Impact of the $500 affordability cheques in Saskatchewan - November 2022

Impact of the $500 affordability Cheques in Saskatchewan

Introduction

Saskatchewan is currently delivering a one-time payment of $500 to Saskatchewan residents over the age of 18. As of July 1, 2021, the population over 18 in Saskatchewan was 907,546 residents,¹ therefore, when multiplied by $500, the payout will be $453,773,000. This expenditure is not unlike the stimulus payments observed in both Canada and USA during the height of the COVID-19 pandemic. While both Canada and the United States has systems in place for stimulus payments, the plan put forward is most like that used by the United States, meaning a one-time payment instead of continued payments.

Studies analyzing how stimulus payments were spent reveal that most of them were put towards either savings or paying of significant debts with only 42% of stimulus money being spent in the local economy.¹  Given the similarity of the payment structure of the payments in the United States to those being provided in Saskatchewan, it is reasonable to assume the spending habits of those receiving the money will also be similar.

Economic Impact

Using the Praxis Saskatchewan economic model, 42 percent of $453.8 million was allocated across the average pattern of household spending, adjusting for imported goods and services (both international and from other provinces).  A similar calculation was made allocating $453.8 million across general provincial government spending including publicly funded health and education as well as executive government outlays.

The results of this simulation are below:

When measured in terms of gross output, GDP, jobs and labour income, the $453.8 million has a greater impact in general government spending rather than with individual households.  It should also be noted that it is likely that only 42 percent of the $453.8 million is expected to be spent.  While in the general government spending scenario, all the $453.8 million is spent, generating a greater and more immediate impact on the provincial economy.  Beyond supporting local jobs and procurement, an injection of cash into health and education would have a positive impact of the quality of life for Saskatchewan’s residents.

Finally, Saskatchewan produces very few consumer goods and, as such, much of this spending leaves the province.  For example, if an individual purchases a $500 television, it is likely that is manufactured in another country.  The profit on the production of that television is captured by that other country as are the wages and depreciation on the production equipment, a payment to capital.  The profit and wages of shipping costs is captured by the international and interprovincial shipping companies used to bring in the television.  If an out-of-province Canadian wholesaler is used, the profit and wages also leave the province.  Saskatchewan only captures a portion of the shipping activity (generally through road and/or rail), the retail markup, and the retail wage paid to complete the sale in store.

Definitions

Direct impact is the total initial expenditure for operations and tourist spending.  

Indirect impact is the secondary impact that includes inter-industry transactions, i.e., purchases of inputs from supporting industries.  

Induced impact is the additional impact from changes in household spending as additional labor is hired or reduced.

Gross Domestic Product (GDP) measures net economic activity within a prescribed geographic area.  It represents the payments made to final factors of production such as labour income, unincorporated business profits, and other operating surplus (corporate profits, interest income, inventory valuation adjustments, and capital consumption allowances).  GDP excludes the value of intermediate goods and services used in production.  

Gross output measures total expenditures on local goods and services as well as payments to labour and business profits.  Gross output is the total value of goods and services produced by an industry and includes intermediate inputs that are foreign and domestically produced goods and services used by an industry in the production of its gross output.  Value added is the difference between gross output and intermediate inputs and represents the value of labour and capital used in producing gross output.  The sum of value added across all industries is equal to gross domestic product for the economy.

Employment impacts are measured in positions and contain a mix of full and part-time positions.  Employment results are rounded to the nearest whole number, and as such, column sums may vary slightly from table totals.

Labour income includes wages, salaries, and employer contributions to pensions and benefit packages.