Social Policy and Productivity: Anybody Here See Any Levers?

In this chapter, William Watson challenges Heath's interpretation of the benefits of productivity growth, but agrees with Richard Harris' views on the state of our knowledge about the potential contribution of social programs to productivity growth. Watson tackles Heath's assessment of the social benefits of productivity growth directly, starting with the issues of social inequality and poverty. He argues that there has been no flagging in redistributive effort in Canada and he challenges what he sees as Heath's preference for enhancing public expenditures, emphasizing the scope for government failures and of the possibility that higher tax rates in the contemporary period have increased the marginal cost of public funds. Even if one were able to resolve the question of the appropriate balance between the public and private sectors, Watson believes that the case for higher productivity would remain compelling. Without powerful analytical guidance, Watson concludes that reform of social policy will inevitably be guided primarily by intuition, politics and hunches. In these circumstances, he counsels modesty in aspirations.