Chapter 8 Stabilization Policy
http://www.edmontonsun.com/homes/homesandcondos/2010/04/25/13716331.html
http://www.actionplan.gc.ca/eng/feature.asp?featureId=18
Summary
On April 24, 2010, federal government transferred funding of $9 million to Alberta to subsidize housing projects; this payment is part of the Canadian Economic Action Plan, which was first introduced in 2009 to fight against the economics downturn that was originated in 2008. This tax credit is aimed to aid people with general improvement, energy-efficiency upgrade and modification for people with disabilities on their accommodations. Home renovation credit does not only “ Improve quality of lives by improving living conditions, but also it stimulates the local economy by creating jobs.” The Ministry of Finance has reserved $1 billion to be transferred for social housing and over $800 million will be distributed among provinces and territories.
Connection
The home renovation and retrofits program is closely connected to the fiscal policy for the Canadian government. Fiscal policy determines government spending level and standard of tax rate. By introducing home renovation and retrofits, Canadian will be encouraged to spend more money on renovation because it is now cheaper for them to improve their houses or buildings. In addition, energy-efficiency upgrade qualifies for the criteria of renovation credit and this certainly does create an incentive for Canadian to go green and save more on their bills in the future. Although people will spend more, the reduced level of tax income will magnify government’s debt level problem.
Reflection
Although economists promote free market system, I find that government intervenes and regulations are necessary to stabilize the economy. Canada Action Plan is a multi-billion project to improve the economy by creating jobs and encouraging spending. Home renovation is an example of encouraging spending by reducing tax rate. However, as government constantly spending money to improve the economy, the deficit level is slowly escalating. These debts are not likely to be paid by this generation, but it will be carried over to the future generation. This accumulated debt will be a big load for the future generations. As economy is now picking up its own pace, it is likely tax benefits might be withdrawn soon to prevent further deficit. Take good use of these tax credits and spending money wisely will be the smart decision to be made currently.
Monday, April 26, 2010
Wednesday, April 7, 2010
'World's factory floor' to raise minimum wage
http://www.ft.com/cms/s/0/4262374c-32f6-11df-bf5f-00144feabdc0.html
Summary
Financial Times has reported a 20% raise of average minimum wages in Guangdong, the biggest export centre in China. The provincial government launched the policy primarily due to massive unfilled jobs positions as factories were rushing to complete “surge in orders since February. The enforcement of raise in minimum wages aimed to attract workers to fill vacant positions and improve their living conditions as CPI in February rose 2.7% comparing last year. Factories in Guangdong have started to move to poorer regions in Western China to take advantages of cheaper taxes and lower wages. Plus, less workers will work in Guangdong as they can now work closer to home. Au Yiu-Chee, who owns a factory in Guangdong, claimed the minimum wage policy was unexpected and he was now in a less favoured position comparing to manufacturers in Cambodia. Forecast for the “world’s factory floors” remains challenging in the 2010.
Connection
Minimum wages and CPI were mentioned in the article and they are closely related to the indicators of economics. First of all, CPI stands for Consumer purchases index and it reflects how prices have changed on daily consuming goods. Some of the examples are milk, pork and beat. It serves as an indicator which can be used to determine the minimum wages because workers will need enough purchasing power to sustain their lives. Ideally, minimum wages should be parallel to the CPI level. Minimum wages impacts both the labour force participation and unemployment rate because if minimum wages are set at workers’ desired level, lots will be more willing to look for a job or work again because they will receive the same minimum amounts of wages regardless of their performance or positions. Keep in mind that because of increase expenses for business, businesses might hire fewer employees to compensate the increasing wages. Eventually, unemployment rate might rise again. It is a dilemma that government has to consider thoroughly before implement minimum wages.
Reflection
The drastic increase in CPI was mainly due to 40% inflation in RMB currencies for the past year. Reasons why China has been the “world factory floors” are its abundant supply of workers and cheap currencies. Cheap currencies allow China factories to stay competitive as we are one of the biggest exporter in the world. China has now faced pressure both within and oustide the country. Foreign countries, like U.S., are forcing the inflation of RMB.On the other hand, in order to resolve complaint from workers and supply factories with workers, the Guangdong Provincial government decided to implement the raise in minimum wages level. Nonetheless, in order for Chinese factories to stay competitive, I don’t think minimum wages should be implemented. Instead of raising minimum wages, factories can negotiates with workers and government by providing foods, shelters and potential medical benefits to avoid a raise in minimum wages. In addition, factories should organize social events so that workers are more loyal to their factories. If workers are pleasant with the wages with all the benefits, raise in minimum can then be prevented and factories can remain competitive although there is an increase in RMB currency.
Summary
Financial Times has reported a 20% raise of average minimum wages in Guangdong, the biggest export centre in China. The provincial government launched the policy primarily due to massive unfilled jobs positions as factories were rushing to complete “surge in orders since February. The enforcement of raise in minimum wages aimed to attract workers to fill vacant positions and improve their living conditions as CPI in February rose 2.7% comparing last year. Factories in Guangdong have started to move to poorer regions in Western China to take advantages of cheaper taxes and lower wages. Plus, less workers will work in Guangdong as they can now work closer to home. Au Yiu-Chee, who owns a factory in Guangdong, claimed the minimum wage policy was unexpected and he was now in a less favoured position comparing to manufacturers in Cambodia. Forecast for the “world’s factory floors” remains challenging in the 2010.
Connection
Minimum wages and CPI were mentioned in the article and they are closely related to the indicators of economics. First of all, CPI stands for Consumer purchases index and it reflects how prices have changed on daily consuming goods. Some of the examples are milk, pork and beat. It serves as an indicator which can be used to determine the minimum wages because workers will need enough purchasing power to sustain their lives. Ideally, minimum wages should be parallel to the CPI level. Minimum wages impacts both the labour force participation and unemployment rate because if minimum wages are set at workers’ desired level, lots will be more willing to look for a job or work again because they will receive the same minimum amounts of wages regardless of their performance or positions. Keep in mind that because of increase expenses for business, businesses might hire fewer employees to compensate the increasing wages. Eventually, unemployment rate might rise again. It is a dilemma that government has to consider thoroughly before implement minimum wages.
Reflection
The drastic increase in CPI was mainly due to 40% inflation in RMB currencies for the past year. Reasons why China has been the “world factory floors” are its abundant supply of workers and cheap currencies. Cheap currencies allow China factories to stay competitive as we are one of the biggest exporter in the world. China has now faced pressure both within and oustide the country. Foreign countries, like U.S., are forcing the inflation of RMB.On the other hand, in order to resolve complaint from workers and supply factories with workers, the Guangdong Provincial government decided to implement the raise in minimum wages level. Nonetheless, in order for Chinese factories to stay competitive, I don’t think minimum wages should be implemented. Instead of raising minimum wages, factories can negotiates with workers and government by providing foods, shelters and potential medical benefits to avoid a raise in minimum wages. In addition, factories should organize social events so that workers are more loyal to their factories. If workers are pleasant with the wages with all the benefits, raise in minimum can then be prevented and factories can remain competitive although there is an increase in RMB currency.
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