Western Producer staff
Political rhetoric aside, food industry firms in Canada have a tax and social benefits cost advantage over their American competitors.
Despite the constant carping from the Canadian business sector about the high cost of taxes and the burden of paying Canadian health and social safety net costs, they are getting a bargain compared to those American firms they consider competitors.
Those are the results of a study completed for the Ontario-based Agri-Food Competitiveness Council, not normally considered a left-wing group that blindly supports big government.
Read Also
Downturn in grain farm economics threatens to be long term
We might look back at this fall as the turning point in grain farm economics — the point where making money became really difficult.
The implications of these findings, if they hold up to scrutiny, are that the so-called “high costs” of maintaining Canada’s social safety net should be a magnet attracting business investment in Canada, rather than a socialist wind blowing business away.
According to Larry Martin of the council, the study challenges much of the conventional wisdom about how well Canadian firms can compete if the much-touted North American free trade deal really does free up trade and allow competition.
And it also should give some pause to those politicians and corporate types who say Canada can’t afford to pay for the level of social services we have built over the years. They say these are just too costly, making the country noncompetitive.
But that’s not the message from the study of comparable food industry firms (a corporate farm, a processor and others with operations in both countries):
“The differences (in lower Canadian costs) are so great based on the case firms that they suggest Canada’s social programs provide a competitive advantage.”
Given all the alarm about unaffordable programs, how can this be?
The simple explanation is that even though the U.S. does not offer universally-available, publicly-funded medicare, jobless benefits, pension plans and the like at the same level as does Canada, American employers do have to pay for their patchwork, private-sector quilt of benefits.
They pay through the nose.
For one food service company studied, per-employee benefit costs were $4,000 in Canada and $18,489 in the U.S.
For a food distributor, Canadian costs were $3,870 compared to $12,322.
For the corporate farm, it was $3,310 in Canada compared to $11,084 in the U.S.
Even with higher corporate tax rates in Canada, American firms have to be much more profitable in gross sales simply to remain comparable to their Canadian competitors on the bottom line.
There are, of course, other issues that affect profit comparisons, from management skill and energy costs to labor rates and economies of scale.
But in an age when much of the public policy debate seems to begin with the assumption that Canadians no longer can afford many of the institutions and programs that make our society different (dare we say better?) than many other countries, the study of social benefit costs suggests that constant repetition of right-wing cliches does not necessarily make them true.
