Quebec’s ground-breaking child benefits reforms opened a substantial gap with Ontario in inequality reduction by these measures. The

258  Comparing Quebec and Ontario

gap eroded modestly according to the Gini, and sharply according to the P10/P50 ratio, after Ontario’s targeted OCB reached maturity. For the personal income tax, on the other hand, Quebec was consistently substantially more redistributive than Ontario. If we consider overall inequality reduction, the inter-provincial difference remained sizable in 2010 according to the Gini. It disappeared even before the advent of the OCB for the P10/P50 ratio. For reasons stated earlier, we should be cautious in accepting this evidence at face value, but in 2010 this gap probably was smaller than a few years earlier. The distinctive policy foci in Ontario and Quebec had different implications for the Gini, a broad measure of income inequality, and the P10/P50, which focuses on the less advantaged. Quebec’s shift from assistance to broad-based child benefits entailed that its redistributive system’s impact became most marked, compared to Ontario’s, according to the Gini. The P10/P50 evidence may be interpreted as suggesting that Quebec’s reforms did not help its least advantaged residents as much as the somewhat better off. But the graphs for poverty reduction should cause us to hesitate before jumping to this conclusion. Poverty reduction for families with children, including single mothers, rose steadily in Quebec after its first child benefits reform. This opened a gap with Ontario that was closed, dramatically and provisionally, only in 2010. The most striking finding of the inequality regressions has to do with the difference between the model 3 and 4 results. For both inequality measures for child benefits and the personal income tax, the model 4 results, which control for political influences, are statistically significant. In three of four regressions, the coefficient for the Ontario FE nevertheless is much larger in model 3, which omits the political variables, suggesting that these contribute strongly to the Ontario-Quebec difference. For social assistance, a positive sign for the Ontario FE in the Ginireduction regression in model 4 becomes negative and significant in model 3. The political variables’ impact is most emphatic for inequality reduction by all provincial measures. For each inequality measure, nonsignificant, though negative, coefficients for the Ontario FE in model 4 become significant in model 3. What does this mean? The differences between the model 3 and 4 results allow us to disentangle the effects of two aspects of the dissimilarity between political-economic institutions in Quebec and Ontario: a “cooperative relations” component and a “balance of power” one. The much stronger support from model 3 than model 4 for a significant Ontario-Quebec difference suggests that it is the latter – encompassing the greater strength of organized labour in Quebec, and the

Quantitative Evidence (2)  259

more redistribution-friendly partisan configuration there – that is the main factor distinguishing inequality reduction in these two provinces. Conversely, the former element, which refers to the more collaborative nature of policymaking in Quebec, and the lesser polarization between its main parties, is less important. Evidence presented above also suggests that Quebec’s inequality outcomes are only distinctive compared to most of the other eight Canadian provinces because of the impact of these balance of power factors. This finding resonates very strongly with a key discovery in chapter 4: concertation was far less important in Quebec for the policies discussed there than it was for any other case examined in this book, and it was particularly weak for social assistance. I hypothesized in chapter 2 (1a) that concertation in Quebec would contribute to expansive social policy outcomes. It is therefore no surprise, conversely, that in the field where concertation was weakest in that province, its policy outcomes were also least distinctive, and that Quebec’s outcomes were especially ungenerous in the social assistance area, where concertation was particularly anaemic. The picture is different for poverty reduction, but this probably is explained by dramatic changes over time in the Ontario-Quebec difference for this measure. The poverty-reduction regressions do not show that Quebec reduced poverty more than Ontario. At the beginning of the period, as the graphs indicate, Ontario reduced poverty by considerably more than Quebec. This advantage swung dramatically in Quebec’s favour until 2009, other than for unattached individuals. The regression results effectively average out these very different patterns. The case comparison in chapter 4 did not fully confirm my chapter 2 hypotheses about the policy process shaping social assistance and income transfers in Ontario and Quebec. The evidence reported in this chapter about policy results is equally uneven (for hypothesis 4b). The personal income tax unequivocally reduced inequality more in Quebec than in Ontario; so did child benefits, but it is not certain that this pattern will persist, according to one inequality measure. Social assistance is not more redistributive in Quebec. Overall inequality reduction is greater there, but this must be qualified in different periods and for different inequality measures and regression models. The poverty-reduction results need to be hedged even further, where our regression results reveal no distinctive pattern for Quebec, though graphical evidence suggests that it may still reduce poverty more than Ontario for families with children, especially single mothers. It does not do so for the childless. In sum, conclusions regarding redistribution must be much more nuanced than for the three other policy domains examined in this book.

260  Comparing Quebec and Ontario

Appendix 8A: Ontario FE Coefficients for All Models and Dependent Variables Dependent Variable

Model 1

2

3 -0.0066*** (-2.47)

4

5

Assistance, Gini (SCF)

-0.0097*** (-3.51)

-0.0088*** (-2.95)

-0.0054* (-1.50)

-0.0035 (-0.89)

LOG Assistance, P10/P50 (SCF)

-1.0225*** (-2.53)

0.2822 (0.80)

-0.0037 (-0.01)

-0.3832 (-0.88)

-0.1341 (-0.29)

LOG Assistance, Gini (SLID)

-0.4120** (-2.07)

-0.0216 (-0.20)

-0.2928** (-1.70)

0.2327 (0.71)

0.0319 (0.09)

Child benefits, Gini (SLID)

-0.0061*** (-5.67)

-0.0060*** (-6.74)

-0.0076*** (-6.48)

-0.0078*** (-4.52)

-0.0068*** (-3.96)

Income tax, Gini (SLID)

-0.0090*** -0.0103*** (-7.36) (−10.51)

-0.0110*** (-8.84)

-0.0123*** (-5.48)

-0.0111*** (-4.87)

LOG All programs Gini (SLID)

-0.4987*** (-4.50)

-0.3609*** (-4.39)

-0.5364*** (-4.72)

-0.1976 (-0.88)

-0.2213 (-0.93)

LOG Assistance, P10/P50 (SLID)

-0.8507*** (-2.61)

-0.0098 (-0.05)

-0.2694 (-0.82)

-0.0480 (-0.08)

-0.4032 (-0.66)

Child benefits, P10/P50 (SLID)

-0.0140*** -2.50)

-0.0175*** (-3.41)

-0.0183*** (-3.06)

-0.0342*** (-3.83)

-0.0310*** (-3.36)

Income tax, P10/P50 (SLID)

-0.0154*** (-5.55)

-0.0121*** (-5.67)

-0.0159*** (-4.57)

-0.0144** (-1.95)

-0.0161** (-2.07)

LOG All progs, P10/P50 (SLID)

-0.8051*** (-3.63)

-0.1051 (-0.73)

-0.3819** (-1.65)

-0.0992 (-0.21)

-0.3349 (-0.66)

Individuals, poverty (SLID)

0.0063 (0.69)

0.0043 (0.52)

0.0065 (0.42)

Single moms, poverty (SLIDS)

0.0098 (0.47)

-0.0123 (-0.59)

Two-parent families, poverty (SLID)

-0.0048 (-0.69) 0.0008 (0.16)

All families, poverty (SLID)

0.0519** (1.71)

0.0612** (1.87)

-0.0212 (-0.74)

0.0026 (0.05)

0.0069 (0.12)

-0.0072 (-1.23)

-0.0130* (-1.34)

0.0057 (0.32)

0.0053 (0.28)

-0.0025 (-0.58)

-0.0039 (-0.57)

0.0054 (0.39)

0.0066 (0.45)

Quantitative Evidence (2)  261

Appendix 8B: Summary of FE Results, for All Provinces and Models

Dependent Variable Assistance, Gini (SCF)

Provincial coefficients below / above Quebec’s

Coefficients statistically significant below / above Quebec’s (> 10%)

Model

Model

1

2

3

4

5

1

2

3

4

5

5/4

8/1

5/4

5/4

5/4

4/1

7/0

5/1

3/1

2/1

LOG Assist, P10/ P50 (SCF)

5/4

5/4

5/4

6/3

7/2

4/3

1/1

2/1

2/1

1/1

LOG Assist, Gini

5/4

4/5

4/5

0/9

0/9

3/2

2/2

1/2

0/6

0/4

Child benefits, Gini

9/0

9/0

9/0

9/0

9/0

9/0

9/0

9/0

6/0

6/0

Income tax, Gini

9/0

9/0

9/0

9/0

9/0

9/0

9/0

9/0

9/0

9/0

LOG All programs, Gini

9/0

9/0

9/0

6/3

6/3

8/0

8/0

6/0

1/0

1/0

LOG Assist, P10/ P50

3/6

4/5

2/7

1/8

2/7

2/3

1/1

0/4

0/4

0/2

Child benefits, P10/ P50

9/0

9/0

9/0

9/0

9/0

9/0

9/0

9/0

9/0

9/0

Income tax, P10/P50

8/1

9/0

8/1

8/1

8/1

5/0

9/0

3/0

3/0

3/0

LOG All progs, P10/P50

3/6

9/0

6/3

2/7

3/6

3/2

4/0

1/2

0/3

0/2

Individuals, poverty

2/7

5/4

4/5

1/8

1/8

1/1

0/0

0/0

0/5

0/5

Single moms, poverty

8/1

8/1

8/1

2/7

2/7

4/0

5/0

3/0

0/1

0/1

2-parent families, poverty

9/0

9/0

9/0

8/1

8/1

8/0

8/0

5/0

2/0

1/0

All families, poverty

8/1

9/0

9/0

7/2

7/2

7/0

7/0

5/0

0/0

0/0

Note 1: All data is from SLID, except where otherwise indicated.

Conclusion: How Large and Durable Are These Differences?

This chapter evaluates our findings, their significance, and likely resiliency. The first section returns to the hypotheses advanced in chapter 2 and asks whether the preceding six chapters have corroborated them. The second appraises the substantive importance of the policy divergences between Ontario and Quebec documented in this study by comparing their magnitude with those observable internationally and among provinces. This is followed by a comparison of the quantitative and qualitative evidence, a return to the themes of globalization and post-industrialism, and discussions of how much one can generalize from our results and of whether differences between Ontario and Quebec are sustainable. How Many Hypotheses Were Corroborated? Fifteen of the nineteen hypotheses presented in chapter 2 received very strong support in this study, though sometimes with qualifications. There was compelling evidence in favour of each of the first four, which addressed the distinctive mechanisms governing policymaking in Ontario and Quebec. In three of the four cases (those treated in chapters 3, 5, and 6), there is much more evidence of meaningful collaboration among state and non-state actors in policy formulation in Quebec than in Ontario (hypothesis 1a). Moreover, while there were partisan differences between the main political parties in Quebec in all four fields, they were always much less pronounced than were the ideological gaps among the three parties that governed Ontario during the period studied (hypothesis 1b). And state actors were more willing to intervene in the economy in Quebec than in Ontario, as a result of the legacies

Conclusion 263

of antecedent interventions there (hypothesis 1c). Finally, the impact of nationalist ideas in Quebec was mostly indirect. During the Quiet Revolution, these ideas shaped the organizational mechanisms that directly conditioned policy during our period, but they were not usually referred to directly to justify new developments (1d). Qualifications nevertheless are required for the first and last of these hypotheses. Concertation was not equally evident in all fields and at all times in Quebec. It was more palpable under PQ governments than under the Liberals. It was noticeably ineffective for social assistance policy and unevenly evident for child benefits reform (chapter 4). The absence of poverty activists from a constructive role is the main exception observed here to the importance of concertation in Quebec. This clearly has much to do with our findings about the two policy outcome hypotheses that were not supported: inequality- and poverty-reduction may not be substantially greater in Quebec than in Ontario for the least advantaged and for those without children (see below). The legacies of nationalist ideas were also more immediate in some cases than in others. Childcare and child benefit reforms in Quebec were possible only when a new reform agenda displaced the natalist and nationalist family benefits of the 1970s and 1980s. Change would have been much harder to justify or to pay for without these indirect nationalist antecedents. Their impact nevertheless was, indeed, indirect. Evidence was conclusive for the leading hypothesis about budgeting policy (2a), that Quebec’s overall levels of own-source taxation and of expenditure would be much higher than Ontario’s. Quebec taxed and spent much more than Ontario at the beginning of our period and continued to do so thereafter. The gap showed no signs of abating. A strong case can also be made (hypothesis 2b) that Quebec did not tax capital more than Ontario, aware of business’s greater mobility. If we accept the “messy middle” view of tax incidence presented in chapter 3, then our hypothesis about this question receives very strong support. For the remaining two hypotheses in this category, the evidence is more mixed. First, Quebec does rely more on regressive consumption and (in the “regressive scenario”) payroll taxes than Ontario (consistent with hypothesis 2c), but it manifestly does not rely only on regressive taxes to finance its higher spending: it generates much higher revenues from the very progressive personal income tax. Second, the evidence presented in chapter 8 did not establish conclusively that Quebec redistributes more through its entire tax and transfer system than Ontario if we consider inequality reduction according to the

264  Comparing Quebec and Ontario

P10/P50 ratio or poverty reduction, but Quebec does lower inequality more according to the Gini coefficient (hypothesis 2d). The first two hypotheses about social assistance and income transfers, which also centrally concern redistribution, likewise were not fully corroborated. According to the best available measures of spending on social assistance and other income transfers, Quebec does not expend more on programs of this type than Ontario, relative to its GDP. Moreover, while it reduces inequality more than Ontario by child benefits, this is not the case for social assistance; the child benefits result also were called into some doubt, at least for the P10/P50 ratio, by the introduction of Ontario’s OCB. Not only are these findings inconsistent with two hypotheses (4a and 4b), but they also diverge from claims made by some recent discussions of inequality outcomes in Quebec.1 In the absence of effective engagement with interests that represent its most disadvantaged residents, Quebec failed to achieve exceptional success in meeting their needs, especially for the childless. There is strong support, on the other hand, for the remaining two assistance and transfer hypotheses: while both provinces emphasized employability measures for assistance recipients, only Ontario moved in the direction of mandatory “workfare” (hypothesis 4c). And Quebec does much more to defray the costs of child-rearing (hypothesis 4d). For outcomes in the remaining two fields examined here, the evidence consistently and very strongly supported all hypotheses. Regarding economic development policy, Quebec applies far greater bureaucratic and financial resources to achieving desired outcomes (hypothesis 3a); there is, again, little evidence that the gap between these levels of commitment has moderated since 1980. Quebec is also much more active in steering investments towards preferred sectors, regions, and technologies (hypothesis 3b) and is far more inclined to direct policy from the executive centre (hypotheses 3c). Yet the latter two tendencies attenuated after the late 1980s, as the province sought more market-conforming ways to intervene; this, again, is consistent with our expectations. Similarly resounding support was reported for childcare. In the wake of its 1997 reform, Quebec spends far more on this service, in relation to the target population of children, than Ontario (hypothesis 5a). It also moved much further in the direction of providing universal childcare, by making regulated spaces available to a much larger share of its children on a non-income-tested basis (hypothesis 5b). The proportion of children receiving care from a non-profit provider also was much higher (hypothesis 5c), and parents in Quebec face much lower fees than their

Conclusion 265

Ontario counterparts (hypothesis 5d). Although there is some evidence of a turning away from these principles in Quebec after 2003, these indications are quite limited. Quebec’s childcare system continued to expand its supply of publicly funded and publicly regulated childcare thereafter. Ontario still provided this service on an income-tested basis. The substantial majority of the hypotheses therefore are very amply supported by a wide array of quantitative and qualitative evidence; the others received partial confirmation. I believe that this vindicates the theoretical ambition of this study, to establish the suitability of insights from comparative political economy scholarship for a study of inter-provincial differences in Canada. The main area where our suppositions were not confirmed nevertheless is important: it encompasses hypotheses 2d, 4a, and 4b and pertains to the two provinces’ records for redistribution. Quebec’s redistributive impact stands out by some measures and for some programs. But its record is unexceptional when we consider inequality reduction according to the P10/P50 ratio and poverty reduction: measures that relate to the least advantaged segments of society. And it does not now distinguish itself in the amount it redistributes via social assistance. It is also here that concertation was singularly unsuccessful. There is a clear linkage, in this case, between our failures to confirm hypotheses about the policymaking process (concertation would be present in Quebec) and about outcomes (Quebec would redistribute more). A tentative explanation of this pattern is offered below. How Big Are These Differences? How important are the dissimilarities between Ontario and Quebec uncovered in this study? What is their substantive magnitude? Answering these questions requires that we settle upon plausible metrics. Regarding policy outcomes, chapters 7 and 8 showed that differences between our two provinces usually were large. Here, I cast a wider net, invoking comparisons with other jurisdictions. An intuitive comparison is international, and for this we turn to data from the OECD and from the Luxembourg Income Study (LIS). I supplement these with comparisons among all Canadian provinces. These are discussed below. Variations in the policymaking process, in contrast, are inherently qualitative and, it seems to me, not amenable to effective summary. Here, we must refer to the evidence presented in chapters 3 to 6 that there was a substantial Ontario-Quebec gap in the extent of concertation, that inter-party ideological differences were much smaller in the latter province, and that

266  Comparing Quebec and Ontario

officials there had a more dirigiste disposition towards their economy. I believe that this evidence is very strong. In addressing outcomes, we first consider budgeting. The data in table 9.1 are for developed European and North American states that have been democracies throughout the post-war era. These Table 9.1. Total Revenues/GDP, Selected Affluent Capitalist Democracies, 2011 Country

Revenues/GDP (%)

Liberal Australia

26.5

Canada

30.4

Ireland

27.9

New Zealand

31.5

United Kingdom

35.7

United States

24.0

Group average

29.3

Christian democratic Austria

42.3

Belgium

44.1

France

44.1

Germany

36.9

Italy

43.0

Netherlands

38.6

Switzerland

28.6

Group average

39.7

Social democratic Denmark

47.7

Finland

43.7

Norway

42.5

Sweden

44.2

Group average

44.5

Source: Organization for Economic Cooperation and Development, OECD.Stat Extracts, http://stats.oecd.org/.

Conclusion 267

provide comparators for differences between Ontario and Quebec (hypothesis 2a) and among all Canadian provinces in own-source revenues, for which data are presented in table 9.3. I focus on own-source revenues for the provinces, not expenditures, because inter-provincial differences for the latter are affected by provinces’ variable access to federal equalization payments. Data in tables 9.1 to 9.8 are the most recent available. I compare differences between Quebec and Ontario and between Quebec and the other nine Canadian provinces (termed “ROC” for “rest of Canada” here) with variations among the main Table 9.2. Regime Differences (%) AbsoluteRelative Liberal / social democratic

+15.2

+51.9

Liberal / Christian democratic +10.4

+35.5

Table 9.3. Provincial Own-Source Revenues / GDP, 2008–9 Province

Own-Source Revenues / GDP (%)

Quebec

25.4

Ontario

19.4

Newfoundland

14.5

PEI

19.5

Nova Scotia

20.0

New Brunswick

20.8

Manitoba

19.8

Saskatchewan

20.3

Alberta

15.2

BC

19.0

ROC average

18.7

Source: See entry for OwnrevP in table 7.2. Table 9.4. Inter-provincial Differences (%) Absolute

Relative

Ontario/Quebec

+6.0

+30.9

ROC/Quebec

+6.7

+35.8

268  Comparing Quebec and Ontario Table 9.5. Spending on Childcare and Home Help Services / GDP, Selected Affluent Capitalist Democracies, 2009 Country

Childcare / GDP (%)

Liberal Australia

0.6

Canada

0.2

Ireland

0.8

New Zealand

1.0

United Kingdom

1.1

United States

0.3

Group average

0.67

Social democratic Denmark

2.0

Finland

1.1

Norway

1.2

Sweden

2.0

Group average

1.58

Christian democratic Austria

0.5

Belgium

0.9

France

1.3

Germany

0.5

Italy

0.7

Netherlands

0.9

Switzerland

0

Group average

0.69

Source: Organization for Economic Cooperation and Development, OECD.Stat Extracts, http:// stats.oecd.org/. Table 9.6. Regime Differences (%) Absolute Relative Liberal / social democratic

0.91

136.8

Liberal / Christian democratic 0.02

  3.0

Conclusion 269 Table 9.7. Provincial Spending on Regulated Childcare / GDP, 2009–10 (%) Province Quebec

0.66

Ontario

0.14

Newfoundland

0.08

PEI

0.13

Nova Scotia

0.11

New Brunswick

0.10

Manitoba

0.23

Saskatchewan

0.09

Alberta

0.08

BC

0.12

ROC average

0.12

Source: Provincial childcare spending data: Human Resources and Skills Development Canada, Public Investments in Early Childhood Education in Canada, 2010 (Ottawa: HRSDC, 2012), 262. GDP data: CANSIM, table 3840013.

Table 9.8. Inter-provincial Differences (%) Absolute

Relative

Ontario/Quebec

0.52

371

ROC/Quebec

0.54

450

groups of capitalist democracies identified in Esping-Andersen’s typology of welfare states (see chapter 1). Quebec clearly differs from Ontario and from the other provinces in its revenue-generating effort to a degree that is sizable, even in comparison with variations among Esping-Andersen’s regimes; comparative scholarship has long identified the latter as being very large. In absolute terms, Quebec raises 6.0% more in revenues than Ontario, relative to its GDP, and 6.7% more than the nine ROC provinces (table

270  Comparing Quebec and Ontario

9.4). Differences in revenue-generation between the low-taxing and low-spending liberal welfare states and their more ample social democratic and Christian democratic alternatives in Europe are larger – respectively, 15.2% and 10.4% higher (table 9.2). In addressing absolute revenue data, however, it is reasonable to double the magnitude of inter-provincial differences before comparing them internationally. This is because provinces control about half of the total revenue-generating capacity of Canadian governments. The other half is under Ottawa’s authority. A province must vary its tax effort by twice as much from its neighbour’s to achieve the same absolute outcome, measured as a share of GDP, as must a sovereign state that controls all revenue sources. If doubled in this way, the Quebec variations with Ontario and other provinces are fully comparable with those between the liberal and non-liberal states internationally. This is again evident if we measure revenue differences in relative terms, by comparing the percentage by which higher-taxing welfare states exceed revenue levels in the low-taxing liberal nations with the extent to which Quebec does this, compared to Ontario and ROC. Quebec’s revenues as a share of GDP exceed Ontario’s by 30.9% and ROC’s by 35.8%. These margins are similar to the 35.5% by which Christian democratic welfare states tax more than liberal ones and are more than half of the 51.9% by which social democratic regimes out-tax liberal ones. A similar pattern is evident for childcare. Expenditures on this and on home help services are much higher in social democratic states than in liberal or Christian democratic ones, though there is much variation within each regime category (table 9.5). In absolute terms, the four social democratic nations on average expend 0.91% more of their GDP on these services than do the liberal ones, and 0.89% more than Christian democratic welfare states (table 9.6). Canada spends less than any other liberal nation. As table 9.7 makes clear, however, the inter-provincial differences of interest to us here nevertheless are very large. Quebec expends 0.52% more than Ontario in this area, relative to GDP, and 0.54% more than the ROC provinces (table 9.8). If we again double these differences to compensate for the fact that provinces share fiscal resources with Ottawa, these differences are fully comparable to the international ones between the social democratic leaders in this field, and all others. That Quebec nevertheless does not more than match average spending levels in the laggard liberal and Christian democratic nations, rather than in the more ample social democratic ones, probably reflects two features of its childcare system that were noted in chapter 5: in spite of

Conclusion 271

its ambition to universality, Quebec could not expand its system fast enough to avoid shortages; perhaps more importantly, moreover, its reliance on family-based services allowed it to constrain expenditures, but at some potential cost for the service’s quality. I am unaware of international comparators for the economic development statistics used in this study. Yet the sheer magnitude of the Ontario-Quebec difference for all of these is strong evidence that Quebec’s outlays are substantively much greater than Ontario’s (hypothesis 3a). For business transfers, the broadest measure, outlays were 291% higher in 2009 in Quebec, in relation to GDP, having averaged 276% more since 1980. For the others, the 2008 or 2009 differences were 138% (microeconomic spending), 61% (R&D spending) and 191% (value of provincial business assets). Here again, the gap was not noticeably smaller in 2008 or 2009 than it has been on average since the 1980s (table 7.4, third column), confirming that there was no important convergence. Caminada, Goudswaard, and Wang report international data on inequality reduction by taxes and transfer payments (hypotheses 2d and 4b) around 2005. They are reproduced in table 9.9. They permit us to make international as well as inter-provincial comparisons in this area. Because Caminada, Goudswaard and Wang rely on the Gini coefficient, I initially do the same in discussing inter-provincial variations here, and report Canadian data for the same year in table 9.11. Other measures for the Canadian data are treated below. Liberal welfare states lag well behind all others in inequality reduction – by 57 points in the Gini index compared to social democratic ones, and 49 points compared to Christian democratic ones (table 9.10). It is evident from comparing tables 9.9 and 9.11 that total redistribution by provinces is far lower than by even the least redistributive category of countries; provinces reduced Gini-measured inequality by an average of 25 points in 2005, compared to 139 points for the average liberal welfare state. It is also evident from the figure for Canadian redistribution in table 9.9 – 114 points – that most redistribution in Canada is done by federal taxes and transfers.2 In evaluating the substantive importance of inter-provincial differences, however, this is not our main concern; we are interested instead in variations among jurisdictions in how much they redistribute. Here our Quebec-Ontario and QuebecROC variations again emerge as important. Quebec redistributed by 23 points more than Ontario, and by 24 more than ROC, in 2005 (table 9.12). If, as we have done before, we double these magnitudes for the provinces, they are in the same league as social democ-

272  Comparing Quebec and Ontario Table 9.9 Redistribution by all Taxes and Transfers, Selected Affluent Capitalist Democracies, around 2005; by Gini Coefficient Country

Total Gini Redistribution

Liberal Australia

149

Canada

114

Ireland

178

UK

145

US

109

Group average

139

Social democratic Denmark

191

Finland

212

Norway

174

Sweden

205

Group average

196

Christian democratic Belgium

263

France

168

Germany

210

Italy

165

Netherlands

196

Switzerland

128

Group average

188

Source: Koen Caminada, Kees Goudswaard, and Chen Wang, “Disentangling Income Inequality and the Redistributive Effects of Taxes and Transfers in 20 LIS Countries over Time,” LIS Working Paper Series 581 (Luxembourg, 2012), 11. LIS data were not available for Austria or New Zealand, two countries included in tables 9.1 and 9.3. The Caminada, Goudswaard, and Wang data are for all families; as has been the case throughout this book, the Canadian data reported below in table 9.11 are for families that have a non-elderly head. Since we are not comparing redistribution levels between these two tables, this should not affect the patterns discussed here.

Conclusion 273 Table 9.10. Regime Differences Absolute

Relative

Liberal / social democratic

57

41.4

Liberal / Christian democratic

49

35.3

Table 9.11. Redistribution by Provincial Taxes and Transfers, 2005; by Gini coefficient Province

Total Provincial Gini Redistribution

Quebec

49

Ontario

26

Newfoundland

45

PEI

20

Nova Scotia

24

New Brunswick

30

Manitoba

25

Saskatchewan

23

Alberta

14

BC

18

ROC average

25

Source: Data are from the Survey of Labour Incomes and Dynamics (SLID); calculations are by the author. Note: Data are for non-elderly-headed families.

Table 9.12. Inter-provincial Differences Absolute

Relative

Ontario/Quebec

23

88

ROC/Quebec

24

96

racy’s advantage over the alternative welfare state regimes (compare tables 9.10 and 9.12 after making this adjustment). In relative terms, indeed, Quebec’s redistributive premium compared to Ontario and ROC is much higher.

274  Comparing Quebec and Ontario

Yet two caveats are required here. First, inter-provincial differences in Gini-measured inequality reduction were smaller in 2010, our most recent year for data at the time of writing, than in 2005. The gap between Quebec and ROC declined only moderately, to 21 points; it remained sizable. But the Quebec-Ontario difference plummeted to 9 points. Nevertheless, as was noted in chapter 8, we should be cautious in interpreting this result from the SLID survey. This gap changed suddenly in that year and, in spite of the OCB’s full maturation then, that program should not be nearly as redistributive as Quebec’s child benefits. Second, as was also emphasized in chapter 8, Quebec’s redistributive premium over Ontario is less impressive according to the P10/P50 ratio and the poverty rate than for the Gini. Quebec lost its advantage according to the former in 2003 (figure 8.3). For the poverty rate, the decline in the Quebec-Ontario gap happened suddenly in 2010 (figure 8.4). On the other hand, both Ontario and Quebec reduced poverty far more than any other province in that year (data not shown). Overall, then, Quebec’s redistributive premium compared to Ontario’s was not as large in 2010 as it once was, especially according to measures that address each province’s least-advantaged residents, but the extent of this change remains unclear. Moreover, overall inter-provincial differences remain sizable and often rival those that exist internationally. Comparing Qualitative and Quantitative Findings This study sought to show the merits of integrating qualitative and quantitative methods. The two kinds of data sometimes were complementary, each providing evidence not available from the other. At other times they offered an internal validity check, allowing us to see how robust the findings of one method were when tested with evidence from the other. Both qualitative and quantitative methods proved to be indispensable. Only by combining them could all hypotheses be tested adequately. For hypotheses about the mechanisms underlying differences in the policymaking process (hypotheses 1a to 1d), qualitative evidence was pivotal. Elucidating them relied mostly on tracing over time the processes by which causal mechanisms affected outcomes. The narratives provided in chapters 3 to 6 documented the extent to which policy formation in Quebec involved more collaboration between government and societal actors than in Ontario (1a), experienced smaller ideological swings between governments of different partisan stripes (1b), and,

Conclusion 275

in the case of economic development, revealed a greater disposition to intervene (1c). Process-tracing also underlay our conclusion that the impact of nationalist ideology in Quebec mostly was indirect in all four cases (1d). Quantitative evidence nevertheless was of value in parsing the first two mechanisms into two distinct elements, a cooperative relations component and a balance of power one. In distinguishing the relative importance of each of these, the regressions were important. They revealed that for most quantitatively measurable outcomes, the latter part, measured by the greater strength of organized labour in Quebec and the different balance among parties of varying ideological stripes there, added significantly to the former in explaining inter-provincial differences. In the areas of social assistance and income transfers, indeed, it alone accounted for the observed variation between the two provinces. The regressions were crucial for hypotheses about policy outcomes where they could be measured in “more or less” terms. This was especially true when we compared spending and revenue effort (hypotheses 2a to 2c, part of 3a, and 4a and 5a) and redistributive impact (hypotheses 2d and 4b), but statistical measures were also helpful for other features of childcare policy (hypotheses 5b to 5d). For all of these outcomes, graphical evidence was first presented in the qualitative case chapters. Regression was used to determine whether differences revealed by the graphs survived once one controlled for a number of variables suggested by CPE literature, which represent alternative explanations of outcomes to the three institutional mechanisms to which I drew attention. Some variables, such as those for differences between levels of prosperity, unemployment, and federal transfers in Ontario and Quebec, often are cited by Canadian scholars as likely explanations of inter-provincial differences. These tests therefore were important. In most cases, in fact, regressions found significant differences when the graphs had suggested they might. In regressions, as well as graphs, overall expenditure and revenue levels, and outlays for economic development and childcare were much higher in Quebec, and the difference was both statistically and substantively significant. There was little convergence between our two cases during the three decades covered by the data. Regressions for social assistance and income transfer outlays did not report an inter-provincial discrepancy of this magnitude, but this was again consistent with the graphical evidence. Results for inequality reduction according to the Gini coefficient and the P10/ P50 ratio again broadly corroborated the graphs, frequently revealing

276  Comparing Quebec and Ontario

a significant Ontario-Quebec gap when models excluded the political variables, which allowed the balance of power differences to affect the inter-provincial result. When these differences were controlled for, however, the Ontario-Quebec gap often dropped. Other outcomes were not as susceptible to quantification. Here we again relied on process-tracing. Establishing that the bureaux available to oversee economic development policy in Quebec (as opposed to their budgets) were larger than Ontario’s (the other part of hypothesis 3a), and that development policy in the former province steered investments more (3b) and was more centralized (3c), required processtracing. The same was true for evidence that Quebec does, indeed, use more enhancing and less punitive forms of work activation than post1995 Ontario (4c). Examining childcare policy also benefited crucially from detailed narrative comparisons, as well as numerical ones, about the degree to which universality emerged in Quebec but not Ontario (5b), and the greater focus on non-profit care (5c) and on containing parental fees (5d) in Quebec. In this policy field, again, much less would have been achieved by either method in isolation than by combining both. Globalization and Post-Industrialism, Again This book contributes to the debate about whether states continue to exercise policymaking autonomy in the face of globalization and postindustrialism. Theories that they have lost this capacity typically anticipate the convergence of previously diverse outcomes among capitalist democracies. In contrast, most evidence presented here suggests substantial and persistent heterogeneity between Quebec and Ontario throughout the globalization era. If this comparison can, as was claimed in chapter 1, serve as a crucial case by testing the prediction of homogenization in relation to sub-national states, where it might be especially likely, then our results represent a strong case against it. Our regression models included IVs for the most commonly discussed and relevant aspects of globalization and post-industrialism. Coefficients for them were seldom statistically significant, and results for individual IVs were not consistent across models. This pattern for our policy “effort” DVs was discussed in chapter 7 and is not examined further here. In chapter 8’s regressions for redistribution, international trade was positive and significant on eight of twelve occasions. But the domestic trade variable was significant only twice and almost always

Conclusion 277

was negatively signed (tables 8.1 to 8.4). Moreover, on only three of fifteen occasions was a post-industrialism IV significant more than once for a redistribution DV – positively for female labour market share and negatively for post-industrial employment, both twice, for the Gini regressions; and positively for unemployment, again twice, for the P10/ P50 ones. Above all, the presence of these controls did not preclude the Ontario FE from being highly significant almost always in both chapters 7 and 8 when our graphs pointed to a sizable difference in outcomes between the two provinces. For many students of globalization and post-industrialism, however, policy convergence is not the only consequence of these phenomena, or even the most important one. Another possible effect is to reduce the impact of a given level of policy commitment. Public revenues and expenditures, and outlays in the specific fields studied here, may have not declined noticeably since the 1980s, but their impact may be less. Analogously, the same level of redistribution may be achieved by tax and transfer regimes that nevertheless cannot prevent rising inequality in market incomes from translating into more unequal final income. The impact of a constant level of policy effort, in this scenario, nevertheless is a less desired outcome. Questions of this kind are beyond the focus of the present study, which addresses the persistence of inter-provincial differences. But they are important, so one aspect of them – the evolution of poverty and inequality in our two provinces – is treated here. Recent Canadian research has concluded that the extent of Gini-measured redistribution by all federal and provincial measures rose during the 1980s and remained about constant during the 1990s. But while these measures prevented rising market inequality from translating into higher final income inequality during the former decade, this was no longer true after 1990. My own calculations confirm this pattern for most Canadian provinces during those years, though it is evident that neither market nor final income inequality, measured by the Gini, continued to rise much after 2000.3 If we focus on Ontario and Quebec and go beyond the Gini to also look at the P10/P50 ratio and the poverty rate, what do we find? The pattern is variable and cannot be assimilated to a simple narrative about declining state capacity in the face of increasingly adverse circumstances. For income after provincial transfers and taxes, Gini-measured inequality rose in Ontario after 1993. The coefficient increased from 354 in 1993 to 383 in 2000 and then to 396 in 2010 – a substantial rise in less than

278  Comparing Quebec and Ontario

two decades.4 In Quebec, by contrast, it rose from 365 in 1993 to 383 in 2000, before falling back to 376 in 2010, an overall rise of only 10 points. Similarly, the P10/P50 ratio, which varies inversely with inequality, fell from 321 to 272 in Ontario, after provincial taxes and transfers, between 1993 and 2010. But in Quebec, it changed little, even rising slightly from 286 and 290. Poverty rose moderately, from 19.8% to 22.8%, for all family units in Ontario between 1993 and 2010, after provincial taxes and transfers. It fell from 24.5% to 21.2% in Quebec. The impact of provincial redistribution on these outcomes is indicated in graph D of figures 8.2 to 8.4. Equally important for the inter-provincial differences noted above is that market inequality and poverty trended upwards in Ontario far more than in Quebec (graphs omitted here). Several improvements in Quebec’s relative socio-economic situation during these years contributed to this movement. Its disadvantage compared to Ontario diminished sharply in unemployment (figure 2.5, graph E), female employment (figure 2.5, graph D), and international trade (figure 2.4, graph A). Quebec’s GDP per capita also converged somewhat with Ontario’s (figure 2.4, graph C), as did its share of immigrants (figure 2.5, graph C). It is beyond our scope to evaluate how much each of these or other factors, including policy changes in each province, contributed to Quebec’s greater resiliency in the face of a likely tendency of globalization and post-industrialism to increase market income inequality. But the often dramatic redistributive effects of policy changes noted in chapter 8, combined with the apparent fact that market forces evolved so differently in these neighbouring jurisdictions, allow us to surmise that rising inequality and poverty in final income is not inevitable. Recent scholarship about another possible effect of globalization and post-industrialism may help explain why the Quebec-Ontario difference was much weaker for redistribution than for our other fields and why there was a sharp gap between social assistance and childrelated policies. “Dualization” now is often identified as characterizing policy in rich democracies. As labour markets polarize between “insiders,” who command high wages and secure employment, and “outsiders”, who do not, a trend fostered by globalization and postindustrialism, policies adjust. “Dualization implies that policies increasingly differentiate rights, entitlements, and services provided to different categories of recipients. Thereby, the position of insiders may remain more or less constant, while the position of outsiders deteriorates.”5

