Small Business & Entrepreneurship Archives - Page 2 of 11

The Political Economy of the Beer Excise Tax

Posted on November 18, 2020 by The Progressive Policy Institute

The presidential election is over, but for progressives, the process of winning back the working class has just begun.

In this note we’re going to focus on beer. Why beer? First, brewery employment is one of the great success stories in manufacturing in recent years. The number of jobs in the brewery industry increased a stunning 230% from 2007 to the pre-pandemic peak of 2019, making breweries the fastest growing manufacturing industry. With many communities—including the “Blue Wall” states—still traumatized by the long-term collapse in manufacturing jobs, the symbolic and actual importance of the health of the brewery industry, especially craft brewers, cannot be underestimated.

Second, beer exemplifies the complicatedpolitical calculation that progressives must make about tax policy. The Tax Cut and Jobs Act of 2017 (TCJA) gashed a huge hole in federal revenues that eventually needs to be plugged. Yet some provisions of the TCJA, such as the excise tax cuts for brewers, have been successful in generating job growth, and deserve to be made permanent.

Third, progressives need to face the regressive and almost punitive nature of excise taxes ingeneral. It’s difficult to build political supportwhen ordinary people feel like they are being nickeled and dimed by taxes and fees that they cannot get away from, whether it’s on beer, telephone service or some other essential product.

BREWERIES AND MANUFACTURING

Let’s start with manufacturing. The demise of many manufacturing jobs left painful scars in many state economies, wounds that were never fully healed under the Trump administration. As of 2019, before the pandemic hit, manufacturing employment in 40 out of 50 states was still below their 2007 level. In particular, the Blue Wall states—Minnesota, Michigan, Wisconsin, and Pennsylvania—were still down 114,000 manufacturing jobs in 2019 compared to 2007.

Against this dismal backdrop, the brewery industry has been a remarkably positive story. As noted, nationally brewer employment has shown the fastest growth of any manufacturing industry between the business cycle peaks of 2007 and 2019. In the Blue Wall states, brewery jobs quadrupled over this stretch, going from 3,000 in 2007 to more than 12,000 in 2019 (Figure 1).

The importance of brewery jobs stands out when we look at the most recent years. From 2015 to 2019, brewery industry jobs rose by an astonishing 79 percent. As Table 1 shows, that makes brewing the second-fastest growing manufacturing industry by jobs over that stretch, second only to storage battery manufacturing (think Tesla and Elon Musk’s huge Gigafactory in Sparks, Nevada, which employs thousands of workers making lithium-ion batteries).

It’s worth noting that the brewery industry is in good company. Other top manufacturing industries in terms of job growth include military armored vehicles, semiconductor machinery and space vehicle propulsion units (another industry related to Musk).

Table 1. Top Manufacturing Industries by Growth, 2015-2019

Data: Bureau of Labor Statistics

TAXES AND JOBS

Brewery employment was boosted, in part, by the “Craft Beverage Modernization and Tax Reform” provisions of the TCJA. These provisions, due to expire on December 31, 2020, reduce federal excise taxes on both large and small domestic breweries. The excise tax rate is reduced on the first six million barrels brewed by any brewer.Small brewers, with less than two million barrels, get a deeper reduction on their first60,000 barrels.

Economic research suggests that these excise tax cuts are mostly passed onto the final consumer. Indeed, the price of beer rose
at only a 1.7 percent rate between 2016 and 2019, slower than the 2.1 percent rate of overallconsumer inflation during the same period. Inother words, beer has been getting relatively cheaper compared to other goods and services.

Should the excise tax reduction be extended? On the one hand, the federal government entered the post-election period with a $3.1 trillion federalbudget deficit for FY 2020, and the public holdingfederal debt equal to 100 percent of GDP. Under normal circumstances that would be seen as an opportunity to raise revenues by allowing the provisions to expire, immediately sending excise taxes on small brewers soaring.

Yet, with the pandemic on the upswing across the country and unemployment still high, the notion of raising taxes on an extremely successful job-creating industry seems misguided, at best. That’s the equivalent of removing a tire from your fastest, most reliable car in the biggest race of the year.

One political hurdle is that the excise tax reduction was originally enacted as part of the TCJA, which has a bad association among many progressives for its top-heavy individual rate cuts and large reductions in corporate income tax rates. Nevertheless, the TCJA contained some important progressive provisions, such as improvements in the U.S. international tax code that make it harder for multinationals to shift income to low-tax countries (the so-called BEAT, or “base erosion and anti-abuse tax”) and set a kind of minimum tax on multinationals (the so-called GILTI or tax on “global intangible low- taxed income”). Within this context, the lower excise tax on beer translates directly into lower prices for consumers and more manufacturing jobs for workers, a general plus. Indeed, the Craft Beverage Modernization and Tax Reform Act had strong bipartisan support when it was first introduced in 2017 and extending the current provisions has strong bipartisan support today.

Figure 1. Soaring Brewery Jobs in the “Blue Wall” States, 2007=1

*Michigan, Minnesota, Wisconsin, Pennsylvania, Data: Bureau of Labor Statistics

THE CASE AGAINST EXCISE TAXES

The next question: Should the excise tax reduction on beer not only be extended, but made permanent? To answer that question requires a discussion of the role of excise taxes in fiscal policy. It’s a general principle ofeconomics that broad-based taxes are moreefficient and less distortionary than a narrowexcise tax on a single good. So, a broad sales tax or value-added tax is better for the economy and economic growth than a narrow excise tax which raises the same amount of money. Similarly, a broad carbon tax is better, in a theoretical sense, than a narrow tax on gasoline.

Nevertheless, excise taxes persist. Generally, excise taxes have been justified on two grounds.First, they serve the purpose of use fees, as in the case of the gas tax, which is used to pay for highway maintenance. But in an era of electric vehicles and oversize trucks, there no longer is a direct link between gas taxes paid and damage to the roads.

Excise taxes have been also justified on social grounds, both negative and positive. The tobacco excise tax, of course, is intended to discourage smoking. Telephone companies pay a contribution to the federal government—effectively an excise tax—to support universal service initiatives. And of course, the excise tax on alcohol has been tied to the social costs of alcohol abuse.

However, there are downsides to the use of excise taxes for any of these purposes. First, excise taxes tend to be regressive. A 2019 analysis by the Tax Policy Center showed that low-income households pay 1.1 percent of their income in federal excise taxes, compared to 0.5 percent for high income households (Table 2).

Table 2. Distribution of Federal Excise Taxes, 2019

*includes alcohol excise tax. Data: Tax Policy Center https://www.taxpolicycenter.org/briefing-book/who-bears-burden-federal-excise-taxes

In terms of alcohol, a 2015 study from the Congressional Research Service noted that excise taxes are generally regressive, alcohol included. Lower income households tend to spend a higher share of their pre- tax income on alcoholic beverages, but this distribution is not as uneven as spending on non-alcoholic beverages or food. In particular, economic studies have shown that beer is much less responsive to price changes than either wine or distilled spirits. This means that excise taxes on beer are much more likely to be transmitted to consumers, which puts more of a burden on low-income consumers. That makes the beer tax regressive.

