Tag Archives: Atlantic Provinces Economic Council

Let’s not race to the bottom


How fare the whipping posts of the East Coast’s civil services? Just fine, thank you very much, if you happen to believe Finn Poschmann, the relatively new president and CEO of the venerable Atlantic Provinces Economic Council.

In his latest email missive he declares that the widening income gap between private sector workers and public ones is becoming economically structural. Specifically, he says, “One way to look at it is to compare wage growth across the board versus government health services and general provincial government services. Let’s go back 15 years and look at a two Nova Scotia neighbours. One is a mid-level manager in the private sector and the other works for the provincial government. Both make $60,000 including benefits.

“Over the past 15 years, using an average all-industry sector hourly compensation measure that includes employer-paid benefits, the manager would have seen his paycheck grow by 3.2 per cent annually. For the government worker, the annual salary bump would have been 4.5 per cent per year.

“Taken over 15 years, the hypothetical $60,000 goes to $97,000 for our manager – but his neighbour, the government worker, is now earning $116,000.  There are perfectly good reasons for differences in pay levels: age, experience, occupation, level of education. These factors go a long way toward explaining the public sector wage premium. Yet the growing wage gap covers the cost of a nice new car payment, permanently, and it only gets bigger.”

He adds: “The numbers are about the same for Prince Edward Island and New Brunswick (not so for Newfoundland and Labrador, where the private sector has done better). Someone has to pay for the difference, and that is a tough job when the population level is stagnant, and so is income growth.”

He concludes: “Holding the line on public sector compensation is one thing. . .Provinces will need to keep a very keen eye on spending – and on public sector headcounts.”

On the face of it, the argument makes sense. After all, why should one class of employees do better than another just because it’s lucky enough to occupy a sector that’s been largely protected from the depredations of market capitalism lo these many years?

The answer is, of course, buried in the question, itself.

Have public sector unions abused their power at the expense of public services? Indubitably, they have. Have various bargaining units thrown their own members under the bus in order to secure a more perfect negotiating position for their narrow objectives? Naturally; that’s only human gamesmanship at play.

The larger issue, though, is whether a good job in one sector of the economy is seamlessly comparable to one in another. If, for example, the private sector fails to produce income growth, does it follow that the public sector should track that descent in kind?

After all, we presume that we – all of us in all sectors of the economy – pay taxes to secure the best, smartest, most innovative people to public service. (Whether or not that particular strategy has been working out for us lately is arguable). What we need to realize is that demonizing one segment of working society is an utterly fruitless distraction from the broader purpose of building productivity, sustainable employment and, yes, happiness in our communities and homes – in our private enterprises.

Who cares whether civil servants in this region are better equipped to weather the storms of market capitalism than are the rest of us?

Let us all race to the top, and leave the whipping posts behind.

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Fun and games with fanciful figures


David Chaundy of the Atlantic Provinces Economic Council (APEC) asks a question of such thoughtful irrelevance, it’s stunning that no other professional numbers-cruncher has, to my knowledge, raised it.

If you had $56 billion what, would you do with it?

Mr. Chaundy’s challenge to readers of one of his recent commentaries for APEC is equal parts whimsy and gravitas; it stems from a metaphorical gauntlet he threw down to delegates to a recent business outlook conference.

The context, he writes, is the federal government’s Fall Fiscal Update of November 12, in which the finance department “revealed a projected $56 billion in surpluses over the next five years, beginning in 2015/2016. . .Since the government is not going to make you and your friends into overnight billionaires, how would you use these projected surpluses to advance Atlantic Canada’s economy?”

There is, of course, a catch. The feds have already committed to spending $26 billion over five years by introducing the Family Tax Cut, or income splitting ($10.3 billion); increasing the family child care benefit ($13.4 billion); raising the limit on tax-free savings account contributions ($2.3 billion); and investing in infrastructure ($1.3 billion).

That leaves you with a mere $30 billion with which to go to Hawaii and, as the accountants say, get permanently lost or, in the alternative, save the Atlantic Canadian economy for Queen and country.

The honourable route is not as easy as it looks, but Mr. Chaundy embarks jauntily, nonetheless . “Adjust transfers to the provinces,” he advises. “Ensure sufficient infrastructure funding (and) focus on globally competitive innovation.”

Regarding his first prescription, he notes astutely, “By tying the size of transfer programs such as Equalization and the Canada Health Transfer to the growth in the overall economy, the federal government has provided itself with greater fiscal certainty and largely insulated itself from the fiscal impacts of population aging. This is not the case at the provincial level.”