Conclusion 279

Chapters 4 and 5 revealed a sharp divide in Quebec between childcare and child benefit policies, on the one hand, and social assistance. The former expanded substantially, aided by some policy concertation. But assistance benefits stagnated or regressed in a setting where confrontation with affected interests was far more typical than collaboration. This hiatus also was evident in Ontario, though it was less pronounced. The dramatic post-1995 assistance cuts, introduced in a poisonous atmosphere, were never reversed. By contrast, the OCB emerged with little controversy, partly in response to demands from influential non-government interests, including business spokespersons who were anxious to enhance the advantages of employment for families with small children. That overall levels of inequality reduction and poverty reduction in Ontario and Quebec did not differ by more during our period may suggest that the logic of dualization, and a consequent desire to reward labour market attachment for potential insiders and to discourage outsiders, shaped redistributive policies in both provinces as much as have their distinctive institutional settings, which is the focus of our attention here. Yet even if this is true, we must remember that the two provinces redistributed very differently to various segments of their populations in ways that have little evident relation to labour market dualization. How Generalizable Are Our Findings? I have argued that the present study sheds light on the prospects for continued policy variety among sovereign states, whose room for manoeuvre probably is greater than for our provinces. But how this broader project should be taken up is not self-evident. If enquiries follow the logic adopted here, they will select cases that scholarship identifies as likely to differ in relation to relevant causal mechanisms, and in policies where they are associated with distinctive outcomes. The task then would be to determine if justifiably anticipated differences in process and outcome actually persist in the contemporary period. This section’s focus is more modest: should we expect the patterns predicted by our chapter 2 hypotheses to be reproduced in other fields of Quebec and Ontario public policy? That our analysis has often, but not always, confirmed these expectations is enough to invite hesitation in answering this question in the affirmative. More caution is suggested by the fact that preconditions of the kind identified above are absent in some other fields. For instance, comparative welfare state scholarship

280  Comparing Quebec and Ontario Figure 9.1. Health and Education Spending, Net Debt, 1988–2008 (ii) Educaon spending as % of prov. GDP

5

5

5.5

6

6

6.5

7

7

8

7.5

(i) Health spending as % of prov. GDP

1990

1995

2000

2005

2010

year Quebec

1990

1995

2000

2005

2010

year Ontario

Quebec

Ontario

10

20

30

40

50

(iii) Provincial public debt as % of prov. GDP

1990

1995

2000

2005

2010

year Quebec

Ontario

Sources: Statistics Canada, CANSIM, table 3850001 for health and education spending; table 3850014 for net financial debt.

strongly associates the distinction discussed in chapter 1 between collaborative and liberal regimes with highly variable commitments to redistribution by income transfers and to childcare. But it provides little support for extending this distinction to health care and education, the two areas where Canadian provinces spend most. Why this is, and a brief look at how these fields compare between Ontario and Quebec, is our focus here. Esping-Andersen’s typology of welfare states, centrally preoccupied with the impact of partisanship, says little about public education. Public outlays for education are greater in social democratic welfare states than in Christian democratic or liberal ones. But universal primary and secondary education is now provided by almost all affluent democracies, and it often emerged first in countries, such as the United States, whose other social policy commitments remain modest. Busemeyer

Conclusion 281

confirms an earlier surmise by Wilensky that socio-economic and demographic factors, such as a country’s wealth and the share of young people in its population, are leading determinants of education spending; political influences are much less important. Wilensky also reports only modest differences in the design of educational services among rich countries.6 Other than the United States, similarly, all rich countries now provide universal coverage for public health services. Public spending on health services differs little across Esping-Andersen’s regimes: in 2010, it absorbed 8.0% of GDP in social democratic countries, 8.2% in Christian democratic ones, and 7.6% in liberal ones. There is a larger gap when we consider public spending as a share of all health expenditures, which varies between 82% for the social democratic countries and 68% in the liberal ones. But even this difference relies crucially on the American case: the other liberal countries fund 74% of their services with public money, the same as in Christian democratic nations. Accordingly, Jensen argues that this welfare state regime typology does not apply to health services, which are delivered in similar ways across most rich nations.7 So there is no reason to expect policy effort to be greater in Quebec than in Ontario in these fields, in spite of their distinctive political economic institutions. What does the evidence tell us? As the first two graphs in figure 9.1 make clear, Quebec spends more than Ontario in both fields, relative to GDP, but the gap narrowed after 2000. A difference of 1% of GDP in health spending in 2000 shrank to 0.3% in 2008. A gap of 1.1% for education outlays in the former year fell to 0.5% in the latter. In regressions using the same model specifications as in chapter 7 (results not shown here), the Ontario FE is not significant for either DV in models that include the political variables, nor in one without political variables for education spending.8 In the latter case for health expenditures, the Ontario FE is negative and the coefficient significant at the 1% level. Overall, we can conclude that Quebec has spent more in the education and health fields than Ontario, facilitated by its considerably higher equilibrium taxing and spending levels. But this gap is not now substantial and usually disappears in the face of the many controls included in our regressions. According to Carolyn Tuohy, the mechanisms underlying health policymaking in Ontario and Quebec strongly resemble the very distinctive ones evident in most of our cases. Relations between government and the medical profession, pivotal in this field, feature considerable

282  Comparing Quebec and Ontario

state intervention in Quebec, where medical associations are weakened by the fact that their mostly francophone members are less mobile than are English-Canadian doctors. But there is also much ongoing and wide-ranging collaboration in this relationship. In Ontario, by contrast, relations often are adversarial and unstable, and different governing parties take strikingly different approaches to negotiations. But unlike the cases examined here, these very different processes do not yield strikingly different outcomes, at least as measured by spending, a pattern that methodologists refer to as “equifinality.”9 I am not aware of research that sheds an equally detailed comparative light on the mechanisms that shape education policy in Ontario and Quebec. Jennifer Wallner’s study of policy outcomes for primary and secondary schooling nevertheless concludes that “there is a remarkable degree of convergence among the education sectors of the Canadian provinces,” suggesting that similar outcomes may also characterize this field.10 Quebec’s government possesses greater fiscal resources than Ontario’s. Different institutions contributed to this variation and could be expected to also foster greater effort in Quebec in other policy fields. But this expectation is not justified everywhere, either by CPE and welfare state scholarship or by empirical evidence. Prospects, or Is the Quebec Model Sustainable? For now, policy variety remains substantial and shows little sign of declining between Ontario and Quebec in most of the fields examined here. But will it diminish in the future? We have seen that predictions of convergence take various forms, sometimes anticipating a compensatory increase in government commitments instead of a neoliberal diminution of policy effort, or something in between. But among these it is the possibility of a neoliberal “race to the bottom” that is discussed most. Not surprisingly, then, the durability of Quebec’s more ample commitments have received much more attention than have Ontario’s. The theme was central to the Pour un Québec lucide manifesto published by several prominent Quebec politicians and journalists in 2005 (see chapter 3). The authors pointed out that Quebec’s population is aging faster than most (see figure 2.5, graph C, for the comparison with Ontario), and alleged that Quebec faced rising competition from Asia and outof-control healthcare costs. But central to their argument that Quebec is on an unsustainable path was the province’s spending and debt levels:

Conclusion 283

“The Quebec government is like a bulky albatross that is unable to take flight, and our per capita public debt is the highest on the continent … If we cannot reduce this [debt] burden, the government’s precarious fiscal situation will worsen quickly once interest rates begin to rise.”11 Among the few solutions that the diverse group could agree upon were proposals to raise hydroelectric charges and tuition fees, ideas taken up by the Liberal government in subsequent budgets. An argument that Quebec cannot sustain its distinctive “model” nevertheless is questionable. Quebec’s per capita GDP rose sharply in relation to Ontario’s during the Quiet Revolution and continued to approach its western neighbour’s thereafter, albeit more slowly (figure 2.4, graph C). Quebec’s position did deteriorate in relation to Canada as a whole, from 89% of the national average in 1961 to 87% in 1980 and 85% in 2010; the decline nevertheless was moderate – and obviously much smaller than Ontario’s fall during the same years.12 Two other concerns also seem less pressing than they may have in 2005. We have seen that health care costs rose much more slowly in Quebec than in Ontario after 2000. In addition, Quebec’s birth rate, whose sharp decline during the Quiet Revolution contributed importantly to population aging, rose markedly after 2000. In that year there were 9.8 births per 1,000 residents in Quebec, compared to 10.9 in Ontario and 10.7 in Canada. In 2010 the Quebec figure had increased to 11.2; Ontario’s birth rate had fallen to 10.5 and Canada’s was 11.1.13 Quebec’s immigration rate, another contributor to population growth, nearly converged with Ontario’s in the same years (figure 2.5, graph C). That the Quebec government’s debt is very high nevertheless is driven home by graph C in figure 9.1. Its net financial debt was around 40% of provincial GDP in 2008, the last year for which we have comparative data; the burden was about twice as high as in Ontario and also slightly higher than it was twenty years earlier. Quebec’s debt ratio is much higher than any other provinces’ or Ottawa’s. This burden can seem truly dire if measured in gross terms, if the debt of Hydro-Québec and of Quebec municipalities is assigned to the province and, most unconventionally, if a share of the federal government’s debt is attributed to the Quebec provincial government. The province’s own Finance Ministry published such a calculation in a 2010 budget document, arriving at a debt-to-GDP ratio for the province of 94.5%. It observed that only four OECD members – Japan, Italy, Greece, and Ireland – had a higher ratio.14 The first of these has suffered from a nearly stagnant economy for more than two decades; the others were among the countries most

284  Comparing Quebec and Ontario

severely affected by the post-2008 debt crises. Calculations of this type have been presented in Quebec public debates as evidence of how grave the province’s situation is. Yet the utility of this calculation is highly debatable. First, the budget document reported no evidence that either Hydro-Québec or the province’s municipalities cannot pay their debts. Second, Quebec is not now responsible for any part of federal debt. If it chose to separate from Canada, it would likely have to assume a share of it, the precise size of which would be subject to negotiation. Quebec would also lose the equalization payments that it receives from Ottawa. On the other hand, it would have access to the full range of revenues available to a sovereign unitary state, which is not the case today; it would also be able to claim a share of federal government assets. Affecting the fiscal transition to independence no doubt would pose a formidable challenge. But this has not yet occurred, was not immanent at the time of writing, and therefore is not an appropriate basis for evaluating the viability of Quebec’s public finances. If we look again at graph C we find another reason for doubting that Quebec’s debt is intractable. Its debt-to-GDP ratio peaked in the late 1990s at over 50%, then fell by more than 10% by 2008. In the wake of the fiscal stimulus launched by the province during the crisis, the ratio then rose again, and the province expects it to continue doing so until its deficit is eliminated. Even then, the ratio will remain lower than it was in 1998, and it is expected to decline again thereafter.15 Evidence presented earlier in this book shows that debt reduction in Quebec was achieved more by increasing revenues than by cutting spending. The former grew significantly in Quebec between 2000 and 2010, while being largely stagnant in Ontario (figure 2.2, graph C; figure 3.1, graph A). This returns us to an argument made in chapter 3: Quebec has long sustained much higher taxes than Ontario, as well as spending more. The popularity of the post-1995 PC government in Ontario rested centrally on its ability to implement substantial tax cuts, such that its Liberal successor felt compelled to commit to not increasing taxes. Central to Kitschelt’s theory of successful retrenchment (chapter 1) is that it depends on the presence of a major neoliberal party able to credibly champion severe cuts. Quebec’s Liberals sometimes preached restraint, but in the face of severe opposition they never pursued it with anything like the single-mindedness of Ontario’s PCs. The resulting preservation of Quebec’s capacity to maintain, even increase, revenues is the strongest guarantee that its debt is a bearable if unfortunate burden.

Conclusion 285

This book identified important persistent differences between Ontario and Quebec. I believe that its results also may give us greater confidence that policy choice remains very real in capitalist democracies. Even in the face of globalization and post-industrialism, and even as subunits of the same federation, these two provinces make very different social and economic policy choices. But this study is also situated squarely in historical institutionalist comparative political economy; choices are constrained by enduring practices, power relations, and capacities, which differ between states. The highly distinctive policy choices made in Quebec in most of the areas examined here since the late 1980s, compared to those typical in liberal settings, were facilitated by an equally distinctive institutional endowment. Yet institutions are not immutable. Quebec’s, for instance, have their own history; they emerged during the Quiet Revolution and in a creative period of the early 1980s when the seeds were planted there for concertation. The political implications of these institutional changes could not have been obvious in advance. It is unlikely that participants in Quebec public life during the 1960s and 1970s anticipated the main preoccupations of economic and social policymaking there thirty or forty years later. The same likely is true for the Ontario of the 1980s when, in the wake of the first strong indications of the province’s economic difficulties, its public life acquired the polarized and fractious qualities that are now its hallmark. There may, then, be reason for hope as well as caution for citizens who are dissatisfied with the range of policy choices available in their own polities. On the one hand, we know that what is politically feasible varies importantly among states, but also that these bounds have not always been what they are now in any state. This realization that the limits of the possible will change again invites us to hope and work for something better. Yet we cannot foretell with confidence how or when the parameters of action will change, how our agency, or that of other actors, will contribute to it, or what new opportunities will be opened up, and which will be foreclosed, in this now modified but not entirely foreign landscape.16

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Notes

Abbreviations Used in Notes CNW CP CTF, FN CUP FP GM LD LP LS MQUP NCW NP OUP PC TS UTP

Canada NewsWire Canadian Press Canada Tax Foundation, Finances of the Nation Cambridge University Press Financial Post, Toronto Globe and Mail, Toronto Le Devoir, Montreal La Presse, Montreal Le Soleil, Quebec City McGill-Queen’s University Press National Council of Welfare National Post, Toronto Oxford University Press La Presse canadienne Toronto Star University of Toronto Press

1. How Do Advanced Political Economies Differ? Why Does It Matter? 1 Timothy McKeown found that “all of the literature cited … as arguing that interdependence is problematic for social democracy [had been] written beginning in the 1980s”; “The Global Economy, Post-Fordism, and Trade Policy in Advanced Capitalist States,” in Continuity and Change in Contemporary Capitalism, ed. Herbert Kitschelt, Peter Lange, Gary Marks, and John D. Stephens (Cambridge: Cambridge University Press [hereafter CUP], 1999), 34.

288  Notes to Pages 3–7 2 See “A Symposium on Methodology in Comparative Research,” Comparative Social Research 24 (2007): 261–409. 3 Glenn Morgan, John L. Campbell, Colin Crouch, Ove Kay Pedersen, and Richard Whitley, “Introduction,” in The Oxford Handbook of Comparative Institutional Analysis, ed. Morgan, Campbell, Crouch, Pedersen, and Whitley (Oxford: Oxford University Press [hereafter OUP], 2010), 2. I use the term sovereign states here to refer to national governments in unitary states, or to the senior level of government in a federation. 4 The term causal mechanism will be clarified later in the chapter; for now, it can be understood, generically, to refer to explanatory factors or causes. 5 Jason Seawright and David Collier, “Glossary,” in Rethinking Social Inquiry, ed. Henry Brady and Collier (Lanham, MD: Rowman and Littlefield, 2004), 293. 6 Morgan et al., “Introduction,” 2. 7 John L. Campbell, Institutional Change and Globalization (Princeton: Princeton University Press, 2004), 1. The specific approach that most informs this study is historical institutionalism, which “stresses the way that institutions shape the goals political actors pursue and the way they structure power relations among them, privileging some and putting others at a disadvantage,” while acknowledging that institutions “are themselves the outcome (conscious or unintended) of deliberate political strategies, of political conflict, and of choice”; Kathleen Thelen and Sven Steinmo, “Historical Institutionalism in Comparative Politics,” in Structuring Politics: Historical Institutionalism in Comparative Analysis, ed. Sven Steinmo, Kathleen Thelen, and Frank Longstreth (Cambridge: CUP, 1992), 2, 10. 8 The foremost contemporary alternative not discussed further here is David Rueda’s “insider-outsider” perspective; see his Social Democracy Inside Out (Oxford: OUP, 2007). Rueda argues that social democratic parties protect “those with secure employment (insiders)” (2), while neglecting insecure “outsiders.” As an approach that stresses the commonality of this alleged influence across capitalist democracies, Rueda’s framework is not well suited to my purpose here, which is to test theories of institutional variation. For a critique, see Jingjing Huo, Third Way Reforms (Cambridge: CUP, 2009), esp. 191–2 and 321–2. 9 Arend Lijphart and Markus Crepaz, “Corporatism, Consensus Democracy in Eighteen Countries,” British Journal of Political Science 21, no. 3 (1991): 235. 10 Franz Traxler argues that neo-corporatism is more vital than is sometimes assumed, though he also detects a potential for significant decline in the future; “The Long-Term Development of Organized Business and Its Implications for Corporatism,” European Journal of Political Research

Notes to Pages 7–8  289 49, no. 2 (2010): 151–73. Wolfgang Streeck and Lane Kirkland are more sceptical about neo-corporatism’s future; “Theories and Practices of Neocorporatism,” in Handbook of Political Sociology, ed. Thomas Janoski, Robert Alford, Alexander Hicks, and Mildred Schwartz (Cambridge: CUP, 2005), esp. 458–60. 11 David Soskice, “Divergent Production Regimes: Coordinated and Uncoordinated Market Economies in the 1980s and 1990s,” in Kitschelt et al., Continuity and Change in Contemporary Capitalism, 101–34; and Peter Hall and Soskice, “An Introduction to Varieties of Capitalism,” in Varieties of Capitalism, ed. Hall and Soskice (Oxford: OUP, 2001), 1–68. 12 These are reviewed in Bob Hancké, Martin Rhodes, and Mark Thatcher, “Introduction: Beyond Varieties of Capitalism,” in Beyond Varieties of Capitalism, ed. Hancké, Rhodes and Thatcher (Oxford: OUP, 2007), 3–38. 13 Richard Deeg, “Complementarity and Institutional Change in Capitalist Systems,” Journal of European Public Policy 14, no. 4 (2007): 611–30. 14 See especially, Kathleen Thelen, “Institutional Change in Advanced Political Economies,” British Journal of Industrial Relations 47, no. 3 (2009): 471–98; Thelen, “Beyond Comparative Statics,” in Morgan et al., Oxford Handbook of Comparative Institutional Change, 42–61. She illustrates her preferred approach in Thelen and Bruno Pallier, “Institutionalized Dualism: Complementarities and Change in France and Germany,” Politics and Society 38, no. 1 (2010): 119–48. For an argument that VoC regimes have partisan origins, see Richard Carney, “Partisan Politics and Institutional (Re)Creation,” West European Politics 33, no. 6 (2010): 1187–213. 15 The debate between “institutional” and “power resources” approaches has been played out largely in welfare state scholarship. That they are regarded as antithetical is partly because much recent institutional writing on welfare states is informed by the VoC stance outlined above; see Walter Korpi, “Power Resources and Employer-Centred Approaches in Explanations of Welfare States and Varieties of Capitalism,” World Politics 58 (2006): 167–206. 16 See, for instance, Herbert Kitschelt, Peter Lange, Gary Marks, and John D. Stephens, “Convergence and Divergence in Advanced Capitalist Democracies,” in Kitschelt et al., Continuity and Change in Contemporary Capitalism, 434. 17 Gøsta Esping-Andersen, “Power and Distributional Regimes,” Politics and Society 14, no. 2 (1985): 223–56. Esping-Andersen made more explicit his departure from a “pure” working-class power approach in The Three Worlds of Welfare Capitalism (Princeton: Princeton University Press, 1990), chap. 1. This typology has been criticized severely; see esp. Lyle Scruggs and James Allan, “Research Note: Social Stratification and Welfare Regimes

290  Notes to Pages 8–11 for the Twenty-First Century,” World Politics 60, no. 4 (2008): 642–64. For our purposes the point is not that Esping-Andersen’s typology is in every respect correct, but that like many others it distinguishes more and less collaborative settings. 18 Paul Pierson, “Post-industrial Pressures on the Mature Welfare States,” in The New Politics of the Welfare State, ed. Pierson (Oxford: OUP, 2001), 80–104. 19 See, for instance, James Allen and Lyle Scruggs, “Political Partisanship and Welfare State Reform in Industrial Societies,” American Journal of Political Science 48, no. 3 (2004): 496–512; Jingjing Huo, Moira Nelson, and John D. Stephens, “Decommodification and Activation in Social Democratic Policy,” Journal of European Social Policy 18, no. 1 (2008): 5–20; David Brady, Rich Democracies, Poor People (Oxford: OUP, 2009), chap. 5. 20 Arend Lijphart, Patterns of Democracy (New Haven, CT: Yale University Press, 1999), 3–4. 21 Ibid., chap. 5. 22 For evidence of this pattern, see Margit Tavits, “The Size of Government in Majoritarian and Consensus Democracies,” Comparative Political Studies 37, no. 3 (2004): 340–59. 23 Kitschelt et al., “Convergence and Divergence in Advanced Capitalist Democracies,” 431–2. Kitschelt’s typology diverges from Lijphart’s in claiming that Scandinavian CMEs, like LMEs, have predominantly economically focused party systems, but in a context where marketliberal parties are more divided and less able to implement their agenda. For empirical support, see Andrija Henjak, “Political Cleavages and Socio-economic Context,” West European Politics 33, no. 3 (2010): 474–504. 24 Herbert Kitschelt, “Partisan Competition and Welfare State Retrenchment,” in Pierson, New Politics of the Welfare State, 274–86. 25 Bertrand Badie and Pierre Birnbaum, The Sociology of the State (Chicago: University of Chicago Press, 1983), chap. 2. 26 Alexander Gerschenkron, Economic Backwardness in Historical Perspective (Cambridge, MA: Harvard University Press, 1962), chap. 2; also see John Zysman in his Governments, Markets, and Growth (Ithaca, NY: Cornell University Press, 1983), esp. chaps 2 and 3. 27 Badie and Birnbaum, Sociology of the State, 83. 28 Colin Crouch, Industrial Relations and European State Traditions (Oxford: Clarendon, 1993), chaps 9 and 10. 29 This is the state’s role in Molina and Rhodes’s “mixed market” production regime; “The Political Economy of Adjustment in Mixed Market Economies,” in Hancké, Rhodes, and Thatcher, Beyond Varieties of Capitalism, 229.

Notes to Pages 11–13  291 30 Linda Weiss, “The State in the Economy: Neoliberal or Neoactivist?” in Morgan et al., Oxford Handbook of Comparative Institutional Analysis, 184, 195–7. For an argument that Japan’s economy remains “developmentalist,” see Wolfgang Streeck and Kozo Yamamura, “Introduction: Convergence or Diversity?,” in The End of Diversity? Prospects for German and Japanese Capitalism, ed. Yamamura and Streeck (Ithaca, NY: Cornell University Press, 2003), 5–11. 31 Peter Hall, Governing the Economy (Oxford: OUP, 1986). 32 Vivien Schmidt, The Futures of European Capitalism (Oxford: OUP, 2002), 116–17; also see her “Putting the Political Back into Political Economy by Bringing the State Back in Yet Again,” World Politics 61, no. 3 (2009): 516–46. 33 Hancké, Rhodes, and Thatcher, “Introduction,” 15. 34 Richard Whitley, Business Systems and Organizational Capacity (Oxford: OUP, 2007), 36–57; Bruno Amable, The Diversity of Modern Capitalism (Oxford: OUP, 2003), 102–14. 35 Whitley, Business Systems and Organizational Capacity, 39–41; Amable, Diversity of Modern Capitalism, 88–9; Peter Katzenstein, Small States in World Markets (Ithaca, NY: Cornell University Press, 1985), 115–23. 36 For two programmatic statements on the ideational current, see Mark Blyth, “Any More Bright Ideas? The Ideational Turn in Comparative Political Economy,” Comparative Politics 29, no. 2 (1997): 229–50; and Sheri Berman, “Ideas, Norms, and Culture in Political Analysis,” Comparative Politics 33, no. 2 (2001): 231–50. Berman distinguishes between ideational and cultural approaches, but these are treated together here, as is commonly done. 37 Mark Irving Lichbach, “Thinking and Working in the Midst of Things,” in Comparative Politics: Rationality, Culture, and Structure, ed. Lichbach and Alan Zuckerman, 2nd ed. (Cambridge: CUP, 2009), 62. 38 These more aggressive claims are associated with the “organizational” or “sociological” institutionalism that emerged within sociology about two decades ago. See Paul DiMaggio and Walter Powell, “Introduction,” in The New Institutionalism in Organizational Analysis, ed. Powell and DiMaggio (Chicago: University of Chicago Press, 1991), 1–39. 39 Mark Irving Lichbach and Alan Zuckerman, “Paradigms and Pragmatism: Comparative Politics during the Past Decade,” in Lichbach and Zuckerman, Comparative Politics, 3. 40 Mark Blyth, “An Approach to Comparative Analysis or a Subfield within a Subfield? Political Economy,” in Lichbach and Zuckerman, Comparative Politics, 219. Blyth advocates the use of both ideational and non-ideational approaches. Other ideational political economists who blend these factors

292  Notes to Pages 13–16 in explanations include Schmidt, Futures of European Capitalism, esp. chap. 5; and Campbell, Institutional Change and Globalization. In this study, I follow the mainstream approach in CPE by not assimilating “interests” and “ideas,” an approach advocated by Campbell, ibid., 91, and alluded to by Blyth, “Approach to Comparative Analysis,” 215. In my view, interests differ from ideas in being rooted in, and conditioned by, the material circumstances of human agents. 41 Dietrich Rueschemeyer, “Why and How Ideas Matter,” in The Oxford Handbook of Contextual Political Science, ed. Robert Goodin and Charles Tilly (Oxford: OUP, 2006), 236, 240, 249. 42 Ibid., 249. 43 Liah Greenfield and Jonathan Eastwood, “National Identity,” in The Oxford Handbook of Comparative Politics, ed. Carles Boix and Susan Stokes (Oxford: OUP, 2007), 258. 44 Ibid., 271. Emphasis in the original. 45 Daniel Béland and André Lecours, Nationalism and Social Policy (Oxford: OUP, 2008), 19. 46 Ibid., 30. 47 In contrast, Moses Shayo detects a strongly negative relationship between national identification and redistribution; “A Model of Social Identity with Applications to Political Economy: Nation, Class and Redistribution,” American Political Science Review 103, no. 2 (2009): 147–74. Shayo’s focus is state-level national identification, not its sub-state variant. 48 Campbell, Institutional Change and Globalization, 94, 96–8. 49 For data on these increases between the 1970s and the 1990s, see Timothy McKeown, “The Global Economy, Post-Fordism, and Trade Policy in Advanced Capitalist States,” in Kitschelt et al., Continuity and Change in Contemporary Capitalism, 12–25; Beth Simmons, “The Internationalization of Capital,” in Kitschelt et al., Continuity and Change in Contemporary Capitalism, 44–56; Duane Swank, Global Capital, Political Institutions, and Policy Change in Developed Welfare States (Cambridge: CUP, 2002), 15–20. 50 Michael Mann, “Globalization and September 11,” New Left Review 12 (2001): 51–72. 51 Paul Pierson, “Post-industrial Pressures on the Mature Welfare State,” 80–104; Gøsta Esping-Andersen, The Social Foundations of Postindustrial Economies (Oxford: OUP, 1999), chap. 6. 52 Early versions of this view include Kenichi Ohmae, The Borderless World (New York: Harper Perennial, 1990); and Susan Strange, The Retreat of the State (Cambridge: CUP, 1996). A Canadian example, less nuanced than Strange’s, is Gary Teeple’s Globalization and the Decline of Social Reform (Toronto: Garamond, 1995).

Notes to Pages 16–18  293 53 David Cameron, “The Expansion of the Public Economy: A Comparative Perspective,” American Political Science Review 72, no. 4 (1978): 1243–61; Katzenstein, Small States in World Markets. 54 Hall and Soskice: “Introduction to Varieties of Capitalism,” 54–60. 55 Esping-Andersen, Social Foundations of Postindustrial Economies, esp. chap. 7. 56 Geoffrey Garrett, Partisan Politics and the Global Economy (Cambridge: CUP, 1998); Swank, Global Capital, Political Institutions. 57 Brian Burgoon, “Globalization and Welfare Compensation,” International Organization 55, no. 3 (2001): 509–51; Alexander Hicks and Christopher Zorn, “Economic Globalization, the Macro-Economy, and the Reversals of Welfare Expansion in Affluent Democracies, 1978–94,” International Organization 59, no. 3 (2005): 631–62; David Brady, Jason Beckfield, and Martin Seeleib-Kaiser, “Economic Globalization and the Welfare State in Affluent Democracies, 1975–2001,” American Sociological Review 70, no. 6 (2005): 921–48; Nancy Brune and Geoffrey Garrett, “The Globalization Rorschach Test,” Annual Review of Political Science 8 (2005): 399–423; Marius Busemeyer, “From Myth to Reality,” European Journal of Political Research 48, no. 4 (2009): 455–82; Carsten Jensen, “Conditional Contraction,” European Journal of Political Research 50, no. 2 (2011): 143–67. 58 Canadian monetary policy is a federal responsibility. There is also little evidence that aggregate demand management has normally been a major provincial government goal in Canada. 59 Public pensions in Canada are delivered by Ottawa or, in the case of the Canada and Quebec Pension Plans, can be reformed only after complex negotiations between Ottawa and the provinces, with Quebec having a distinctive role. 60 Literature on Canadian health insurance includes Antonia Maioni, Parting at the Crossroads (Princeton: Princeton University Press, 1998); Carolyn Tuohy, Accidental Logics (Oxford: OUP, 1999); and Gerard Boychuk, National Health Insurance in the United States and Canada (Washington: Georgetown University Press, 2008). 61 Geoffrey Garrett defended the financial sustainability of high-tax welfare states but observed that they ran higher deficits during the 1990s; Partisan Politics and the Global Economy, 74–5. In evaluating the constraints imposed by global financial markets, Layna Mosley found them to be limited, though higher-taxing countries pay a modest interest-premium on government debt; see her Global Capital and National Governments (Cambridge: CUP, 2003), 95–7. Philip Genschel’s 2002 article claimed that high-spending welfare states could expect to face mounting deficits; “Globalization, Tax Competition, and the Welfare State,” Politics and Society

294  Notes to Page 19 30, no. 2 (2002): 245–75. Yet a subsequent account documents the success of many nations in reducing debt; Uwe Wagsschal and Georg Winzelberger, “Roads to Success: Budget Consolidation in OECD Countries,” Journal of Public Policy 28, no. 3 (2008): 309–39. 62 On the neoliberal turn, see Duane Swank, “Tax Policy in an Era of Internationalization,” International Organization 6, no. 4 (2006): 847–82. By neoliberal, Swank means a lowering in rates accompanied by a broadening of the base. Scott Basinger and Mark Hallenberg document the domestic pressures that impede capital tax reform; “Remodeling the Competition of Capital,” American Political Science Review 98, no. 2 (2004): 261–76. Jude Hays shows that rates are higher in liberal countries and also detects convergence towards the middle; “Globalization and Capital Taxation in Consensus and Majoritarian Democracies,” World Politics 56, no. 1 (2003): 79–113. 63 On the “paradox” that generous welfare states depend on social security deductions, see Walter Korpi and Joakim Palme, “The Paradox of Redistribution and Strategies for Equality,” American Sociological Review 63, no. 5 (1998): 661–87. The importance of regressive financing is emphasized by Junko Kato, Regressive Taxation and the Welfare State (Cambridge: CUP, 2003). Steffen Ganghof confirms the pattern, though he contests Kato on other grounds; he also notes that progressive income taxes are an alternative source for high-spending welfare states; “Tax Mixes and the Size of the Welfare State,” Journal of European Social Policy 16, no. 4 (2006): 360–73. Pablo Beramendi and David Rueda argue that the association between tax regressivity and welfare generosity depends on the presence of corporatist bargaining; “Social Democracy Constrained,” British Journal of Political Science 37, no. 4 (2007): 619–41. 64 Jonas Pontusson, Inequality and Prosperity (Ithaca, NY: Cornell University Press, 2005), 154–5; Vincent Mahler and David Jesuit, “Fiscal Redistribution in Developed Countries,” Socio-Economic Review 4 (2006), 483–511. 65 Hans Kemen, “Cutting Back Public Investment after 1980,” Journal of Public Policy 30, no. 2 (2010): 163–82; Carles Boix, Political Parties, Growth and Equality (Cambridge: CUP, 1998), esp. chaps 3 and 4; Mosley, Global Capital and National Governments, 95–7; Garrett, Partisan Politics in the Global Economy, 80–1. 66 Robert Boyer, “New Growth Regimes, but Still Institutional Diversity,” Socio-Economic Review 2, no. 1 (2004): 1–32; Whitley, Business Systems and Organizational Capacity, 57–85; Dan Breznitz, Innovation and the State (New Haven, CT: Yale University Press, 2007), esp. chap. 1; Mark Zackary Taylor, “Empirical Evidence against Variety of Capitalism’s Theory of

Notes to Pages 20–1  295 Technological Innovation,” International Organization 58, no. 3 (2004): 601–31. For a dissenting view, which defends VoC, see Steven Casper, “Can New Technology Firms Succeed in Coordinated Market Economies? A Response to Hermann and Lange,” Socio-Economic Review 7 (2009): 209–15. 67 Lane Kenworthy, “Institutional Coherence and Macroeconomic Performance,” Socio-Economic Review 4, no. 1 (2006): 69–91. 68 Whereas Breznitz, Innovation and the State, treats state direction and networking as opposite tendencies, Whitley, Business Systems and Organizational Capacity, more usefully sees them as distinct patterns of variation. The degree of decentralization is stressed by Breznitz. 69 For a qualified defence of expenditure data, see Nico Siegel, “When (Only) Money Matters,” in Investigating Welfare State Change, ed. Jochen Clasen and Siegel (Cheltenham, UK: Edward Elgar, 2007), 43–71. LIS data now allow figures for inequality, redistribution, and poverty to be compared among affluent nations. Relying on provincial-level data drawn from the Canadian contribution to the LIS, this will be the approach to program adequacy in chapter 8 of this book. 70 Two accounts of declining benefits, using different adequacy measures, are Walter Korpi and Joakim Palme, “New Politics and Class Politics in the Context of Austerity and Globalization,” American Political Science Review 97, no. 3 (2003): 425–46; and James Allen and Lyle Scruggs, “Political Partisanship and Welfare State Reform in Advanced Industrial Societies,” American Journal of Political Science 48, no. 3 (2004): 496–512. Also see Lane Kenworthy and Jonas Pontusson, “Rising Inequality and the Politics of Redistribution in Affluent Countries,” Perspectives on Politics 3, no. 3 (2005): 449–71. 71 Francis Castles and Herbert Obinger, “Social Expenditure and the Politics of Redistribution,” Journal of European Social Policy 17, no. 3 (2007): 206–22; and David Brady, Rich Democracies, Poor People. Torben Iversen and David Soskice stress that redistribution continues to be much higher in CMEs than in LMEs; “Distribution and Redistribution: The Shadow of the 19th Century,” World Politics 61, no. 3 (2009): 438–86. David Brady, Andrew Fullerton, and Jennifer Cross find less poverty where welfare generosity, conditioned by left party strength and union density, is greatest; “Putting Poverty in Political Context,” Social Forces 88, no. 1 (2009): 271–99. Also see the previous note. 72 Irene Dingeldey, “Between Workfare and Enablement,” European Journal of Political Research 46 (2007): 823–51; Jingjing Huo, Moira Nelson, and John D. Stephens, “Decommodification and Activation in Social Democratic Policy,” Journal of European Social Policy 18, no. 1 (2008): 5–20. Also see John

296  Notes to Pages 21–3 Hudson and Stefan Kuhner, “Towards Productive Welfare?,” Journal of European Social Policy 19, no. 1 (2009): 34–46. 73 On increasing benefits, see Shirley Gabel and Sheila B. Kamerman, “Investing in Children,” Social Service Review 80 no. 2 (2006): 239–63. Regarding their poverty-reducing impact, see Janet Gornick, “Women and Economic Outcomes, Gender and Public Policy,” Socio-Economic Review 2, no. 2 (2004): 213–38; and Joya Misra, Stephanie Moller and Michelle Budig, “Work-Family Policies and Poverty for Partnered and Single Women in Europe and North America,” Gender and Society 21, no. 6 (2007): 804–27. 74 Sheila Kamerman, “Early Childhood Education and Care,” International Journal of Educational Research 33, no. 1 (2000): 7–29; Kimberly Morgan, “The ‘Production’ of Child Care,” Social Politics 12, no. 2 (2005): 243–63; and Jane Lewis, Trudie Knijn, Claude Martin, and Ilona Ostner, “Patterns of Development in Work/Family Reconciliation Policies for Parents in France, Germany, the Netherlands and the UK in the 2000s,” Social Politics 15, no. 3 (2008): 261–86. 75 Esping-Andersen, Social Foundations of Postindustrial Economies, chap. 5; Carsten Jensen, “Worlds of Welfare Services and Transfers,” Journal of European Social Policy 18, no. 2 (2008), 151–61; and Giuliano Bonoli and Frank Reber, “The Political Economy of Childcare in OECD Countries,” European Journal of Political Research 49, no. 1 (2010): 97–118. Also see the preceding note. 76 Misra, Moller, and Budig, “Work-Family Policies and Poverty.” 77 Priscilla Lambert, “The Comparative Political Economy of Maternal Leave and Child Care,” Social Politics 15, no. 3 (2008): 315–44; Evelyne Huber, John D. Stephens, David Bradley, Stephanie Moller, and François Nielsen, “The Politics of Women’s Economic Independence,” Social Politics 16, no. 1 (2009): 1–39; Bonoli and Reber, “Political Economy of Childcare in OECD Countries.” 78 Gary King, Robert Keohane, and Sidney Verba, Designing Social Inquiry (Princeton: Princeton University Press, 1994), 3, 8–10. 79 Ibid., 88. 80 Alexander George and Andrew Bennett, Case Studies and Theory Development in the Social Sciences (Cambridge, MA: MIT Press, 2004), 131–4; Andrew Bennett and Colin Elman, “Qualitative Research: Recent Developments in Case Study Methods,” Annual Review of Political Science 9 (2006): 237. 81 James Mahoney and Gary Goertz, “A Tale of Two Cultures: Contrasting Quantitative and Qualitative Research,” Political Analysis 14, no. 3 (2006): 238.