And then there’s one more issue that’s especially important politically at this moment. A narrowly focused excise tax is perceived by many Americans as direct government interference in their choices. From the progressive perspective, that power should be used judiciously and notwith profligate abandon. That suggests as ageneral principle, we should move away from excise taxes towards broader-based taxes.

That principle obviously has wide applications. But getting back to beer, which is where we started: It’s time to get rid of the temptation to “tax sin” and let the excise tax reductions on beer be permanent. The U.S. needs more tax revenue, but it has to come from broader based taxes.

Semiconductor Bill a Step in the Right Direction for Innovation and Economic Growth

Posted on October 23, 2020September 18, 2024 by The Progressive Policy Institute

The U.S. and China continue to battle it out over semiconductor manufacturing as part of the larger tech war between the two countries. While the Semiconductor Industry Association (SIA) estimates U.S. firms account for 45 to 50 percent of annual semiconductor sales worldwide, their share of global semiconductor manufacturing capacity has declined from 37 percent in 1990 to 12 percent in 2020. Asian countries meanwhile account for nearly 75 percent of global semiconductor manufacturing capacity today. Importantly, China is projected to lead the world in manufacturing capacity by 2030, more than doubling its capacity from 2010 and 2030.

Going forward, only 6 percent of new capacity is expected to be located in the U.S., under current market conditions. That’s not acceptable. As we’ve seen this year, during tough times like pandemics and wars, countries with factories producing crucial goods prioritize their own needs ahead of foreign customers. Moreover, it takes time and money to build up alternative sources of supply. That’s why N95 masks, a “middle-tech” product, are still in short supply. In the event of a global crisis that cut off semiconductor supplies from Asia, it could take years to make up the difference at home.

It should be noted that semiconductors, more than data, are the oil of the 21st Century. By allowing semiconductor production to drift overseas, the U.S. is putting itself in the uncomfortable position of allowing foreign countries to control an essential input to the economy and defense sector.

Investments in semiconductors have huge externalities for the rest of the economy. PPI has often talked about the need to apply tech and advanced communication capabilities like 5G to the physical industries, in order to boost productivity and create new cognitive-physical jobs. But these gains won’t be possible without a steady and reliable source of semiconductors.

In terms of defense, relying on a potential rival as a major source of key semiconductors would present an important national security issue. It’s essential for the U.S. to retain a substantial semiconductor production base that can be expanded as needed in a crisis.

The rise of Asian capacity can partly be attributed to cheap capital and government incentivization of the industry, including land, housing, telecommunications, utilities, logistics, regulatory relief, expedited permitting, and special economic zones and science parks. In other words, the workings of the market have been distorted by government policy.

In order to match these foreign advantages, a bipartisan group of legislators have sponsored the Creating Helpful Incentives to Produce Semiconductors for America Act, known as the CHIPS for America Act. Introduced in the Senate by Sens. Warner (D-VA), Sinema (D-AZ), Cornyn (R-TX), Risch (R-ID), and Rubio (R-FL) and in the House by Reps. Matsui (D-CA) and McCaul (R-TX), the proposal would provide a 40 percent refundable investment tax credit for semiconductor equipment and facilities, as well as billions more for research, development, and production incentives over the next decade.

The SIA estimates a $20 to $50 billion federal program of additional grants and tax incentives for new manufacturing facilities built over the next 10 years would be enough to reverse the declining trend of U.S. semiconductor manufacturing over the last three decades. The CHIPS for America Act would be a down payment on this amount, helping the U.S. re-secure its foothold in semiconductor manufacturing and unlocking the next wave of economic growth.

The Brazilian App Economy 2020

Posted on April 23, 2020 by The Progressive Policy Institute

The COVID-19 pandemic is already a world-historic event, both in terms of health and economics. For Brazil, no one knows how far the disease will go and how bad the damage will be.

(A Brazillian Portuguese version is available for download here/Versão em português do brasil)

Yet as people around the world engage in “social distancing” in order to stem the virus, the importance of connectivity and in particular wireless connectivity stand out. Mobile phones enable people and business to communicate and be productive even when they have to stay physically apart. In particular, mobile apps are becoming even more embedded into daily life.

In this paper, we focus on Brazil’s App Economy: Those app developers and other workers who create, maintain, and support an ever-expanding range of apps for health, communications, ecommerce, education, transportation, banking, and smart homes. The size of an App Economy workforce in a country is indicative of the rate at which that country is embracing the digital transformation and how well it will be positioned as the global economy recovers from the pandemic.

As of January 2020, before the global pandemic took hold, we estimate Brazil has 277,000 App Economy jobs.¹ We find 178,000 App Economy jobs to belong to the iOS ecosystem, and the Android ecosystem to total 228,000 jobs. (These numbers sum to more than the total of Brazilian App Economy jobs because App Economy jobs can belong to multiple ecosystems).

INTERNATIONAL COMPARISONS

How does Brazil’s App Economy compare with other countries? In absolute terms, Brazil’s 277,000 App Economy jobs as of January 2020 compares well with Canada, which had 262,000 App Economy jobs as of November 2018.² Brazil’s App Economy rivals that of some important European Union members.³

For example, we estimated Germany to have 296,000 App Economy jobs as of July 2019 and the Netherlands to total 212,000 App Economy jobs as of July 2019. On a smaller scale, Argentina had 40,000 App Economy jobs as of February 2018 (Figure 2).⁴

EXAMPLES OF APP ECONOMY JOBS

The Brazilian App Economy is extensive both in terms of its depth and range of industries. We examined App Economy job postings as of March 2020, as the global pandemic was starting to take hold.

The Brazilian ICT sector was undoubtedly hiring App Economy workers. As of March 2020, content platform Encripta S/A was searching for a senior Android developer in Sao Paulo. IT company Indra Sistemas, S.A. was seeking a senior Java developer with knowledge of iOS and Android in Sao Paulo. Software firm TOTVS was looking for a junior front-end developer to work on mobile apps in Joinville. Mobile app development company Tap4 Mobile was hiring a mobile developer with knowledge of Swift programming in Manaus. Software developer Supero was searching for an Android developer with experience in Kotlin and Swift in Florianópolis.