Mr. Chaundy endorses the Parliamentary Budget Office’s recommendation to restore the Canada Health Transfer growth rate to six per cent and factor a sliding scale of regional benefits based on provincial age demographics. Such moves could mean an addition $500-600 million to the Atlantic provinces over the next five years.

As for infrastructure, he writes “The Canadian Centre for Policy Alternatives estimated that underinvestment in infrastructure in Canada amounted to a gap of $145 billion: Canada needs to spend $20-30 billion a year for ten years on top of current spending to return infrastructure spending to historic levels.”

Atlantic Canada’s portion could amount to some $670 million annually if the funding formula was a per-capita calculation. “But if distributed according to need, the Atlantic provinces would receive proportionately more due to the region’s older infrastructure.”

Finally, on the subject of innovation, Mr. Chaundy is as clear as every other economist in the developed world: No amount of spending on social services or, indeed, infrastructure will actually goose a jurisdiction’s earned incomes and overall net worth. “What is critical for the region’s growth are firms that are export oriented and that have differentiated their products and services in the global market through their proprietary technology, specialized competencies or superior quality of their products or services.”

Mr. Chaundy suggests the federal government ponies up an additional $1 billion a year. (That’s not, in fact, a heck-of-a-lot when you consider the several, different diverse economies functioning within individual provinces. Does Newfoundland and Labrador’s offshore oil and gas industry resemble, either in the skills it requires or the technology it deploys, anything remotely comparable on Prince Edward Island?)

The new money could be used to help businesses leverage private sources of funding for innovation, technology commercialization, strategic alliances, mergers, and expansions.

All of which makes eminently good sense and, in fact, always has.

For several decades, two of Atlantic Canada’s great fiscal burdens have been the cost of providing for its disproportionately older workforce and comparatively ancient infrastructure. Both have siphoned off public money that might otherwise have been spend on economic capacity-building exercises of the type Mr. Chaundy describes.

Still, these mind experiments always remind me of those times when, in weak and weary moments, I daydream about winning the lottery.

Let’s see. . .If I had a million dollars, $10 million, $50 million. . .what would I do?

Something or someone always arrives to shake me out of my reverie.

This time, it’ll be falling oil prices.

Hello resource economy.

Goodbye surplus city.

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In New Brunswick, all roads are leading to nowhere


When we reach the end of our ropes, I wonder if we’ll ever look back and reckon the moments when we might have done something but, defiantly, didn’t.

Of course, looking back is what we do peerlessly well in this province.

If a sense of entitlement, broad anger, bold arrogance, and a slavish devotion to dead leaders is any indication, then sentimentality and nostalgia are our greatest market capitalizations – the ones we offer to the world.

The problem is, simply, that the world isn’t buying any of it.

In fact, the world is beginning to laugh its collective butt off at the spectacle of New Brunswick’s quasi-serious posturing to become anything but a welfare state in, paradoxically, one of the richest, most economically accomplished nations on Earth.

Here, in one corner, is a series of single-term governments vowing to balance their budgets and retire their long-term debts over periods in which they have no mandates.

They choose to do this by keeping one of the nation’s largest civil service rolls, relative to the general population, largely intact, and nibble around the edges of gold-plated public pensions, for fear of inspiring any more court challenges to their electoral credibility.

Here, in another corner, is the current Liberal government inveighing against a proven, effective, efficient and reliably responsible form of gas extraction in New Brunswick, even as it welcomes, arms open, the construction of a pipeline, carrying some of the dirtiest crude oil on the planet, from Alberta’s tar sands (yes, folks, not oil sands) to an East Coast refinery in Saint John. Throughout, the distinction fails to make any difference to public policy.

Look there, in another corner, and you’ll find one local burgermeister battling another for scraps from the federal government’s now-ancient Economic Action Plan.

One wants a hockey rink and will do anything to persuade Ottawa, and the provincial government, that he has the best interests of his community’s fat, bloated, Internet-addicted youngsters in mind (even as the federalistas do their level-best to keep the next generation of voters firmly planted in their cushy chairs with appeals to low-cost providers of full-spectrum, online infotainment).

The other wants a soccer pitch and will bend over backwards to convince Harpertown, and Freddy Beach, that his motives are pure, even though his ulterior angles have more to do with boosting his electoral prospects, year after year after unchanging year, than they do with true, durable, sustainable community development.

Meanwhile, the old people keep dying; and the young ones keep leaving.

Away, the youth cry, away. Maybe, they allow, they’ll come back when things get better, when life improves.

When, I wonder, will that great regeneration occur?