Notes to Pages 23–32  297 82 George and Bennett, Case Studies and Theory Development, 137. Some authors instead refer to “causal-process observation”; David Collier, Henry Brady, and Jason Seawright, “Sources of Leverage in Causal Inference,” in Rethinking Social Inquiry, ed. Brady and Collier (London: Rowman and Littlefield, 2004), 229. 83 Charles Tilly and Robert Goodin, “It Depends,” in The Oxford Handbook of Contextual Political Science, ed. Goodin and Tilly (Oxford: OUP, 2006), 13–15. 84 George and Bennett, Case Studies and Theory Development, 206; James Mahoney, “After KKV: The New Methodology of Qualitative Research,” World Politics 67, no. 1 (2010): 131. 85 George and Bennett, Case Studies and Theory Development, 231, 234. 86 Nathaniel Beck, “Is Causal-Process Observation an Oxymoron?,” Political Analysis 14, no. 3 (2006): 347–52; John Gerring, “Causal Mechanisms: Yes, But …,” Comparative Political Studies 43, no. 11 (2010): 1499–526. 87 See Mahoney and Goertz, “Tale of Two Cultures.” 88 Gerring, “Causal Mechanisms,” 1510–12. 89 George and Bennett, Case Studies and Theory Development, 219, 248; Mahoney, “After KKV,” 131; Henry Brady, David Collier, and Jason Seawright, “Towards a Pluralistic Vision of Methodology,” Political Analysis 14, no. 3 (2006): 131. 2. Typing Provinces: The Political Economies of Ontario and Quebec 1 Arend Lijphart, Patterns of Democracy (New Haven, CT: Yale University Press, 1999), 189. 2 Robert Vipond, “Canadian and American Federalism: A Comparative Perspective,” in Challenges to Canadian Federalism, ed. Martin Westmacott and Hugh Mellon (Scarborough, ON: Prentice-Hall Canada, 1998), 17–29. 3 Ronald Watts, Comparing Federal Systems, 3rd ed. (Kingston: Queen’s University Institute of Intergovernmental Affairs, 2008), 84. Watts does not use this vocabulary, instead distinguishing federations with “watertight sphere[s] of responsibility” (such as Canada) from those with “interlocking relationships between governments.” 4 Garth Stevenson, Unfulfilled Union: Canadian Federalism and National Unity, 4th ed. (Montreal and Kingston: McGill-Queen’s University Press [hereafter MQUP], 2004), chaps 6–7. 5 Douglas Brown, “Fiscal Federalism,” in Canadian Federalism: Performance, Effectiveness, and Legitimacy, ed. H. Bakvis and G. Skogstad, 2nd ed. (Toronto: OUP, 2008), esp. 72–5.

298  Notes to Pages 33–6 6 Figures in the last column were calculated as follows: determine the percentage of federal transfer payments that are conditional (third column x fourth column); subtract the result from the percentage of spending that is non-federal after transfer payments (which = 100 – second column). 7 Rodney Haddow, Poverty Reform in Canada, 1958–1978 (Montreal and Kingston: MQUP, 1993), chap. 3. 8 Gerard Boychuk, Patchwork of Purpose (Montreal and Kingston: MQUP, 1998). 9 Haddow, “Federalism and Economic Adjustment,” in Bakvis and Skogstad, Canadian Federalism, 2nd ed., 250. 10 Frank Underhill, In Search of Canadian Liberalism (1935; Toronto: Macmillan, 1961), chap. 2. 11 Seymour Martin Lipset and Stein Rokkan, “Cleavage Structures, Party Systems, and Voter Alignments: An Introduction,” in Party Systems and Voter Alignments, ed. Lipset and Rokkan (New York: Free Press, 1967), 1–64. 12 Janine Brodie and Jane Jenson, Crisis, Challenge and Change (Ottawa: Carleton University Press, 1988), chap. 1. 13 Anthony Sayers, “The End of Brokerage?,” in Canadian Politics in the 21st Century, ed. M. Whittington and G. Williams, 7th ed. (Toronto: Thomson Nelson, 2008), 137–52. 14 Pradeep Chhibber and Ken Kollman, The Formation of National Party Systems (Princeton: Princeton University Press, 2004), 181–92. 15 R.K. Carty and David Stewart, “Parties and Party Systems,” in Provinces: Canadian Provincial Politics, ed. C. Dunn (Peterborough, ON: Broadview, 1996), 72–86. 16 James Bickerton, “The Party System and the Representation of Peripheral Interests: The Case of the Maritimes,” in Canadian Parties in Transition, ed. A.-G. Gagnon and A.B. Tanguay (Scarborough, ON: Nelson, 1989), 463. 17 H.A. Innis, “The Importance of Staple Products,” in Approaches to Canadian Economic History, ed. W.T. Easterbrook and M.H. Watkins (Toronto: McClelland and Stewart, 1967), 16–19. Innis’s Fur Trade in Canada, from which this passage was excerpted, was published in 1930. 18 Daniel Drache, “Rediscovering Canadian Political Economy,” in A Practical Guide to Canadian Political Economy, ed. W. Clement and D. Drache (Toronto: James Lorimer, 1978), 18–20; Janine Brodie, The Political Economy of Canadian Regionalism (Toronto: Harcourt Brace Jovanovich, 1990), 105–18. 19 Michael Howlett and M. Ramesh, The Political Economy of Canada (Toronto: McClelland and Stewart, 1992), 170–1, 187, 205–6; Stevenson, Unfulfilled Union, 4th ed., especially chaps 4 and 8.

Notes to Pages 36–8  299 20 For one effort along these lines, see Paul Bernard and Sebastien SaintArnaud, “Du pareil au même? La position des quatre principales provinces canadiennes dans l’univers des régimes providentiels,” Canadian Journal of Sociology 29, no. 2 (2004): 209–39. 21 Rodney Haddow and Thomas Klassen, Partisanship, Globalization and Canadian Labour Market Policy (Toronto: University of Toronto Press [hereafter UTP], 2006), 50–3, 62. 22 See, for instance, Richard Simeon and David Elkins, “Provincial Political Cultures in Canada,” in Small Worlds, ed. Elkins and Simeon (Toronto: Methuen, 1980), 31–76; and John Wilson, “The Canadian Political Cultures,” Canadian Journal of Political Science 7, no. 3 (1974): 438–83. 23 Nelson Wiseman, In Search of Canadian Political Culture (Vancouver: UBC Press, 2007), chaps 6 to 11. 24 Ibid., 46. 25 These results are based on six national surveys conducted during these years; see Matthew Mendelsohn and J. Scott Matthews, The New Ontario: The Shifting Attitudes of Ontario towards the Federation (Toronto: Mowat Centre for Policy Innovation, February 2010), 6. 26 Vincent Lemieux, “Heaven Is Blue and Hell Is Red,” in Canadian Provincial Parties, ed. Martin Robin (Scarborough, ON: Prentice-Hall, 1972), 266. On the ideological similarity of the PLQ and the UN before the 1960s, in the context of pervasive conservative nationalism, also see Marcel Rioux, “The Development of Ideologies in Quebec,” in Party Politics in Canada, ed. Hugh Thorburn, 6th ed. (Scarborough, ON: Prentice-Hall, 1991), 379–80. 27 Louis Balthazar, “The Faces of Quebec Nationalism,” in Quebec: State and Society, ed. A.-G. Gagnon, 2nd ed. (Scarborough, ON: Nelson, 1993), 5–6; William Coleman, The Independence Movement in Quebec, 1945–1980 (Toronto: UTP, 1984), 46–64. 28 French-owned firms were predominantly small and family-based before the Quiet Revolution and lost considerable ground to anglophone firms after the 1930s. See Yves Bélanger, “Economic Development: From Family Enterprise to Big Business,” in Gagnon, Quebec: State and Society, 390–1. 29 Reginald Whitaker, “From the Quebec Cauldron to the Canadian Cauldron,” in Gagnon, Quebec: State and Society, 20–2. On the close relationship between conservative-clerical interests and English-speaking big business under Duplessis, see Kenneth McRoberts and Dale Posgate, Quebec: Social Change and Political Crisis (Toronto: McClelland and Stewart, 1980), 73–5.

300  Notes to Pages 38–40 30 Herbert Quinn, The Union Nationale (Toronto: UTP, 1963), chap. 5; Réjean Pelletier, Partis politiques et société québécoise (Montreal: Québec/Amérique, 1989), 47, 57, 187–8. 31 Luc Bernier, “The Beleaguered State,” in The Provincial State in Canada, ed. K. Brownsey and M. Howlett (Peterborough, ON: Broadview, 2001), 146–7. Elements of the Quiet Revolution can be traced to the brief premiership of Paul Sauvé in 1959–60. 32 This “New Middle Class thesis” originated with Hubert Guindon; see his Quebec Society: Tradition, Modernity, and Nationhood (Toronto: UTP, 1988), esp. 38–59. On its links to both main post-1960 parties, see McRoberts and Posgate, Quebec, 98–104, 199, 243–4. 33 Réjean Pelletier and Daniel Guérin, “Postmatérialisme et clivages partisans au Québec: les partis sont-ils différents?,” Canadian Journal of Political Science 29, no. 1 (1996): 71–109. These authors found that economic and redistributive issues divide both PQ and PLQ cadres and their voters, though post-materialist issues also distinguish them. 34 Raymond Hudon, “Polarization and Depolarization of Quebec Political Parties,” in Gagnon, Quebec: State and Society, 1st ed. (Toronto: Methuen, 1984), 315–24. A. Brian Tanguay, “Sclerosis or a Clean Bill of Health?” in Gagnon, Quebec: State and Society, 3rd ed. (Peterborough, ON: Broadview, 2004), 234–5. 35 Éric Bélanger and Richard Nadeau, Le comportement électoral des Québécois (Montreal: Les Presses de l’Université de Montréal, 2009), 40. My translation. 36 Ibid., 37. 37 Ibid., 131. My translation. Bélanger and Nadeau found that PQ and PLQ supporters differed very little, during both the 2007 and 2008 election campaigns, in their assessment of “the role of the state,” the authors’ main measure of left-right ideological differences. They differed more in the extent to which they preferred employers over unions (greater among Liberal supporters), but this was much less pronounced than their divergence over “the national question” and was matched by differences regarding “moral conservatism” and, in 2008, “democratic malaise”; ibid, 73, 113. 38 The now-deceased ADQ did promote such views. The broader argument made here about Quebec’s party system was advanced by Haddow and Klassen in Partisanship, Globalization, and Canadian Labour Market Policy, 56–7; more of the relevant scholarship was reviewed there.

Notes to Pages 41–4  301 39 Bélanger, “Economic Development,” 390–406; Matthew Fraser, Quebec Inc. French-Canadian Entrepreneurs and the New Business Elite (Toronto: Key Porter Books, 1987), esp. chap. 4. 40 Two interesting treatments of this theme from the 1990s are Marc Ferland, Benoit Montreuil, and Diane Poulin, “Quebec’s Strategy to Foster Value-Adding Interfirm Cooperation,” in Business Networks: Prospects for Regional Development, ed. U. Staber, N. Schaefer, and B. Sharma (Berlin: Walter Gruyter, 1996), 82–96; and Daniel Latouche, “Do Regions Make a Difference?,” in Regional Innovation Systems, ed. H.-J. Braczyk, P. Cooke, and M. Heidenreich (London: UCL Press, 1997), 319–44. Both saw state leadership as blended with a more concerted approaches in Quebec – what Ferland, Montreuil, and Poulin term “bottom-up” strategies (82), and Latouche characterizes as “regional state-building in a neocorporatist context” (323). This points to the importance of concertation in Quebec’s economy, discussed below. 41 Roch Denis and Serge Denis, “Quebec Unions in Politics, 1960–90,” in A.-G. Gagnon, Quebec State and Society, 2nd ed., 200–2; Jean Charest, “Labour Market Transformations and Labour Law,” in ibid., 3rd ed., 272–5. 42 Denis and Denis, “Quebec Unions in Politics,” 207–17. 43 Statistics Canada, CANSIM, table 2780009. 44 A. Brian Tanguay, “Concerted Action in Quebec, 1976–1983,” in Gagnon, Quebec, 1st ed., 365–85; Denis and Denis, “Quebec Unions in Politics,” 211–12. The latter authors saw concertation as a sign of labour’s weakness during the 1980s (217–18). 45 All three features that, for Rhodes, distinguish social pacts from traditional corporatism characterize the Quebec case: less routinized bargaining, societal actors that are organizationally weaker than in typical corporatist countries, and a stronger role for the state; Martin Rhodes, “The Political Economy of Social Pacts,” in The New Politics of the Welfare State, ed. P. Pierson (Oxford: OUP, 2001), 177. 46 Concertation requires greater organization of both business and labour than is typical in liberal political economies. For business, this is provided primarily by the Conseil du patronat du Québec (CPQ), which is unique in Canada as a peak-level association for business of the kind commonly found in Europe; William Coleman, Business and Politics (Montreal and Kingston: MQUP, 1988), 93–4. Quebec’s labour movement is divided among three main labour federations: the Fédération des travailleurs du Québec (FTQ), the largest, with a large presence in the private sector; the Confédération des syndicats nationaux (CSN), mostly public-sector based; and the Centrale de l’enseignement du Québec (CEQ), the teachers

302  Notes to Pages 44–5 federation. The FTQ was fastest to embrace concertation. See Denis and Denis, “Quebec Unions in Politics,” 202; and Gilles Bourque, Le modèle québécois de développement (Quebec City: Presses de l’Université du Québec, 2000), 123–6. For more on labour and concertation during the 1980s, see Jean-Marc Piotte, Du combat au parternariat (Quebec City: Éditions Nota bene, 1998), 187–92; and Jacques Rouillard, Expérience syndicale au Québec (Montreal: VLB Éditeur, 2008), 44–50. Piotte agrees with Denis and Denis that labour accepted concertation from a position of weakness. 47 Clinton Archibald, Un Québec Corporatiste? (Hull: Éditions Asticou, 1983), esp. chaps 3, 5, 7, and 8. 48 Éric Montpetit, “A Policy Network Perspective on the Quebec Model,” in Quebec and Canada in the New Century, ed. M. Murphy (Kingston: Queen’s University Institute of Intergovernmental Relations, 2007), 113–16; and Montpetit, “Can Quebec Neo-Corporatist Networks Withstand Canadian Federalism and Internationalization?,” in Gagnon, Quebec, 3rd ed., 165–82. Montpetit identifies an increasingly “inter-sectoral” aspect to Quebec concertation; ibid, 170–1. Haddow and Klassen identified concerted relations in each policy subfield they studied. These typically involved business and labour prominently; Partisanship, Globalization, and Canadian Labour Market Policy, chap. 5, and 218–23. 49 Grace Skogstad, “The Farm Policy Community and Public Policy in Ontario and Quebec,” in Policy Communities and Public Policy in Canada, ed. W. Coleman and Skogstad (Mississauga, ON: Copp Clark Pitman, 1990), 59–90; Carolyn Tuohy, Accidental Logics (Oxford: OUP, 1999), 207–8. 50 Bourque, Le modèle québécois de développement, chap. 4 and conclusion. 51 Yves Vaillancourt, L’économie sociale au Québec et au Canada (Montreal: Centre de recherche sur les innovations sociales, 2008), 12–18. The comparison with the 1980s summits is by Montpetit, “Can Quebec Neo-Corporatist Networks Withstand Canadian Federalism and Internationalization?,” 170. 52 Lucie Morissette and Jean Charest, “Variétés de capitalisme ou entrepreneurs institutionnels?,” Canadian Sociological Review 47, no. 3 (2010): 225–45; Marie Bouchard, Modèle québécois de développement et gouvernance (Montreal: Centre de recherche sur les innovations sociales, 2005), xi. The issue of efficiency is a focus for Benoît Rigaud, Louis Côte, Benoît Levesque, Joseph Facal, and Luc Bernier, “Les complémentarités institutionnelles du modèle québécois de développement,” Recherche sociographiques 51, nos 1–2 (2010): 20–3. 53 Peter Graefe, “The Politics of Social and Economic Development in Quebec,” in Quebec Questions: Quebec Studies for the Twenty-First

Notes to Pages 46–8  303 Century, ed. S. Gervais, C. Kirkey, and J. Rudy (Toronto: OUP, 2011), 357–70. 54 In the early 1960s Jean Lesage asserted that the “Québécois have only one powerful institution: their government. And they now want to use this institution to build a new era to which they could not formerly aspire”; cited in John Dickinson, A Short History of Quebec, 3rd ed. (Montreal and Kingston: MQUP, 2002), 319. 55 For instance, Hydro-Québec’s successful hydroelectrical projects during the 1960s and 1970s are thought to have enhanced national pride in Quebec, arguably an example of state intervention fostering nationalism; see David Mansell, “A Question of Power: A Brief History of Hydroelectricity in Quebec,” in Gervais, Kirkey, and Rudy, Quebec Questions, 347. 56 The first interpretation can be found in Wiseman, In Search of Canadian Political Culture, 192–4. The second and third accounts are offered by Jane Errington, The Lion, the Eagle, and Upper Canada (Montreal and Kingston: MQUP, 1994), 7–10, 28; and S.J.R. Noel, Patrons, Clients, Brokers: Ontario Society and Politics, 1791–1896 (Toronto: UTP, 1990), esp. introduction. Noel is especially compelling in light of the framework adopted here; he situates the early colony’s culture in relation to prevailing social relations. 57 Randall White, Ontario 1610–1985 (Toronto: Dundurn, 1985), 95–100. 58 On patronage under Oliver Mowat’s Liberals, see Noel, Patrons, Clients, Brokers, 277–81. Randall White labels his government a “‘blend of conservatism and reform, of caution and advancement.’ Unlike George Brown, Mowat saw the intrinsic diversity and factionalism of Ontario society as something to be managed and contained, not polarized”; Ontario 1610– 1985, 142. The cited passage is from Margaret Evans. On PC pragmatism during the Big Blue Machine era, see Jonathan Manthorpe, The Power and the Tories (Toronto: Macmillan, 1974), 8; Robert Williams, “Ontario’s Party System,” in Thorburn, Party Politics in Canada, 488–90; and John Wilson, “The Red Tory Province,” in Government and Politics of Ontario, ed. Donald MacDonald, 2nd ed. (Toronto: Van Nostrand Reinhold, 1980), 210–12. 59 On the importance of perceptions of managerial competence and balance, see John Wilson, “The Red Tory Province,” in MacDonald, Government and Politics of Ontario, 208–26; and Sid Noel, “The Ontario Political Culture,” in The Government and Politics of Ontario, ed. G. White, 5th ed. (Toronto: UTP, 1997), 60–1. 60 James MacKenzie, “Interacting with Government,” in MacDonald, Government and Politics of Ontario, 2nd ed., 342. 61 Ibid., 356.

304  Notes to Pages 48–50 62 Henry Jacek, “Interest Groups and Public Policy in Ontario,” in The Government and Politics of Ontario, ed. G. White, 4th ed. (Scarborough, ON: Nelson, 1990), 272. One sector identified by Jacek as involving more collaboration is agricultural marketing. But Skogstad’s comparison of the agricultural sector in Quebec and Ontario found that collaboration was more typical in Quebec, and pluralism in Ontario; Skogstad, “The Farm Policy Community and Public Policy in Ontario and Quebec,” in Coleman and Skogstad, Policy Communities and Public Policy in Canada, 78. 63 Jacek, “Interest Groups and Public Policy in Ontario,” 257. Emphasis in the original. 64 Noel, “Ontario Political Culture,” 64. Emphasis in the original. 65 Haddow and Klassen, Partisanship, Globalization and Canadian Labour Market Policy, 46–7. 66 Colin Crouch, Industrial Relations and European State Traditions (Oxford: Clarendon, 1993), 326. 67 For more details, and a review of relevant sources, see Rodney Haddow, “Ontario Politics: ‘Plus Ça Change .…,’” in Canadian Politics, ed. J. Bickerton and A.-G. Gagnon, 2nd ed. (Peterborough, ON: Broadview, 1994), 475. 68 Data from Statistics Canada, CANSIM, tables 3840023 and 3840024. Quebec’s much higher ratio cannot be explained by the fact that it is poorer and might therefore be inclined to set higher tax rates to meet greater social needs. In 1985, three of the four Atlantic Provinces had ratios that were below the ten-province average; three of four Western provinces had ratios above that average. 69 Subsequently, the PCs often chose similar leaders. Among non-interim ones, the following can be considered solidly conservative: Miller, 1985–6, Mike Harris, 1990–2002, and Tim Hudak, 2009–14. Larry Grossman, 1986–7, and John Tory, 2004–9, were more centrist. Ernie Eves, 2002–3, is perhaps a more ambiguous case. 70 On Ottawa’s role in attending to Ontario’s economic interests before the 1980s, see Thomas Courchene and Colin Telmer, From Heartland to North American Region State (Toronto: Faculty of Management, University of Toronto, 1998), 11–12. 71 H.V. Nelles, The Politics of Development (Toronto: Macmillan, 1974), chaps 2 and 6. On British efforts of this kind, see John Zysman, Governments, Markets and Growth (Ithaca, NY: Cornell University Press, 1983), chap. 4. 72 Richard Bird, Industrial Policy in Ontario (Toronto: Ontario Economic Council, 1985), 54, 65.

Notes to Pages 50–4  305 73 K.J. Rea, The Prosperous Years: The Economic History of Ontario, 1939–1975 (Toronto: UTP, 1985), 235–8; Robert Finbow, “The State Agenda in Quebec and Ontario, 1960–1980,” Journal of Canadian Studies 18, no. 1 (1983): 117– 35. P. Davenport, C. Green, W.J. Milne, R. Saunders, and W. Wilson also found Quebec’s industrial policy spending to be greater than Ontario’s as a share of GDP in the 1960s and 1970s; Industrial Policy in Ontario and Quebec (Toronto: Ontario Economic Council, 1982), 19. 74 Courchene and Telmer, From Heartland to North American Region State, 70. 75 Ibid., chaps 6 and 7. 76 Robert Williams, “Ontario Party Politics in the 1990s,” in White, Government and Politics of Ontario, 5th ed., 229. 77 This controls to a degree for the impact of the substantial business cycle swings of these years, which is not the case if one examines Ontario’s levels alone. 78 Calculations based on data from Statistics Canada, CANSIM, tables 3840023 and 3840024. The figures combine provincial and local spending and revenues and are from the Provincial Expenditure Accounts. 79 John Ibbitson, Loyal No More: Ontario’s Struggle for a Separate Identity (Toronto: Harper Collins, 2001). 80 Neil Bradford, “Public-Private Partnerships? Paradigms of Economic Governance in Ontario,” Canadian Journal of Political Science 36, no. 5 (2003): 1017–23; David Wolfe and Meric Gertler, “Globalization and Economic Restructuring in Ontario,” European Planning Studies 9, no. 5 (2001): 586–9. 81 Henry Jacek, “The New World of Interest Group Politics in Ontario,” in White, Government and Politics of Ontario, 5th ed., 325. 82 For instance, a Toronto City Summit Alliance, launched in 2002 and rechristened Civic Action in 2010, became a leading advocate of initiatives to address social and economic problems. 83 According to the Mowat Centre, 51% of Ontario respondents to a 2010 survey found Ottawa “not responsive” to their province’s needs, and 32% believed that Ontario got “less than its fair share” from Ottawa; but only 4% identified more with Ontario than with Canada; Mendelsohn and Matthews, New Ontario, 3–4, 6. 84 There are few reliable data for provincial social service spending, as opposed to income transfers, until the late 1980s, or for childcare specifically before the early 1990s. See chapters 4 and 5. 85 These are the best available data on the four policy fields that are available on a continuous basis since 1960. 86 This is a common approach to measuring spending and taxing “effort.” For a discussion of its strengths and weaknesses in measuring welfare “effort,” see Jochen Clasen and Nico A. Siegel, “Comparative Welfare State

306  Notes to Pages 54–67 Analysis and the ‘Dependent Variable Problem,’” in Investigating Welfare State Change, ed. Clasen and Siegel (Cheltenham, UK: Edward Elgar, 2007), esp. 7–10, and other contributions to that volume. This study does not adopt any of the more “qualitative” measures of program adequacy that are discussed in that volume but that have not yet been applied extensively. But chapter 8 examines how much taxes and transfers reduce income inequality and poverty. The examination of childcare services in chapters 5 and 7 encompasses service provision levels, as well as spending. 87 Quebec taxpayers receive an abatement worth 16.5% of the value of Ottawa’s personal income tax revenues in Quebec. In other provinces, this sum is received by the provincial government as a cash transfer. The latter is reported by Statistics Canada as a federal transfer payment, but Quebec’s abatement is not. In this study, to make Quebec’s revenue data consistent with other provinces’, a sum equal to 16.5% of Ottawa’s income tax revenues in Quebec has been added to the reported value of federal transfers, and subtracted from those for provincial own-source and income tax revenue for Quebec. 88 Investment Canada started to collect province-level data only recently on the number of FDI acquisitions. 89 See, for instance, Robert Benzie, “Canada’s Wealth-Sharing Plan Is Unconstitutional, Study Says,” TS, 6 February 2012. The article reports the views of a researcher at Ontario’s Mowat Centre for Policy Innovation. 90 This reduction partly reflects an improvement in Quebec’s prosperity during these years, relative to Ontario. 3. Budgeting: Why Some Tax and Spend More Than Others, and How 1 On the Quebec abatement, see chapter 2, note 87. The PEA and FMS both record the abatement as own-source revenue for the personal income tax for Quebec, while the payment to other provinces is reported as a federal transfer. To render the figures comparable here, a sum equal to the federal abatement was subtracted from Quebec’s reported own-source and personal income tax revenue. That sum was added to federal transfers to Quebec. 2 Canada Tax Foundation, Finances of the Nation (hereafter CTF, FN) 2009, A1, B1. 3 In the FMS, a deficit or surplus is the difference between total expenditures and total revenues. But this is not true for the PEA. Current expenditures and revenues in the PEA exclude net lending, savings, capital consumption allowances, net capital transfers, and acquisition of non-financial capital. The figure reported in this table for “difference” is the part of the Quebec/

Notes to Pages 68–73  307 Ontario current expenditure-to-GDP ratio that is not explained by the difference in the combined value of their own-source revenues and federal transfers. 4 Jonathan Kesselman and Ron Cheung, “Taxation Impacts on Inequality in Canada,” in Dimensions of Inequality in Canada, ed. D. Green and Kesselman (Vancouver: UBC Press, 2006), 347. 5 Data used here for the corporate income, business property, and resource and capital taxes are from the FMS; Statistics Canada, CANSIM, table 3850001. Payroll taxes are reported in a more fine-grained manner and for a longer period in the PEA; Statistics Canada, CANSIM, tables 3840007, for “payroll taxes,” and 3840006, for workers’ compensation premiums. 6 Evidence about the apportionment of property taxes between businesses and residences is meagre in Canada. But an early-1990s study by Harry Kitchen and Enid Slack calculated that commercial business taxes paid for about 16% of all municipal revenues in Ontario, and residential property taxes 23%; Kitchen and Slack, Business Property Taxation (Kingston: Queen’s University School of Policy Studies, 1993), 13. I therefore attribute 60% of all property taxes in both provinces to residential taxpayers, and 40% to firms. They also show that property taxes represented 22.5% of a business’s income in downtown Toronto in 1991 (and 18.1% in the suburbs) compared to 12.9% in downtown Montreal (and 10.6% in its suburbs); ibid., 18. 7 Kesselman and Cheung, “Taxation Impacts on Inequality in Canada,” 394–9. 8 Ibid., 389–93, 397–8. 9 Luc Godbout and Suzie St-Cerny argue that Quebec’s sales tax has a progressive incidence; “Are Consumption Taxes Regressive in Quebec?,” Canadian Tax Journal 59, no. 3 (2011): 463–94. Ross Finnie and Ian Irvine do the same for contributions to federal EI; “The Redistributional Impact of Canada’s Employment Insurance Program,” Canadian Public Policy 37, no. 2 (2011): 208–14. 10 An exception is a small part of the payroll tax that Quebec charges for its parental leave insurance program, discussed in chapter 5, part of whose premiums are charged to workers. But most funds come from an abatement of federal EI premiums. 11 As with the data presented above, most figures used here are from the FMS; Statistics Canada, CANSIM, table 3850001. The exceptions, derived from the PEA, are the two mentioned note 5, and health premiums charged to individuals; CANSIM, tables 3840006 and 3840007. 12 Kesselman and Cheung, “Taxation Impacts on Inequality in Canada,” 348–52.

308  Notes to Pages 75–9 13 André Blais and François Vaillancourt, “Le Budget 1988–89,” in L’Année politique au Québec 1987–1988, http://www.pum.umontreal.ca/apqc/, 5 of 10. 14 André Pépin, “Les maires sont en furie contre Ryan,” La Presse (hereafter LP), 15 December 1990, A1; Pierre Avril, “En 1991, les municipalités ont perdu la bataille de la fiscalité,” LP, 28 December 1991, H1. 15 Frederic Tremblay, “Le CPQ exhorte Québec de ne pas alourdir le fardeau fiscal des contribuables,” LP, 12 February 1992, C10; Francis Vailles, “Réforme de la fiscalité municipale,” Les Affaires, 29 February 1992, 2. 16 Denis Lessard, “La TVQ sur les services,” LP, 28 April 1992, A1; Lessard, “La TVQ nivelé a 6,5%,” LP, 13 May 1994, A1. 17 Mario Fontaine, “Le CPQ invite Québec à instaurer sa propre taxe sur les produits et services,” LP, 23 January 1990, B1; Maurice Jannard, “Les entreprises: 800 millions d’impôts de plus,” LP, 15 May 1992, A3; André Blais and François Vaillancourt, “Le Budget,” in L’Année politique au Québec 1989–1990, 5 of 7; Rheal Seguin, “Grit Government to Inject Money into Economy,” Globe and Mail (hereafter GM), 27 April 1990, A13. 18 Valerie Beauregard, “Un budget qui laisse les gens d’affaires sur leur appétit,” LP, 3 May 1991, A4; PC, “Rien pour l’emploi, dénoncent les syndicats,” LP, 3 May 1991, A3. 19 D. Lessard, “Québec augmente ses dépenses de 6,2%,” LP, 28 March 1990, A1; Lessard, “Johnson évoque d’éventuelles hausses d’impôt,” LP, 22 March 1991, A1; Lessard, “Québec n’arrive pas à freiner ses dépenses,” LP, 25 March 1992, A1; R. Seguin, “Quebec Forecasts Tiny Increase in Spending,” GM, 25 March 1993, A2; Miville Tremblay, “Les points saillants du budget provincial,” LP, 13 May 1994, A4. 20 André Blais and François Vaillancourt, “Le budget,” in L’Année politique au Québec 1990–1991, 8 of 8; Blais and Vaillancourt, “Les budgets du Québec 1993–94 et 1994–95,” in L’Année politique au Québec 1993–1994, 3 of 5. For the CPQ’s changing position, see “L’Association des manufacturiers ne partage pas l’avis du CPQ,” Le Soleil (hereafter LS), 21 April 1992, A3; Canadian Press (hereafter CP), “Le CPQ remet en cause la sécurité d’emploi des fonctionnaires,” Le Devoir (hereafter LD), 18 August 1993, A4. 21 Paule des Rivières, “Réactions des syndicats d’employés du gouvernement” LD, 14 May 1994, A4. 22 Michel Venne, “Le budget Levesque,” LD, 21 May 1993, A1; Katia Gagnon, “Les baisses d’impôt prévues au budget entrent en vigueur le 1er juillet,” LD, 28 June 1994, B3; Alain Dubuc, “Budget,” LP, 28 April 1990, B2; P. April, “Québec introduira bientôt des tickets modérateurs,” LD, 3 February 1993, B1.

Notes to Pages 79–81  309 23 M. Venne, “Consultation sur les finances publiques,” LD, 3 February 1993, A1; Roger Bellefeuille, “Fin de la commission parlementaire sur les finances publiques,” LS, 20 February 1993, A4. 24 See Blais and Vaillancourt, “Les budgets québécois de 1988–1989 à 1998–1999,” in L’Année politique au Québec, 1997–1998, 5-6 of 6; and Philippe Dubuisson, “Le modèle de Landry,” LP, 4 April 1998, B2. 25 Brigitte Breton, “Pas de répit pour les fonctionnaires,” LS, 21 October 1994, A1; “Les points saillants du budget Campeau,” LP, 10 May 1995, A4; CTF, FN 1995, 2:15–17. 26 Konrad Yakabuski, “Bouchard passe à l’action,” LD, 28 March 1996, A1; M. Venne, “Landry donne d’une main et prend de l’autre,” LD, 26 March 1997, A1; D. Lessard, “La taxe de vente haussée de 1%,” LP, 26 March 1997, A1; CTF, FN 1996, 2:10–13; FN 1997, 2:13–15. 27 These calculations are based on the difference between the preliminary total expenditures for the current years and the estimates for the next, as reported in CTF, FN 1999, 2:10; FN 2000, 2:15; and FN 2001, 2:12. 28 M. Venne, “Le budget de la santé augmente,” LD, 26 March 1998, A5; Louise Leduc and Judith Lachapelle, “La santé,” LD, 10 March 1999, B1; P. des Rivières, “L’éducation,” LD, 10 March 1999, B4; Marie-Andrée Chouinard, “Éducation,” LD, 15 March 2000, B1. 29 Murray Maltais, “Bien paraître,” Le Droit, 1 April 1998, 22; Eric Hamelin, “Fiscalité des entreprises,” Le Nouvelliste, 23 June 1998, 13; Gérard Bérubé, “Landry fait miroiter des réductions d’impôts plus grandes que prévu,” LD, 12 March 1999, A6; CTF, FN 2000, 2:14–15. 30 Hélène Baril, “Landry veut imposer un plafond aux dépenses de santé,” LD, 17 March 2000, A7. 31 M. Tremblay, “1600 personnes participant au Forum pour l’emploi,” LP, 6 November 1989, A5; Tremblay, “Le Forum pour l’emploi poursuivre son action,” LP, 7 November 1989, D1. The CPQ joined in 1991; “Le Conseil du Patronat rallie le Forum pour l’emploi,” LP, 4 July 1991, A14; “Historique du Forum pour l’emploi,” http://www.unites.uqam.ca/ forum/2Historique.html. 32 The CSN took this position; Pierre Paquette, “Pour une véritable ‘autre façon de gouverner,’” LS, 18 April 1995, A15; Gilbert Leduc, “Consultation sur le financement des services publics,” LS, 11 November 1995, A19. 33 Pierre O’Neill, “Bouchard veut négocier un nouveau pacte social,” LD, 7 December 1995, A1; K. Yakabuski, “Landry ne veut pas sacrifier la paix sociale: Pas question d’imiter l’Ontario,” LD, 9 May 1996, A1. 34 K. Yakabuski, “Pour un déficit zéro dans quatre ans,” LD, 20 March 1996, A1; Jean-Robert Sansfaçon, “Drôle de commission!,” LD, 13 June 1996, A6.