The financial sector was actively hiring App Economy workers. As of March 2020, payment processor Stone Tecnologia was seeking a front-end developer with experience in iOS and Android in Sao Paulo. Financial firm SPC Brasil was looking for a senior mobile developer with iOS experience in Sao Paulo. Banking cooperative Sicredi was searching for an iOS developer in Porto Alegre. Financial research firm Empiricus was hiring a senior mobile specialist with knowledge of iOS in Sao Paulo. Payment platform PicPay was seeking an iOS developer in Vitória. Banking company Banco Itau was looking for mobile engineers with iOS and Android experience in Sao Paulo.

But other industries are also hiring App Economy workers as digital technology spreads into the physical industries. Pulp company Eldorado Brasil was hiring an Android developer in Campinas. Farming equipment manufacturer John Deere was searching for a junior backend software engineer with knowledge of Java or Kotlin in Indaiatuba. As of February 2020, appliance manufacturer Whirlpool Corporation was seeking a senior information systems analyst with experience in iOS and Android in Sao Paulo. Agricultural company Cargill was looking for a senior software engineer with experience in Xamarin and Swift in Sao Paulo. Medical e-learning company MedMKT was hiring a developer with knowledge of iOS and Android in Moncoes.

As of March 2020, retail company Via Varejo SA was searching for an Android developer in São Caetano do Sul. Event platform Uhuu! was seeking an Android developer in Porto Alegre. Travel aggregator Hurb – Hotel Urbano was looking for an Android developer in Rio de Janeiro. As of February 2020, ecommerce logistics company ASAP Log was hiring a fullstack developer with Android experience in Curitiba.

Media company Grupo Global was searching for iOS and Android developers in Rio de Janeiro as of March 2020. News company globo.com was seeking an iOS developer in Rio de Janeiro. As of February 2020, content publisher Secad was looking for a mobile application developer with experience in iOS and Android in Porto Alegre.

Academic institution Fundação Armando Alvares Penteado was hiring a mobile iOS developer in Sao Paulo as of March 2020. Research nonprofit Instituto de Pesquisas Eldorado was searching for an Android developer in Brasília. As of February 2020, research organization Atlantico Institute was seeking a junior test analyst with knowledge in Android.

FUTURE GROWTH

The economic turmoil caused by the global pandemic is likely to depress demand for App Economy workers in the short-run in Brazil and elsewhere. But as that turmoil dies down, the economic and social changes triggered by COVID-19 are likely to expand demand for health related apps. Telehealth, or the ability to deliver healthcare at a distance, will become more important in the aftermath of the pandemic. Similarly, long distance learning will become more accepted, as will ecommerce delivery.

In a 2019 report, Brasscom, the Brazilian ICT industry association, projected the need for 70,000 new ICT professionals per year going forward. According to Brasscom, the demand is spread across such areas as mobile apps, the cloud, information security, Internet of Things, and big data.

But mobile apps are a key enabling technology, because it is only natural to use tablets or phones as the human interface for almost any technology. A farmer who accesses a program for boosting crop yields, for example, will almost invariably use an app.

And then there are gig economy apps such as Rappi, iFood, and Uber. Our figure for App Economy jobs does not include gig economy workers. However, according to the Instituto Locomotiva, approximately 17 million Brazilians regularly use an app to generate income.5 These gig economy jobs are suffering during the pandemic, but they will be a potent source of growth in the future.

POLICY DEVELOPMENTS

In August 2018, Brazil passed Lei Geral de Proteção de Dados (LGPD), a comprehensive data protection law. Similar to the European Union’s General Data Protection Regulation, LGPD regulates the use of personal and sensitive personal data and defines an individual’s data rights such as the right to access and delete data.6 Additionally, the law requires businesses and organizations handling data to hire a data protection officer, provides ten legal bases for processing data, allows fines of two percent of a company’s Brazil revenues up to 50 million reals, and applies to multina-tional companies doing business in Brazil.

As economies become increasingly connected through globalization and digital technology, multinational companies will naturally gravitate toward investing in countries with better business conditions. Additionally, costly and burdensome requirements like LGPD make it difficult for startups to innovate and provide new products and services.

CONCLUSION

The coronavirus pandemic will undoubtedly transform global health and the economy. Ways of doing business while limiting contact like telehealth, distance learning, and ecommerce will likely see increased demand. As a result, apps and data – which allow consumers to purchase goods and services without coming into contact with others – will play a critical role in the recovery. Brazil’s App Economy is already sizable, totaling 277,000 App Economy jobs by our estimates as of January 2020. That includes the digital sector but also physical industries such as banking, ecommerce, media, and education.

This number is not directly comparable to our February 2017 estimate of 312,000 Brazilian App Economy jobs because of a subsequent change in methodology. A description of our current methodology can be found in our October 2017 report, “The App Economy in Europe: Leading Countries and Cities, 2017.”
Elliott Long, “The App Economy in Canada,” Progressive Policy Institute, July 2019.
Michael Mandel, “European App Economy Jobs Update, 2019,” Progressive Policy Institute, September 5, 2019.
Elliott Long and Michael Mandel, “The Argentina App Economy: 2018,” Progressive Policy Institute, April 2018.
“Brazil’s Gig Economy Gains Ground,” Angelico Law, May 17, 2019.
“What is the LGPD? Brazil’s version of the GDPR,” GDPR.eu.

Blog: Policymakers Should Look to Accelerate the Spread of the App Economy

Posted on February 12, 2020September 18, 2024 by The Progressive Policy Institute

The failure of the app intended to collect results from the Democratic caucuses in Iowa wasn’t the best advertisement for the App Economy. But we have to remember that apps play a central role in the economy.

As part of a global project measuring the size of the App Economy, we estimated the U.S. App Economy to have 2.246 million App Economy jobs as of April 2019. That’s an increase of 30 percent from our December 2016 estimate of 1.729 million jobs.

Many of them are at large corporations in tech hubs like the Bay Area, New York City, or Austin. But App Economy jobs aren’t exclusive to the tech sector or major cities. In fact, a growing number have seeped into smaller metro to rural areas, the physical industries, as well as startups.

For instance, as of February 2020, small IT firm Four Nodes was hiring a mobile application developer with experience in Android in Camden, Delaware. Kent Displays, which makes e-writing displays, was looking for a mobile app developer in Kent, Ohio. Federal Home Loan Bank of Des Moines was searching for a lead IT service desk analyst with knowledge of Android and iOS in Des Moines, Iowa. Television broadcasting company CBS was seeking a frontend engineer with experience in iOS and or Android development in Louisville, Kentucky.

In terms of App developing companies, Little Rock-based Apptegy is an education technology startup that allows administrators to tailor how they market their school. Leawood, Kansas-based Farmobile allows farmers to collect and share data with agronomists and other farmers. And Fargo, North Dakota-based WalkWise uses a walker attachment to track fitness data and send alerts using its mobile app.

Indeed, the ability to code from anywhere coupled with apps’ integration with the physical world (which accounts for roughly 80 percent of the economy) has democratized opportunity in these areas for businesses and consumers alike. And the Internet of Things, which will enable individuals and companies to use mobile apps to interact with physical objects and processes such as their home, cars, equipment, and warehouses, only promises to increase the interaction between apps and the physical world.

