AS Award #6
There are lies, damn lies and then there are statistics. For his innovative use of statistics to show that the employment insurance program in Canada continues to push up unemployment rates, Herb Grubel is the deserving winner of my AS Award.
Herb argued (in an October 29 column in the Financial Post) that the Trudeau Government’s 1972 reforms to the unemployment insurance program raised Canada’s unemployment rate by about 1.6 percentage points per year during the past 26 years. He derived his estimate by taking the average of the differences between the U.S. and Canadian unemployment rates between 1972 and 2008.
In 2009, Canada’s unemployment rate will be below the rate in the United States. Does this mean that the reforms of 37 years ago are finally beginning to produce “positive” outcomes for Canada? If so, why change the system now?
But Professor Grubel ignored two important pieces of information. A number of studies in the 1970s (I was the author of one of them) estimated the impact of the reforms on the unemployment rate to be approximately 1.0 percentage point. Moreover, most of the original reforms were largely reversed by the late 1980s. So Grubel’s back of the envelope estimate is absurdly silly.