310  Notes to Pages 81–3 35 M. Venne, “La fiscalité québécoise,” LD, 24 October 1996, A1. For government acknowledgments of its debt to the commission, see Quebec minister of state for the economy and finance, 1997–1998 Budget, 13; Quebec Ministry of Finance, Quebec Focus on Jobs: Corporate Taxation Reform, 1–2. The latter is a 1998–9 budget document. The commission’s chair later estimated that more than half of its recommendations were implemented; Mario Cloutier, “L’après déficit zéro,” LD, 12 October 1999, A1. 36 Gilbert Leduc, “L’impôt à la solidarité est rejeté,” LS, 1 November 1996, A8; Jean Pichette, “Une fausse note dans la messe du consensus,” LD, 2 November 1996, A8. The business participant was National Bank president André Bérard. On the youth summit, see Marie-Andrée Chouinard and Robert Dutrisac, “Bouchard gagne son pari,” LD, 25 February 2000, A1; Dutrisac, “La Santé et l’Éducation d’abord,” LD, 15 March 2000, A1. 37 For examples of successful pay bargaining, see Mario Cloutier, “Négotiations du secteur public,” LD, 31 December 1996, A1; Michel Hébert, “Caisse de retrait des employés de l’État,” LD, 23 December 1999, A3. 38 CTF, FN 2001, 2:12; FN 2002, 2:12. The PQ’s March 2003 budget was superseded by another after the Liberals formed a government. 39 R. Dutrisic, “Des surplus à tous vents,” LD, 30 March 2001, A1; Dutrisac, “Marois prive la santé à cause d’Ottawa,’” LD, 20 March 2002, A1; also see the preceding note. 40 La Presse canadienne (hereafter PC), “Ottawa a contribué aux succès québécois, selon Charest,” LD, 22 March 2000, A8; R. Dutrisac, “Dépensés en santé,” LD, 10 January 2002, A4. 41 Éric Desrosiers, “Le budget réunit le monde des affaires et les syndicats,” LD, 30 March 2001, A5. 42 R. Dutrisac, “Prudence dans la dépense,” LD, 12 March 2003, A1. 43 Parti Libéral du Québec, Un Gouvernement au Services des Québécois (Quebec City: September 2002). 44 By December it was clear that this first tranche would fall well short of the promised $1 billion in reductions for all earners; R. Dutrisac, “Finie la baisse générale d’impôt,” LD, 4 December 2003, A1. 45 PC, “Les points saillants,” LD, 13 June 2003, A2; R. Dutrisac, “Faire sans compter sur l’état,” LD, 13 June 2003, A1. The numerous tax credit curtailments are enumerated in CTF, FN 2003, 2:17–26. 46 Official deficits were $346 million in 2003–4, $221 million in 2004–5, and $392 million in 2005–6. There was a surplus of $1,993 million in 2006–7, partly because of a substantial increase in federal transfer payments; CTF, FN 2005, 2:9; FN 2007, 2:11; and FN 2008, 2:9. Quebec’s auditor-general frequently accused the government of understating the deficit;

Notes to Pages 83–4  311 R. Dutrisac, “Québec sous-évalue le déficit et la dette,” LD, 23 March 2005, A1. 47 R. Dutrisac, “Un budget à retardement,” LD, 31 March 2004, A1; Tommy Chouinard, “240 millions consacrés aux bas salariés,” LD, 31 March 2004, A5; Dutrisac, “Prudence et austérité,” LD, 22 April 2005, A1; G. Berube, “Un allégement du fardeau des entreprises,” LD, 22 April 2005, A2; R. Dutrisac, “De tout pour tous,” LD, 24 March 2006, A1. 48 François Desjardins, “Le patronat est satisfait mais émet des réserves,” LD, 22 April 2005, A5. 49 The Liberal policy to reduce staffing involved replacing only 50% of retiring officials; R. Dutrisac, “Jérôme-Forget dépose 358 millions dans les goussets d’Audet,” LD, 21 April 2005, A5. The Liberals argued in 2005 that wage increases precluded a tax cut; Dutrisac, “Adieu, baisses d’impôt!,” LD, 28 September 2005, A1. 50 The documents signatories included Lucien Bouchard, a former PQ premier; Pierre Fortin, a prominent economist; and André Pratte, editor of La Presse. See L. Bouchard, J. Facal, P. Fortin, R. Lacroix, S. Lalande, C. Montmarquette, A. Pratte, D. Robert, J-C. Robert, G. Saint-Pierre, M. Saint-Pierre, and D. Verreault, Pour un Québec lucide, 19 October 2005; http://classiques.uqac.ca/contemporains/finances_publiques_qc/ manifeste_qc_lucide.pdf. 51 Anonymous, “Manifesto for a Quebec Based on Solidarity,” Inroads 19 (2006): 106–11. 52 The budget legislated a schedule for debt reduction, but its initial plans were overturned by the financial crisis; Youri Chassin and Marcelin Joanis, “L’endettement public: où la récession nous laisse-t-elle?” in Le Québec Économique 2009, ed. M. Joanis and Luc Godbout (Quebec City: Les Presses de L’Université Laval, 2009), 243–5. 53 My translation. See Jean Charest, “À la question nationale, nous allons opposer la richesse nationale,” LD, 15 March 2006, A7; Jocelyne Richer, “Québec se donnera pas moins de 20 ans pour mater la dette,” LD, 22 March 2006, B3. 54 Harvey Mead, “Avenir démographique du Québec,” LD, 14 October 2004, A7; Canada NewsWire (hereafter CNW), “Forum des générations,” 18 October 2004; R. Dutrisac and T. Chouinard, “Charest renonce aux baisses générales d’impôt,” LD, 14 October 2004, A1. 55 These details refer to the budget tabled in May 2007, after the election. An earlier budget, introduced in February, was not passed. 56 Ministre des finances, “Budget 2007–2008: Valorisation du travail: réduction de 950 millions de dollars de l’impôt des Québécois,” news release, 24 May 2007; François Desjardins, “Le pari libéral: baisser les

312  Notes to Pages 84–5 impôts et survivre,” LD, 25 May 2007, A3; R. Dutrisac, “Budget: le fossé devient gouffre,” LD, 31 May 2007, A1; Ministre des finances, “Déclaration ministérielle de Mme Monique Jérôme-Forget concernant la politique budgétaire 2007–2008,” news release, 1 June 2007. On the initial union reaction, see Alexandre Shields, “Prochaine budget: La CSQ invite les libéraux à renoncer aux baisses d’impôt,” LD, 7 May 2007, A2. 57 CTF, FN 2009, 2:14; FN 2010, 2:12. 58 R. Dutrisac, “Dans la foulée du budget de Monique Jérôme-Forget,” LD, 21 March 2009, C3; Philip Authier, “PQ’s Marois Leads Opposition Attack in Raucus Debate,” Gazette, 1 April 2010, A6; Antoine Robitaille, “Le Québec de rêve, version PQ,” LD, 8 February 2007, A1. 59 Pierre St-Arnaud, “Un groupe de travail propose modifications majeures à l’aide aux régions,” PC, 7 February 2008; Cabinet de la ministre des Finances, “La ministre des Finances réagit au rapport du Groupe de travail sur les aides fiscales aux régions ressources et à la nouvelle économie,” news release, 7 February 2008; Eric Desrosiers, “Bachard préfère les crédits d’impôts aux baisses d’impôt généralisées,” LD, 21 March 2008, A7. 60 The 2008 budget introduced an investment tax credit that was most generous in remote regions, cancelled the capital tax for manufacturing firms, and launched a tax credit for information technology. A November update extended more lending to small firms. The 2009 budget included measures to stimulate investment, finance venture capital, aid the forestry and tourism sectors, encourage individual investors, and subsidize firms that retrained workers. Cabinet de la ministre des Finances, “Budget 2008–09 Prudence et Discipline,” news release, 13 March 2008; Cabinet de la ministre des Finances, “Québec annonce de nouvelles mesures adaptées à la situation économique,” news release, 4 November 2008; Cabinet de la ministre des Finances, “Un effort sans précédent pour protéger nos emplois,” news release, 19 March 2009. 61 CTF, Finances of the Federation 2008, 2:9; Finances of the Federation 2010, 2:11–12; Alexandre Robillard, “Québec laisse un point d’interrogation de 4 milliards $ dans le budget,” PC, 19 March 2009. 62 A. Robillard, “Le PQ presse le gouvernement de s’attaquer aux ‘vaches sacrées,’” PC, 16 June 2009; Jocelyne Richer, “L’état des finances publiques marquera la rentrée parlementaire,” PC, 13 September 2009. 63 “Dumont Calls for Selling of Part of Hydro-Quebec,” Gazette, 7 November 2008; A. Robillard, “Québec rejette les principales propositions financières du rapport Castonguay,” PC, 19 February 2008. 64 The Liberals commissioned a study in 2008 that recommended higher user fees, but they appeared to reject its conclusions at that time. See

Notes to Pages 85–8  313 T. Chouinard, “Consultations pré-budgétaires à Québec,” LP, 17 February 2009, A12; Chouinard, “‘Il est temps de bouger,’” LP, 20 March 2009, A4. 65 T. Chouinard, “Plan pour revenir à l’équilibre budgétaire,” LP, 19 September 2009, A8; “Invitation de presse – Naissance d’une Coalition opposée à la tarification et à la privatisation des services public,” CNW, 15 January 2010; “La CSN lance un appel au gouvernement,” CNW, 10 March 2010; Stéphanie Marin, “Le milieu des affaires réagit plutôt bien mais pas les syndicats,” PC, 30 March 2010. 66 On the March 2010 budget measures, see Kevin Dougherty, “Quebec Unveils Austere Budget,” Gazette, 30 March 2010; and R. Séguin, “Quebec Stirs Health-Care Debate with Proposed User Fee,” GM, 30 March 2010. On the large demonstrations against user fees, see Sylvain Larocque, “Budget: la controverse est loin d’être terminée,” PC, 11 April 2010. On the abandonment of the per-visit fee, see J. Richer, “Raymond Bachand fait volte-face et renonce au ticket modérateur en santé,” PC, 22 September 2010. 67 In addition to the points raised below, the government’s ability to work collaboratively did not break down after the new fees policy. It reached yet another agreement with public sector workers on wages in 2010, and committed to implementing staffing reductions via attrition, as previously, rather than by dismissing many employees. See A. Robillard, “Charest annonce une entente sur les salaires,” PC, 25 June 2010; and K. Dougherty, “Quebec Cabinet Meets to Cut Government Spending,” Gazette, 25 April 2010. 68 On Marois’s changing position on user fees, see R. Dutrisac, “Malgré la crise, Charest dit non à un gel des tarifs,” LD, 17 February 2009, A3; Dutrisac, “Dans la foulée du budget de Monique Jérôme-Forget,” LD, 21 March 2009, C3; P. Authier, “PQ’s Marois Leads Opposition Attack in Raucous Debate,” Gazette, 1 April 2010, A6. An example of PQ discussion of raising using fees, not taxes, transpired while Lucien Bouchard was premier; J.-R. Sansfaçon, “Des taxes ou des tarifs?,” LD, 2 April 1996, A6. 69 Herbert Kitschelt argues, “When faced with a strong market-liberal competitor, social democratic parties may adopt policy retrenchment in agreement with a modified ‘Nixon in China’ logic”; “Partisan Competition and Welfare State Retrenchment,” in The New Politics of the Welfare State, ed. Paul Pierson (Oxford: OUP, 2001), 275. 70 A period of buoyant growth raises absolute revenues, making higher expenditures affordable. In relative terms, expenditures likely will fall, barring major program expansion, because of declines in business-cyclesensitive expenditures such as social assistance. Revenues will decline as a share of GDP if governments use an improving fiscal situation to reduce

314  Notes to Pages 89–90 taxes. But these influences cannot explain Ontario’s distinctive pattern: the difference in average annual growth per capita in 1995–2003 and that for the preceding and subsequent periods for Ontario (+0.6%) was much lower than it was for Quebec (+1.9%) and comparable to the other eight provinces’ (+0.5%). 71 These calculations are based on figures from the Provincial Economic Accounts; Statistics Canada, CANSIM, table 3840004. GDP data are from table 3840013. 72 The public works program was launched earlier; Richard Mackie, “NDP Plans to Jump-Start Economy with Works Projects, Tax Measures,” GM, 5 December 1990, A1. 73 CTF, Provincial and Municipal Finances, 1991, 14:19–22; Matt Maychak, “‘Recession-Fighting’ Budget Takes from Rich, Gives to Poor, Punishes the Sinful,” Toronto Star (hereafter TS), 30 April 1991, A17; Ontario Ministry of Treasury and Economics, “Ontario Budget Fights Recession,” CNW, 29 April 1991. 74 “Canada: Provincial Budgets,” World Tax Report Financial Times Information Ltd., 1 June 1992; Geoffrey Scotton, “$1B Tax Grab in Ontario Budget,” Financial Post (hereafter FP), 1 May 1992, 1; James Daw, “Double Whammy Hits Paycheques Starting July 1,” TS, 20 May 1993, A8; Bruce Cohen, “Taxpayers Get Hit with One-Two Punch,” FP, 20 May 1993, 33; R. Mackie, “Laughren Lands the Blow,” GM, 20 May 1993, A1. 75 The NDP sometimes suggested that it was increasing capital spending in later budgets, but its own budget documents show that the capital budget was either stable or declined after 1991–2; Ontario Ministry of Finance, Ontario 1992 Budget: Legislative Address, “1992 Budget Summary”; Ontario 1993 Budget: Legislative Address, “1993 Ontario Budget”; Ontario 1994 Budget: Legislative Address, “Budget at a Glance.” 76 Ontario Ministry of Finance, “Jobs, Commitment to Services and Controlling the Deficit Priorities of 1992 Ontario Budget,” CNW, 30 April 1992; Ontario Ministry of Finance, “1993 Budget: Ontario Budget Invests in Jobs and Services, Controls Growth of Debt,” CNW, 20 May 1993; Janet McFarland, “Health Cuts to Trim $1.1B,” FP, 20 May 1993, 32; Kelly Toughill and Leslie Papp, “Unions to Rae: Increase Taxes,” TS, 5 May 1993, A1. 77 The budget promised a further 0.8% decline in operating costs; but later documents show that operating expenditures in fact rose by 1.3% from 1994–5 to 1995–6. Maureen Murray, “Tax Hike and Social Contract,” TS, 23 July 1993, D1; William Walker, “Risk-Free NDP Budget Vows 100,000 New Jobs,” TS, 6 May 1994, A1; Ontario 1994 Budget: Legislative Address, “Budget at a Glance”; CTF, FN 1995, 2:18.

Notes to Pages 90–1  315 78 Paula Todd, Derek Ferguson, and Shawn McCarthy, “Ontario’s First NDP Budget under Fire,” TS, 30 April 1991, A1; Derek Ferguson, “McLeod Predicts Budget will Torpedo 25,000 Jobs,” TS, 6 May 1992, A17; R. Mackie, “Laughren Lands the Blow,” GM, 20 May 1993, A1; CP, “No-Tax-Hike Budget Draws Scant Praise,” Kitchener-Waterloo Record, 6 May 1992, A1. 79 Bernard Simon, “Ontario Business Community Critical,” Financial Times, 1 May 1991, 6; Dana Flavelle, “Business Fears Budget Will Slow Any Recovery,” TS, 1 May 1992, D1; Art Chamberlain, “Raising Taxes Will Kill More Jobs,” TS, 20 May 1993, C1; Maureen Murray and John Spears, “Businesses Call New Measures Only ‘a Drop in the Bucket,’” TS, 6 May 1994, C3. 80 M. Maychuk, “Business, Labour at Odds on Budget,” TS, 30 April 1991, A19; “Tough Times Budget, Wilson Says,” CNW, 1 May 1992; Thomas Walkom, “No More Party of the Underdog,” TS, 22 May 1993, D1; Virginia Galt, “Business, Labour Disappointed,” GM, 6 May 1994, A9. 81 The Social Contract legislation subjected the members of unions who refused to negotiate to an additional penalty; Stephen McBride, “The Continuing Crisis of Social Democracy,” Studies in Political Economy 50 (1996): 88. Also see V. Galt, “Controversial Budget Casts Pall over SocialContract Talks,” GM, 21 May 1993, A8; G. Scotton, “Ontario Bargaining to Begin in Earnest,” FP, 21 May 1993, 6. 82 J. Armstrong, “‘Fair Tax’ Commission to Pave Way for Change,” TS, 21 November 1990, A10; Fair Tax Commission, “Fair Tax Commission Releases Its Report,” CNW, 16 December 1993. 83 Ontario PC Party, The Common Sense Revolution (Toronto, 1994), 1–2, 5–10. 84 William Walker, “The Axe Falls 3 Weeks in Power,” TS, 22 July 1995, A1; Martin Mitttelstaedt, “Ontario Tories Slash Spending by $1.9 billion,” GM, 22 July 1995, A1. 85 W. Walker, “It’s Pay as You Go User Fees for Services Seen as Tories Cut Wide and Deep,” TS, 30 November 1995, A1; Murray Campbell, “The Common Sense Revolution Moves on to a Phase That Reveals the Harris Tories as Sternly Ideological,” GM, 30 November 1995, A6; M. Mittelstaedt, “Ontario to Cut $6-Billion in 3 Years,” GM, 30 November 1995, A1. 86 M. Mittelstaedt, “Ontario to Chop $1.4-Billion,” GM, 8 May 1996, A1; K. Toughill, “Here’s What the Budget Does,” TS, 8 May 1996, A1; CTF, FN 1996, 2:13–14. 87 James Rusk, “Election Turn Signal Is Blinking,” GM, 7 May 1997, A6; Rusk, “Ontario’s Growth Will Shrink Deficit,” GM, 17 October 1997, A4. 88 Bruce Little, “The Ontario Tories Discover High Cost of Revolution,” GM, 7 May 1997, A6; Jennifer Lewington, “Turnaround Results in Modest

316  Notes to Pages 92–3 Funding Hikes,” GM, 5 May 1999, A11; Jeffrey Simpson, “Harris Tories Join the Health Game,” GM, 5 May 1999, A14. 89 Calculations based on a comparison of combined capital and operating expenditures for 1995–6, reported in CTF, FN 1997, 2:16, with combined total expenditures for 1997–8 and estimated total expenditures for 1999– 2000, as reported in FN 1999, 2:12. These are the most comparable figures available for Ontario. Inflation is measured with the Ontario Consumer Price Index (CPI). 90 Carrie Buhanan, “Business Grants Going,” Ottawa Citizen, 25 October 1995, C7; CTF, FN 1997, 2:16–17; FN 1998, 2:13–15; and FN 1999, 2:11–13. On the property tax reform, see Carolyn Abraham, “Ontario Passes New Property Tax Law,” Hamilton Spectator, 27 May 1997, B1; “Eves Promises to Balance Business Taxes,” GM, 11 February 1998, A8; and J. Armstrong and R. Mackie, “Ontario Caps Business Property Tax,” GM, 28 March 1998, A1. 91 R. Mackie, “Election Budget Chops Taxes,” GM, 5 May 1999, A1. 92 Robert Benzie, “Budget Brandishes 67 Tax Cuts,” NP, 3 May 2000, A10; Benzie and Les Perreaux, “Rebates Spell End to Public Schools,” NP, 10 May 2001, A11; R. Ferguson, “Tories Committed to More Cuts,” TS, 18 June 2002, D11; Madhivi Acharya-Tom Yew, “Capital Tax Headed for Scrap Heap,” TS, 28 March 2003, E3. 93 Based on a comparison of 1998–9 budget figures with those for 2002–3; CTF, FN, 2000, 2:17; FN, 2004, 2:15. Adjusted for inflation using the Ontario CPI. 94 This goal was announced in the PCs’ 1995 program, which asserted that “Canadians are probably the most over-governed people in the world,” adding, “It is rare for politicians and bureaucrats voluntarily to surrender power. But it must happen”; Ontario PC Party, Common Sense Revolution, 17. 95 Steven Theobald, “Business Reaction to Tax Cut Is Mixed,” TS, 7 May 1997, C10; R. Ferguson, “Firms Get Taste of Tax Breaks,” TS, 5 May 1999, 1. 96 John Barber, “Hampton Offers to Restore Health and Education Funds by Cancelling Tax Cuts,” GM, 6 May 1999, A13; “Hampton’s Plan Overly Ambitious” (editorial), TS, 26 September 2003, A26. 97 Bernard Weil, “Opposition Decries Harris ‘Hoax,’” TS, 5 May 1999, 1; Ontario Liberal Party, Growing Strong Rural Communities (Toronto, 2003), 15–16. 98 Daniel Girard, “Bill Proposes Cabinet Ministers Balance the Budget or Get Fined,” TS, 15 December 1998; Jane Coutts, “McGuinty Pledges BalancedBudget Law,” GM, 14 May 1999, A1. The Liberals, like the NDP, had rejected legislation of this kind. 99 Henry Jacek, “The New World of Interest Group Politics in Ontario,” in The Government and Politics of Ontario, ed. G. White, 5th ed. (Toronto: UTP, 1977), 325.

Notes to Pages 93–5  317 100 Two themes addressed in this paragraph were often mentioned by interviewed Ontario government officials: the PCs’ reference to The Common Sense Revolution as their mandate, and their preference for informal meetings with kindred interests. 101 Ontario Ministry of Finance, “Province Launches Widest-Ranging Budget Consultations Ever,” news release, 6 December 2001. The anti-tax group was the Canadian Taxpayers’ Federation; “Flaherty under Fire for Budget Discussions,” TS, 14 March 2002, A25. 102 A similar premium was abolished by the Liberals before they left power in 1990. James McCarten, “Health Premiums to Pay for Ontario’s New Spending in Health, Education,” CP, 18 May 2004; Gloria Galloway, “Promise to Hold Taxes Had to Go, Liberals Say,” GM, 19 May 2004, A4; Katherine Harding and Galloway, “Health-Care Premiums Reinstated,” GM, 19 May 2004, A6. 103 April Lindgren, “Ontario to End Hydro Price Freeze,” NP, 31 October 2003, A9; Ontario Ministry of Finance, “McGuinty Government Gives Municipalities Tools to Ease Residential Property Tax Burden,” news release, 15 March 2004; Scott Stinson, “Businesses Allege Liberal Tax ‘Betrayal,’” NP, 16 March 2004, A1; M. Mittelstaedt, “End to Hydro Subsidy Will Deliver Rate Shock,” GM, 19 May 2004, A5. 104 R. Mackie, “Education and Health Upgrades in Exchange for Tax and Deficits,” GM, 19 May 2004, A1; Katherine Harding, “Cuts to OHIP Will Be Painful, Critics Warn,” GM, 19 May 2004, A6. 105 M. Campbell, “Sorbara Plays It Safe,” GM, 12 May 2005, A1; Kevin McGran, “Province Banks on Transit,” TS, 24 March 2006, A1; M. Mittelstaedt, “New Green Initiatives to Come within Weeks,” GM, 23 March 2007, A9; Office of the Premier of Ontario, “McGuinty Government Uploads $935 Million in Social Programs from Municipalities,” CNW, 20 August 2007. 106 CTF, FN, 1997, 2:16 (for 1995–6, for which total operating and capital expenditures are summed), FN, 2005, 2:10; FN, 2008, 2:11. Adjusted for inflation using the Ontario CPI. 107 K. Howlett, “Spending Boost for Hard Times Ahead,” GM, 26 March 2008, A1; Jordana Huber, “Liberals Unveil ‘Prudent’ Ways to Aid Economy,” Ottawa Citizen, 26 March 2008, A3; R. Benzie, “Recession-Fighting Plan Features Business-Friendly Tax Changes,” TS, 27 March 2009, A01; Steve Arnold, “On Borrowed Time,” Hamilton Spectator, 27 March 2009, A17; Allison Hanes, “Queen’s Park Takes Back Services,” NP, 1 November 2008, A11; Tyler Hamilton, “Ontario Plans a Massive Boost to Its Electricity Grid,” TS, 22 September 2009, B01.

318  Notes to Pages 95–6 108 CTF, FN, 2008, 2:11; FN, 2010, 2:15. Figures were adjusted for inflation using the Ontario CPI. The Liberals planned to reduce the corporate income tax rate to 10% in 2013, but later cancelled this final reduction. 109 K. Howlett, “Deficit Forces Spending Choices on Ontario,” GM, 21 October 2009, A7; R. Ferguson, “Deficit-Saddled Ontario Shuns Sweeping Cuts,” TS, 27 October 2009, A06. 110 Maria Barbage, “Ontario Announces $1.5 Billion All-Day Learning for Four- and Five-Year-Olds,” CP, 12 January 2010; K. Howlett, “Ontario to Unveil 7-Year Plan for Balancing Budget,” GM, 23 March 2010, A6; Tavia Grant, “Facing Years of Deficits, Ontario Freezes Wages,” GM, 25 March 2010; K. Howlett, “Duncan Warns of Tough Times Ahead in Ontario,” GM, 18 November 2010. 111 CTF, FN, 2010, 2:15. Figures were adjusted for inflation using the Ontario CPI. 112 Ontario Progressive Conservative Party, “Budget Misses Opportunity to Help Real People,” CNW, 11 May 2005; R. Benzie, “Getting Ontario Back to Work,” Kitchener-Waterloo Record, 26 March 2008, A4; Laurie Monsebratten, “Poor Get Savings Programme,” TS, 26 March 2008, A14. There were inconsistencies in Tory’s position; Ian Urquhart, “Miscues Aside, Tory Raises Stature in Debut,” TS, 30 March 2005, A21. 113 Andrew Steele, “Cuts Ontario vs Open Ontario,” GM, 24 March 2010. 114 R. Brennan, “Hudak: Cut Wages Deeper,” TS, 26 March 2010, A11; R. Benzie, “Tory Leader Takes Shot at ‘Nanny Premier,’” TS, 18 May 2010, A6. 115 Keith Leslie, “Ont. Economy Doing Better Than Expected,” CP, 1 November 1995; K. Howlett, “Property Tax Reform Underlined in Budget,” GM, 23 March 2007, A1; L. Monsebratten, “Housing, Child Benefit Items Praised,” TS, 27 March 2009, A12. 116 For examples of business and labour views, see Claudia Cattaneo, “McGuinty May Push Head Offices Westward,” FP, 6 October 2003, 1; Steve Erwin, “Ont. Budget Gives Toronto Money for Transit, Roads,” CP, 23 March 2006; David Friend, “Ontario Budget Cuts Small Business Tax by Half,” CP, 22 March 2007; Ontario Chamber of Commerce, “Ontario Budget Lays Foundation for Stronger Economic Growth,” CNW, 26 March 2009; Romina Maurino, “Unions Vow to Protect Their Wages after Budget,” CP, 26 March 2010. 117 This was the view of five interviewed Ontario business and labour spokespersons. 118 M. Campbell, “Stretched Dollars, Broken Budgets,” GM, 22 February 2005, A10.

Notes to Pages 99–103  319 4. Social Assistance and Transfers: Redistributing, but Differently 1 It is difficult to document the absence of an influence, but the available research sources do not indicate that ideas about Quebec nationhood, or a plausible substitute for it, such as the natalist preferences documented in chapter 5, played a noteworthy role in determining social assistance or child benefit policies during our period. 2 This discussion is informed by Rodney Haddow and Thomas Klassen, Partisanship, Globalization and Canadian Labour Market Policy (Toronto: UTP, 2006), 218–23, but that study paid less attention than I do here to child benefits. 3 Thomas Lemieux and Kevin Milligan, “Incentive Effects of Social Assistance,” National Bureau of Economic Research, Working Paper 10541 (Cambridge, MA: NBER, 2004), 5–6, 47; CP, “Quebec Youths on Welfare Say Aid Leaves Them Hungry,” GM, 31 May 1984, 10. 4 CP, “PQ Unveils Last Stage in Work Plan,” GM, 18 September 1980, 9; Margot Gibb-Clark, “PQ Job Proposals a ‘Calculated’ Risk,” GM, 14 November 1983, 1. In 1984, the PQ Cabinet apparently considered a proposal from Pauline Marois to increase benefits for young employable recipients, but it was not implemented; CP, “Welfare Increase, Tax Reform Expected in Quebec Address,” GM, 16 October 1984, N5. 5 Evidence on this point is presented at the end of this chapter. 6 Jacques Bouchard, “Réforme de l’aide sociale au Québec,” LP, 24 April 1986; “PLQ et l’aide sociale,” LP, 2 February 1985; “Bernard Landry s’oppose à la parité chez les moins de 30 ans,” LP, 23 February 1985. 7 Mario Roy, “Début des visites à domiciles des inspecteurs de l’aide sociale,” LP, 17 May 1986; Gilbert Brunet, “Le rythme des ‘coupures’ chez les assistés sociaux se maintient à 20%,” LP, 15 January 1987; Human Resources Development Canada (HRDC), Social Security Statistics, Canada and the Provinces, 1978–79 to 2002–03 (Ottawa: Supply and Services Canada, 2002), table 361. 8 Denis Lessard, “Baisse de revenus pour 78 000 assistés sociaux,” LP, 8 May 1990, A1; PC, “Les assistés sociaux préparent, pour l’automne, une grande riposte à la loi 37,” LP, 27 July 1990, B1. The law permitted a deduction for young people based on an assumed parental contribution to their upkeep, but this was not implemented. 9 D. Lessard, “Québec assouplit la réforme de l’aide sociale,” LP, 15 June 1990, C12; PC, “Nouvelles améliorations au régime d’aide sociale,” LP, 16 March 1992, A9.

320  Notes to Pages 103–4 10 Jean Francoeur, “Des ‘boubou-macoutes’ dotés des pouvoirs élargis,” LD, 8 October 1992, B1; D. Lessard, “Bourbeau proposera de nouveau barèmes pour l’aide sociale,” LP, 12 February 1993, A1; Lessard, “Le chèque mensuel des assistés sociaux serait amputé de 30$,” LP, 12 March 1993, A1; Lessard, “Les assistés sociaux vont passer à la … caisse de la RRQ,” LP, 2 April 1994, A1; Lessard, “Québec resserré une autre prime d’aide sociale,” LP, 19 April 1994, A1. 11 Jean-Pierre Bonhomme, “Le Front commun des assistés sociaux prédit un été ‘dur,’” LP, 10 April 1990, A18; François Berger, “Des organismes tenteront d’embourber la machine,” LP, 22 July 1990, A1. 12 Conrad Bernier, “37 jours de protestation contre la loi 37,” LP, 11 September 1990, A12; Norman Delisle, “Le ministre André Bourbeau envisage deux modifications à l’aide sociale,” LP, 13 May 1992, B8; F. Berger, “Les bureaux de l’aide sociale occupés par des manifestants victimes du couperet,” LP, 1 August 1990, B1; CP, “Churches Won’t Help with Welfare Inspectors,” Hamilton Spectator, 30 October 1992, B11; Jules Béliveau, “Le ministre Bourbeau ne devrait pas compter sur la délation des curés,” LP, 22 December 1992, A3; D. Lessard, “Jacoby dénonce le manque de cohésion ‘sur le dos des citoyens’ des organismes d’État,” LP, 12 April 1990, B1; Roland-Yves Carignan, “Les assistés sociaux manifestent leur grogne au bureau de Bourbeau,” LP, 3 August 1990, B1; Michel Venne, “Trois ‘chiens de garde’ préviennent Bourbeau contre les abus,” LD, 26 November 1992, A1; Louise Boivin, “Les assistés sociaux contestent deux dispositions jugées discriminatoires,” LP, 5 February 1994, A4. 13 F. Berger, “Le ministre Bourbeau tente de se reprocher des assistés sociaux,” LP, 6 April 1991, A11; “Des groupes d’assistés sociaux retirent leur concours à Québec,” LP, 5 September 1992, A2. 14 The National Council of Welfare’s (hereafter NCW) LICO calculations were the best available measure of benefit adequacy during these years. The LICO figures indicate that the adequacy of basic benefits for a single mother with one child rose somewhat in Quebec between 1986 and 1994, when the Liberals left office; adequacy rose markedly for single employable persons. It fell marginally for a family of two parents and two children, and was stable for disabled persons. The NCW was abolished by the federal government in 2012. The welfare incomes adequacy data used here, accessible for this author from a federal government site in 2012, apparently was no longer available from that source in 2014; for the years since 1992 the data nevertheless could be found at National Council of Welfare, http://web.archive.org/ web/20120920183257/http://www.ncw.gc.ca/l.3bd.2t.1ilshtml@-eng.

Notes to Pages 104–5  321 jsp?lid=331&fid=32, accessed 5 August 2014. For 1986 and 1989–2003, adequacy data is in National Council of Welfare, Welfare Income, 2003 (Ottawa: Minister of Supply and Services, 2004), 63–6. In 2014, this report was available in Welfare Incomes 2003, 2004, National Council of Welfare Reports, http://tdrc.net/resources/public/WelfareReport.pdf. 15 HRDC, Social Security Statistics, Canada and the Provinces, 1978–79 to 2002–03, table 361. 16 Vincent Marissal, “Guerres aux fraudeurs du BS,” LS, 14 March 1995, A1; D. Lessard, “Aide sociale: Québec coupera les vivres à ceux qui refuseront de suivre des cours,” LP, 30 March 1995, A1. 17 D. Lessard, “Aide sociale,” LP, 22 November 1995, B8; Katia Gagnon, “Compressions à l’aide sociale,” LS, 25 November 1995, A17; V. Marissal, “Aide sociale,” LS, 19 January 1996, A6. 18 Jean-Marc Salvert, “Caucus du PQ: La reforme Harel dans la mire des députes,” LS, 8 October 1997, A7. 19 A deduction for shared accommodation was also ended for single mothers. D. Lessard, “Québec serre la vis aux jeunes bénéficiaires de l’aide sociale,” LP, 19 December 1997, B1; Mario Cloutier, “Harel bonifie le régime d’aide sociale,” LD, 19 December 1997, A1; Cloutier, “Harel assouplit sa réforme,” LD, 18 June 1998, A1. 20 Sarah Scott, “Business Puts on a Happy Face,” Gazette, 2 November 1996, A13; J. Salvet, “Les ténors de l’État pavoisent,” LS, 25 February 2000, A3. 21 Pierre Vennat, “La réforme du bien-être social dans un cul-de-sac,” LP, 24 July 1990, B2; V. Marissal, “Sortir 100 000 ménages de l’aide sociale, pour aller où?,” LD, 29 January 1997, B8; Valerie Dufour, “Les priorités de Bernard Landry,” LD, 23 March 2001, A3. 22 Marie-Claude Lortie, “La pénalité aux colocataires assistés sociaux sera abolie,” LP, 25 February 2000, A14; R. Dutrisac, “Solidarité Jeunesse sera offert à tous les jeunes assistes sociaux,” LD, 18 March 2000, A9; Michel Hebert, “215 000 signatures en faveur de l’élimination de la pauvreté,” LP, 23 November 2000, A15; Tommy Chouinard, “Une nouvelle loi antipauvreté en cadeau,” LD, 14 December 2002, A12. 23 Mark Thibodeau, “Blackburn crée la Conférence permanente sur la sécurité du revenue,” LD, 6 December 1994, A7; PC, “Dix groupes retirent leur collaboration,” LS, 6 December 1995, A8. 24 Lia Levesque, “Aide sociale: Le Livre vert d’Harel soulève déjà des critiques,” LD, 11 December 1996, A4; V. Marissal, “La réforme Harel prise à partie,” LS, 12 February 1997, A8; Michel Hebert, “Le réforme de l’aide sociale,” LD, 14 February 1997, A2; Alain Bouchard, “Les assistés sociaux promettent une révolte carabinée,” LS, 27 March 1997, A7; D. Lessard, “Québec ne peut offrir des parcours d’insertion individualisés qu’à 46%

322  Notes to Pages 106–7 des jeunes assistés,” LP, 14 May 1998, B7; PC, “Les évêques sont contre la refonte de l’aide sociale,” LD, 11 June 1998, A4. 25 PC, “Lutte à la pauvreté,” LS, 12 January 2002, A10. 26 The NCW’s LICO calculations indicate that benefit adequacy declined by 3% for single employable persons and for families consisting of two parents and two children during these years, and by 6% for single mothers with one child. But these calculations do not reflect the benefit of Quebec’s child benefits reform to low-income families with children who did not rely on assistance. The NCW data show no significant change for disabled persons during this period; see note 14 for the source for NCW data. Figure 4.1 indicates that the caseload fell significantly in Quebec after 1998, but this is likely to have been strongly influenced by the improving economy; the caseload was already declining when the legislation was implemented. It represented the same share of Quebec’s population – around 8% – at three economic peaks encompassed by the figure: 1980, 1989, and 2000. That it continued to fall after 2000 in a context of consistently quite low unemployment, I shall suggest below, probably reflects the impact of the province’s child benefit reforms. 27 See, for instance, M. Venne, “Sortir les enfants du BS,” LD, 16 March 1996, A10. 28 NCW, Welfare Incomes 2005 (Ottawa: Ministry of Public Works, 2006), 53–4. 29 Quebec, Office of the Premier, “Allocution du premier ministre du Québec, M. Lucien Bouchard, à l’occasion de la présentation de la nouvelle politique familial,” news release, 23 January 1997, 4–5. 30 Support for income testing became common in Canada, including Quebec, during the 1970s; see R. Haddow, Poverty Reform in Canada (Montreal and Kingston: MQUP, 1993), chap. 5. On the two committee reports, see Venne, “Sortir les enfants du BS.” On the views of ministry officials, see Konrad Yakabuski, “Réforme de l’aide sociale,” LD, 30 November 1995, A4. The PQ income security minister had already indicated an interest in incometested child benefits when he launched the Bouchard-Fortin committee in June 1995; Yakabuski, “L’objectif n’est pas de couper,” LD, 20 June 1995, A1. The government then drew the committee’s attention to this policy option, not the converse. 31 Jacques Benoit, “72% des familles vont recevoir moins de Québec,” LP, 19 December 1997, C2; Robert Baril, Pierre Lefebvre, and Philip Merrigan, “La politique familiale au Québec,” LP, 18 March 1998, B3; D. Lessard, “Boisclair reconnaît que Québec s’interroge sur le ‘bébé-bonus,’” LP, 17 October 1996, B1; André Pratte, “Les primes à la naissance sont ‘dans les cartons’ du Conseil de la famille et de l’ADQ,” LP, 31 January 2001, A5.