Here are some examples of App Economy jobs in the physical industries: as of February 2020, agricultural merchandiser Tractor Supply Company was hiring a mobile apps IT architect in Brentwood, Tennessee. Medical device company Medtronic was looking for a senior software quality engineer with experience in iOS and Android in Chanhassen, Minnesota. Manufacturing company IDEX was searching for a QA test engineer with knowledge of iOS or Android in Huntsville, Alabama. As of January 2020, ecommerce company SupplyHouse.com was seeking a senior Android developer in Melville, New York.

From this perspective, apps play a critical role in spreading the information revolution beyond the traditional metro hubs and tech sector. They serve as an important means to unlocking growth for smaller metro and rural areas, the physical industries, and startups.

Cuomo Scores Win-Win with Tipped Wage Rule

Posted on February 5, 2020September 18, 2024 by The Progressive Policy Institute

In a perfect example of unintended consequences, restaurant workers are pushing back against a nationwide campaign by labor advocates intended to raise their wages. They worry that the advocates’ push will cost them more in lost tips than they’ll gain in mandated wage increases – and cut their income overall.

These workers have found an ally in New York Governor Andrew Cuomo, who has come up with a sensible compromise that strikes a balance between overdue increases in the minimum wage and protecting workers who rely on tips.

Under federal law the minimum “cash wage” for tipped workers is $2.13 an hour, with tips making up the rest of workers’ pay. If tips don’t bring the worker up to the full federal or state minimum wage (whichever is higher), the employer is required by law to make up the rest. However, advocates’ “One Fair Wage” campaign aims to eliminate the tipped wage at the state level.

Seven states – California, Nevada, Alaska, Oregon, Washington, Montana, and Minnesota – have eliminated the tipped wage, requiring employers to pay the full minimum wage plus tips. This has drawn furious protests from both restaurant workers and owners, who say it means lower pay and lost jobs.

A 2018 survey by restaurant platform Upserve found that workers overwhelmingly – by 97 percent – prefer the tipped system to the full minimum wage. In Maine and Washington, D.C., restaurant workers led efforts to reverse laws passed under pressure from the One Fair Wage campaign.

Enter Governor Cuomo. In December, Cuomo’s Labor Department issued an order eliminating the tipped wage for some service sector occupations such as nail salon workers, hairdressers, and valet parking attendants, while retaining it for the restaurant industry. Cuomo’s rationale was to combat wage theft in those industries with the highest risk, while preserving the tipped wage system for restaurant workers who earn more than they would receiving the full minimum wage.

It’s been a popular move. Data from the Bureau of Labor Statistics show the annual median wage of waiters and waitresses, including tips, to be higher in New York than every state that has eliminated the tipped wage, and the annual median wage of bartenders to be higher in six of the seven states.

As PPI wrote in 2018, studies have shown that raising the tipped wage does not increase wages for restaurant workers because diners often end up tipping less. For instance, Census Bureau economist Maggie Jones found that raising the tipped minimum wage “increase[s] that portion of wages paid by employers, but decrease[s] tip income by a similar percentage.” Concern about declining tips and lower wages is why many restaurant workers have opposed an increase in the tipped minimum wage.

Restaurateurs also favor the tipped wage, as it enables owners to succeed in an industry with notoriously razor thin profit margins of 3 to 5 percent. Many owners cite having to close or cut hours (and thus wages) if faced with higher labor costs from raising or eliminating the tipped wage. When San Francisco increased its minimum wage from $13 an hour to $14 an hour in July 2017, bar owner Miles Palliser was forced to close after 5 years. “I think that the dramatic rise in minimum wage definitely affected us at the Corner Store and probably all three of our places in some fashion,” he told the San Francisco Chronicle at the time.

Governor Cuomo’s compromise is a win-win for both restaurant workers and owners. Other states should follow New York’s example.

Stangler for Medium: “The first Democratic debate of 2020 is next week: Guess what won’t be talked about?”

Posted on January 9, 2020September 18, 2024 by The Progressive Policy Institute

The Democratic presidential field continues to be in flux, with Julian Castro dropping out and Michael Bloomberg ramping up his campaign. Participation in the January 14th debate is, as of yesterday, limited to just five candidates. Those five — Joe Biden, Amy Klobuchar, Elizabeth Warren, Pete Buttigieg, and Bernie Sanders — have hit the polling and donation thresholds to qualify.

The narrowing is unsurprising, but unfortunate in many respects. The biggest is that it means the debate likely won’t include much mention of one of the most important economic issues facing the country. What’s that?

Declining business creation and overall economic dynamism.

Read the full piece here.

Stangler for Medium: “The Democrats Should Talk About This Tonight”

Posted on December 19, 2019September 18, 2024 by The Progressive Policy Institute

Here is how tonight’s Democratic debate should begin:

The American economy has always been driven by entrepreneurial energy — the creation and growth of new businesses. Today, however, entrepreneurship in the United States is in trouble. Business creation has stalled; overall economic dynamism is faltering. We are experiencing what some researchers call a “startup deficit.”

How would your administration address this?

Most of the seven debate participants would be speechless, at least momentarily, before quickly running through a litany of actions they would take — some of which are tangential to entrepreneurship. A few of them would talk about the virtues of small business before bashing the evils of big business. A few might actually say the word “entrepreneurship.” At least a couple of them would be able to talk coherently about how they would tackle the startup deficit.

In all likelihood, of course, this question won’t be asked and entrepreneurship will barely be mentioned. More attention will be paid to the labor issues that almost derailed the debate. Yes: unions and the minimum wage should be topics of discussion. But, without the businesses to employ union workers and pay higher wages, those issues are moot.

Read the full piece here.

Gold for Medium: “Attention Democrats: UK Elections Not Only Cautionary Tale from Europe”

Posted on December 19, 2019September 18, 2024 by The Progressive Policy Institute

As Democratic presidential hopefuls gather in Los Angeles this week for the last debate of 2019, candidates should look across the Atlantic for a cautionary tale.

No, I’m not just talking about last week’s UK elections, which saw Labour’s far left-wing leader, Jeremy Corbyn, get crushed by Brexiteer Boris Johnson. Democrats can also draw useful lessons from the United Nations Conference of Parties (COP25) in Madrid, which by all accounts failed to kickstart progress toward implementing the Paris Climate Accords.

The culprit here, of course, is President Trump. His threat to pull the United States out of international efforts to combat climate change has created a major vacuum of leadership. What happened in Madrid underscores the folly of relying mainly on governments to tackle the climate crisis. Democratic presidential hopefuls should promise not only to re-exert U.S. leadership but to engage the private sector in efforts to reduce greenhouse gas emissions — regardless of which way the political winds happen to be blowing.