Now, we are reliably informed, New Brunswick’s unemployment rate has dropped for the first time in a very long while. That should be good news. But statistics can also be cruel mistresses. Read between her lines and you understand that fewer people in this part of the country are actually looking for work, so impoverished are the opportunities for gainful employment here.

Now, according to economic think tanks, this province’s major capital projects are in limbo, because if we can’t guarantee that we’ll capitalize on what is literally in our own backyard, we are unlikely to persuade anyone else to invest there.

Or, as Atlantic Provinces Economic Council President Elizabeth Beale said last week in Saint John, “The investment activity coming into (Newfoundland and Labrador) to develop the large oil and gas fields. . .has completely revolutionized their economy and it has driven up very strong wages. Consumer spending there is very high. Employment income has grown. Young families are moving into the province because there are jobs now where there weren’t in the past, so, obviously, if you don’t have that kind of investment, you are going to see things proceed on a much slower path. . .It doesn’t mean nothing is going to happen. . .Good things can still go on here (in New Brunswick), but it does mean you have lowered your horizon in terms of your expected growth in the province.”

And, in the process, we have lowered the horizon on our province’s future.

On that, too, we might someday look back in jaw-dropping wonder.

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Spreading a little of Moncton’s famous mojo


Hindsight makes geniuses of us all, which is one reason why the most astute economic development gurus are keen students of history.

For Greater Moncton last week, the past met the present and together they stared steadily, if not altogether fearlessly, into the future.

It’s nearly impossible to get 300 people to sit still in one room, let alone command their undivided attention, but there were times during the 2014 Greater Moncton Economic Summit when all eyes were fixed on the gantlet that history has thrown down.

That gantlet is nothing less than 25 years of sturdy growth in the Hub City regardless – and, at times in defiance – of weak economic conditions elsewhere in New Brunswick and Canada.

The challenge, as always, in the here and now, where and when we gather to consider our options, is in properly appreciating what the community has done right – not to replicate an old vision, but to help create a new one for different and, in some ways, tougher times.

Of course, ever since the financial meltdown of 2008 and subsequent recession cities and towns all over Canada – indeed, the world – have made routine naval gazing a part of their municipal roadshows.

But in my 30-plus years covering city halls and urban planning conferences, only in Moncton have I observed deliberate, indefatigably cheerful determination actually transform street scapes, sectors and even industries.

All of which is fortunate for those of us who live, work and play here. The city – nay, the entire province – is going to need such a patented brand of pluck.

“We’ve seen almost five years with no net employment growth in Nova Scotia, for example, and there’s a big difference too now between Newfoundland and Labrador, which is looking to a long and sustained period of large project activity and all the benefits that brings in terms of high income growth, high employment growth. The difference here in the Maritimes couldn’t be more stark.”

Those were Elizabeth Beale’s words in mid November. She’s the president of one of the region’s leading think tanks, the Atlantic Province’s Economic Council (APEC). Specifically, here’s what the organization predicted for the provinces:

“Newfoundland and Labrador is expected to have one of the fastest growth rates in Canada this year, at six per cent, due to increased oil production and capital investment.

“Prince Edward Island will see its economy expand by 1.1 per cent in 2013, due to a strong labour market. The forecast for 2014 calls for growth of 1.3 per cent, due partly to growth in the bioscience sector, a rebound in aerospace and defence, increased food processing and a decent tourism season.

“Nova Scotia sees flat employment and weak consumer spending in 2013, limiting GDP growth to about 0.8 per cent. In 2014, that is forecast to accelerate to about 2.0 per cent, boosted by a jump in natural gas output and increased investment in major projects.”

And what of New Brunswick, host province of the original “Moncton Miracle” – the retail, transportation, IT and entertainment capital of the central Maritimes?

Says APEC: “New Brunswick will have no economic growth in 2013 as a result of a weak labour market, the closure of the Xtrata mine in Bathurst and a lack of major projects. New Brunswick’s real GDP growth is forecast to expand 0.9 per cent in 2014.

However, that is expected to slow to 0.8 per cent in 2014 due to flat oil production and investment.”

This follows five straight years of double-digit unemployment overall (despite one of the highest per-capita public-sector employment rates in the country) the slowest housing starts and lowest house prices east of Toronto. Then, of course, there is the fiscal morass: a $550-million annual budget deficit on a structural long-term debt of $11 billion, closing in on $12 billion.

This is the context in which Moncton now reviews its history by way of envisioning its future.

What does it want to be over the next 25 years, not merely to itself but to a province that, in important respects, has lost its way along with whatever mojo it once possessed?

History may open doors to the future, but attitude – and lots of it – marches us through them.

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