Notes to Pages 107–9  323 32 Françoise David, Huguette Labrecque-Marcoux, and Sylvie Lévesque, “La politique familiale du Québec,” 18 April 1997, 1–2. This was an official submission to a National Assembly committee on behalf of the FFQ and two other organizations. 33 PC, “Moins d’enfants mais plus de frais,” LS, 5 May 2001, A26. 34 Ruth Rose, “La politique de soutien au revenu des familles du Québec,” Fédération des associations de familles monoparentales et recomposées du Québec, February 2001; Rose, “Pour un État socialement responsable,” January 2004, 16. The latter was a memorandum submitted to the Quebec minister of finance on behalf of fourteen groups, including the FFQ. The “clawback” was suspended in May 2000, and abolished in 2001; NCW, Welfare Incomes 2005, 56. 35 M. Venne, “La compassion libérale,” LD, 15 June 1998, A8; Venne, “Les jeunes assistés sociaux au travail ou aux études,” LD, 12 September 1998, A7; Venne, “Vous avez dit à gauche?,” LD, 29 May 2001, A6; T. Chouinard, “Les libéraux veulent un barème plancher à l’aide sociale de 515 $ par mois,” LD, 11 December 2002, A5. 36 Bulletin national, SRC Radio, 13 June 2003, 6 p.m.; T. Chouinard, “Tolérance zéro pour les assistes sociaux aptes au travail,” LD, 4 July 2003, A1; Tristan Péloquin, “Le Québec, dernière province à appliquer le workfare,” LP, 5 July 2003, B4; Karim Benessaieh, “Aide sociale,” LP, 8 July 2003, A4; Le Téléjournal / Le Point, SRC Télévision, 29 November 2003, 9 p.m.; Kathleen Levesque, “Un mur de silence à l’aide social,” LD, 17 February 2004, A3. 37 T. Chouinard, “Le colère gronde chez les libéraux,” LD, 2 October 2003, A1; Chouinard, “Une promesse irréaliste,” LD, 11 December 2003, A3. 38 Josée Boileau, “Le chèque et la vie,” LD, 3 April 2004, B4; D. Lessard, “Lutte contre la pauvreté,” LP, 3 April 2004, A4; Brigitte Breton, “Locataire assisté,” LS, 17 June 2004, A16; T. Chouinard, “Nouvelles pénalités à l’aide sociale,” LD, 22 September 2004, A1; Chouinard, “Forte opposition à la tutelle volontaire,” LD, 25 November 2004, A2. APPORT was available only to families with children; it was replaced by Soutien aux emplois, discussed below. Prime au travail extended coverage to all low-income earners. While APPORT had 30,000 clients in 2004, about 500,000 were considered eligible for the new Prime. See Frédéric Perron, “Ça s’explique,” bobboom, http://www.jobboom.com/magazine/27-04-texte. html, accessed 5 August 2014. 39 T. Chouinard, “Les assistés sociaux continueront de s’appauvrir,” LD, 1 December 2004, A2; D. Lessard, “Les compressions aux oubliettes,” LP, 14 April 2005, A1. An anti-poverty activist calculated that between 2004 and 2008 partial indexation caused rates for employable individuals to

324  Notes to Pages 109–10 decline by 5%; Alexandre Shields, “La guignolée soulage mais ne remplace pas un plan de lutte contre la pauvreté,” LD, 5 December 2008, A4. This assessment is largely borne out by the data presented below in part D of figure 4.3, using the MBM methodology. The LICO measurement (part B of that figure) indicates less change. The Liberals fully indexed benefits the following spring; Kevin Dougherty, “Quebec Declares ‘War on Poverty II,’” Gazette, 10 April 2009, A6. 40 Simon Boivin and Michel Corbeil, “Statut particulier pour les 16 à 24 ans,” LS, 29 March 2006, A1; T. Chouinard and Pascale Breton, “Les médicaments gratuits pour les assistés sociaux,” LP, 27 January 2007, A14; A. Shields, “Hamad veut réinsérer sur le marché du travail les case les plus lourds,” LD, 8 May 2007, A2; Paul Roy, “Les dons en nature sont acceptables, confirme le ministre Hamad,” LP, 15 June 2007, A11; MarcAndré Boisvert, “Des mesures pour sortir les jeunes de l’aide sociale,” LS, 19 June 2007, 14. 41 Martin Ouellet, “Le PLQ accuse Dumont de vouloir faire payer les pauvres,” LD, 17 February 2007, A3; R. Dutrisac, “Neuf mois pour réduire de 25 000 le nombre d’assistés sociaux,” LD, 21 March 2007, A1; Catherine Handfield, “Le projet des jeunes adéquistes dénoncé,” Le Droit, 19 November 2007, 13. 42 K. Dougherty, “Billion-Dollar Carrot Held Out to Welfare Recipients,” Gazette, 19 March 2008, A10; B. Breton, “Tout le monde au travail,” LS, 19 March 2008, 24; Karim Benessaieh, “Un demi-milliard pour contrer la crise,” LP, 24 March 2009, A10. 43 Interviewed Quebec anti-poverty activists expressed generally positive views about the Comité and its recommendations; see Bruno Bisson and Malorie Beauchemin, “Les coûts font mal aux plus démunis,” LP, 4 April 2008, A11; Membres du Comité AVEC, “Pour une véritable chance,” LD, 5 May 2009, A7. In the latter article, members of the Collectif support, with reservations, the Comité’s 2009 recommendations on categories and benefits. 44 Dougherty, “Quebec Declares ‘War on Poverty II’”; “Les consultations sur la pauvreté et l’exclusion s’arrêtent à Montréal,” CNW, 23 November 2009. 45 Annie Mathieu, “Le gouvernement lance un programme de 7 milliards $ pour combattre la pauvreté,” PC, 6 June 2010; Martin Ouellet, “Les femmes vont faire les frais des coupes à l’aide sociale, accuse le PQ,” PC, 10 June 2010. 46 For an example of Liberal advocacy of a return to the universal allowance, see M. Cloutier, “Aide aux familles: Copeman met en garde le PQ,” LP, 15 February 2003, A13; For the Liberal leader’s stress on tax cuts, see Jean Charest, “QLP Action Plan for Quebec’s Families,” CNW, 23 March 2003.

Notes to Pages 110–13  325 47 On the IRPP’s lobbying, see P. Breton, “Deux chercheurs recommandent le rétablissement de allocations familiales universelles,” LP, 11 October 1993, A26. For Rose’s argument, now endorsed by the FFQ and many other groups, see “Pour un État socialement responsible.” 48 D. Lessard, “Québec rétablit les allocations familiales,” LP, 5 March 2004, A3; K. Levesque, “Coup de cœur pour les familles,” LD, 31 March 2004, A4. 49 Based on calculations presented in Stéphanie Grammond, “Un changement PAYANT pour les familles,” LP, 26 February 2006, A3. 50 L. Levesque, “Juste avant les élections, Hamad fait le bilan de lutte contre la pauvreté,” PC, 3 November 2008; Dougherty, “Quebec Declares ‘War on Poverty II.’” 51 P. Breton, “Le ministre Béchard veut simplifier les mesures d’aide,” LP, 27 March 2004, A15; T. Chouinard, “Les allocations familiales corrigeront certains iniquités, selon Béchard,” LD, 27 March 2004, A4; Martin Ouellet, “L’ADQ veut encourager les familles nombreuses,” LD, 17 November 2006, A2; Hugo De Grandpré, “Les libéraux chiffrent les promesses de l’ADQ,” LP, 10 March 2007, A15; A. Shields, “L’Association québécoise des CPE critique rudement l’ADQ,” LD, 19 March 2007, A3. 52 Le Collectif pour un Québec sans pauvreté often advocated improved benefits for the childless; see its “Dévoilement du Plan d’action gouvernemental pour la solidarité et l’inclusion sociale,” CNW, 7 June 2010. By 2010 this was also a concern for the government-appointed committee, which concentrated on older single persons; Comité consultatif de lutte contre la pauvreté, “Des actions concrètes pour contrer l’exclusion sociales des personnes qui vieillissent seules et pauvres,” CNW, 20 June 2010. Also see “Un groupe de femmes manifeste à Québec pour la justice sociale et l’égalité,” PC, 29 May 2010. 53 According to the MBM measure, discussed below, income adequacy for a single employable person fell by 6%; for a disabled individual the decline was 5%. The MBM measurement suggests modest improvements for families of two parents and two children (2%) and for a single parent with one child (3%). But, for reasons discussed in the conclusion to this chapter, the well-being of poor families with children probably improved more than these figures indicate. 54 Rigina Hickl-Szabo, “Ontario Task Force on Welfare System Swamped by Briefs,” GM, 3 February 1987, A11; Trish Crawford, “Welfare System Due for a Major Overhaul,” TS, 23 April 1987, A16. The report went well beyond income security, proposing an increase in the minimum wage, more social housing, and a new disability insurance program; Matt Maychak, “Give ‘Working Poor’ More Money to Meet Basic Needs, Report

326  Notes to Pages 113–15 Urges,” TS, 6 September 1988, A1; Mary Gooderham, “Ontario Report Urges $2.1 Billion Welfare Increase,” GM, 7 September 1988, A1; Leonard Shifrin, “Future of Social Reform Uncertain,” TS, 12 September 1988, A15. 55 CP, “Welfare Payments to Rise 5%,” GM, 11 November 1987, A3; Robert Sheppard, “Welfare Rolls Rise in Booming Ontario,” GM, 18 November 1987, A1. A “spouse in the house” rule denied benefits to recipients who cohabited with an employed partner. 56 STEP stood for Supports to Employment Program. Derek Ferguson, “Sweeney Aims at Ending Welfare Trap,” TS, 19 May 1989, A12; Gene Allen, “Ontario Welfare Reform Praised,” GM, 23 May 1989, A15. 57 Policy experts did favour them. See L. Shifrin, “Welfare Reform Strategy Flawed,” TS, 6 March 1989, A17. 58 Gene Allen and Richard Mackie, “Rae Vows to Fight Inequality,” GM, 2 October 1990, A1; Mackie, “Ontario Pledges to Fight Recession,” GM, 21 November 1990, A1. 59 All figures are for 31 March and are rounded to the nearest 10,000; HRDC, Social Security Statistics, Canada and the Provinces, 1978–79 to 2002–03, table 361. 60 Statistics Canada, CANSIM, table 3850001, vector 632247. The reported figures are in current dollars. 61 D. Ferguson, “Province to Lose $500 Million Next Fiscal Year Treasurer Warns,” TS, 21 February 1990, ME1; R. Mackie and Rheal Seguin, “Ontario Expresses Anger over Federal Economic Plan,” GM, 4 December 1992, B7. 62 D. Ferguson and M. Maychak, “Ontario Puts Welfare Reforms on Hold,” TS, 27 February 1991, A1; Linda Hossie, “NDP Boosts Funds for Social Assistance,” GM, 30 November 1990, A6; Paula Todd, “Ontario Moves to End Backlog in Welfare Cases,” TS, 27 March 1991, A10; Todd, “NDP Eases Welfare Rules for Low-Income Workers,” TS, 2 May 1991, A20; M. Maychak, “Welfare to Rise by Only 2%,” TS, 4 December 1991, A13; Martin Mittelstaedt, “Ontario Welfare Payments to Rise by 1 per cent,” GM, 28 January 1993, A5; Kelly Toughill, “Rae’s Grand Plan for Welfare Reform Flops,” TS, 1 April 1995, B4. 63 The quote is from Thomas Walkom, “Visceral Issue of Campaign Is Welfare ‘Reform,’” TS, 13 May 1995, SA2. Also see Lois Sweet, “Recession Sparks Anger over Welfare,” TS, 1 June 1991, A1; CP, “Public Seeks Welfare Changes,” GM, 25 August 1993, N4. 64 Toughill, “Rae’s Grand Plan for Welfare Reform”; M. Mittelstaedt, “Sir Bob Takes on the Armada,” GM, 19 February 1993, A1; R. Mackie, “Rae Softens Comments on Welfare,” GM, 11 February 1993, A4.

Notes to Pages 115–16  327 65 T. Walkom, “Can Ontario’s NDP Save Itself?,” TS, 26 March 1994, B1. Benefits nevertheless fell for two-adult families in 1994; Haddow and Klassen, Partisanship, Globalization, and Canadian Labour Market Policy, 214. The second of these events was described in separate interviews with two officials who worked in the Community and Social Services Ministry at the time. Mandatory employment measures had already been discussed in a November 1992 ministry document, also rejected by the NDP; M. Mittelstaedt, “NDP Winnows Out Harshest of Proposed Changes,” GM, 30 January 1993, A7. 66 P. Todd, “Making Welfare Work,” TS, 19 April 1992, B1; Helen Henderson, “How You Can Participate in Ontario’s Job Program,” TS, 16 May 1992, G3; Leslie Papp, “Success of Jobs Program a $365 Million Question,” TS, 1 October 1994, A14. 67 R. Mackie, “Ontario to Revamp Welfare,” GM, 6 July 1993, A6; K. Toughill, “Huge Welfare Reform Planned,” TS, 8 July 1993, A1; M. Mittelstaedt, “Ontario to Overhaul Welfare,” GM, 9 July 1993, A1. 68 William Walker, “Municipalities off Hook for Welfare as Ontario Agrees to Pay Whole Tab,” TS, 22 January 1993, A1; Royson James, “Ontario’s Welfare Takeover in Jeopardy,” TS, 3 March 1993, A6; K. Toughill, “NDP to Fall Short on Ambitious Plan for Welfare Reform,” TS, 25 January 1994, A1; L. Papp, “Hard Times Inevitable,” TS, 23 February 1994, A14; Craig, “Ontario Job Plan Falls Short of Goal,” GM, 22 June 1994, A5; McInnes, “Axworthy Gives Ontario $25-Million Peace Offering,” GM, 29 July 1994, A3. 69 “Coalition Prods NDP,” GM, 26 November 1990, A9; K. Toughill, “NDP Eyes Making Welfare Recipients Work,” TS, 29 January 1993, A1; Jack Lakey, “Hundreds Protest Cutbacks to Welfare,” TS, 15 April 1994, A11. 70 Bob Brent, “Unions Oppose Welfare Volunteers as ‘Cheap Labour,’” TS, 12 January 1994, A6. Labour representatives also questioned income-tested benefits, arguing that these might subsidize low-wage employment; K. Toughill, “Debate Rages as NDP Eyes New Plan for Working Poor,” TS, 2 August 1993, A2; D. Ferguson and Susan Reid, “Leave Door Open, Food Banks Told,” TS, 30 November 1990, A12; L. Sweet, “Recession Sparks Anger over Welfare,” TS, 1 June 1991, A1; Barbara Aarsteinsen, “Metro Activists Declare War on Welfare System Cutbacks,” TS, 27 March 1993, A3; W. Walker, “NDP Puts Welfare Cuts on the Table,” TS, 21 March 1994, A1. 71 W. Walker, “Welfare Panel Includes Real Experts,” TS, 2 April 1993, A1. On business support for Harris’s subsequent assistance cuts, see Michael Valpy, “Why the Cheers?,” GM, 25 July 1995, A11.

328  Notes to Pages 117–18 72 Harris made social assistance central to his attack on the NDP as early as 1991; “Correct Welfare ‘Flaws,’ NDP Told,” TS, 24 October 1991, A12. Also see M. Mittlestaedt, “NDP Winnows Out Harshest of Proposed Welfare Changes,” GM, 30 January 1993, A7; L. Papp, “Tory Welfare Plan Leaves Sour Taste,” TS, 11 May 1994, A10. 73 M. Mittelstaedt, “Harris Warns Ontario to Brace for Massive Cuts,” GM, 20 July 1995, A6; Laurie Monsebraaten and K. Toughill, “Welfare Cuts to Hit 500,000,” TS, 20 July 1995, A1; M. Mittelstaedt, “Ontario Tories Target Welfare Fraud,” GM, 22 August 1995, A1; Murray Campbell, “Ontario’s Welfare Fraud ‘Hotline’ in Operation,” GM, 3 October 1995, A10. 74 K. Toughill, “Tsubouchi Rules Out Welfare Earnings Grab,” TS, 4 October 1995, A9; Toughill, “Rebate a Cynical Ploy,” TS, 7 September 1995, A12. 75 M. Mittelstaedt, “Ontario Screens for ‘Truly Disabled,’” GM, 11 October 1995, A11; “Ontario Government Admits Error,” GM, 18 October 1995, A10. For later developments, see Margaret Philp, “Benefits Rules to Be Less Onerous in Case of Disabled,” GM, 30 September 1997, D10; Roel Ruimy, “Move Takes Disabled Jobless off Welfare Rolls,” TS, 1 June 1998, A8; Caroline Mallan, “Ontario Finds Extra $50 Million for the Disabled,” TS, 6 May 2000, NE14. 76 This distinction in Tory policy was stressed by three interviewed current and past provincial officials who were familiar with policy development while that party was in power. 77 M. Mittelstaedt, “Ontario Launches Workfare Amid Jeers,” GM, 13 June 1996, A10; “Workfare Refusal to Carry Huge Penalties,” GM, 27 August 1996, A7. 78 R. Mackie and M. Philp, “Single Parents to Work for Welfare,” GM, 13 June 1997, A1; “The Good and Bad of Welfare Reform,” TS, 14 June 1997, B2. 79 M. Mittelstaedt, “Take Over Welfare, Ontario Told,” GM, 12 October 1996, A1; Mittelstaedt, “Municipalities Get Social-Service Tab,” GM, 15 January 1997, A4; James Rusk, “Tories Back Down on Offloading Plan,” GM, 2 May 1997, A5. 80 Mittelstaedt, “Ontario Launches Workfare Amid Jeers”; L. Monsebraaten, “Metro Gets Workfare but It Has a Softer Face,” TS, 31 March 1997, A6. 81 Jane Coutts, “15,000 Fell Off Welfare in July,” GM, 17 August 1999, A7; I. Urquhart, “Workfare Programme a Fraud,” TS, 18 August 1999, A1. 82 M. Philp, “Homeless Will Have to Show Receipts for Welfare,” TS, 3 February 1998, A3; J. Lakey, “New Rules Bar Some Car Owners from Welfare,” TS, 24 April 1998, A8; Kellie Hudson, “Workfare Off-Limits to Unions in New Bill,” TS, 15 May 1998, A8; “Sensible Welfare Plan,” TS, 9 March 1999, A1.

Notes to Pages 119–20  329 83 C. Mallan, “Tories Focus on Welfare Reform,” TS, 30 April 1999, A1. The “spouse in the house” rule, reinstated in 1995, was suspended by a review board in 1998. The province went to court to have this ruling overturned; R. Mackie, “Government to Appeal Welfare Ruling,” GM, 30 June 2000, A6; Tracey Tyler, “Spouse Rule Violates Charter, Court Says,” TS, 14 May 2002, A2; Tom Blackwell, “Drug Testing for Welfare Softens Edges,” NP, 20 July 2002, A12. 84 The benefit was called the Ontario Child Care Supplement for Working Families; L. Monsebraaten and K. Hudson, “More Cash for Poor Children Welcome,” TS, 19 June 1998, A6; Richard Brennan, “Ontario Boosts Child Care Aid,” TS, 30 December 1999, 1. 85 April Lindgren, “Tories Move to Raise Welfare for Families,” NP, 21 May 2003. This article points out that “the scheme went unmentioned in party press releases detailing highlights of the latest Tory election platform.” I found no other newspaper articles on the proposal, which was called the Ontario Child Benefit (OCB), but should not be confused with the Liberals’ later measure of the same name. The one available PC press release that referred to the OCB did so in the context of detailing Eves’s continuing effort to “crack down on those abusing the welfare system”; PC Party of Ontario, “Eves Cracks Down on Welfare Fraud – Invests in Children,” CNW, 11 June 2003. 86 W. Walker, “70% Support Tory Plans for Workfare,” TS, 28 April 1996, A15; CP, “Welfare Changes Supported,” GM, 18 August 1998, A6; Valpy, “Why the Cheers?”; R. Mackie, “Workfare Could Be Expanded to Private Sector,” GM, 9 February 1998, A6. 87 T. Tyler, “500 Protest ‘Shameful’ Harris Cuts,” TS, 30 July 1995, A2; L. Papp, “Workfare Protesters Invade Eateries,” TS, 21 July 1996, A6; CP, “Unions Want to Organize Workfare Participants,” TS, 29 January 1997, A11; Gay Abbate, “Anti-Workfare Rally Planned,” GM, 10 March 1998, A8; C. Mallan, “Province Pushes Cities on Workfare,” TS, 23 November 1999, A6; Susan Bourette, “Workfare Jobs Hurt Members,” GM, 6 July 2000, A17; 88 The two measures are the LICO and the ratio of assistance incomes to 50% of average incomes. According to the NCW, the adequacy of assistance benefits for a single parent with one child, using the LICO, rose by 17% between 1986 and 1994, then fell by 27% by 2003; the corresponding figures for two-parent / two-child families were +14% in the first period and -22% in the second; and for single employable persons, +8% in the first period and -17% in the second; NCW, various years; see note 14 for source URLs for NCW data. The pattern for the 50% of average income measure is similar. For disabled recipients, however, adequacy based on the LICO rose by only 3% between 1989 and 1994 and fell by 12% by 2003.

330  Notes to Pages 120–1 Its descent after 1995 was much more gradual and continued at a similar pace after 2003. This suggests that partisanship has affected it much less in Ontario. 89 Ontario Liberal Party, Achieving Our Potential: The Ontario Liberal Plan for Economic Growth (Toronto, 2003), 15. 90 Kate Harries, “Lifetime Welfare Ban for Fraud Repealed,” TS, 10 January 2004, A2; “Spouse in the House” (editorial), TS, 14 September 2004, A24; R. Brennan, “Welfare Changes Reduce Penalties,” TS, 16 December 2004, A4; Carol Goar, “Sound Footing for Welfare Reform,” TS, 10 May 2004, A18; Goar, “A Distressing Lack of Humanity,” TS, 3 December 2004, A26. 91 According to Campaign 2000, this was true for a family receiving Ontario Works that consisted of a single parent and one child. Its benefits increased by 7.2% between 2003 and 2007, while prices rose 8.9% during that period; Campaign 2000, 2007 Report Card on Child and Family Poverty in Ontario (Toronto: Campaign 2000, 2008), 5. 92 R. Ferguson and Robert Benzie, “Activists Protest ‘Diet’ Cut,” TS, 4 October 2005, A7; Kerry Gillespie and Benzie, “Province Closes Welfare Loophole,” TS, 8 November 2005, A2. 93 C. Goar, “Miserly Help for the Disabled,” TS, 17 February 2006, A22; K. Gillespie, “Unfair Burden Lifted off Disabled,” TS, 23 November 2006, A5; R. Ferguson, “Mom Struggles on $1,008,” TS, 15 January 2007, A1. 94 “Ontario’s Balancing Act” (editorial), GM, 23 March 2007, A22; Karen Howlett, “Property Tax Reform Underlined in Budget,” GM, 23 March 2007, A1. 95 Income Security Advocacy Centre (ISAC), “Ontario Child Benefit: Questions and Answers,” Income Security Advocacy Centre, October 2007, http://www.incomesecurity.org/documents/ISACOCBQandAOct07_000. pdf. Also see ISAC’s “Fact Sheet: Update,” Income Security Advocacy Centre, June 2009, http://www.incomesecurity.org/campaigns/ documents/RateRestructuringandChildBenefits-June2009.doc, accessed 4 August 2014. 96 See, for instance, CP, “Increase in City’s Child-Poverty Rates Reflects National Trends, Advocate Says,” GM, 1 July 2003, A12; K. Gillespie, “No Commitments Offered on Poverty Group’s Targets,” TS, 14 July 2007, A20. 97 The campaign was launched on 1 January 2007 with an editorial entitled “The Hidden Faces of Canada’s Poor,” A18. 98 C. Goar, “Prying Open the Welfare Trap,” TS, 16 September 2005, A24; “Fix Welfare Rules That Hurt Jobless” (editorial), TS, 24 March 2009, A14. Drummond’s interventions were mentioned by a number of interviewed observers.

Notes to Pages 121–3  331 99 “A Promise of Change” (editorial), TS, 21 February 2005, A18. On the origins of MISWAA, see Jennifer Lewington, “Coalition to Unveil Recommendations on Social Safety Net,” GM, 15 May 2006, A4; “Affordable Help for Working Poor” (editorial), TS, 16 May 2006, A20. 100 The Alliance’s letter was published in the Globe and Mail and the Toronto Star; “A Decent Living for All,” 20 March 2007. See Toronto City Summit Alliance, Toronto Summit 2007: Making Big Things Happen, 18–22, http:// www.civicaction.ca/sites/default/files/TCSA%20Summit-Making%20 big%20things%20happen%20report%20NOV%2020%2007-FINAL.pdf, accessed 4 August 2014. On the role of Pecaut and the Alliance’s business membership in lobbying for MISWAA, see K. Howlett, “Bankers, Activists Join Forces to Help the Province’s Poor,” GM, 10 April 2007, A11; and City of Toronto, “‘Toronto for All’ – Income Security,” Backgrounder, 18 June 2007. 101 Dollar figures are the maximum available. Both benefits are available to families with children under eighteen. The reduction in the Basic Needs allowance in Ontario is greater for children over twelve. The figures in the last column therefore blend these rates of reduction, weighing the underthirteen reduction three times more than the over-twelve one. Calculations of the reduction are based on Ontario Income Security Advocacy Centre, “Fact Sheet: Update,” June 2009. In addition to the reasons raised in the text, Quebec’s benefit should also have a greater poverty-reducing impact because incomes and the cost of living are lower there. 102 Liberal Party of Ontario, Moving Forward Together (Toronto: 2007), 18. 103 C. Goar, “Strong Voice for Ontario’s Poor,” TS, 31 October 2007, A6; M. Campbell, “Activists Want Progress on Poverty,” GM, 3 November 2007, A14. 104 C. Goar, “Glimmers of Hope in Poverty Fight,” TS, 17 October 2008, A6. 105 “Drawing Up a Poverty Plan” (editorial), 4 February 2008, A6. This target had already been advocated by Campaign 2000, a member of the new network. 106 Government of Ontario, “Breaking the Cycle,” CNW, 4 December 2008, 2. 107 Tanya Talaga and L. Monsebraaten, “Poverty Plan Slammed as an Empty Gesture,” TS, 26 February 2009, A1; Monsebraaten, “Advisers Aim to Fix Ontario’s Welfare ‘Quagmire,’” TS, 2 December 2009, A21. 108 Ontario Social Assistance Advisory Council, Recommendations for an Ontario Income Security Review (Toronto: Ministry of Community and Social Services, 2010); T. Talaga, “Ex-StatsCan Chief to Lead Welfare Reform,” TS, 30 November 2010, A6; C. Goar, “A Flurry of Announcements but Little Content,” TS, 6 December 2010, A17.

332  Notes to Pages 124–31 109 K. Gillespie, “Premier Vows Cash for Cities,” TS, 20 August 2007, A1; Jake Rupert and Lee Greenberg, “No Relief in Sight for City,” Ottawa Citizen, 1 November 2008, D1. 110 L. Monsebraaten, “Keep Diet Program, Groups Urge,” TS, 26 May 2010, GT2; T. Talaga, “$250 Special Diet Payment Stays as Welfare Reviewed,” TS, 1 December 2010, A10. 111 According to the MBM measure, incomes increased for four-member and two-member families by 4% and 5% respectively; for single employable persons, welfare incomes declined by 3%. The welfare incomes of disabled individuals also declined under the Liberals, according to this measure. 112 Emily Reilly, “Hudak Unclear on Uploading,” Hamilton Spectator, 26 August 2011, A3; R. Ferguson, “Critics Say Hukak’s Welfare Plan Illegal,” TS, 2 June 2011, A8. 113 Separate cost-of-living calculations are made for communities of different sizes; NCW, Poverty Profile 2007: Methodology, Definitions and Information Sources (Ottawa: NCW, September 2009), 1–2. 114 Calculations based on the MBM poverty measure, discussed below, also indicate that Ontario’s benefits for disabled individuals were considerably higher after 2000. A measurement based on incomes as a ratio of 50% of average income, also discussed below, finds little difference between these provinces in benefits for disabled persons. 115 These calculations used the NCW’s reported welfare incomes, in constant dollars, for the four family types discussed here; see note 14 for source URL for NCW data. Incomes were measured as a percentage of average AEA income for all family types; Statistics Canada, table 2020706. To make the two sets of data compatible, the welfare income of families with children was divided by the square roots of family size. 116 The MBM methodology is detailed in NCW, Income for Living? (Ottawa: NCW, 2004), 4–7. Researchers often prefer relative measures of poverty; see Gøsta Esping-Andersen and John Myles, “Economic Inequality and the Welfare State,” in The Oxford Handbook of Economic Inequality, ed. W. Salverda, Brian Nolan, and Timothy Smeeding (Oxford: OUP, 2009), 650. Results for a relative measure, which compared the NCW’s total welfare incomes to average income, were reported in the previous paragraph. 5. Childcare and Early Learning: Can the Residual Mould Be Broken? 1 Three of the four components of Early Learning and Child Care (ECEC) policy as defined by the Childcare Resource and Research Unit (CRRU) are

Notes to Pages 133–6  333 treated in this chapter: “regulated child care and kindergarten,” “family resource programs that are primarily intended to support parents,” and “maternity and parental leave.” The fourth, “cash payments” for families, was addressed in chapter 4; Jane Beach, Martha Friendly, Carolyn Ferns, Nina Prubha, and Barry Forer, Early Childhood Education and Care in Canada, 2008 (Toronto: CRRU, 2009), xii. 2 This term was used to characterize childcare advocacy in Ontario by Vappu Tyyska, “Advocacy Ignored: Child Care Policy in Ontario in the 1990s,” in Changing Child Care, ed. S. Prentice (Halifax: Fernwood, 2001), 134. 3 Jane Jenson argues that advocacy of educationally rich childcare by experts helped encourage Quebec’s childcare reforms; see Jenson, “Family Policy, Child Care and Social Solidarity,” in Prentice, Changing Child Care, 49. 4 Micheline Lalonde-Graton, Des salles d’asile aux centres de la petite enfance: la petite histoire des services de garde au Québec (Sainte-Foy, QC: Presses de l’Université du Québec, 2002), 38–9, 43. 5 Ibid., 67, 80–4; Jenson, “Family Policy, Child Care and Social Solidarity,” 44–5. 6 Lalonde-Graton, Des salles d’asile aux centres de la petite enfance, 168–75, 188–90. 7 Quebec’s per-child spending was also below the Canadian average of $154; Beach et al., Early Childhood Education and Care in Canada, 2008, 201, 207. 8 Régie des Rentes du Québec, “Généalogie des programmes d’aide à la famille,” Liaison RRQ Magazine, 10 June 2008, http://www.rrq.gouv.qc.ca/ fr/services/depeches/magazine/edition_24/regie_mene_enquete/Pages/ regie_mene_enquete.aspx. 9 Lalonde-Graton, Des salles d’asile aux centres de la petite enfance, 93–6, 168–70; Jenson, “Family Policy, Child Care and Social Solidarity,” 45–7; Michel Lanteigne, “L’impact des particuliers,” LP, 2 May 1990, C3; André Pépin, “Modeste majoration des programmes d’aide à la famille,” LP, 15 May 1992, A4. 10 Caroline Montpetit, “La Régie des rentes du Québec publie ses chiffres,” LD, 19 July 1994, A2. 11 Lalonde-Graton, Des salles d’asile aux centres de la petite enfance, 63, 144, 169, 187–8 ; “Les garderies réclament un fonds d’urgence de 15 millions $,” LS, 4 May 1993, A4; Claudette Samson, “Si l’État ne verse pas l’argent que réclame Concertaction, menace de démissions en bloc dans les garderies,” LS, 5 May 1994, A3. 12 Jenson, “Family Policy, Child Care and Solidarity,” 43–5, 49; Jean-Pierre Bonhomme, “Le Conseil du statut de la femme invite le Québec à revoir sa politique familiale,” LP, 6 March 1991, A11; Liliane Lacroix, “Le CSF

334  Notes to Pages 136–9 propose un régime de congés parentaux entièrement québécois,” LP, 14 February 1990, A10. 13 Jenson, “Family Policy, Child Care and Social Solidarity,” 42. 14 Ibid. 15 Lalonde-Graton, Des salles d’asile aux centres de la petite enfance, 81, 172. 16 Jane Jenson, “Rolling Out or Backtracking on Quebec’s Child Care System? Ideology Matters” (paper presented at the Annual Meetings of the Canadian Political Science Association, Toronto, June 2006), 9. 17 Lalonde-Graton, Des salles d’asile aux centres de la petite enfance, 146–7, 154–9; Denis Lessard, “La politique familiale du Québec,” LP, 19 March 1994, G1. 18 François Berger, “Québec refuse de financer davantage les garderies,” LP, 23 April 1993, A3; Pierre Roberge, “2000 éducatrices de garderies ‘souspayées’ débrayeront le 30 septembre,” LP, 23 September 1993, A8; Gilles Paquin, “La grève se poursuit dans les garderies,” LP, 16 May 1994, A7. 19 Quebec, Un Québec fou de ses enfants, Rapport du groupe de travail pour les jeunes (Quebec City: Gouvernement du Québec, 1992), 95–6, 97. My translation. On the policy impact of research, see Camil Bouchard (the report’s lead author), “Une science folles de ses enfants,” Québec Science, numéro spécial, August–September 2010, 6–7. 20 D. Lessard, “La politique familiale du Québec,” LP, 19 March 1994, G1. My translation. 21 Miville Tremblay, “L’économie sociale,” LP, 3 September 1995, B1. 22 Carole Thibaudeau, “Souveraineté, éducation et services publics,” LP, 3 January 1995, A4; Chantal Verlinde, “Reconnaître la mission éducative des garderies,” LS, 13 March 1996, B7. 23 M. Lalonde-Graton, Un enfance à préserver (Montreal: CIGQ, 1996); Daniel Berthiaume, “Le petite enfance: oser faire les choses autrement,” LS, 14 March 1996, B7; Paul Cauchon, “États généraux sur l’éducation,” LD, 5 September 1996, A2; Louise Lafrance, “Entre la classe et la garderie,” LD, 24 September 1996, B1. 24 Jocelyne Tougas, “What We Can Learn from the Quebec Experience,” in Our Children’s Future, ed. M. Krashinsky and G. Cleveland (Toronto: UTP, 2001), 95; Claudette Pitre-Robin, “Rêver, construire, détruire …,” Le Bulletin du Regroupement des Centres de la Petite Enfance de la Montérégie, October 2005, 1–2. 25 Katia Gagnon, “Les nouvelles garderies privées ne seraient plus subventionnées,” LP, 2 May 1996, B1; Pierre April, “Dépôt d’un projet de loi,” LD, 14 May 1996, A4; Lalonde-Graton, Des salles d’asile aux centres de la petite enfance, 241.