Read the full piece here.

Long for Medium: “The Canadian App Economy is Global and Diverse – But Can Improve”

Posted on August 2, 2019September 18, 2024 by The Progressive Policy Institute

The Canadian App Economy is strong both in terms of app exports and compared to its industrialized peers. The Canadian App Economy has 262,000 App Economy workers as of November 2018, according to a recently released report by the Progressive Policy Institute (PPI). App Economy workers are those that develop, maintain, or support mobile applications. What’s more, Canada is outperforming many of its industrialized peers.

Read the full piece on Medium by clicking here.

Regulatory Reform Could Revitalize Sluggish Business Creation

Posted on July 16, 2019September 18, 2024 by The Progressive Policy Institute

The U.S. economy recently marked 10 years of economic expansion – its longest in history – but there’s an important exception: new business creation. In recent decades, the American entrepreneurial engine has decelerated. Regulatory reform could help revive American entrepreneurship, reducing the burden on new businesses and realizing gains in economic growth. That doesn’t necessarily mean deregulation, but rather streamlining and updating old or obsolete rules to provide entrepreneurs with flexibility in today’s fast-changing world.

New and young businesses are the foundation of the United States’ economy, creating jobs and spreading wealth across our society. “Together, startups and high-growth firms (which are disproportionately young) account for about 70 percent of firm-level gross job creation in a typical year,” write entrepreneurship researchers Decker et al. Many of these young companies go on to become the next generation of small businesses, which employ 48 percent of private sector employees.

Unfortunately, the rate at which new businesses are being created has fallen off in the wake of the Great Recession. While firm deaths have returned to their pre-recession levels, firm births are down 22 percent compared to 2006 levels. And, for the first time since the Census Bureau began collecting data, firm deaths exceeded firm births from 2009 to 2011.

Smart policy can help increase the number of new businesses that are created and the number that scale up, though. Regulation is one area where policy can be made more efficient. A 2017 National Small Business Association survey estimated that the average small business owner spends at least $12,000 every year on compliance, with nearly one in three spending more than 80 hours every year dealing with federal regulation.

We know from research by Victor Bennett and Ronnie Chatterji that many people have entrepreneurial aspirations, but fail at many steps along their path to move to actual business formation. While many fail at early stages, such as basic market research, others undoubtedly run up against these mountainous regulatory costs and say, “not worth it.”

One way to reduce these costs is to focus on the steady buildup of regulation, or regulatory accumulation. The Code of Federal Regulations, where rules promulgated by the federal government are published annually, swelled by 17 percent from 2008 to 2018 alone. While Washington has dozens of agencies that issue new rules, not one institution is dedicated to streamlining the accumulated body of regulations. That’s why PPI proposed the Regulatory Improvement Commission (RIC). The RIC would fill an institutional vacuum in regulation policy by creating a mechanism for the periodic clearing out of obsolete rules.

Modeled on the Base Realignment and Closure Commission (BRAC) and comprised of a bipartisan group of highly qualified stakeholder appointees, the RIC would be an independent commission of eight members, appointed by the President and Congress, with regulatory expertise across industry and government. It would meet as authorized by Congress to review and, following a public comment period of 60 days, draw up a list of 15 to 20 rules for elimination or modification. The package would be sent to Congress for an up-or-down vote, and the RIC would be disbanded. If the proposed changes pass Congress, they would go to the president’s desk for signature or veto.

In 2015, bipartisan groups of lawmakers introduced bills in the House and Senate to establish the RIC based on the BRAC model. House cosponsors included Mick Mulvaney (R-SC), now acting White House Chief of Staff, and Kyrsten Sinema (D-AZ), now a Democratic Senator from Arizona.

Startup-friendly policies such as the RIC can help reduce compliance and opportunity costs, catalyzing a rebound in America’s startup rate and spurring economic growth. Streamlining regulation would help inventors and entrepreneurs spend less time and resources on regulatory compliance and focus instead on delivering goods and services and scaling their enterprises.

Research assistance was provided by Roman Darker, economics intern at the Progressive Policy Institute.

Kim for Medium: “How to get more companies to put people over profits”

Posted on May 13, 2019September 18, 2024 by The Progressive Policy Institute

Corporate profits are soaring. Yet Americans’ paychecks are inching upward by comparison. It’s no wonder many Americans feel anxious despite an economy that, by the numbers, is booming.

This disconnect between shareholders’ prosperity and workers’ precarity has led many on the progressive left to question the very future of capitalism. Some 2020 presidential candidates, such as Sens. Elizabeth Warren and Bernie Sanders, now routinely paint Big Business as the enemy of middle-class mobility and have called for drastic measures to rein in corporate power and mandate better behavior.

It might be too soon, however, to write off U.S. companies as a force for good.

Read the full piece on Medium by clicking here.

Do-Something Congress No. 9: Reserve corporate tax cuts for the companies that deserve it

Posted on May 2, 2019 by The Progressive Policy Institute

Americans are fed up seeing corporate profits soaring even as their paychecks inch upward by comparison. Companies need stronger incentives to share their prosperity with workers – something the 2017 GOP tax package should have included.

Though President Donald Trump promised higher wages as one result of his corporate tax cuts, the biggest winners were executives and shareholders, not workers. Nevertheless, a growing number of firms are doing right by their workers, taking the high road as “triple-bottom line” concerns committed to worker welfare, environmental stewardship and responsible corporate governance. Many of these are so-called “benefit corporations,” legally chartered to pursue goals beyond maximizing profits and often “certified” as living up to their multiple missions. Congress should encourage more companies to follow this example. One way is to offer tax breaks only for high-road companies with a proven track record of good corporate citizenship, including better wages and benefits for their workers.

THE CHALLENGE: Good corporate citizenship is punished, not rewarded, in a market that puts profits first.

The pressure to return profits to shareholders – the tyranny of so-called “shareholder primacy” – is one reason companies have been disinvesting in their workers. As Brookings Institution scholars Bill Galston and Elaine Kamarck have noted, many companies are increasingly reverting to “short-termist” behavior to avoid missing the quarterly earnings targets promised to shareholders (1). For instance, one notable survey of more than 400 CFOs found that 80 percent would “decrease discretionary spending on R&D, advertising and maintenance … to meet an earnings target” and 55 percent would “delay starting a new project” even if it meant sacrificing long-term value (2).

Companies also don’t seem to be raising wages or investing in worker training. Even as many firms have been reporting some of their best profits in years during this recovery (3), companies are cutting back on benefits like health insurance and offering less on-the-job training than they once did. And despite their recent uptick, workers’ wages haven’t caught up to where they should be. According to a Brookings Institution analysis, real wages for the middle quintile of workers grew by just 3.41 percent between 1979 and 2016, and actually fell slightly for the bottom fifth.

Corporate short-termism is bad for workers, who don’t get the wages and training they deserve. It’s also bad for companies, which are shortchanging their long-term health to satisfy short-term shareholder demands. But as long as current corporate culture remains fixated on companies’ stock prices, firms will feel tremendous pressure to put short-term profits above all other priorities – and often at workers’ expense.

THE GOAL: ENCOURAGE MORE BUSINESS TO BE “TRIPLE-BOTTOM LINE” CONCERNS THAT PUT PEOPLE ON PAR WITH PROFITS

A small but growing number of firms have begun to reject the hold of “shareholder primacy” and have organized themselves as “triple-bottom line” companies committed equally to social and environmental good as well as profit. Among these is the growing number of “benefit corporations” specially organized under state law with the purpose of “creating general public benefit.” Since 2010, 34 states and the District of Columbia have passed legislation legally recognizing benefit corporations and protecting them from shareholder lawsuits for decisions that don’t maximize profits. Notably these states include Delaware, which is the leading “domicile” – or legal home – for most of America’s major companies. A significant number of benefit corporations have also won third-party certification from the nonprofit B Lab as “Certified B Corps” – essentially a Good Housekeeping seal of approval for benefit companies that have met strict standards for worker treatment, environmental stewardship and social responsibility. Among the many factors considered for certification are the share of workers who get formal training; rates of employee retention and internal promotion; the share of workers receiving tuition reimbursement or similar benefits for training and education; the extent to which “worker voice” plays a role in the company’s governance; pay equity; and company practices to reduce its environmental footprint.

According to the nonprofit B Lab, more than 2,500 businesses globally are certified B Corps. While the vast majority of these businesses are small, certified B Corps include such well-known U.S. and global brands as outdoor clothing maker Patagonia, Cabot Creamery, Ben and Jerry’s Ice Cream, and New Belgium Brewery, the makers of Fat Tire beer. A small but growing number of B Corps are now publicly traded, including cosmetics company Natura; Sundial Brands, a subsidiary of Unilever; and Silver Chef, a company that finances commercial kitchen equipment purchases for restaurateurs. These firms are proof that companies with an avowed social mission can in fact succeed in a cutthroat capital market. If more companies follow suit, the result could be a dramatic and beneficial shift away from the stranglehold of shareholder primacy and toward better corporate practices.

THE SOLUTION: OFFER TAX BREAKS TO “BENEFIT CORPORATIONS” AND HIGH-ROAD FIRMS THAT DEMONSTRATE SOCIAL RESPONSIBILITY

Many companies may feel they can’t “afford” to invest in their workers if it affects the bottom line for their shareholders. Targeted tax cuts to reward high road companies such as certified benefit corporations could, however, change the calculus for some companies and encourage them to change their behavior. These tax benefits could be structured in one of two ways:

Option One: Preferential tax rate.

As PPI has previously proposed, one option is to modify the new corporate tax rate to establish a preferential “public benefit corporation” rate for businesses that meet “high-road” requirements. Only the most deserving companies should qualify for the new 21 percent corporate tax rate; all others should pay a rate that is two to three percentage points higher.

To be entitled to these benefits, companies would meet one of two requirements: (1) that they be legally organized as “public benefit corporations” in their state and can provide good evidence of how they are fulfilling that mission; or (2) they must meet a minimum set of standards for worker treatment and investment, to be promulgated by a new standards-setting body authorized by Congress (effectively behaving like benefit corporations without the formality of legal status). To set the required standards, Congress could establish an inter-agency “workers’ council,” including representatives from labor and business, to establish guidelines for public benefit corporation rate eligibility (though enforcement would be left to the IRS). Companies would apply for a discounted tax rate in the same way that charities and nonprofits apply to the IRS for tax-exempt status, with the proviso that companies must also report annually on their performance, either in their public filings or in separate submissions to the IRS.

Option two: Benefit corporation tax credit.

A second option for structuring a high road company tax incentive is to create a tax credit for benefit corporations like the “sustainable business tax credit” offered by the city of Philadelphia. Under this benefit, first launched in 2012, Philadelphia businesses that are either certified B Corps or that can show they meet similar standards of social and environmental responsibility can qualify for a tax credit of up to $8,000 against their revenues. Up to 75 firms can apply for the credit on a first-come, first-served basis.

This structure might be especially beneficial for small and medium-sized benefit corporations structured as “pass-through” entities not subject to the corporate tax rate. As Jenn Nicholas, co-founder of the Philadelphia-based graphic design firm Pixel Parlor told Governing magazine, the credit has helped her afford higher wages and other benefits for her 10 workers. “It’s a challenge to be profitable and provide benefits to our employees,” Nicholas said. “Every tiny bit helps, and it feels like somebody is looking out for us when the general climate [for small businesses] is the opposite” (10).

While some policymakers have proposed requiring companies to treat their workers more fairly, tax incentives for high-road businesses are a better approach. Top-down mandates tend to invite resistance or evasion and will not succeed in changing the overall spirit of corporate culture in favor of shareholders over workers. Encouraging companies to reform themselves will ultimately prove the more enduring tactic. As more businesses see that they can indeed “do good and do well,” the grip of shareholder primacy will weaken, and workers will benefit.

Sources:

1) Galston, William A., and Elaine C. Kamarck. More builders and fewer traders: a growth strategy for the American economy. Washington, DC: Brookings Institution, 2015.

2) Graham, John R., Campbell R. Harvey, and Shiva Rajgopa. The Economic Implications of Corporate Financial Reporting. N.p., 2005.

3) Bureau of Economic Analysis. “Gross Domestic Product, Third Quarter 2018 (Second Estimate); Corporate Profits, Third Quarter 2018 (Preliminary Estimate).” News release. November 28, 2018. Accessed March 28, 2019. https://www.bea.gov/news/2018/gross-domestic-product-third-quarter-2018-second-estimate-corporate-profits-third-quarter.

4) Kim, Anne. Tax Cuts for the Companies That Deserve It. Washington, DC: Progressive Policy Institute, 2018.

5) Shambaugh, Jay, Ryan Nunn, Patrick Liu, and Greg Nantz. Thirteen Facts About Wage Growith. Washington, DC: Brookings Institution, 2017.

6) B Lab. “State by State Status of Legislation.” benefitcorp.net. Accessed March 28, 2019. https://benefitcorp.net/policymakers/state-by-state-status.

7) Title 8: Corporations, Delaware Code §§ CHAPTER 1. GENERAL CORPORATION LAW; Subchapter XV. Public Benefit Corporations-361-386 (2017).

8) B Lab. “Certified B Corporation: About B Corps.” Benefitcorp.net. Accessed March 28, 2019. https://bcorporation.net/about-b-corps

9) Id.