Notes to Pages 139–40  335 26 K. Gagnon, “Éducation: les nouveaux services à la petite enfance dès l’an prochain,” LP, 25 October 1996, A1; Michel Corbeil, “Pauline Marois s’attaque en priorité aux services à la petite enfance,” LS, 25 October 1996, A1; “Sommet sur l’économie et l’emploi: Les projets du Sommet,” LP, 2 November 1996, B4. 27 Premier Ministre du Quebec, Politique familiale: le Québec fait le choix de ses enfants (Quebec: Bureau du Premier Ministre, 31 October 1996). On the extension of the service to school-based childcare, see Mario Cloutier, “Garderies a 5 $: Québec ouvre des places en milieu scolaire,” LD, 2 April 1998, A4. 28 The total value of the benefit rose with each additional child, but usually at a decreasing rate; this was in sharp contrast to the bonus and allowance, which had paid much larger sums for a third or subsequent child. The proportional increase in benefits that resulted from adding an additional child nevertheless depended on a family’s income and whether it included one or two parents; K. Gagnon, “La politique familiale reçoit bon accueil,” LP, 24 January 1997, A13; Robert Fleur, “Finis les chèques pour tout le monde,” LS, 5 August 1997, A1. 29 M. Cloutier, “Québec accroit son aide aux familles dans le besoin,” LD, 23 January 1997, A1. My translation. 30 For the social economy reference, see Premier Ministre du Québec, Politique familiale: des services à la petite enfance pour tous les enfants du Québec (Quebec: Bureau du Premier Ministre, 31 October 1996). 2. The other press releases for that date were Politique familiale: le Québec fait le choix de ses enfants, Politique familiale: une allocation unifiée couvrant les besoins essentiels des enfants des familles à faible revenu, Politique familiale: un nouveau régime d’assurance parentale, and Politique familiale: un effort majeur de réallocation des ressources financières. The reference for the white paper is Premier Ministre du Québec, Allocution du premier ministre du Québec, M. Lucien Bouchard, à l’occasion de la présentation de la nouvelle politique familial (Quebec: Bureau du Premier Ministre, 23 January 1997). 31 The main concerns were to see quick implementation and to receive assurances that it could be financed while the province eliminated its deficit. M. Cloutier, “Une nouvelle politique de la famille,” LD, 1 November 1996, A1; K. Gagnon, “La politique familiale reçoit bon accueil,” LP, 24 January 1997, A13 ; Lalonde-Graton, Des salles d’asile aux centres de la petite enfance, 250, 264. 32 Fédération des femmes du Québec, “La politique familiale du Québec: Les enfants vraiment au cœur de nos choix?,” news release, 16 April 1997. For the FFQ, CEQ, CSN, and CIRGQ submissions, see Quebec, Journal des

336  Notes to Pages 140–3 débats, 35e législature, 2e session, Commission permanente des affaires sociales, 5 and 6 June 1997. 33 Tougas, “What We Can Learn from the Quebec Experience,” 101. 34 Jean-Pierre Bonhomme, “L’absence de garderies dans les entreprises lèse les femmes au travail,” LP, 31 October 1991, A19; “Le CPQ veut de nouveaux pouvoirs pour le Québec,” LP, 4 February 1992, C13. 35 Michel Venne, “Les commentaires des participants: Un rapprochement palpable,” LD, 2 November 1996, A8. 36 Marc Thibodeau, “Les garderies à but non-lucratif crient à la trahison,” LP, 7 June 1997, A6. 37 M. Cloutier, “Québec resserre les règles d’attribution des permis,” LD, 9 May 2002, A4. 38 Vincent Marissal, “Nouvelle politique familiale,” A7; Quebec, Journal des débats, 35e législature, 2e session, Commission permanente des affaires sociales, 11 June 1997; Quebec, Débats de l’Assemblée nationale, 19 June 1997. Kelley’s main reservations were about the need for a new ministry and whether the government would fund the new system adequately. Daniel Johnson stated his personal objections to the PQ’s family policy much more forcefully in his final National Assembly speech as Liberal leader; D. Lessard, “Johnson régle ses comptes,” LP, 29 April 1998, B4. 39 The figure then rose more slowly, under the Liberals, to 162,992 in 2008; Beach et al., Early Childhood Education and Care in Canada (various years). 40 Michel Hébert, “Si le Parti québécois est élu, des garderies à 5 $ tous en l’an 2000,” Le Droit, 6 November 1998, 4; M. Thibodeau, “Garderies: le ministre Léger promet d’agir ce printemps,” LP, 9 April 1999, A5; Robert Dutrisac, “Garderies: Le CSN crie victoire,” LD, 21 May 1999, A1; Dutrisac, “Garderies à 5 $: 200,000 places en 2005 ne suffiront pas,” LD, 15 September 2000, A4; Pascale Breton, “La famille, une priorité gouvernementale?,” LP, 15 June 2002, A6; Lisa-Marie Gervais, “Grève évitée dans les garderies,” LP, 19 June 2002, A1. 41 For an early discussion of Quebec as a potential model, see Camil Bouchard, “Politiques familiales et pauvreté des enfants,” LD, 8 November 1997, A11. On $5/day childcare’s standing several years later, see Josée Boileau, “Le symbole des garderies à 5 $,” LD, 10 November 2001, B3. 42 Jenson, “Rolling Out or Backtracking on Quebec’s Child Care System?”; Alan Noël, “Quebec’s New Politics of Redistribution,” in Inequality and the Fading of Redistributive Politics, ed. Keith Banting and John Myles (Vancouver: UBC Press, 2013), 256–82. 43 In 2001 the PQ considered raising the per diem to $8/day; Lalonde-Graton, Des salles d’asile aux centres de la petite enfance, 330. On the other points discussed here, see Claude Béchard and Carole Théberge, “L’avenir des

Notes to Pages 143–4  337 services de garde au Québec,” LD, 14 August 2003, A7; Mylène Moisan, “Les garderies à 7 $ subiront une hausse de tarif annuelle,” LS, 14 November 2003, A10. 44 “Le minister Jérôme-Forget améliore le crédit d’impôt pour services de garde,” PC, 13 March 2008; “Budget 2009–2010 – Le Québec renforce sa position de paradis des familles,” CNW, 22 March 2009. The Liberals had considered taking this step as early as 2004 but were initially deterred by its cost; D. Lessard, “Québec rétablit les allocations familiales,” LP, 5 March 2004, A3. 45 Most such facilities are home-based ones that care for six or fewer children. On the rules for qualifying non-profit centres, see Jocelyn Tougas, La Restructuration des services éducatifs et de garde a l’enfance au Québec (Toronto: Childcare Resource and Research Unit, 2002), 67. On the unregulated sector, see Baptiste Richard-Châtelain, “Une garderie … qui n’en est pas,” LS, 7 February 2009, 4; Richard-Châtelain, “Les tarifs montent au gré du crédit d’impôt,” LS, 28 September 2009, 18. 46 See Violaine Ouellette, “Le modèle d’économie sociale est-il en péril?” Momentum: Le bulletin économique du chantier de l’économie socale, June 2010, 7–8. 47 Association québécoise des CPEs, Étude du projet de loi 126: Mémoire de l’AQCPE, présenté à la commission des relations avec les citoyens (Montreal: AQCPE, 16 November 2010), 10–11. 48 PC, “Réforme des CPEs,” Le Droit, 26 October 2005, 2; Clairandrée Cauchy, “Service de garde,” LD, 23 November 2005, A1; Marie Caouette, “Le ministre met un peu d’eau dans son vin,” LS, 3 March 2006, A5; Matthieu Boivin, “Québec choisit les 164 bureaux de coordination des CPEs,” Le Droit, 29 April 2006, 7. 49 “Le projet de loi 51 suscite des réjouissances et des inquiétudes,” PC, 23 May 2009; Tommy Chouinard, “Québec recule,” LP, 11 June 2009, A9. 50 Marie Caouette, “Garderies en milieu familial,” LS, 18 September 2001, A13. The Liberal legislation was necessitated by a labour board judgment in May 2003 that overturned the PQ policy, ruling that the workers could in fact unionize; PC, “Pas de syndicats dans les garderies familiales, décrète Québec,” Le Droit, 18 June 2003, 21. 51 PC, “Le gouvernement Charest n’ira pas en appel,” LD, 24 November 2008, A5; André Paulin, “Les responsables des services de garde en milieu familial approuvent l’entente intervenue entre Québec et leur syndicats,” Québec Hebdo, 6 December 2010. 52 Jean-Robert Sansfaçon, “Un congé problème,” LD, 10 May 2000, A6; Norman Delisle, “Jean Charest en appelle à la bonne foi de chacun dans le

338  Notes to Pages 144–6 dossier des congés parentaux,” PC, 17 May 2001; M. Cloutier, “Assurance parentale: Québec poursuit Ottawa,” LD, 21 December 2001, A1; Jean Charest, “QLP Action Plan for Quebec’s Families,” CNW, 23 March 2003 ; Hélène Buzzetti and T. Chouinard, “Congés parentaux: Ottawa empiète,” LD, 28 January 2004, A1; Allison Dunfield, “Quebec, Ottawa Sign ParentalLeave Deal,” GM, 1 March 2005; Andy Riga, “Parents Go Gaga over Revamped Leave Program,” Gazette, 2 January 2006, A1. 53 Andre Pratte, “Oups!,” LP, 22 March 2008; B. Richard-Châtelain, “Hausse de la cotisation à l’assurance parentale,” LS, 12 September 2009, 7; “Le Régime québécois d’assurance parentale,” CNW, 15 September 2010. 54 Kevin Dougherty, “Family Minister Admits Meeting Liberal Fixer,” Gazette, 3 December 2005, A11; R. Dutrisac, “Novelles place en garderie – Les donateurs libéraux ont priorité, accuse le Parti québécois,” LD, 2 December 2009, A4; D. Lessard and T. Chouinard, “Une controverse de trop,” LP, 7 May 2010, A2. 55 R. Dutrisac, “Fini, le favoritisme dans les garderies,” LD, 5 November 2010, A2; Cabinet de la ministre de la Famille, “Adoption du projet de loi no. 126,” CNW, 10 December 2010; Association québécoise des CPEs, Étude du projet de loi 126, esp. 16–17. 56 Martin Pelchat, “Bébé-bonus,” LS, 10 March 2007, 8; “Allocations aux familles: Des groupes de femmes disent non à la proposition de l’ADQ,” CNW, 10 November 2008. 57 Conseil du patronat du Québec, Pour une politique universelle d’aide à la famille (Montreal: CPQ, August 2003). CPQ memoranda said little about childcare after 2005. Its 2011 pre-budget statement returned to the theme briefly, recommending that the government consider replacing the $7 per diem with a sliding scale that would raise rates for higher income earners; CPQ, Propositions du Conseil du patronat pour le budget du Québec, 2011–2012 (Montreal: CPQ, January 2011), 7. The CPQ’s main family policy preoccupation then was parental leave. Although it endorsed the program in principle, it protested that employer contribution rates were rising too fast; CPQ, Réaction du Conseil du patronat du Québec à la quatrième hausse consécutives du taux de cotisations au Régime québécois d’assurance parentale (Montreal: CPQ, 22 July 2010). 58 At times, Toronto budgeted much more than the 20% rule required to extend services to more families; Rianne Mahon, “Childcare as Citizenship Right? Toronto in the 1970s and 1980s,” Canadian Historical Review 82 (2006), 285–316. “Toronto” here means the municipality of that name as it exists at the time of writing, i.e., the city that until 2002 was known as

Notes to Pages 146–8  339 the Municipality of Metropolitan Toronto. It assumed responsibility for childcare in 1967. 59 Cheryl Collier, “Working with Parties: Success and Failure of Child Care Advocates in British Columbia and Ontario in the 1990s,” in Prentice, Changing Child Care, 125–6. 60 Mahon, “Childcare as Citizenship Right?,” 300. The OCBCC was originally called the Ontario Coalition for Better Day Care or OCBDC; it is referred to here consistently by the later name. 61 Collier refers to the prominence of for-profit advocacy in Ontario; “Working with Parties,” 124. 62 According to the CRRU, “Each centre and family child care agency must have a written statement regarding parental involvement. The type of parental involvement is not specified”; Beach et al., Early Childhood Education and Care in Canada, 2008, 74. 63 On this general theme, see Linda White, “Partisanship or Politics of Austerity? Child Care Policy Development in Ontario and Alberta, 1980 to 1996,” Journal of Family Issues 18 (1997): 7–29. 64 Collier, “Working with Parties,” 125; Luc Turgeon, “Tax, Time and Territory: The Development of Early Childhood Education and Child Care in Canada and Great Britain” (PhD diss., University of Toronto, 2010), 208–9. 65 Dorothy Lipovenko, “Draft Ontario Study,” GM, 17 January 1985, M1; Beverly Bowen and John Cruickshank, “Ontario to Give $24 Million to Day Care,” GM, 21 March 1985, M5. 66 This promise was reiterated in the accord that the Liberals signed with the NDP in exchange for its support, and in a 1987 policy statement. See Denise Harrington, “Minister Fears Bill for Free Day Care May Be $3 Billion,” TS, 4 October 1985, A3; Matt Maychak, “Ontario Plans 26,000 New Day Care Spaces over 3 Years,” TS, 5 June 1987, A1. 67 White, “Partisanship or Politics of Austerity?,” 17; Sean Fine, “Liberals Not Doing Enough to Help Children,” GM, 23 August 1990, A4. 68 Lynne Ainsworth, “Partial Day-Care Subsidy Sought to Aid MiddleIncome Families,” TS, 9 December 1986, A2; Lois Sweet, “Day Care in Schools,” TS, 15 July 1990, B1. 69 Ontario Ministry of Treasury and Economics, “Innovation for Education,” CNW, 17 May 1989; Richard Mackie and Margaret Polanyi, “Peterson Coy on Costs to Expand Kindergarten,” GM, 27 April 1989, A18. 70 M. Maychak, “Phase-Out of Private Day Care Still Possible,” TS, 30 April 1987, A10; Kevin Donavan, “5 Unions, NDP Denounce Aid for Private Day Care,” TS, 24 May 1987, A8; Association of Day Care Operators of Ontario, letter to the editor, TS, 30 August 1988, A16.

340  Notes to Pages 149–51 71 Peter Krivel, “Child-Care Plan Irks Private Operators,” TS, 1 December 1991, A9; Michael Valpy, “A Dubious Approach to Child Care,” GM, 6 June 1995, A15. 72 R. Mackie, “Added Funds for Day Care Welcomed – and Criticized,” GM, 1 February 1991, A8; Paula Todd, “‘Cheated’ Day-Care Workers Vow to Fight Rae at Polls,” TS, 12 February 1991, D8; Patrick Doyle, “Ontario Tops Day-Care Pay Survey,” TS, 24 April 1992, D13. 73 Mackie, “Added Funds for Day Care Welcomed”; Barbara Turnbull, “Province Urged to Give Day Care $45 Million Boost,” TS, 19 October 1991, A10. 74 P. Todd, “$1 Billion Targeted for Jobs, Day Care,” TS, 1 May 1992, A13; Margaret Philp, “Money Crisis Blocks Ontario Child-Care Reform,” GM, 31 March 1994, A8. 75 On the OCBCC’s original proposal, see Linda Hossie, “New Democrats Hear Day-Care Plan,” GM, 9 November 1990, A10. The NDP version is discussed in Kelly Toughill, “Ontario to Introduce Universal Day Care,” TS, 18 February 1994, A1; M. Philp, “Another Wheel off Child-Care Reform Vehicle,” GM, 25 March 1994, A3. 76 Regarding the earlier NDP ruminations, see Susan Walker, “NDP Studies Child Care for Kids 3 to 5 in Schools,” TS, 12 February 1993, A2. On the royal commission and the NDP response, Andrew Duffy, “Make School Tougher Sweeping Study Urges,” TS, 27 January 1995, A1; Jennifer Lewington, “Full-Day Kindergarten Vowed for Four- and Five-Year-Olds,” GM, 22 February 1995, A3. 77 S. Fine, “Ontario Seeks Reform of Day Care,” GM, 18 February 1992, A8. 78 “Day-Care Dilemma Invites Trade-Offs” (editorial), TS, 31 August 1994, A14. 79 Valpy, “Dubious Approach to Child Care”; Laurie Monsebraaten, “Ontario Considers Day-Care Voucher System,” TS, 2 November 1995, A9. 80 A. Duffy, “Make School Tougher Sweeping Study Urges,” TS, 27 January 1995, A1; Duffy, “NDP Decides Against School for 3-Year-Olds,” TS, 21 February 1995, A1. 81 On these first three changes, see Friendly et al., Early Childhood Education and Care in Canada, 2006, 88; Mahon, “Gender and the New Politics of Redistribution,” 19–20; M. Philp, “Quick Change Undoes Day-Care Deal,” GM, 27 July 1995, A8; and Gord Garland, “Taking on the Tories on Day Care,” TS, 17 November 1997, 1. 82 On the initial cut, see Jane Gadd, “Child Care, Pay-Equity Cuts Called ‘Abusive,’” GM, 22 July 1995, A5. Janet Ecker, the social services minister, provided the estimate of 2500 lost spaces in July 1996; the OCBCC estimated that the total decline in subsidized spaces since the

Notes to Pages 151–3  341 Conservatives came to power was, at that point, much higher; “Tory Cuts Cost 9,000 Child-Care Subsidies, Survey Say,” TS, 24 July 1996, A11. A Social Services Ministry statement, released the previous January, already estimated that 2800 spaces had been lost; CP, “Day-Care Subsidies on Decline in Ontario,” GM, 3 January 1996, A8. 83 Jane Gadd, “Ontario Day-Care Report Gets Mixed Reviews,” GM, 7 September 1996, A3; “Child Care Philosophies” (editorial), GM, 10 September 1996, A18. 84 Rianne Mahon, “Gender and the New Politics of Redistribution: Child Care Politics in Ontario,” in Banting and Myles, Inequality and the Fading of Redistributive Politics, 370–3. 85 K. Toughill, “$4,500 Pay Cut Urged for Day-Care Workers,” TS, 6 September 1996, A1; Robyn Gallimore, letter to the editor, GM, 13 April 1996, D7; Joan Walters, “Day-Care Centre Allowed to Carry on Despite Violations,” Hamilton Spectator, 24 August 2002, A03. 86 K. Toughill, “Cities Will Be Forced to Provide Child Care, Municipalities to Pay Half of Costs,” TS, 15 January 1997, A1; James Rusk, “Tories Back Down on Offloading Plan,” GM, 2 May 1997, A5; Friendly et al., Early Childhood Education and Care in Canada, 2006, 88. 87 Caroline Mallan, “Tax Credit to Help Low-Income Parents,” TS, 7 May 1997, A1; L. Monsebraaten, “Child-Care Benefits Rise for the Poor,” TS, 6 May 1998, A12; Richard Brennan, “Ontario Boosts Child Care Aid,” TS, 30 December 1999, 1. The May 1998 budget included two other childcare measures: a 30% tax deduction for firms that created on-site childcare facilities, and a $35 million fund for Ontario Works clients who were completing high school. The subsequent Liberal administration claimed that the deduction resulted in few new childcare spaces; L. Monsebraaten, “Province Touts Its Own Child-Care Program,” TS, 1 September 2008, A06. 88 M. Philp, “Ontario Set to Overhaul Welfare,” GM, 9 May 1997, A1. Ontario Works, a new and more coercive social assistance scheme, is also discussed in chapter 4. 89 Tracey Bushnik, Child Care in Canada (Ottawa: Statistics Canada, 2006), 62. 90 Beach et al., Early Childhood Education and Care in Canada, 2008, 205. 91 Jack Lakey, “Subsidized Day-Care Spaces at 7-Year Low,” TS, 17 September 2002, B05; M. Philp, “Education Reforms Clobber Day Care,” GM, 8 May 1998, A12; Garland, “Taking on the Tories on Day Care.” 92 Bushnik, Child Care in Canada, 59–60. 93 Premier Harris asked McCain and Mustard to prepare a report on the learning needs of children. Their “Early Years Study” proposed the establishment of centres to nurture preschool children and provide

342  Notes to Pages 153–6 resources and skills to their parents. The PCs responded with a network of 103 “Early Years Centres,” one for each provincial constituency. But these did not include childcare facilities, as McCain and Mustard had proposed, instead focusing on supporting parents. Some observers saw the centres as valuable, but others characterized them as “information kiosks” and of marginal value. See M. Philp, “Harris Becomes a Booster of Preschool Education,” GM, 21 April 1999, A1; Ian Urguhart, “Will Tories Change Course on Child Care?” TS, 15 May 2002, A29. 94 Ontario Liberal Party, Excellence for All: The Ontario Liberal Plan for Education (Toronto, 2003), 6–7. 95 Gloria Galloway, “Liberals Woo Women with Nod to Family,” GM, 27 September 2003, A18. 96 Rob Ferguson, “Province Announces 4,000 Day-Care Spaces,” TS, 15 July 2004, A3 On the PCs’ earlier reluctance, see Valarie Lawton, “Ontario Balks at Day-Care Funding,” TS, 18 February 2003, A6. 97 M. Philp, “Ontario to Unveil School Child-Care Plan,” GM, 24 November, 2004, A1; Philp, “Middle Class to Get Day Care Help,” GM, 26 November 2004, A10. 98 R. Ferguson, “$1.8B Pledge for Ontario Child Care,” TS, 7 May 2005, A9; Campbell Clark and Jane Taber, “Tories Aim Daycare Dollars at Parents,” GM, 6 December 2005, A1. Not all funds had to be spent on non-profit childcare, but the Liberals said that most would flow to them and that only they could receive funds for expansion; Steve Erwin, “Ontario Tackles Daycare Crunch,” GM, 29 July 2005, A7. 99 Karen Howlett, “Daycare Expansion at Risk, Groups Say,” GM, 9 February 2006, A4; Tess Kalinowski, “Daycare Expansion Meets the Axe,” TS, 24 March 2006, A08. 100 Elizabeth Ablett, “It’s Not Too Late to Keep Child-Care Promise,” TS, 14 March 2007, A17; L. Monsebraaten, “$25M Seen as ‘Welcome’ First Step,” TS, 23 March 2007, A7. 101 L. Monsebraaten and Robert Benzie, “Liberals Woo Parents with Plans for Preshoolers and Undergrads,” TS, 6 September 2007, A1. On the Conservatives’ lack of commitments, see Katie Lewis, “Advocates Criticize Tory over Day Care,” TS, 5 October 2007, A17. 102 Charles Pascal, With Our Best Futures in Mind: Report to the Premier by the Special Advisor on Early Learning (Toronto: Queen’s Printer for Ontario, June 2009), 55–6. 103 Caroline Alphonso, “Full-Day Kindergarten Comes into Play,” GM, 16 June 2009, A16; Jake Rupert, “Groups Cheer McGuinty Education Plan,”

Notes to Pages 156–65  343 Ottawa Citizen, 22 June 2009, A9; Adam Radwanski, “A Little Learning Is a Dangerous Thing,” GM, 26 September 2009, F6. 104 R. Benzie, “Daycare Gets Budget Bailout,” TS, 24 March 2010, A1; A. Radwanski, “Ontario Seizing an Opportunity to Make a ‘Federal Case,’” GM, 24 March 2010, A7. Ontario nevertheless still used federal funds from the MFELCC. 105 Kristin Rushowy, “Plan Will Bump Kindergarten Classes to 26 from 20,” TS, 22 September 2009, A01; Rushowy and Tanya Talaga, “Budget Clouds Early-Learning Plan,” TS, 23 September 2009, A18. 106 L. Monsebraaten and K. Roshowy, “Daycares Getting $51M as Kids Move to Schools,” TS, 28 April 2010, A12. 107 L. Monsebraaten and K. Roshowy, “Province to Scrap Key Piece of Kindergarten Plan,” TS, 15 December, 2010, A1; K. Howlett and Kate Hammer, “Ontario Backtracks on Offering One-Stop Daycare, Kindergarten,” GM, 16 December 2010, A1. 108 K. Rushowy, “Price Tag for All-Day Kindergarten Rises $400M,” TS, 27 October 2009, A01; A. Radwanski, “With Full-Day Kindergarten, McGuinty Builds a Legacy,” GM, 28 October 2009, A13. 109 T. Talaga, “Early Learning Takes ‘Leap Forward,’” TS, 18 February 2010, A10; A. Radwanski, “Hudek’s Kindergarten Stand Risks Raising Voters’ Ire,” GM, 18 September 2010, A7. 110 The NLSCY distinguishes children in the care of a non-relative outside of the home from those in a childcare centre; but the figure for the latter for Quebec presented in graph B probably includes many, if not all, Quebec children in regulated family-based care. Otherwise (as figure 5.1, graph C suggests) the Ontario-Quebec gap likely would have been much smaller in 2002. 6. Economic Development: Can States Still Intervene? 1 M  ichael Atkinson and William Coleman, The State, Business, and Industrial Policy (Toronto: UTP, 1989), 23. 2 This largely has replaced “industrial policy” in identifying this field. Taxation is discussed here if it is used selectively to promote particular sectors, technologies, or types of investment. General taxation was treated in chapter 3. Public infrastructure spending also is excluded. 3 On path dependency, see Paul Pierson, Politics in Time (Princeton, NJ: Princeton University Press, 2004), esp. 20–40. This concept is, in fact, relevant to all three of our institutional mechanisms, but this is a particularly compelling example of it.

344  Notes to Pages 165–72 4 This theme is addressed in the literature on the Quiet Revolution; see, for instance, Gilles Bourque, Le modèle québécois de développement (Quebec City: Presses de l’Université du Québec, 2000), 39–41, 45. 5 John Zysman, Governments, Markets and Growth (Cambridge: CUP, 1983), chap. 2; Peter Hall, Governing the Economy (Oxford: OUP, 1986), 242–4. “The State as a Socio-Cultural Phenomenon” is the title of chapter 2 in Kenneth Dyson, The State Tradition in Western Europe (Oxford: Martin Robertson, 1980), where the concept is also explicated. These studies exemplify the qualitative focus of much of this literature. 6 These three designations are used in the FMS documentation to identify these figures. 7 These surveys did not question firms about how much of each type of assistance they received, so no inference can be made about the volume of support in either province. The CANSIM data also do not report response frequencies. 8 The 2005 survey asked firms, “During the three years 2002 to 2004, did your plant cooperate on any of your innovation activities with other firms or institutions? Innovation cooperation is active participation with other firms or organizations in innovative activities. Exclude pure contracting out of work where there is no active cooperation.” Statistics Canada, Survey of Innovation, 2005, 8; http://www23.statcan.gc.ca/imdb-bmdi/ instrument/4218_Q1_V5-eng.pdf. The 2003 question was the same, with different dates. 9 Kenneth McRoberts and Dale Posgate, Quebec: Social Change and Political Crisis (Toronto: McClelland and Stewart, 1980), 104–9, 125–6, 164–7; William Coleman, The Independence Movement in Quebec, 1945–1980 (Toronto: UTP, 1984), chap. 4; and Bourque, Le modèle québécois de développement, chap. 3. 10 Mathieu Laberge, Marcelin Joanis, and François Vaillancourt, “Caisse de dépôt et de placements du Québec,” in Le Québec Économique 2009, ed. M. Joanis and L. Godbout (Quebec City: Les Presses de l’Université Laval, 2009), 304–6. 11 Luc Bernier, “State-Owned Enterprises in Quebec,” in Quebec: State and Society, ed. A.-G. Gagnon, 2nd ed. (Toronto: Nelson, 1993), 243–53. 12 Richard Morin, Régionalisation au Québec (Montreal: Éditions Saint-Martin, 2006), 17, 28. 13 On the origins of the FTQ fund, see “QFL Close to Launching Union Investment Fund,” GM, 2 September 1983, 9; Robert Gibbens, “Solidarity Fund Opened to Non-QFL Investors,” GM, 6 June 1985, B7. The Quebec and federal governments provided loans to help set up the fund.

Notes to Pages 172–4  345 Subsequent aid primarily took the form of generous tax credits for investors. Also see Bourque, Le modèle québécois de développement, 123–5. 14 This paragraph is based substantially on Bourque, Le modèle québécois de développement, chap. 4. 15 The value of business transfers (figure 6.1, graph A) fell from 1.4% of provincial GDP in 1985 to 1.0% in 1988, but returned to 1.5% by 1991, and remained at or above that level for the remainder of the Liberal period. The other measures presented in figure 6.1 also declined after the mid-1980s, then rebounded (in graphs B and C), or levelled off (graph D) by 1990. 16 Jacques Benoit, “Le stratégie de création d’emplois de Québec est bien accueillie par l’industrie,” LP, 4 December 1991, D3; Gérard Tremblay, “Vers une économie et une société à valeur ajoutée,” LP, 4 December 1991, B3. 17 Bourque, Le modèle québécois de développement, 95, 143. 18 On the variety of views on the state’s role, as implied by Porter’s theory, see ibid., 140–3. 19 Denis Lessard, “Innovatech est au cœur du plan de relance de Montréal,” LP, 17 December 1991, A1; Serge Laplante, “Innovatech-Québec,” LD, 4 December 1993, B3. 20 Bourque, Le modèle québécois de développement, 129–32. 21 Laurier Cloutier, “Rendez-vous économiques,” LP, 20 September 1991, A9. 22 Hélène Baril, “Les grappes industrielles, un an plus tard,” LS, 15 May 1993, B1. Tremblay admitted that progress was uneven but argued for more time; Bernard Plante, “Les grappes ne sont pas assez mûres pour en faire un bilan,” LD, 12 April 1994, B2. 23 An editorial referred to the grappes, modestly, as “less an industrial policy to direct investments than a commercialization effort”; Frédéric Wagniere, “Les raisons de la colère,” LP, 15 June 1993, B2; my translation. A business leader referred to the strategy as “more an analytical framework than an action plan”; Frédéric Tremblay, “Les ‘grappes’ manquent de prise sur le réel,” LP, 13 April 1994, E11; my translation. 24 F. Tremblay, “Le CPQ remet en cause les grappes industrielles,” LS, 11 June 1993, B16; Claude Turcotte, “Rendez-vous économique 1993,” LD, 17 September 1993, B4; Tremblay, “Les ‘grappes’ manquent de prise sur le réel.” 25 Miville Tremblay, “Les politiques industrielles nous conduisent-elles au communisme? se demande Léon Courville,” LP, 1 December 1992, C3; Tremblay, “Les grappes industrielles: des bourgeons plein les branches,” LP, 11 September 1993, F1; Michel Venne, “Parizeau promet des fonds de

346  Notes to Pages 174–6 solidarité régionaux,” LD, 6 August 1994, A5; Pierre April, “Québec ‘se moque des régions,’ selon le PQ,” LP, 13 May 1992, B5. 26 Observatoire sur le développement régional, “Historique des politiques régionales de développement du Québec,” Orégand, http:// www.oregand.ca/veille/historique-des-politiques-regionales-dedeveloppement-au-qc.html. On the lack of integration between sectors and regions, see J. Benoit, “Le plan Tremblay ne favorise pas le développement régional,” LP, 18 December 1993, C3. 27 Bourque, Le modèle québécois de développement, 143–8; Catherine Leconte, “Les placement de l’État,” LD, 15 March 1993; L. Cloutier, “La Caisse de dépôts s’implique dans le projet de Cité de l’image,” LP, 9 July 1993, A1; C. Turcotte, “À la défense de la Société de développement industriel,” LD, 22 August 1994, B2; Jean Chartier, “Fonds d’investissement régionaux,” LD, 19 December 1996, B1; Éric Bérard, “Les outils d’investissement des sociétés d’État,” LD, 29 March 1997, C5. 28 F. Tremblay, “Le ministre Paillé annonce la fin des ‘grappes,’” LD, 23 November 1994, B2; Marc-Urbain Proulx, “Stratégie mi-figue, mi-raisin,” LD, 12 December 1994, A7. 29 PC, “Québec: Industrie et Commerce désire consulter les patrons et employés,” LS, 28 November 1995, C7; Bourque, Le modèle québécois de développement, 193. 30 Robert Dutrisac, “La méthode Landry,” LD, 2 July 1997, A1; Bourque, Le modèle québécois de développement, 193. 31 D. Lessard, “Une politique économique avec le budget,” LP, 28 February 1997, D1; Lessard, “Le projet de super SGF bat de l’aile,” LP, 28 February 1997, B9; Gérard Bérubé, “Claude Blanchet est emballé par la nouvelle vocation de la société publique,” LD, 2 April 1998, B2. On multimedia, see R. Dutrisac, “Québec traitera tout le monde sur le même pied qu’Ubi Soft,” LD, 23 May 1997, A3; C. Turcotte, “Un coup de pouce au Québec,” LD, 4 July 1998, C2. On the high tech centres, see PC, “300 nouveaux emplois à Hull,” LP, 10 February 1999, E6. 32 Cabinet du Vice-premier ministre et ministre d’État de l’économie et des finances, “Susciter 19 milliards de dollars d’investissements privés sur 5 ans,” news release, 31 March 1998; G. Bérubé, “Politique industrielle de Québec,” LD, 3 April 1998, A8; Jean-Robert Sansfaçons, “Objectif investissement,” LD, 3 April 1998, A10; Bérubé, “Québec provoque (du moins),” LD, 8 April 1998, B1; Norman Delisle, “Bilan législatif du gouvernement québécois,” LD, 28 December 1998, A2. 33 Conseil du statut de la femme, Avis sur la politique de soutien au développement régional et social, December 1997, 8–11; E. Bédard, “Les CLD et les CLE: Vers un guichet unique,” LD, 28 March 1998, C8.

Notes to Pages 176–8  347 34 Morin, Regionalisation au Quebec, 37–9. 35 Bernard Landry, “Un budget pour relancer l’action,” LD, 10 March 1999, A9; H. Baril, “250 millions $ pour l’emploi et les régions,” LS, 10 March 1999, B3; M. Tremblay, “Québec alloue 164 millions de plus,” LP, A6. 36 Romain Pelletier, “17e Carrefour de la nouvelle économie,” LS, 3 January 2000. On the Montreal venture, G. Bérubé, “Un pari intelligent,” LD, 30 May 2000, B1; Sophie Cousineau, “Les subventions au commerce électronique sortent de la Cité,” LP, 2 November 2001, D5. 37 Ministre de la Recherche, de la Science et de la Technologie, Savoir Changer le Monde (Quebec City: 2001), 9–13, and annexes 1–3; PC, “Québec veut les bouchées double pour la recherché,” Le Droit, 26 January 2001, 9. 38 Paul Roy, “800 millions pour les régions-ressources,” LP, 30 March 2001, A4; H. Baril, “788 millions pour les régions,” LD, 30 March 2001; P, “Impôt zéro pour les 1500 PME du Québec,” Le Droit, 30 March 2001, 16. 39 Stéphane Paquet, “Rendez-vous national des régions,” LS, 5 November 2002, A4; Société générale de financement du Québec, “Projet ACCORD,” news release, 13 November 2002; Louis Tanguay, “La SGF compte utiliser 600 millions $ en cinq ans,” LS, 14 November 2002. 40 Jean-Yves Duthel, “SGF’s New Five-Year Development Plan,” CNW, 24 February 2003; Valérie Dufour, “Le SGF veut ‘turbocharger’ les économies régionales,” LD, 24 February 2003, B1. 41 Lisa Binsse, “Culinar reste au Québec,” LP, 5 August 1999, A1; Konrad Yakabuski, “Quebec’s Investment in a Snack-Cake Maker Signals a Resurgence of Economic Nationalism,” GM, 26 November 1999, 27; H. Baril, “Québec met son nez un peu partout,” LP, 6 October 2001, E1. 42 Pierre Arbour, “Reform the Caisse,” NP, 2 April 2002, FP15; H. Baril, “Le rendement de la SGF tombe au-dessous de zéro,” LP, 23 May 2002, D3; S. Paquet, “Rapport annuel de la SGF,” LS, 23 May 2002, C1; Paquet, “Subventions aux entreprises,” LS, 23 October 2002, A6. 43 Sean Silcoff, “Best Caisse Scenerio,” NP, 1 March 2003, 42; Paul Kenrosky, “The Caisse: First Make Money,” NP, 11 March 2003, FP15. 44 S. Paquet, “Subventions aux entreprises,” LS, 23 October 2002, A6; L. Cloutier and Pascale Breton, “Rendez-vous des régions,” LP, 15 November 2002, A4. 45 D. Lessard, “Faire sans l’État,” LP, 13 June 2003, A1; Francis Vailles, “La fins des Cités de la nouvelle économie,” LP, 13 June 2003, B5; Sean Silcoff, “Quebec Takes Axe to Corporate Welfare,” NP, 13 June 2003, FP1; Tommy Chouinard, “Québec refile la facture aux régions,” LD, 14 June 2003, A1. 46 “Shaking Up Quebec Inc.” (editorial), GM, 23 May 2003, A16; R. Dutrisac, “Place au privé dans le capital de risque,” LD, 18 December 2003, A1; Ministère du Développement économique (hereinafter MDE), “Les actions

348  Notes to Pages 178–9 stratégiques du gouvernement du Québec dans l’économie,” news release, 6 April 2004; MDE, “Des fonds régionaux et locaux pour investir dans le développement des régions,” news release, 6 April 2004; Pierre Couture and Mylène Moisan, “Innovatech Québec ne sera pas démantelée,” LS, 7 April 2004, C1. 47 P. Fortin, “À fond la Caisse!,” L’Actualité, 15 April 2005, 62; Marilyse Hamelin, “Cherche financement désespérément,” LD, 2 October 2004, H4. The Liberals formalized the dual mandate in 2005, but this was seen by some as favouring profit-maximizing; Laberge, Joanis, and Vaillancourt, “Caisse de dépôt et placement du Québec,” 306. 48 MDE, “Le gouvernement propose une nouvelle gouvernance aux régions du Québec,” news release, 12 November 2003; MDE, “Adoption de la Loi sur le ministère du Développement économique et régional et de la Recherche,” news release, 17 December 2003. 49 S. Cousineau, “C’est le tour des PME,” LP, 22 April 2005, A20; Rudy Le Cours, “Les entreprises arrachent un joli morceau,” LP, 22 April 2005, A27. 50 Ministère des Ressources naturelles et de la Faune, “Le gouvernement du Québec et les régions,” news release, 23 March 2005; Jeanne Corriveau, “Le CMM cultive 15 grappes industrielles,” LD, 10 May 2005, A5; MDE, “Le ministre Claude Béchard dévoile la nouvelle stratégie gouvernementale du développement économique,” news release, 13 October 2005; S. Cousineau, “On a la carte routière, mais où sont les clefs?,” LP, 14 October 2005, 2; Michèle Boisvert, “L’Avantage québécois,” LP, 17 October 2005, 5. 51 François Desjardins, “Coup de pouce aux forestières,” LD, 24 March 2006, A2; Dene Moore, “L’aide financière de Québec déçoit l’industrie forestière,” LD, 25 March 2006, C3; MDE, “Des investissements important pour les entreprises manufacturières,” news release, 27 March 2006; MDE, “Le gouvernement du Québec annonce un plan pour le secteur forestier,” news release, 20 October 2006. 52 Antoine Robitaille, “Fronde anti-Charest dans le milieu de la recherche,” LD, 12 April 2006, A1; Ministère du Développement économique, “Le premier ministre Jean Charest annonce des investissements de 1,2 milliard $ en recherche et innovation,” news release, 4 December 2006; C. Turcotte, “Québec investira 888 millions de plus en recherche et en innovation,” LD, 5 December 2006. 53 The strategy did not pass before the April election but was implemented afterwards; Michel Audet, “Le Québec des villes et des régions,” LD, 21 February 2007, A9; Maxime Bergeron and Rodrigue Sébastien, “Montréal se satisfait de 140 millions,” LP, 21 February 2007, A7.

Notes to Pages 179–80  349 54 See Brigitte Breton, “L’intervention libéral,” LS, 21 February 2007. Other also now argued that the Liberals had abandoned their market-oriented agenda; T. Chouinard, “Bilan du premier discourse inaugural,” LP, 14 March 2006, A10; David McGrane, “Full-Blooded Social Democracy – or Another Third Way?,” Canadian Dimension, January 2006, 10. 55 Bureau de le premier ministre du Québec, “Investir dans un secteur gagnant,” news release, 23 November 2007; F. Desjardins, “Québec lance une bouée aux manufacturiers,” LD, 24 November 2007, B1; MDE, “Des gestes concrets pour la prospérité économique du Québec,” news release, 14 March 2008; S. Cousineau, “La fin de la récré,” LP, 14 March 2008, 1; Le ministère des Finances, “Le gouvernement du Québec annonce des modifications au crédit d’impôt à l’investissement,” news release, 10 December 2009. 56 Ministère des ressources naturelles, “Launch of the Green Paper on the New Forest Regime,” news release, 14 February 2008; Ministère des ressources naturelles, “Le ministre annonce des investissements de plus de 102 millions de dollars,” news release, 6 June 2008; Bernard Barbeau, “200 millions pour aider l’industrie forestière,” LD, 16 May 2009, B3; Government of Canada, “Canada-Quebec Investment of $110 Million to Stimulate the Forest Sector,” Targeted News Service, 26 May 2010. 57 MDE, “Pour un Québec vert et prospère,” news release, 7 May 2008; Martin Ouellet, “Québec contribue à la création d’un fonds pour le développement d’énergie propre,” PC, 1 April 2008. 58 MDE, “825 M$ pour la Stratégie de développement économique des régions,” news release, 24 May 2007; MDE, “Le projet ACCORD,” presentation by Xavier Fonteneau, 12 February 2010, 24. 59 MDE, “Québec vient en renfort aux entreprises,” news release, 17 December 2008; R. Dutrisac, “Bachand annonce une mesure pour affronter la tempête économique,” LD, 18 December 2008, A4; Ministère des Finance, “Le gouvernement bonifie de 800 millions son plan d’action pour soutenir l’économie,” news release, 27 October 2009. 60 Ministère des Finances, “Monique Jérôme-Forget annonce des actions additionnelles pour stimuler l’économie québécoise,” news release, 14 January 2009; Ministère des Finances, “Budget 2009–2010: Un effort sans précédent pour protéger nos employées,” news release, 19 March 2009; François Desjardins, “Entreprises: Québec cible les problèmes de liquidités,” LD, 20 March 2009, A4; “Teralys Capital Launches Operations,” CNW, 9 July 2009; Jason Magder, “Venture Capital ‘Pivotal’ for Tech,” Gazette, 26 March 2010, B2.

350  Notes to Pages 180–3 61 The government also noted that the mandates of the two companies increasingly were becoming blurred; Bertrand Marotte, “Quebec Merges Key Agencies,” GM, 18 September 2010, B4; Société générale de financement, “Société générale de financement du Quebec invested $288 million in 2009,” CNW, 1 April 2010. 62 MDE, “Quebec Invests $1.16 Billion in Innovation and Prosperity,” CNW, 29 June 2010; “Quebec Updates $1.16B Research Strategy,” eSource Canada Business News Network, 19 July 2010. 63 Lynn Moore, “Winter Road Will Help Miners,” Gazette, 24 March 2009, B3; Rhéal Séguin, “Economic Plan Divides Quebec’s Native Communities,” GM, 7 November 2009, A13; Séguin, “Quebec to Invest $80 Billion in North,” GM, 10 May 2011, A9. 64 Bourque, Le modèle québécois de développement, 143. 65 For an argument that its development role is now modest, see Laberge, Joanis, and Vaillancourt, “Caisse de dépôt et placement du Québec,” 307–12. 66 This figure is for 2003. The MDEIE figures include only financial assistance from the ministry, not its entire budget, which is reported in table 6.1. 67 Quebec consolidates data on tax expenditures that it attributes to economic development objectives. Figures for 2006–10 are from Ministère des Finances, Dépenses fiscales, 2011 (Quebec City, Ministère des Finances, 2012), A.36. Those for earlier years are from previous iterations of this publication. 68 A strong argument against this equivalence is that, as we saw in chapter 1, the economic interventions of many states historically have been motivated by a desire to “catch up” to earlier-industrializers, not by nationalist ideas. This equivalence nevertheless is implied by some commentators on Quebec and may have been assumed by Jean Charest when he first attacked intervention as PLQ leader in 1998; R. Séguin, “Charest Pledges Tax Cuts,” GM, 11 September 1998, A8. For a compelling argument that nationalism and intervention should be distinguished, see Pierre-Yves Jetté, “Nécessaire interventionnisme,” LP, 25 September 2003, A19. 69 Graham Fraser, “Bouchard’s Stand on State Intervention Unacceptable from a Premier, Dion Says,” GM, 8 June 1999, A2. Dion argued that each intervention should be evaluated on its own merits. 70 K. Yakabuski, “Sugar Daddy,” GM, 26 November 1999, 27. Associating “economic nationalism” with such uneconomical goals is common in Quebec policy discussions; see, for instance, Christiane Théberge, “À

Notes to Pages 184–5  351 propos du modèle québécois,” LD, 20 August 1999, A8; Jacques Samson, “Le fin de Québec Inc.,” LS, 14 February 2000, B8. 71 This expression is borrowed from John Zysman, who used it to characterize the politics of British economic development policy during the post-war era; Governments, Markets, and Growth, 171. The Ontario and British cases are not identical, but there are similarities: the absence of preexisting institutions able to facilitate intervention, and sharp and persistent policy disagreement between the major parties and economic interests. 72 The development corporations were the Ontario Development Corporation and agencies that specialized in the province’s north and east; Davenport et al., Ontario and Quebec Industrial Policies in the 1970s, 32; Philippe Faucher, André Blais, and Robert Young, “L’Aide financière directe au secteur manufacturier au Québec et en Ontario, 1960–1980,” Journal of Canadian Studies 18, no. 1 (1983): 70; Robert Finbow, “The State Agenda in Quebec and Ontario, 1960–1980,” Journal of Canadian Studies 18, no. 1 (1983): 131. 73 Much of its budget was spent on infrastructure construction; see Robert Bird, Industrial Policies in Ontario (Toronto: Ontario Economic Council, 1985), 63–5; Stan Oziewicz and Rosemary Speirs, “Davis Denies Political Motive,” GM, 28 January 1981, 3; Judy Steed, “BILD’s Veil Hides Progress and a Record That’s Ragged,” GM, 15 May 1984, 7; “$30 Million Research Fund Planned to Encourage High-Tech Industries,” GM, 16 May 1984; CP, “Liberals Plan Phase Out of Davis’s IDEA Corp.,” GM, 20 February 1986, A12. 74 The two funds in question are the Ontario Teachers’ Pension Plan (Teachers) and the Ontario Municipal Employee Retirement System (OMERS). In 2008, when the Caisse managed $120.1 billion in assets, Teachers held $85.1 billion and OMERS $44.0 billion; Laberge, Joanis, and Vaillancourt, “Caisse de dépôt et placement du Québec,” 301. 75 H.V. Nelles, The Politics of Development (Toronto: Macmillan, 1974), chaps 6 and 7; Jamie Swift and Keith Stewart, Hydro: The Decline and Fall of Ontario’s Electric Empire (Toronto: Between the Lines, 2004), 214–15; Martin Mittelstaedt, “Ontario Hydro Faces Shifting Playing Field,” GM, 6 June 1996, B8. Some PCs continued to promote Hydro’s nuclear program in the early 1980s; Steed, “BILD’s Veil.” Ontario’s geography offers fewer opportunities than Quebec’s for hydroelectric development. 76 Robert Sheppard, “$1-Billion Fund Promised: High Tech Goals Set for Ontario,” GM, 23 April 1986, A1; S. Oziewicz, “‘Centres of Excellence’ to Get Research Funds,” GM, 20 June 1987, A4; Sheppard, “Ontario

352  Notes to Pages 185–6 Technology Fund’s Spending to Exceed $100 Million,” GM, 8 April 1989, B6. 77 Premier’s Council, Competing in the New Global Economy (Toronto: Queen’s Printer for Ontario, 1988), 9–34. On the council’s perceived interventionism, see Terence Corcoran, “Peterson Should Pay Heed to U.S. Guru on Consumers’ Takeover,” GM, 9 March 1990, B2. That the broader business community may have been out of step with the council’s business members is suggested by its response to a second report from the council, on labour market policy, in 1990. The Toronto Board of Trade firmly rejected them. Premier’s Council, People and Skills in the New Global Economy (Toronto: Queen’s Printer for Ontario, 1990); Board of Trade of Metropolitan Toronto, “Board of Trade Seriously Concerned over Issues of Training, Education and Labour Adjustment in Ontario,” CNW, 24 October 1990. 78 On the importance of the National Policy tariffs for Ontario’s traditional manufacturing, and the province’s weak economic performance during the late 1980s, see Thomas Courchene and Colin Telmer, From Heartland to North American Region State (Toronto: Faculty of Management, University of Toronto, 1998), 12–16, 31–3. David Wolfe discusses the role of the 1988 Free Trade Agreement in stimulating greater intervention in Ontario; “Ontario’s Future as a Region-State?,” in Ontario: Exploring the Region-State Hypothesis (Toronto: Proceedings of a Colloquium Held at the University of Toronto, Friday, 26 March 1999), 36–7. H.V. Nelles stresses that Ontario’s perception of neglect by Ottawa motivated it to intervene on behalf of its resources industries during the first half of the twentieth century; The Politics of Development. This activist legacy was a distant memory by 1990. 79 David Crane, “NDP Social Aims Only Possible with Sound Industrial Policies,” TS, 8 September 1990, D2; James Laxer, “A New ‘Economic Culture’ for Ontario?,” TS, 17 September 1990, A17. 80 Richard Mackie, “Ottawa Rejects Worker Plan,” GM, 7 October 1991, B5. 81 The OFL had proposed a smaller fund that would focus on social investment. For details on the NDP’s plans, and labour’s response, see Virginia Galt, “NDP Studying Ways to Bolster Investment,” GM, 30 April 1991, A6; R. Mackie, “NDP to Launch Plan for Worker Ownership,” GM, 23 July 1991, A3; G. Scotton, “Labour Groups Slam Investment Fund Plan,” FP, 18 June 1992, 51. The CAW’s negative assessment is developed by Jim Stanford in “Labour-Sponsored Funds,” Canadian Dimension, 1 May 1999, 41. On the size of the Ontario funds’ holdings in 1995, compared to those of the Caisse, see Andrew Bell, “Labour-Sponsored Funds Grow Lavish,” GM, 5 April 1995, B9.

Notes to Pages 186–8  353 82 On “rent-a-union” funds, see Stanford, “Labour-Sponsored Funds”; and Bruce Cohen, “Ontario Set to Give Labour Fund $6M Loan,” FP, 13 January 1995. On the financial markets’ scepticism, see Richard Blackwell, “Labour-Sponsored Funds Create Ripples in Investment Circles,” FP, 14 May 1994, S33; Adam Mayers, “Labour Fund Tax Credits Are Just Too Rich,” TS, 16 January 1995, B1. 83 G. Scotton, “Ontario May Set Up Investment Agency,” FP, 23 September 1991, 3; T. Walkom, “Seeking Economic Salvation,” TS, 30 November 1991, D1; Scotton, “Ontario Unveils Investment Fund,” FP, 15 April 1992, 14. 84 Board of Trade of Metropolitan Toronto, “Government’s Proposed $2 Billion ‘Ontario Investment Fund’ Is Risky Business,” CNW, 29 June 1992; “The Great Funds Debate,” ROB Magazine, 21 August 1992, 49; Bud Jorgensen, “Ontario Fund a Shadow of Original,” GM, 12 January 1993, B8; G. Scotton, “Ontario’s $70M Fund to Back Leading-Edge Firms,” FP, 19 November 1993, 5; R. Blackwell, “Tories Chop Ontario Fund,” FP, 1 December 1995, 8. 85 Ministry of Treasury and Economics, Investing in Tomorrow’s Jobs (Toronto: Queen’s Printer for Ontario, 2002), 25–6; CP, “Opposition Ridicules Proposed Hi-Tech Aid,” Hamilton Spectator, 13 May 1992, F7. 86 David Wolfe and Meric Gertler, “Globalization and Economic Restructuring in Ontario” (paper presented at Conference on Regional Innovation Systems in Europe, Donostia–San Sebastian, Spain, October 1999), 20–1; Jonathan Ferguson, “NDP Cutting Deals to Assist Businesses,” TS, 4 June 1994, E1; Art Chamberlain, “Bob Rae’s New Friends,” TS, 1 May 1995, B1. 87 The Canadian Federation of Independent Business (CFIB) and the Canadian Manufacturers’ Association (CMA) responded favourably to the cut; Dana Flavelle, “$71 Million Cut in Subsidies,” TS, 22 July 1995, E1. 88 For examples of each endeavour, see D. Crane, “Rae to Boost Training, Hi-Tech,” TS, 19 October 1991, C1; Michael Smith, “$81 Million to Spur High-Tech Innovation,” TS, 31 July 1992, A15; Bob Meyer, “Crown Firm a Partner in Innovation,” Windsor Star, 23 July 1991, C6; John Saunders, “Helping the Helpless,” GM, 27 May 1995, B4. 89 PC Party of Ontario, The Common Sense Revolution (Toronto: 1994), 13. There was a more tentative reference to privatizing parts of Ontario Hydro. 90 Adam Mayers, “Labour Funds Lose Some Tax Benefits,” TS, 8 May 1996, C2; Shirley Won, “Ontario to Boost Investment Limit in Labour Funds,” GM, 30 September 1998, B16. On the size of the labour-sponsored funds not long after the PCs left power, see James Bagnall, “End of the Line,” Ottawa Citizen, 22 September 2005, F1. On the centres of excellence,

354  Notes to Page 188 see Ministry of Economic Development (hereinafter MED), “Minister Saunders Announces New Approach for Centres of Excellence,” CNW, 16 December 1996; D. Crane, “Let’s Hear It for Centres of Excellence,” TS, 21 October 1997, 1. 91 J. Ferguson, “Clear-Cut Approval,” TS, 30 November 1995, C1; D. Crane, “PQ Outdoes Ontario Wooing Business,” TS, 4 April 1998, C2. On the cultural sector cuts, see Robert Everett-Green, “Culture Minister Means Business,” GM, 27 September 1995, C1; Everett-Green, “Just How Dire Are the Cuts to Arts Funding?,” GM, 4 January 1997, N4; Everett-Green, “Tories Wean Cultural Sector off Trough,” GM, 22 May 1999, C2. 92 Sid Adilman and Greg Quill, “Moviemakers Give Tax Credit Thumbs Up,” TS, 8 May 1995, D1; “Ontario Budget Takes the Right Direction” (editorial), TS, 8 May 1996, 14; Val Ross and Christopher Harris, “Tax Breaks to Benefit Ontario Arts Sector,” GM, 8 May 1996, C1; R. Ferguson, “Firms Get Taste of Tax Breaks,” TS, 5 May 1999, 1. 93 Ministry of Finance, “1997 Ontario Budget: Ontario Creates Jobs for the Future,” CNW, 6 May 1997; D. Crane, “Insight,” TS, 7 May 1997, A23; Margot Gibb-Clark, “Tax Breaks, Credits Aim at Job Creation,” GM, 7 May 1997, A7; Ontario Ministry of Finance, “1998 Ontario budget,” CNW, 5 May 1998. 94 D. Crane, “Ontario Grasping Innovation Hi-Tech Opportunities,” TS, 20 December 1998, A19; Ministry of Energy, Science and Technology, “Chair Appointed for Ontario Research and Development Challenge Fund Board,” CNW, 5 March 1998. For a critique, see John Polyani, “Shackling Research Suffocates Creativity and Commerce,” TS, 5 February 1998, A23. 95 Lisa Wright, “Tories Scrap Blue-Ribbon Panel,” TS, 7 July 1995, A1; Rodney Haddow and Thomas Klassen, Partisanship, Globalization, and Canadian Labour Market Policy (Toronto: UTP, 2006), 103–8. 96 Office of the Premier, “Premier Announces New Jobs and Investment Initiative,” CNW, 24 September 2007. The prominent Conservative was David Lindsay. 97 OJIB had sixteen members, of whom fifteen are identifiable from press releases and media reports. Of these, thirteen were businesspersons; the others were hospital and community college administrators; see Office of the Premier, “Premier Appoints Ontario Business and Community Leaders to Jobs and Investment Board,” CNW, 25 May 1998; D. Crane, “Report Aims to ‘Stretch’ Ontarians,” TS, 15 February 1999, 1; Ian Urquart, “Invest Heavily in Education: Report,” TS, 25 March 1999, 1; “Harris Agenda: Leave It to Business” (editorial), TS, 28 March 1999, 1; Richard Brennan, “Harris Advisor Posted to Power,” TS, 11 December 1999, 1.

Notes to Pages 188–90  355   98 Progressive Conservative Party of Ontario, Common Sense Revolution, 14–15.   99 The other new firms would pay down the defunct firm’s debt, oversee the new electricity market, and maintain safety and system-access standards. The remainder of this paragraph is based largely on Jamie Swift and Keith Stewart, Hydro: The Decline and Fall of Ontario’s Electric Empire (Toronto: Between the Lines, 2004), chaps 7, 8, and 9. 100 D. Crane, “Eves Recognizes Economic Role,” TS, 3 May 2000, 1; Patrick Grady, “Say No to Ontario Separatists,” GM, 20 June 2000, A17; Ministry of Finance, “Eves Challenges the Federal Government to Match Tax Credit for R&D Businesses,” CNW, 17 October 2000. 101 Caroline Mailan, “Harris Touts Infrastructure Fund,” TS, 7 October 1999, 1; Ministry of Energy, Science and Technology, “Ontario Invests in Biotechnology Industry Growth,” CNW, 2 November 1999; Sandra Martin, “Ontario Expands Role of Media Development Agency,” GM, 2 February 2001, A8; Paul Viera, “Science and Technology Gets $800M Commitment,” NP, 18 June 2002, OB4. 102 Ministry of Energy, Science and Technology, “Province Commits $9 Million for Biotech Commercialization Centre,” CNW, 14 June 2000; D. Crane, “Bioscience Holds a Key to Toronto’s Future,” TS, 6 March 2001, 1; Crane, “Ottawa Absent at Launch of MaRS Project,” TS, 5 June 2002, E2; Cancer Care Ontario, “Cancer Leaders Applaud Government Investment,” CNW, 28 March 2003; Ministry of Enterprise, Opportunity and Innovation, “Eves Government Celebrates New Commercialization Centre,” CNW, 22 April 2003. 103 T. Armstrong, “Industry Loves a Good Carrot,” GM, 29 May 2002, A17; Paul Brent, “New Auto Plant Hinges on Public Money,” NP, 17 October 2002, FP1; Armstrong, “Ontario Rejects Concept of Cash for Chrysler,” NP, 8 February 2003, FP3; Greg Keenan and Simon Tuck, “Ontario to Fuel Auto Sector,” GM, 27 February 2003, B1. 104 The institute was the C.D. Howe Institute. T. Corcoran, “E-Business Doesn’t Need E-Subsidies,” NP, 3 October 2000, C19; Luiza Chwialkowska, “The Corporate Welfare Dilemma,” NP, 31 October 2000, A17; Jack Mintz, “A Tax Cut for Everyone,” NP, 26 March 2003, FP15; Dunajie Chen and Mintz, “Fiscal Folly,” NP, 26 November 2003, FP15. 105 Richard Brennan, “Ontario Eyes Sale of Public Assets,” TS, 20 April 2001, A12; Ministry of Finance, “Responsible Choices,” CNW, 9 May 2001; Red Tape Commission, “Harris Government Announces Public Consultations to Ensure Ontario Continues to Be Competitive,” CNW, 6 August 2001; D. Crane, “New Institute Should Boost Our Competitiveness,” TS, 17 October 2001, E2; Institute for Competitiveness and Prosperity, “Ontario Task Force Calls for Bold Initiatives,” CNW, 5 November 2002.

356  Notes to Pages 190–2 106 In 2003, the PLQ estimated that Quebec spent twice as much as Ontario on tax expenditures. An Ontario observer estimated that Ontario spent at most $800 million on tax expenditures, about half Quebec’s reported figure; R. Seguin, “Quebec Budget Cuts Role of State,” GM, 13 June 2003, A4; April Lindgren “Sorbara Argues Elimination of Tax Credits Not a Tax Hike,” NP, 2 December 2003, A10. 107 Lee Greenberg, “McGuinty Raises Corporate Tax Rate,” NP, 25 November 2003, A1; Lindgren, “Sorbara Argues Elimination of Tax Credits Not a Tax Hike”; C. Mailan, “Movie Bailout Gets Rave Reviews,” TS, 22 December 2004, F1. 108 James Daw, “Ontario Drops Tax Break for Labour-Sponsored Funds,” TS, 30 August 2005, E1; Keith Damsell, “Ontario to Allow Five Years to Unwind Tax Credit,” GM, 1 October 2005, B9. 109 Office of the Premier, “Province of Ontario, Canada Strengthens Auto Sector,” news release, 14 April 2004; G. Keenan, “Ottawa Challenged to ‘Pony Up’ Cash for Auto Industry,” GM, 15 April 2004, B3. 110 R. Ferguson, “Ontario to Sell Ideas,” TS, 24 June 2004, D3; C. Mailan, “McGuinty Vows More Cash for Research,” TS, 7 October 2004, A19; MED, “Ontario Government Announces Centre of Excellence for Energy,” news release, 10 January 2005; Ministry of Research and Innovation (hereafter MRI), “Premier McGuinty Officially Opens MaRS,” news release, 26 September 2005. 111 Ministry of Finance, “March 2006 – Budget Press Release: Strengthening Ontario’s Economic Advantage,” news release, 23 March 2006; Dana Flavelle, “A Bricks-and-Mortar Budget,” TS, 24 March 2006, F1; Ministry of Finance, “Budget Press Release: Expanding Opportunities for Business in Ontario,” news release, 22 March 2007; David Friend, “Ontario Budget Cuts Small Business Tax by Half a Billion as Minimum Wage Climbs,” CP, 22 March 2007. 112 Ministry of Natural Resources, “Ontario Strengthens Forest Industry,” news release, 13 June 2005; Ministry of Natural Resources, “McGuinty Government Invests in New Generation of Forest Sector Jobs,” news release, 29 September 2005; Murray Campbell and Karen Howlett, “Ontario Plans Aid Package for Troubled Forestry Firms,” GM, 29 September 2005, A10; Office of the Premier, “A Vision for Prosperity,” news release, 22 February 2006; 113 MEDT, “McGuinty Government Partners with Manufacturing Sector,” news release, 16 December 2005; G. Keenan, “Ontario to Unveil Jobs Strategy,” GM, 16 December 2005, B1; CP, “Ontario to Offer Loans,” TS, 17 December 2005, D11.

Notes to Pages 192–4  357 114 Ministry of Northern Development and Mines, “Ontario Government Strengthens Mineral Sector,” news release, 6 March 2006; Rob O’Flanagan, “Ontario Unveils New Mining Strategy,” Sudbury Star, 8 March 2006, A3; Ministry of Agriculture, “McGuinty Government Supports Ontario Farmers,” news release, 6 March 2006; Ministry of Agriculture, “McGuinty Government Invests in Rural Ontario,” news release, 19 September 2006. 115 Office of the Premier, “Creating Jobs by Going Green,” news release, 19 June 2007; R. Ferguson, “Auto Firms Get New Lease on Research,” TS, 20 June 2007, A19; “McGuinty Announces New Green Fund,” eSource Canada Business News Network, 22 June 2007. On Liberal and PC promises, see mapleleafweb.com. 116 Anne Golden, “Budget Steps Cautiously in Risky Economic Climate,” TS, 27 March 2008, A6; MRI, “Ontario’s Innovation Agenda,” news release, 29 April 2008; Tony Spears, “Ontario’s ‘Innovation Agenda’ Does Nothing to Save Jobs,” Ottawa Citizen, 1 May 2008, D5; R. Benzie, “Ontario Lets (Tax) Credits Roll,” TS, 2 July 2009, A17. 117 Office of the Premier, “Prime Minister Harper and Premier McGuinty Announce Financial Support for the Auto Industry,” news release, 20 December 2008; Tony VanAlphen and R. Benzie, “Bailout Bill Is $4B and Counting,” TS, 21 December 2008, A1; Romina Maurino, “Reaction Mixed to Government Auto Loan,” CP, 21 December 2008. 118 Office of the Premier, “Ontario Removing Barriers to Green Energy,” news release, 7 February 2009; Lisa Wood, “Ontario Premier Releases Broad Energy Legislative Plan Focusing on Renewables,” Platts Global Power Report, 26 February 2009, 37; Richard Blackwell, “New Rules Could Fuel Green Bonanza,” GM, 29 October 2009, B5. 119 R. Benzie, “Liberals Fear Green-Deal Backlash,” TS, 23 January 2010, A17; R. Blackwell, “‘Unfair’ Advantages Cited in Samsung Deal,” GM, 25 January 2010, B5; K. Howlett, Richard Blackwell, and Shawn McCarthy, “Province Takes Green Lead with Record $8 Billion Energy Investment,” GM, 8 April 2010, A1. 120 Lynn Moore, “Quebec’s Wind-Power Plants Take a Blow,” Montreal Gazette, 10 November 2009, B3; Tim Hudak, “Pull Plug on Pricey Energy,” TS, 10 December 2010, A19. 121 Tanya Talaga, “Can Ring of Fire Burn Deficit?,” TS, 26 March 2010, A14; Keith Leslie, “Far North Act Passed by Liberal Majority,” CP, 23 September 2010; Talaga, “Far North Bill Passes but ‘Fight Is Just Beginning,’” TS, 24 September 2010, A14. For a comparison of the Ontario and Quebec initiatives that suggests the relative modesty of the former, see Rick Owen, “Ontario Could Learn a Lesson from Quebec in How to

358  Notes to Pages 194–9 Deal with the North,” Kirkland Lake Northern News, 19 September 2011, A3. 122 If tax expenditures in 2003 were little different from those in 2005, when data first became available, combined outlays of these two types would have equalled $1.206 billion in that year. They reached $1.896 billion in 2010. 123 T. Corcoran, “Hewers of Wood, Drawers of Subsidy,” NP, 25 February 2006, FP19. The role of associational representations in the other sectors mentioned here was discussed in interviews with Ontario government officials. 7. Quantitative Evidence (1): Comparing Policy “Effort” 1 For a recent argument in favour of combining historical-comparative evidence with quantitative research, with the former largely preceding the latter, see Marcus Kreuzer, “Historical Knowledge and Quantitative Analysis,” American Political Science Review 102, no. 2 (2010): 369–92. 2 See, for instance, Evelyne Huber and John Stephens, Development and Crisis of the Welfare State (Chicago: University of Chicago Press, 2001), 50–3; and Torben Iversen, Capitalism, Democracy and Welfare (Cambridge: CUP, 2005), 196–7. 3 Variables for formal political institutions, common in comparative research, are inapplicable here. Canadian provinces are identical in relation to such institutional measures as federalism, parliamentarism. and the number of veto players. 4 I use the economic and fiscal IVs that are most commonly employed in CPE and welfare state scholarship. For examples of growth as an IV, see James Allen and Lyle Scruggs, “Political Partisanship and Welfare State Reform in Advanced Industrial Societies,” American Journal of Political Science 48, no. 3 (2004): 504; Olof Bachman, “Institutions, Structures and Poverty,” European Sociological Review 25, no. 2 (2009): 259; David Rueda, Social Democracy Inside Out (Oxford: OUP, 2007), 92–3. For examples of the use of GDP per capita, see Huber and Stephens, Development and Crisis of the Welfare State, 75–6; David Bradley, Evelyne Huber, Stephanie Moller, François Nielsen, and John Stephens, “Distribution and Redistribution in Postindustrial Democracies,” World Politics 55, no. 2 (2003): 206–7; Brian Burgoon, “Globalization and Backlash,” Review of International Political Economy 12, no. 2 (2009): 161–2. This literature often uses budget deficits as an IV. I use debt servicing costs instead, a related measure that is available for both the FMS and the PEA. Deficits are not reported in the PEA. The latter measure is also less likely to be endogenous with our DVs, as it

Notes to Page 201  359 more clearly reflects past deficits. One of our measures, federal transfers as a share of GDP, has no parallel in this comparative scholarship but is of manifest relevance here. 5 Trade openness is the most widely used measure of globalization; see the Allen and Scruggs and Huber and Stephens sources cited above, and Walter Korpi and Joakim Palme, “New Politics and Class Politics in the Context of Austerity and Globalization,” American Political Science Review 97, no. 3 (2003): 437–8. The main alternative measures, noted in the text, are the volume of financial flows, the level of capital controls, and foreign direct investment. 6 Consistent with standard practice, the declining share of industrial employment (here measured by summing employment in manufacturing, forestry, and agriculture) is calculated by subtracting the percentage of such employment from 100. 7 Examples of research that use the unemployment rate as an IV include the Allen and Scruggs, Bachman and Huber and Stephens studies referenced above; it is one of the most common regressors. Bachman and Burgoon, also referenced above, use immigration levels as an IV, as do Stephanie Moller, David Bradley, Evelyne Huber, François Nielsen, and John Stephens, “Determinants of Relative Poverty in Advanced Capitalist Democracies,” American Sociological Review 68, no. 1 (2003): 29–30. Burgoon includes a measure of de-industrialization of employment, as do Bradley, Huber, Moller, Nielsen, and Stephens, “Distribution and Redistribution”; and Alexander Hicks and Christopher Zorn, “Economic Globalization, the Macro-Economy, and the Reversals of Welfare,” International Organization 59, no. 3 (2005): 646. For examples of the use of female labour market share, see, again, Huber and Stephens and Bachman, as well as Philip Manow, “Electoral Rules, Class Coalitions and Welfare State Regimes,” Socio-Economic Review 7, no. 1 (2009): 116. The aged population as a proportion of total population is used by Huber and Stephens, Manow and Burgoon, among many others. All five IVs are used extensively. 8 This adjustment was explained in the note to figure 2.3 in chapter 2. For examples of union density as an IV in CPE research, see the Bradley, Huber, Moller, Nielsen, and Stephens study, and the Rueda one, both cited in note 4, as well as David Brady, Andrew Fullerton, and Jennifer Cross, “Putting Poverty in Political Context,” Social Forces 48, no. 1 (2009): 279. Other measures of labour strength by comparative scholars include labour movement centralization and corporatism, criteria that do not vary among Canadian provinces. 9 See, for instance, Geneviève Tellier, Les dépenses des gouvernements provinciaux canadiens (Quebec City: Les Presses de l’Université Laval,

360  Notes to Pages 202–9 2005), 218–19. The BC Social Credit Party and the Saskatchewan Party are assigned to the “right” category. In comparative welfare state research it is common to use cumulative indexes instead of dummies to measure partisanship. These are not used here. The assumption that underlies their use – that the impact of left parties, in particular, is likely to be felt in the very long run because of its cumulative, ratchet-like effect in institutionalizing social programs – is not relevant to our economic policy dependent variables. It is also not likely to be applicable to social policy outcomes in Canada, where left governments are much less common than centre and right ones, and where the rarity of coalition governments makes such a cumulative impact unlikely. 10 Peter Kennedy, A Guide to Econometrics, 5th ed. (Cambridge, MA: MIT Press, 2003), 303. 11 An example of the critique of using spending data to measure welfare state effort, and of an effort to develop a qualitative alternative measure, is Lyle Scruggs, “Welfare State Generosity across Space and Time,” in Investigating Welfare State Change, ed. J. Clasen and N. Siegel (Cheltenham, UK: Edward Elgar, 2007), 133–65. 12 Expenditures in the PEA are for the current year; expenditures and revenues exclude net lending, savings, capital consumption allowances, net capital transfers, and acquisition of non-financial capital. These exclusions do not apply to the FMS. On the other hand, the PEA encompasses some government activities that are excluded from the FMS. Both series are used widely. 13 William Greene, Econometric Analysis, 5th ed. (Upper Saddle River, NJ: Prentice-Hall, 2003), 320. 14 Heteroscedasticity tests was completed with model 4, discussed below. All IVs and DVs also were tested in the form identified below. All test result were significant at the 1% level. 15 Where the measurement of unobserved panel effects is found necessary, researchers typically favour a random effects (RE) approach to fixed effects. But REs in TSCS scholarship are rejected by leading writers on theoretical grounds. The RE approach presupposes that the data consist of random draws from a wider population. This is rarely the case with TSCS figures, which often represent the universe of data available, as they do here. See Alexander Hicks, “Introduction to Pooling,” in The Comparative Political Economy of the Welfare State, ed. T. Janoski and A. Hicks (Cambridge: CUP, 1994), 178; Nathaniel Beck, “Time-Series-Cross-Section Data,” Annual Review of Political Science 4 (2001): 284. 16 Beck and Jonathan Katz introduced the PCSE approach in their “What to Do (and Not to Do) with Time-Series Cross-Section Data,” American

Notes to Pages 209–10  361 Political Science Review 89, no. 3 (1995): 634. The quoted passage is from Beck, “Time-Series-Cross-Section Data,” 290. 17 Sven Wilson and Daniel Butler, “A Lot More to Do: The Sensitivity of Time-Series Cross-Section Analysis to Simple Alternative Specifications,” Political Analysis 15 (2007): 101, 108–15. For other objections, see Donald Green, Soo Yeon Kim, and David Yoon, “Dirty Pool,” International Organization 55, no. 2 (2001): 441–68; Thomas Plumper, Vera Troeger, and Philip Manow, “Panel Data Analysis in Comparative Politics,” European Journal of Political Research 44, no. 2 (2005): 327–54. 18 Jeffrey Wooldridge, Econometric Analysis of Cross Section and Panel Data (Cambridge, MA: MIT Press, 2002), 275–6. 19 Joshua Angrist and Jorn-Steffen Pischke, Mostly Harmless Econometrics (Princeton, NJ: Princeton University Press, 2009), 294; see also Wooldridge, Econometric Analysis of Cross Section and Panel Data, 275–6. 20 The DV models for which the null of no serial correlation was rejected at the 1% level were ExpendP, OwnrevP, Propertytax, Consumptax, Payrolltax, Assistservice1, and Assistservice2. Those for which the null was rejected at 5% were ExpendF, OwnrevF, R&Dspend, and Personinctax. No serial correlation was detected for Micro, Businesstranfers, Busassets, Businesstax, and Personstrans. Because data were missing, the test could not be performed on the three childcare variables. All variables were tested in the forms identified below. 21 Beck and Katz initially rejected an AR(1) estimator as inferior to OLS with an LDV, but they later concluded that if an LDV does not eliminate serial correlation, researchers should turn to alternatives, such as AR(1) estimation or other options; “Nuisance vs Substance,” Political Analysis 6, no. 1 (1996): 12–15; Beck and Katz, “Modelling Dynamics in Time-SeriesCross-Section Political Economy Data,” Annual Review of Political Science 14 (2011): 334–5. Their more recent writing has also been less resistant than was their earlier work to the use of fixed effects; “Modelling Dynamics in Time-Series-Cross-Section Political Economy Data,” 342. 22 For the other thirteen variables, the number of provincial panels for which serial correlation did not exceed one lag were as follows: ExpendF (nine), OwnrevF (ten), ExpendP (ten), Micro (eight), Businesstrans (nine), R&Dspend (nine), Busassets (seven), Businesstax (nine), Personinctax (nine), Consumptax (nine), Payrolltax (nine), Assistservice1 (ten), and Assistservice2 (ten). 23 Beck and Katz, “What to Do,” 640. 24 Two observations are missing for New Brunswick for the latter variable. 25 In the Stata software, an LDV and AR(1) are the two alternatives for addressing serial correlation in a PCSE model.