10) Kim, Anne. “The Rise of Do-Gooder Corporations.” Governing, Jan 2019.

PPI’s Ben Ritz Discusses Social Security Trustees Report on C-SPAN

Posted on May 1, 2019 by The Progressive Policy Institute

PPI’s Ben Ritz joined an expert panel on Capitol Hill last week to discuss the recently published report by Social Security’s trustees. The annual report projected that the program’s trust funds face insolvency within the next 16 years, after which point beneficiaries face the prospect of an across-the-board cut of 23 percent. All panelists encouraged policymakers to close the gap between Social Security’s revenues and spending sooner rather than later, which Ben noted is critical for ensuring the changes are fair to younger and older Americans alike.

Watch the full panel here on C–SPAN.

A Radically Pragmatic Vision for Universal Health Care

Posted on April 15, 2019 by The Progressive Policy Institute

When it comes to health care, Americans could not face a clearer choice. Progressives believe all Americans should have access to affordable, high-quality health coverage. Republicans want to kill the Affordable Care Act – thereby depriving an additional 17 million Americans of insurance – and have no credible plan to replace it. Too often, however, the health care debate focuses on how to pay for health insurance rather than how to deliver better health care.

PPI believes producing better outcomes at lower prices must be the first principle of health care reform, and share a vision for health care reform in Des Moines, Iowa on Friday, April 12th.

The App Economy in Canada

Posted on April 8, 2019 by The Progressive Policy Institute

La version française est ci-dessous.

The global App Economy started in 2007, when Apple introduced the first iPhone. Apple’s opening of the App Store in 2008 – followed by Android Market (later renamed Google Play), Blackberry App World (later renamed Blackberry World) and other app stores – created a way for developers to write mobile applications (“apps”) that could run on smartphones anywhere. These apps became an essential part of daily life for most people – and an indispensable tool for business.

The rise of the App Economy has unleashed an abundance of “app developers.” These workers create, maintain, and support an ever-expanding range of apps. Mobile games are the most visible part of the App Economy, but certainly not the only component of it. Mobile apps include such key uses as shopping applications, home banking programs, smart automobile interfaces, healthcare apps for monitoring patients, and sophisticated apps for running manufacturing plants.

The extent of the App Economy workforce in a country reflects how quickly that country is embracing the next stage of the Information Revolution, which depends on mobile technology to digitize physical industries such as manufacturing and healthcare.

However, official economics statistics do not provide an easy way to measure the size of the App Economy. In response, PPI developed a methodology based on a systematic analysis of online job postings. In particular, we look for job postings that call for app-related skills such as knowledge of the iOS, Android, or Blackberry operating systems (though support for the Blackberry operating system is currently scheduled to cease at the end of 2019).

Based on this methodology, in this paper we provide an employment analysis of Canada’s App Economy. We provide an estimate of the total number of App Economy jobs; a breakdown of the jobs among iOS, Android, and Blackberry ecosystems; and an estimate of App Economy jobs by province. In particular, we estimate that Canada has 262,000 App Economy workers as of November 2018.

THE DEFINITION OF AN APP ECONOMY JOB

For this study, a worker is in the App Economy if he or she is in:

An IT-related job that uses App Economy skills – the ability to develop, maintain, or support mobile applications. We will call this a “core” App Economy job. Core App Economy jobs include app developers; software engineers whose work requires knowledge of mobile applications; security engineers who help keep mobile apps safe from being hacked; and help desk workers who support use of mobile apps.
A non-IT job (such as human resources, marketing, or sales) that supports core App Economy jobs in the same enterprise. We will call this an “indirect” App Economy job.
A job in the local economy that is supported by the income flowing to core and indirect App Economy workers. These “spillover” jobs include local retail and restaurant jobs, construction jobs, and all the other necessary services.

To estimate the number of core App Economy jobs, we use a multi-step procedure based on data from the universe of online job postings. Then the number of indirect and spillover jobs is estimated using a conservative job multiplier. The methodology is described in detail in previous research (2).

CANADA’S APP ECONOMY

Table 1 presents two pieces of information. First, we estimate Canada has 262,000 App Economy jobs as of November 2018. We also break down the total by ecosystem, finding the iOS ecosystem includes 200,000 jobs, the Android ecosystem includes 199,000 jobs, and the Blackberry ecosystem includes 27,000 jobs. The three sum to more than the total because many App Economy jobs belong to multiple ecosystems.

Using a different methodology, the Information and Communications Technology Council (ICTC) estimated total App Economy and related employment in Canada at 51,700 in its 2012 report, “Employment, Investment, and Revenue in the Canadian App Economy” (3). We infer from this that Canadian App Economy jobs roughly quintupled from 2012 to today. That’s consistent with what we have seen for the United States over the same time period.

Now we compare Canada to some of its industrialized peers. In absolute numbers, Canada’s App Economy is relatively small. But, when we adjust for country size, Canada is doing very well. App intensity represents the number of App Economy jobs divided by total employment, where the latter figure is drawn from the International Labor Organization for standardization.

Canada’s app intensity of 1.4 percent ranks ahead of the United States, the United Kingdom, Germany, and Japan – and only slightly behind Korea.

Canada’s relative success can be attributed in part to its prioritization of digital connectivity and skills. Digital Canada 150 aimed to create jobs and economic growth by, among other things, connecting rural areas to high-speed Internet and investing in Canadian businesses and consumers through technology integration and skills development (4). Accomplishments include extending high-speed Internet to an additional 356,000 households, completing multiple spectrum auctions to improve wireless service, investing an additional $200 million to help entrepreneurs learn about IT technologies, and supporting up to 3,000 internships in high-demand fields. These types of policies help increase access to and employment in the App Economy.

GEOGRAPHIC DISTRIBUTION

Our methodology also allows us to look at the geographic distribution of App Economy jobs by province – breaking out the different ecosystems. If we estimate fewer than 500 jobs in a region, we don’t report the number. Not surprisingly, Ontario leads in App Economy jobs, followed by Quebec and British Columbia. Also not surprisingly, the Blackberry ecosystem jobs are concentrated in the company’s home province of Ontario.

EXAMPLES OF APP ECONOMY JOBS

The Canadian App Economy is vibrant across a wide range of industries and geographies. As of October 2018, digital studio Adfab was searching for a front-end developer in Montréal with App Economy skills. Mobile device solutions firm Asset Science was seeking a mobile application developer with iOS and Android experience. Mango Software Inc. was looking for an Android developer in Montréal. IT firm CORE Resources was hiring a senior software engineer with Android experience in Mississauga.

Looking at Ontario in particular, as of October 2018, mapping software company Avenza Systems Inc. was searching for a full stack developer with experience in iOS and Android app development in Toronto. Life insurance company Manulife was seeking a senior Android developer in Kitchener. Digital billing company Sensibill was looking for a software developer with Android and iOS experience in Toronto. Household labor marketplace AskforTask was hiring a senior Android developer in Toronto.