362  Notes to Pages 210–11 26 For most variables, the dataset has an N of about 300. According to one estimation, moderate outliers, on average, will occur 2.25 times with an N of this size; see Stata, Stata Base Reference Manual, Release 11 (College Station, TX: Stata, 2009), 953. In comparison, nine of fourteen continuous IVs used here had no outliers; only one had more than five. 27 Stata, Stata Base Reference Manual, Release 11, 850. For each DV, the test was applied to a model that included all IVs in the form identified above. 28 Damodar Gujarati, Basic Econometrics, 4th ed. (New York: McGraw-Hill, 2003), 173–4. 29 This was the case at the 5% level and usually much higher. The RESET test also was applied to each model and confirmed that the identified choice was the best one. 30 Histograms always indicated that the selected form was appropriate. In this form, no DV included extreme outliers. Ten of nineteen variables also had no mild outliers; only three had more than four. 31 Peter Kennedy, A Guide to Econometrics, 5th ed. (Cambridge, MA: MIT Press, 2003), 209. 32 These five pairs are Femeleshare and Gdp_pc (.74), Domtrade and FedtransP (.71), Immigrant and FedtransP (.76), Immigrant and Domtrade (.71), and Femaleshare and Age (.72). The Gdp_pc, Domtrade, FedtransP, and Immigrant variables were tested in log form, the one used in regressions. 33 The three variables concerned are FedtransP, Gdp_pc, and Femaleshare; the second of these again is in log form. 34 Gujarati, Basic Econometrics, 4th ed., 363. 35 Christopher Baum, An Introduction to Modern Econometrics Using Stata (College Station, TX: Stata, 2006), 87. For a more extensive critique of the VIF “rule of thumb” that ten is excessive, and a warning about the harm that it can cause, see Robert O’Brien, “A Caution Regarding Rules of Thumb for Variance Inflator Factors,” Quality and Quantity 41 (2007): 673–90. 36 Beck and Katz, “Modelling Dynamics in Time-Series-Cross-Section Political Economy Data,” 342–4. 37 Nathaniel Beck, “Time-Series Cross-Section Methods,” in The Oxford Handbook of Political Methodology, ed. J.M. Box-Steffensmeier, Henry Brady, and David Collier (Oxford: OUP, 2008), 479. 38 The test models included all variables and were in the form discussed above. It could not be applied to the three childcare variables because of its requirement that an LDV be used, which is not possible in their case because of missing data. The six models with results over .6 were:

Notes to Pages 211–39  363 Bussinesstrans (.662), Busassets (.712), Propertytax (.718), Payrolltax (.601), Personstrans (.648), and Assistservice1 (.613). 39 For a recent restatement of the view, prominent during the 1960s and 1970s, that rising affluence and industrialization led to broadly comparable developments in social and economic institutions, see Harold Wilensky, Rich Democracies (Berkeley: University of California Press, 2002), chap. 1. 40 But adding a time trend to model 3, where the political variables are absent, does not reduce it to insignificance (results not shown). 41 Two other IVs reveal interesting patterns in this case. LOG Fedtrans and LOG Inttrade moderate the Ontario-Quebec difference considerably; this suggests that Quebec’s economic development policy effort is stimulated significantly by its receipt of federal transfers and by its level of international trade. Removing the first of these from model 4 for the LOG Micro regression lowers the Ontario FE coefficient to -.48, significant at 1% (results not shown). Removing both variables from model 4 for the LOG Businesstrans regression lowers the Ontario FE’s coefficient to -.74, also significant at 1%. But the Quebec-Ontario difference remains very large in all cases, even in the face of these attenuating influences. 42 Alain Gagnon and Mary Beth Montcalm argue that Quebec’s underdevelopment, or “peripheralization,” induced its state to intervene: Quebec: Beyond the Quiet Revolution (Scarborough, ON: Nelson, 1990), 8. Such arguments cannot explain why economic intervention is so much greater in Quebec than in Atlantic Canada, which is much more economically marginalized. 43 Huber and Stephens, Development and Crisis of the Welfare State, 65. For these authors, the variable dropped in detrended models was GDP per capita. 44 Neither of these province’s FE coefficients are ever significantly lower than Quebec’s for these three variables; Alberta’s is significantly higher in both models for LOGassets. 45 John Richards and Larry Pratt, Prairie Capitalism (Toronto: McClelland and Stewart, 1979). 8. Quantitative Evidence (2): Comparing Redistributive Outcomes 1 Pierre Fortin, “Quebec Is Fairer,” Inroads 26 (2010): 58–65; Alain Nöel, “Quebec’s New Politics of Redistribution,” in Inequality and the Fading of Redistributive Politics, ed. K. Banting and J. Myles (Vancouver: UBC Press,

364  Notes to Page 240 2013), 256–82; Luc Godbout and Suzie St-Cerny, Le Québec, un paradis pour les familles? (Quebec City: Les Presses de l’Université Laval, 2008). 2 To make this calculation, one must be able to distinguish the impact of provincial and federal measures. This is possible for all important programs reported by the SLID survey, but the earlier SCF did not separate data for federal and provincial income taxes and tax transfers. For the years before 1993 we therefore can measure only the redistributive impact of one provincial measure, social assistance. 3 On the difficulty of measuring the redistributive impact of services and other non-transfer government measures, see Gøsta Esping-Andersen and John Myles, “Economic Inequality and the Welfare State,” in The Oxford Handbook of Economic Inequality, ed. W. Salverda, B. Nolan, and T. Smeeding (Oxford: OUP, 2009), 651–2. 4 It also cannot account for the impact of interactions between federal and provincial measures, though the influence of such federal measures as Employment Insurance (EI) is likely to correlate highly with factors that are controlled for in the regressions – such as the unemployment rate. 5 Along with those cited below, examples of this kind of research include Vincent Mahler and David Jesuit, “Fiscal Redistribution in the Developed Countries: New Insights from the Luxembourg Income Study,” SocioEconomic Review 4 (2006): 483–511; and Marc Frenette, David A. Green, and Garnett Picot, “Rising Income Inequality in the 1990s: An Exploration of Three Data Sources,” in Dimensions of Inequality in Canada, ed. D. Green and J. Kesselman (Vancouver: UBC Press, 2006), 65–100. 6 Constantine Kapsalis, An Assessment of EI and SA Reporting in SLID (Ottawa: Statistics Canada, Business and Labour Market Analysis Division, no. 166, 2001). 7 On the difficulties with the SLID sample, see Marc Frenette, David A. Green, and Kevin Milligan, “Looking for Smoking Guns: The Impact of Taxes and Transfers on Canadian Income Inequality” (unpublished, 2009). On the steps that were taken to rectify the problem, see Andrew Heisz, “Income Inequality and Redistribution in Canada: 1976 to 2004,” Analytical Studies Branch Research Paper Series 298 (Ottawa: Statistics Canada, 2007). The inequality and poverty measures used here also do not depend unduly on the distribution’s extremes, so they are unlikely to be affected much by underrepresentation. 8 For Statistics Canada, an economic family is “a group of two or more persons who live in the same dwelling and are related to each other by blood, marriage, common-law or adoption. A couple may be of opposite or same sex. Foster children are included”; http://www.statcan.

Notes to Pages 240–7  365 gc.ca/concepts/definitions/fam-econ-eng.htm, accessed 8 August 2014. 9 The three other adjustments are (1) dropping economic families with zero after-tax income (there are not many), (2) “top coding” all income sources at ten times their median level, and (3) “bottom coding” incomes at 1% of their mean. See Heisz, Income “Inequality and Redistribution in Canada,” 15. Unlike Heisz, however, we did not drop economic families that include more than one census family. Frenette, Green, and Milligan calculate that there is little difference between inequality levels for census and economic families. See their “Looking for Smoking Guns,” 32n6. 10 For more detail on each of these measures, see Jonathan Haughton and Shahidur Khandker, Handbook on Poverty and Inequality (Washington: World Bank, 2009), 68–70, 104–6. 11 The Gini coefficient usually is reported as varying between zero and one. I vary it between zero and one hundred here for ease of presentation. 12 The SLID survey does not report child tax benefits separately for the provinces and for Ottawa for 1993–5. For 1996, only Quebec and British Columbia are recorded as having paid such benefits. For the other provinces, I therefore assumed that all 1993–5 benefits were federal, and these were recorded as such in my database. Consistent with its average share of total federal and provincial child benefits for 1996–8, 20% of total recorded child benefits for 1993–5 were imputed to the province in the case of Quebec for these years. A similar procedure was not followed for BC because average federal child benefits alone in 1996 and 1997 were at about the same level as the recorded total for the preceding three years in that province, suggesting that there had probably been no or very little provincial child benefit payments in BC from 1993 to 1995. 13 This does not mean that total redistribution by both levels of government did not rise in these years, as Quebec residents, like those of all other provinces, would have benefited from improvements in Ottawa’s child benefits. My focus here is on the evolution of benefits in our two provinces so that we can compare their impact. 14 It is evident, however, that other factors, not measured here, contributed to a marked increase in Gini-measured inequality-reduction in Ontario between 2008 and 2010. All Ontario programs redistributed by 9.0 more points in 2010 than in 2008, by this measure. The contributions of the following measures were: assistance, 2.5 points; child benefits, 2.3 points; personal income tax, 0.2 points; and workers’ compensation, 0.6 points. The combined effect of these measures was 5.6 points, perhaps a bit more

366  Notes to Pages 248–57 if we consider interactions among them. This still leaves about 3 points to be explained by other Ontario transfers not treated here. 15 The Wald test uncovered heteroscedasticity in models that included all IVs for all but one of these DVs. Only in the case of inequality-reduction by the income tax was the DV homoscedastistic. The Persan test for crosssectional dependence detected this problem in nine DVs. Independence on the cross-sectional dimension was found, above the 10% level, only for the four poverty-reduction DVs. 16 For the data examined here, this choice occasions none of the problems encountered in chapter 7. Panel-by-panel inspection of regression residuals identified none that were correlated beyond the first lag for ten DVs. For each of the other four there was only one such panel. For the povertyreduction for unattached individuals variable, and the SCF variable for Gini-measured inequality reduction by assistance, one of ten provincial panels was auto-correlated at the second lag. For poverty-reduction for two-parent families and for all families, one panel was correlated at the third lag. An AR(1) correction is likely to address serial correlation very adequately in these circumstances. 17 The three exceptions were the full models for poverty-reduction for singlemother families, for two-parent families, and for all families. But the null hypothesis that pooling was acceptable in these cases nevertheless was endorsed only at the 10%, 12%, and 16% level, respectively, in these cases. For all of the others it was rejected at the 5% level, and usually at the .01% level. 18 The distribution of values for these variables raises particular problems – there are many zeros (for provinces and years where there was no benefit) and enough negative scores to make a logarithmic transformation impractical. The zero scores cause the data’s histogram to skew heavily to the right for the P10/P50 measure in linear form and also dominate scores for the Gini measure, resulting in a more-peaked-than-normal (leptokurtic) distribution. 19 Tests included all IVs. In each case, only one IV, LOGfedtranP, received a score above the commonly recognized threshold of ten. The problem is greater, with five IVs exceeding this level, for regressions of the two SCFderived DVs. As was noted in the previous chapter, such patterns render statistically significant results less likely but should not preclude us from proceeding. 20 Only in one case – Gini-reduction by social assistance according to the SCF data (first row) – does a significant result change in model 5; the addition of a time trend therefore is of little consequence. In the absence of the post-industrialism variables, but with the globalization ones present

Notes to Pages 264–81  367 (model 1), all ten Ontario FE coefficients for inequality are negative and significant, almost always at the 1% level. In the reverse scenario (model 2), in contrast, the Quebec-Ontario difference weakens, though the Ontario coefficient remains negative and statistically significant in six of ten inequality models. The most consistently important post-industrialism variable is unemployment, always higher in Quebec during our period. It is positively and significantly associated with redistribution in six of these cases; its addition to models 2 through 5 attenuates the Quebec-Ontario difference. International trade openness, higher for Ontario than Quebec, is significantly associated with inequality-reduction in seven of eight inequality models for the SLID data. It therefore enhances the QuebecOntario divergence, contributing to the emphatic model 1 inequality results. For poverty-reduction, no Ontario FE coefficient is significant for any of the model 1 or 2 regressions. Conclusion: How Large and Durable Are These Differences? 1 As was noted in chapter 8, the claim that Quebec is now more redistributive than other provinces, and than it was before the 1990s, has been made by Pierre Fortin and Alain Noel, among others. 2 This result is consistent with evidence I have reported elsewhere. See Rodney Haddow, “Labour Market Income Transfers and Redistribution: National Themes and Provincial Variations,” in Inequality and the Fading of Redistributive Politics, ed. Keith Banting and John Myles (Vancouver: UBC Press, 2013), 404–6. 3 Marc Frenette, David Green, and Garnett Picot, “Rising Income Inequality in the 1990s,” in Dimensions of Inequality in Canada, ed. David Green and Jonathan Kesselmann (Vancouver: UBC Press, 2006), 65–100; Andrew Heisz, “Income Inequality and Redistribution in Canada: 1976 to 2004,” in Analytical Studies Branch, Research Paper 298 (Ottawa: Statistics Canada, 2007); Haddow, “Labour Market Income Transfers and Redistribution,” 381–409. 4 This calculation, and all others reported in this and the next paragraph, were made by the author, based on data from Statistics Canada’s Survey of Labour and Income Dynamics (SLID). 5 Patrick Emmenegger, Silija Hausermann, Bruno Palier, and Martin Seeleib-Kaiser, “How We Grow Unequal,” in The Age of Dualization, ed. Emmenegger, Hausermann, Palier, and Seeleib-Kaiser (Oxford: OUP, 2012), 10. 6 Jonas Pontusson, Inequality and Prosperity (Ithaca: Cornell University Press, 2005), 134; Harold Wilensky, Rich Democracies: Political Economy, Public

368  Notes to Pages 281–5 Policy, and Performance (Berkeley: University of California Press, 2002), 33–9; Marius Busemeyer, “Determinants of Public Education Spending in 21 OECD Democracies, 1980–2001,” Journal of European Public Policy 14, no. 4 (2007): 582–610. 7 The health spending data are from OECD, OECD.StatExtracts, http:// stats.oecd.org; Carsten Jensen, “Worlds of Welfare Services and Transfers,” Journal of European Social Policy 18, no. 2 (2008): 151–61. 8 The education and health spending data are from the FMS. Consistent with the chapter 7 methodology, the federal transfers and debt payment IVs in these regressions therefore also are the FMS versions: FedtranF and DebtpayF. 9 Carolyn Tuohy, Accidental Logics (Oxford: OUP, 1999), 207–10, 226–31. Although Tuohy concurs that spending levels do not vary unduly among the provinces, she argues that provinces vary in their allocation of funds among different parts of the medical system. On equifinality, see Alexander George and Andrew Bennett, Case Studies and Theory Development in the Social Sciences (Cambridge, MA: MIT Press, 2004), 161–2. 10 Jennifer Wallner, “Defying the Odds: Similarities and Differences in Canadian Elementary and Secondary Education” (PhD diss., University of Toronto, 2009), ii. 11 This passage is cited from the manifesto’s English version; Lucien Bouchard et al., Clear-Eyed Vision of Quebec, October 2005, http://www. pourunquebeclucide.info/documents/manifesto.pdf. 12 Quebec and Canadian data for these calculations are from Statistics Canada, CANSIM, tables 3840013 (Quebec’s GDP), 3800016 (for the Canadian GDP), and 510001 (for population). 13 Statistics Canada, CANSIM, table 1024505. 14 Ministère des Finances, The Quebec Government Debt (Quebec City: 2010), 27–31. 15 Ibid., 10. 16 Needless to say, this formulation, consistent with contemporary historical institutionalist thinking in political science, also resonates with Karl Marx’s mid-nineteenth-century affirmation, “Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past.” The Eighteenth Brumaire of Louis Napoleon (1852), https://www.marxists.org/archive/marx/works/1852/18th-brumaire/ ch01.htm.

Index

Action démocratique de Québec (ADQ), 40, 74, 84–6, 109, 111, 144–5 Alliance des manufacturiers et des exportateurs du Québec, 140 Amable, Bruno, 11–12 Angrist, Joshua, 209 Archibald, Clinton, 44 Association of Day Care Operators of Ontario (ADCO), 147–9, 151 Association Québécoise des centres de la petite enfance (AQCPE), 143–5 Badie, Bertrand, 11 balance of power aspect of OntarioQuebec institutional difference: definition, 7, 10; how tested for in regressions, 202–3, 212; regression results, 231–2, 249, 253, 256–9, 275–6 Baum, Christopher, 211 Beck, Nathaniel, 208–9, 211, 248–9 Beckfield, Jason, 17 Béland, Daniel, 14 Bélanger, Yves, 39 Bennett, Andrew, 23

Bird, Richard, 50 Birnbaum, Pierre, 11 Blais, André, 76 Boix, Carles, 19 Bouchard, Camil, 107 Bouchard, Lucien, 39, 138–40, 175, 183 Bourassa, Robert, 38–9 Bourbeau, André, 103 Bourque, Gilles, 44 Boyer, Robert, 19 Brady, Henry, 17 Breznitz, Dan, 19–20 Brune, Nancy, 17 budgeting policy: definition of variables for use in regressions, 204, 206–7; hypotheses tested in this study, 61; qualitative evidence, 63–98; regression results, 213–19; scholarly literature reviewed, 18–19, 22 Burgoon, Brian, 17 Busemeyer, Marius, 17, 280 Butler, Daniel, 209 Cameron, David, 16 Caminada, Koen, 271

370 Index Campaign 2000, 121 Campbell, John L., 14 Canada: political-economic institutions relevant to this study, 31–7 Canadian Auto Workers (CAW), 186 causal mechanism: definition, 23–4; typology of those tested in this study, 24–6 Centrale de l’enseignement du Québec (CEQ), 103, 137–8, 140 Centrale des syndicats du Québec (CSQ), 144 centre party impact on policy: how operationalized for statistical analysis, 201–3; measured impact in regressions, 215–26, 231–3, 250–9 Chambre de commerce du Québec, 140 Charest, Jean, 39, 45, 84, 108, 110, 193 Cheung, Ron, 68 Chibber, Pradeep, 35 childcare and early learning policy: definition of variables for use in regressions, 205, 207; hypotheses tested in this study, 62; qualitative evidence, 131–62; regression results, 224–6; scholarly literature reviewed, 21–2 child tax credits: impact in reducing inequality and poverty, 242–8, 258–61, 264; policy developments in Ontario and Quebec, see chapter 4 Christian democratic welfare states, 8, 16, 21, 266–73, 280–1 collaborative decision-making: early evidence in Ontario, 50–2; early evidence in Quebec, 37, 44;

evidence in Ontario during study period, 157, 162, 171, 186, 195–6; evidence in Quebec during study period, 77, 101, 129, 138, 161, 171; how examined in regressions, 202, 259; how examined in this study, 24–6, 28–9, 280 collaborative political economies (including CMEs), 6–12, 19–20, 22 Collectif pour un Québec sans pauvreté, 109 comparative political economy, 3–6, 8, 11–13, 24–6, 28, 36, 98, 198–9, 275, 282 concertation: definition as distinctive form of policy collaboration in Quebec, 44–6, 53; impact on budgeting policy, 74, 79–80, 84, 98–9; impact on childcare policy, 132, 136–8, 145–6, 162; impact on economic development policy, 172–7, 179, 195–6; impact on social assistance and income transfers policy, 101, 104, 110, 119, 125, 129; impact overall, 202, 259, 263–5, 279, 285 Concertaction inter-régionale des garderies du Québec (CIRGQ), 136, 138–40, 143, 147 Confédération des syndicats nationaux (CSN), 103, 136–40, 172, 179, 181 Conseil du patronat du Québec, 75–6, 140–1, 145, 172–4 consumption taxes: importance, 32; Ontario and Quebec levels, 63, 70–2, 81; regression evidence, 204, 207, 216–19, 234, 237 cooperative relations aspect of Ontario-Quebec institutional

Index 371 difference: definition, 7, 10; how tested for in regressions, 202, 212, 216; regression results, 231–2, 249, 256–8, 275 corporate income taxes: importance, 32; Ontario and Quebec levels, 68–9, 75, 77; regression evidence, 207, 216–19, 230–1, 234, 237 corporatism: application of concept to Quebec, 44; definition and scholarship on, 7–8, 12, 16; empirical indicators for, 202 Courchene, Thomas, 50 Crouch, Colin, 11, 48 debt, public, its sustainability in Quebec, 282–4 dependent variables used in regressions: definitions, 203–7, 210–11, 238–41 Dingeldey, Irene, 20 Dion, Stéphane, 183 Drummond, Don, 121 Duplessis, Maurice, 38–9, 42, 44 Eastwood, Jonathan, 14 economic crisis of 2008: impact in Ontario, 95, 97, 193; impact in Quebec, 82, 85, 109, 179, 284 economic development policy: definition of variables for use in regressions, 204, 207; hypotheses tested in this study, 61; qualitative evidence, 163–96; regression results, 219–21; scholarly literature reviewed, 19–20, 22 education: spending on, 32, 79, 280– 2; for annual changes in education budgets, see chapter 3

employability enhancement measures: as alternative to workfare, 20, 22, 61, 130 Esping-Andersen, Gøsta, 8, 16, 21, 269, 280–1 Eves, Ernie, 47, 51, 119, 121, 189 federalism, in Canada, 31–4 Fédération des femmes de Québec (FFQ), 103, 105, 107–8, 110, 132, 136, 140 Fédération des travailleurs et travailleuses du Québec (FTQ), 103, 172, 174, 179–81, 185–6 Finbow, Robert, 50 Fortin, Pierre, 107, 239 Front commun des personnes assistées sociales du Québec (FCPASQ), 103, 105, 109, 116 Garrett, Geoffrey, 16–17, 19 George, Alexander, 23 Gerschenkron, Alexander, 10 Gini Coefficient, definition, 240 globalization: definition, 15; evidence of its impact, 226–8, 233, 276–9, 285; how examined in this study, 3–5, 14, 15–17, 28, 29; impact on Ontario and Quebec, 55–60; variables used to measure it in regressions, 199–201, 206, 212–13 Godbout, Luc, 239 Goudswaard, Kees, 271 Graefe, Peter, 45 Greenfield, Liah, 13 Haddow, Rodney, 36, 48 Hall, Peter, 11, 16–17, 165 Harris, Mike, 47, 50–2, 96, 117, 120–1, 124, 150, 153, 189, 243, 247, 257

372 Index health care: spending, 17, 32, 280–3; for annual changes in health care budgets, see chapter 3 Heisz, Andrew, 240 Hicks, Alexander, 17 Huber, Evelyne, 226 Hudak, Tim, 51, 96, 124 Hudon, Raymond, 39 Huo, Jingjing, 20

Kesselman, Jonathan, 68 kindergarten: extension of its availability in general, 131–2; in Ontario, 148–9, 153–8; in Quebec, 138–9 King, Gary, 22–3 Kitschelt, Herbert, 9, 52, 87, 125, 284 Klassen, Thomas, 36, 48 Kollman, Ken, 35

ideas: role in shaping public policy, 12–17, 27, 162; see also nationalism Income Security Advocacy Centre, 121 independent variables used in regressions: definitions, 198–203, 210–11 inequality, measured reduction by provincial transfers and income taxes, 241–8 Innis, Harold, 35 Institute for Research on Public Policy (IRPP), 107, 110 institutionalism: application to Ontario and Quebec, 30–1; how examined in regressions, 197, 275; its use in this study, 6, 19, 21, 24–7, 285

Landry, Bernard, 39, 175 Lecours, André, 14 left party impact on policy: how operationalized for statistical analysis, 201–3; measured impact in regressions, 215–26, 231–3, 250–9 Lesage, Jean, 38–9 Lévesque, René, 38–9 liberal decision-making and institutions, 24–7; how examined in regressions, 202; in Quebec, 43–5, 53; in Ontario, 52–3, 60, 229 Liberal Party of Ontario: childcare policy, 147–8, 153–7; economic development policy, 185, 191–4; historical role, 46–52; impact on budgeting policy, 87, 94–7; social assistance and income transfers policy, 113–14, 120–4 Liberal Party of Quebec (PLQ): historical role, 37–47; impact on budgeting policy, 75–9, 82–6; social assistance and transfers policy, 102–4, 108–12; childcare policy, 135, 142–6; economic development policy, 172–4, 177–80 liberal political economies (including LMEs), 6–12, 20, 19–20, 22

Jacek, Henry, 48, 52 Jensen, Carsten, 17, 281 Jenson, Jane, 136, 142 Katz, Jonathan, 208–9, 211, 248 Katzenstein, Peter, 12, 16 Kelley, Geoffrey, 141 Kemen, Hans, 19 Kennedy, Peter, 210 Kenworthy, Lane, 19–20 Keohane, Robert, 22–3

Index 373 liberal welfare states, 8, 16, 19–21, 73, 266–73, 280–1 Lijphart, Arend, 9, 31–3, 37–8, 52 Low-Income Cut-Off (LICO), 127–8 Luxembourg Income Study (LIS), 20, 265, 272 MacKenzie, James, 48 Mahon, Rianne, 146 Mann, Michael, 15 market-based measure of poverty (MBM), 128 Marois, Pauline, 86, 139 Matthews, Deb, 120 McCain, Margaret, 153, 156 McGuinty, Dalton, 47, 51, 93, 96, 100, 120–1, 123–5, 127, 153, 155, 158, 194 Metcalfe Foundation, 121 Miller, Frank, 49 Montpetit, Éric, 44 Mosley, Layna, 19 Mustard, Fraser, 153, 156 Nadeau, Richard, 39 National Council of Welfare (NCW), 126–8 nationalism: absence in Ontario, 30, 36, 53; definition and how examined in this study, 4, 13–15, 25–7, 61; evidence of impact in Quebec during study period, 64, 84, 98, 134, 165, 183, 196, 263; historical development in Quebec, 30, 36–8, 45–6, 53 Neamtan, Nancy, 138, 140 Nelson, Moira, 20 neoliberal parties: implications of their presence in a party system, 4, 40, 65, 97, 125, 202, 284

New Democratic Party of Ontario (NDP): childcare policy, 147–50; economic development policy, 185–7; historical role, 46–52; impact on budgeting policy, 87, 89–91; social assistance and transfers policy, 114–16 Noël, Alain, 142, 239 Noel, Sid, 48 Ontario: budgeting policy, 86–97; childcare policy, 146–58; economic development policy, 184–95; overall summary of results in comparison with Quebec, 262–5; political-economic institutions, 46– 52; regression results summarized, 231–3, 257–9; selection as case for study, 4; social assistance and transfers policy, 113–25 Ontario Coalition against Poverty (OCAP), 116, 119–21 Ontario Coalition for Better Child Care (OCBCC), 146–50, 155, 157 Ontario Federation of Labour, 186 P10/P50 ratio, definition, 240 Paillé, Daniel, 174–5 parental leave policy: general approach, 18, 131–3; in Ontario, 156, 158; in Quebec, 136, 139, 144–5, 162 Parizeau, Jacques, 39, 175 Parti Québécois (PQ): childcare policy, 134–41; economic development policy, 172, 174–7; historical role, 38–47; impact on budgeting policy, 79–82; social assistance and transfers policy, 101–2, 104–8

374 Index partisanship: how operationalized for statistical analysis, 201–3; measured impact in regressions, 215–26, 231–3, 250–9 party systems: in Canada, 34–5; in Ontario, 46–52; in Quebec, 37–46 Pascal, Charles, 156 payroll taxes: general approach, 63; Ontario and Quebec levels, 68–72, 75; regression results, 204, 207, 210, 216–19, 234, 237 Pecaut, David, 121 personal income taxes: impact in reducing inequality and poverty, 238, 241–4, 246–9, 252–4, 258–61, 263; international evidence, 18–19; importance, 32; Ontario and Quebec levels, 63, 70–4; regression results for levels, 204–5, 207, 216–19, 230, 234, 237 Peterson, David, 47, 50–1, 113, 118–19, 127 Pierson, Paul, 8 Pischke, Jorn-Steffen, 209 pluralism: definition, 7; in Ontario, 48, 51–2; Quebec’s departure from it, 44 political culture: of Canada, 36–7; of Ontario, 30; of Quebec, 30 political economy: of Canada, 35–6; of Ontario, 46–52; of Quebec, 37–46 Pontusson, Jonas, 20 Porter, Michael, 173 post-industrialism: definition, 15; evidence of its impact, 226–8, 233, 276–8, 285; how examined in this study, 3–4, 15–17, 21, 28; impact on Ontario and Quebec, 55–60; variables used to measure it in regressions, 201, 212–13

Pour un Québec lucide, 83, 282 poverty: definition used in calculations for this study, 241; measured reduction by provincial transfers and income taxes, 241–8 power resources theory, 6, 8, 202 process tracing, 23–5, 64, 89, 97, 274–6 Progressive Conservative Party of Ontario (PC): childcare policy, 147, 150–3; economic development policy, 184, 187–90; historical role, 46–52; impact on budgeting policy, 87, 91–4; social assistance and income transfers policy, 117–20 property taxes: apportionment of, between business and individual taxpayers, 68; Ontario and Quebec levels, 69–72; regression results, 204–5, 207, 216–19, 230, 234, 237 qualitative research methods, 22–4 quantitative (regression) research methods, 208–13; summary of results in comparison with qualitative methods, 274–6 Quebec: budgeting policy, 74–86; childcare policy, 134–46; economic development policy, 171–84; overall summary of results in comparison with Ontario, 262–5; political-economic institutions, 37– 46; regression results summarized, 231–3, 257–9; selection as a case for study, 4; social assistance and transfers policy, 101–13 Québec Solidaire, 40 Radwanski, George, 148–9, 156 Rae, Bob, 47, 50–1, 115, 186

Index 375 Rea, K.J., 50 Rhodes, Martin, 44 right party influence in policy: how operationalized for statistical analysis, 201–3 Rose, Ruth, 107, 110 Rueschemeyer, Dietrich, 13–14 Schmidt, Vivien, 11 Seeleib-Kaiser, Martin, 14 social assistance and income transfers policy: definition of variables for use in regressions, 204–5, 207; hypotheses tested in this study, 61; impact in reducing inequality and poverty, 241–8, 258–61, 264; qualitative evidence, 99–130; regression results, 222–4; scholarly literature reviewed, 20–2 social democratic welfare states, 8, 16, 20–1, 266–73, 280–1 Socio-Economic Summit (1996), 44–5, 74, 79, 81, 105, 138–41, 161, 176 Soskice, David, 11, 16–17 state: its role in public policy, 4, 10–12, 26–7, 61, 164–5, 196, 264 state enterprises: in Ontario, 49–50, 184–5, 189; in Quebec, 41–2, 171–2, 175, 181–2; overall role in economic development policy, 164, 196 St-Cerny, Suzie, 239 Stephens, John, 20, 226 Swank, Duane, 16 Taylor, Zackary, 19 Telmer, Colin, 50 Thelen, Kathleen, 7–8, 10

Thompson, George, 113–14, 116, 121, 242 Toronto Board of Trade, 186 Toronto City Summit Alliance, 121 Toronto Star, 121 Tory, John, 96 Tougas, Jocelyne, 140 Tremblay, Gérard, 173, 175, 178, 185 Tuohy, Carolyn, 281 Underhill, Frank, 35 union density: how operationalized for statistical analysis, 43, 201–3; measured impact in regressions, 215–26, 231–3, 250–9 Union Nationale, 38–9 Vaillancourt, François, 77 Vaillancourt, Yves, 45 varieties of capitalism (VoC): applicability to Quebec, 43; theory in general, 7–8, 11–12, 19 Verba, Sidney, 22–3 Vipond, Robert, 31 Wallner, Jennifer, 282 Wang, Chen, 271 Watts, Ronald, 32–3 Whitley, Richard, 11–12, 19–20 Wilensky, Harold, 281 Wilson, Sven, 209 workfare: definition and application in this study, 61, 99– 100, 125, 130, 164; international evidence, 20, 22; introduction in Ontario, 113–20; relevance to Quebec, 103 Zysman, John, 165

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Studies in Comparative Political Economy and Public Policy 1 The Search for Political Space: Globalization, Social Movements, and the Urban Political Experience / Warren Magnusson 2 Oil, the State, and Federalism: The Rise and Demise of Petro-Canada as a Statist Impulse / John Erik Fossum 3 Defying Conventional Wisdom: Political Movements and Popular Contention against North American Free Trade / Jeffrey M. Ayres 4 Community, State, and Market on the North Atlantic Rim: Challenges to Modernity in the Fisheries / Richard Apostle, Gene Barrett, Peter Holm, Svein Jentoft, Leigh Mazany, Bonnie McCay, Knut H. Mikalsen 5 More with Less: Work Reorganization in the Canadian Mining Industry / Bob Russell 6 Visions for Privacy: Policy Approaches for the Digital Age / Edited by Colin J. Bennett and Rebecca Grant 7 New Democracies: Economic and Social Reform in Brazil, Chile, and Mexico / Michel Duquette 8 Poverty, Social Assistance, and the Employability of Mothers: Restructuring Welfare States / Maureen Baker and David Tippin 9 The Left’s Dirty Job: The Politics of Industrial Restructuring in France and Spain / W. Rand Smith 10 Risky Business: Canada’s Changing Science-Based Policy and Regulatory Regime / Edited by G. Bruce Doern and Ted Reed 11 Temporary Work: The Gendered Rise of a Precarious Employment Relationship / Leah Vosko 12 Who Cares?: Women’s Work, Childcare, and Welfare State Redesign / Jane Jenson and Mariette Sineau with Franca Bimbi, Anne-Marie Daune-Richard, Vincent Della Sala, Rianne Mahon, Bérengèr Marques-Pereira, Olivier Paye, and George Ross 13 Canadian Forest Policy: Adapting to Change / Edited by Michael Howlett 14 Knowledge and Economic Conduct: The Social Foundations of the Modern Economy / Nico Stehr 15 Contingent Work, Disrupted Lives: Labour and Community in the New Rural Economy / Anthony Winson and Belinda Leach 16 The Economic Implications of Social Cohesion / Edited by Lars Osberg 17 Gendered States: Women, Unemployment Insurance, and the Political Economy of the Welfare State in Canada, 1945–1997 / Ann Porter 18 Educational Regimes and Anglo-American Democracy / Ronald Manzer 19 Money in Their Own Name: The Feminist Voice in Poverty Debate in Canada, 1970–1995 / Wendy McKeen

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