As of October 2018, commercial contractor Flynn Group of Companies was hiring a mobile iOS developer in Mississauga, Ontario. Airline software firm NAVBLUE was seeking a software developer in Waterloo, Ontario. Fintech company Borrowell was looking for a React Native developer with experience building iOS and Android apps in Toronto. Consulting firm Neel-Tech Inc. was searching for an iOS developer in Mississauga.

In Quebec, as of October 2018, drone company Microdrones was hiring a senior Android developer in Vaudreuil-Dorion. Event app company Greencopper was seeking a mobile developer with iOS and Android experience in Montréal. Mobile payment company Mobeewave was searching for a mobile Android developer in Montréal. IT firm SolidByte was looking for a programmer with knowledge of iOS and Android programming in Montréal.

British Columbia has plenty of App Economy activity as well. As of October 2018, payment technology firm Alpha Pay was looking for an iOS or Android mobile developer in Richmond, British Columbia. Financial cloud company Global Relay was hiring a senior Android developer in Vancouver. Shopping app company StylePixi was seeking an iOS developer in Vancouver. Digital development firm Atimi was searching for a senior native mobile developer with iOS experience in Vancouver.

Considering Alberta, as of October 2018, GPS company Trimble Inc. was hiring a software engineer with iOS and Android experience in Calgary. Digital production firm Division [1] Media Corp was looking for a mobile app developer in Edmonton. The University of Alberta was searching for a lead software engineer with experience in Android and iOS in Edmonton. Aviation company Air Trail was seeking an intermediate iOS developer in Edmonton.

And the App Economy has spread even further. In Winnipeg, Manitoba, Pollard Banknote Limited – a leading supplier of instant lottery tickets – was hiring a senior applications developer with experience in mobile app development. In Saskatoon, Saskatchewan, Affinity Credit Union was searching for an iOS developer. In Fredericton, New Brunswick, Welltrack – a company that provides a suite of interactive self-help tools – was looking for a mobile developer. And in Bedford, Nova Scotia, IBM’s Client Innovation Centre was hiring a mobile application developer for iOS and Android.

Canadians are developing apps for the rest of the world, not only Canada. One well-known Canadian app that has spread globally is the messaging mobile app Kik, which was created in 2009 by University of Waterloo students and has 300 million users today around the world. Another example: Public transit app Transit was developed in Montréal in 2012. Today, Transit provides real-time crowdsourced data to users in 175 cities across the United States, Canada, and Europe. And well-regarded password manager 1Password, which was developed by Toronto-based AgileBits, has a global user base.

POLICY DEVELOPMENTS

As shown in this report, the Canadian App Economy has fared better in terms of scale than some of its industrial peers. Its growth since the introduction of the iPhone over a decade ago (and app intensity today) demonstrate the country is embracing the digital age and is well positioned to be a global leader. A few reforms could catalyze the next round of growth.

Unlike in the United States, where a patchwork of laws govern privacy, one law applies at the federal level in Canada – the Personal Information Protection and Electronic Documents Act (PIPEDA). But, while PIPEDA covers all health data, personal information, and employee information in one comprehensive structure, if a province has passed legislation deemed “substantially similar,” the province’s law prevails. For example, Alberta, British Columbia, and Quebec have laws in place that have been deemed substantially similar, thus serving as the prevailing law. But, as PPI has previously recognized, cross-border data flows means multiple regulatory regimes can be burdensome, unclear, and even contradictory for app developers – slowing the digitization of physical industries and economic growth.

The Canadian government began a review of its Broadcasting and Telecommunications Acts in 2018, with the intent of modernizing its legislative framework after the invention of new technology – particularly streaming services otherwise known as “over-the-top” (OTT) providers (5). OTT providers are those companies delivering video streaming, voice calls, or messaging via the Internet, without requiring users to subscribe to a traditional cable, satellite, or phone service. Policymakers should be cautious of taking a heavy-handed regulatory approach that would slow growth and, instead, should opt for a balanced approach that both promotes competition without jeopardizing the cost savings this technology has afforded consumers.

Lastly, according to the Information and Communications Technology Council’s latest ICT Labor Outlook, Canada will need an additional 216,000 ICT professionals by 2021 (6). Programs designed to incorporate and lower the cost of ICT skills development could help close this shortage. To that end, in their recent report on innovation and competitiveness, Canada’s Economic Strategy Tables recommend expanding on existing work-integrated learning opportunities, adopting portable competency-based credentials, and consolidating and streamlining skills and talent programming (7).

CONCLUSION

Canada has a vibrant App Economy that spans the iOS, Android, and Blackberry ecosystems. Compared to most of its industrialized peers, Canada’s app intensity is high, and represents a wide diversity of locations and jobs. Policy reforms such as streamlining privacy laws, taking a balanced regulatory approach when it comes to OTT providers, and closing the skills gap could help catalyze future growth.

PDF En Français: PPI_CandianAppEconomy_FRA-V2

ENDNOTES

1) PPI has issued App Economy reports on the United States, Japan, Vietnam, Indonesia, Korea, Thailand, Mexico, Brazil, Colombia, Argentina, Chile, and most of the countries of the European Union, including the United Kingdom, Germany, and France. Most notably, we have not yet issued reports on China and India.

2) A description of the methodology can be found in the appendix to Michael Mandel and Elliott Long, “The App Economy in Europe: Leading Countries and Cities, 2017,” Progressive Policy Institute, October 2017. https://www.progressivepolicy.org/wp-content/uploads/2017/10/PPI_EuropeAppEconomy_17.pdf

3) “Employment, Investment, and Revenue in the Canadian App Economy,” October 2012, Information and Communications Technology Council. https://www.ictc-ctic.ca/wp-content/uploads/2012/10/ICTC_AppsEconomy_Oct_2012.pdf

4) “Digital Canada 150,” Industry Canada. https://www.ic.gc.ca/eic/site/028.nsf/eng/home#item5

5) Canadian Heritage, “Government of Canada launches review of Telecommunications and Broadcasting Acts,” June 5, 2018. https://www.newswire.ca/news-releases/government-of-canada-launches-review-of-telecommunications-and-broadcasting-acts-684595661.html

6) “The Next Talent Wave: Navigating the Digital Shift – Outlook 2021,” Information and Communications Technology Council. https://www.ictc-ctic.ca/wp-content/uploads/2017/07/ICTC_Outlook-2021-ENG-Final.pdf

7) “The Innovation and Competitiveness Imperative Seizing Opportunities for Growth,” Canada’s Economic Strategy Tables. https://www.ic.gc.ca/eic/site/098.nsf/vwapj/ISEDC_SeizingOpportunites.pdf/$file/ISEDC_SeizingOpportunites.pdf