It’s time to end the EI fiction

There’s a story on the CBC website this morning about the plight of workers on EI that work seasonally at Kings Landing.  It’s unfair, they say, because they get fewer weeks of EI than their counterparts in the Village historique acadien.  The trusted federal government labour market economist patiently explained that the policy is that EI weeks are longer in areas of high unemployment because it is presumed to be harder to find a job in areas with high unemployment.

But if no seasonal worker is actually looking for work why does the unemployment rate matter?  In fact, mathematically the higher rates of seasonal EI usage push up the unemployment rate leader to longer weeks of EI collection.  Because of this folks on EI should cheer when the unemployment rate goes up.

It’s time to stop the fiction that is the EI program – or to reform it.  The gentlemen complaining that their EI has run out live within a short commute of Harvey (unemployment rate of 43.9% from the Census) and Nackawic (22.4% unemployment rate).  They live reasonably close to Woodstock and Fredericton that have low unemployment rates.  According to NBJobs.ca there are more than 500 jobs on offer right now within a 50km radius of Nackawic.

But as the gentleman in the article implies he has no intention of working another job as his real job starts in May. He just needs EI to cover him from February to May and, besides as he says – who would hire him to work for just a few months?

From the Census we know that nearly 50 municipalities in New Brunswick have unemployment rates of more than 20%.  This should be a crisis of Grecian scale but there are lots of employers in those communities and surrounding areas struggling to find workers.  And the MP for that area is dutifully looking for a solution (i.e. so those workers can get more EI).

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In 2015 there were 54,000 people that lived outside NB’s urban centres who collected EI at some point during the year or 37% of everyone that collected wages/salary income.  A large share of that 54,000 works seasonally and it is fiction to think they are ready and willing to work the jobs on offer in their communities and surrounding areas.

So we either a) reform the EI system to compel people to work even if they don’t want to (i.e. they work at Kings Landing for 5 months and Walmart for 7 months every year – its almost guaranteed that Walmart would agree to this arrangement; or b) we move the people on seasonal EI (i.e they have collected EI at least 3 years in a row) out of the labour market altogether and fund them separately with the understanding they have no intention of working outside of their seasonal job.

I believe the unemployment rates around the province would drop precipitously if we did this.

The problem here is more than just the fact that unemployment rates are distorted.  It drives broader government policy.  Why do we need immigrants when we have 40% unemployment in Harvey?  We set up ‘training’ programs for EI workers but they are really just a bridge to pay people between seasonal work.

It’s time to change this now.  I realize it is toxic for both provincial and federal politicians – the mighty federal Cabinet Minister Doug Young was brought down because of EI tweaks back in the 1990s.

This is no excuse not to act.  This issue is holding back our province and its economic potential.

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The disappearing wage gap between NB and Ontario

Someone asked me about the wage gap between New Brunswick and Ontario after reading my column this week.  Happy to accommodate.

If you go back to the 1950s, depending on the measure you use the wage ‘gap’ between New Brunswick and Ontario was around 40% – meaning on average you could earn 40 percent more in Ontario than you could here in New Brunswick. This is just wages – not net worth which has more factors such as the value of your housing, accumulation of savings, etc.

There has been a steady decline in this wage gap since.  In 2016, using Statistics Canada’s Survey of Employment, Payrolls and Hours the average weekly wage (including overtime) in New Brunswick was 10% less than in Ontario – up from 15% less a decade ago.  The table below expresses this as an index with the Ontario wage being 1.00.  Anything below 1.00 means wages are higher in Ontario and above means wages are higher in New Brunswick (average weekly wages).  We are really seeing upward pressure on wages in the sectors that are having the hardest time recruiting workers.  Look at truck transportation.  In 2006 there was a 19% wage gap with Ontario and that has essentially evaporated.  Look at grocery stories and building materials stores.  Already average weekly wages are higher here.  Nursing care is an interesting one.  There are many pushing for higher wages in this sector (and home care) as a way to draw more in to the workforce.  Government essentially sets the wages in this sector.  The average weekly wage in this sector is already 10% more than in Ontario.  How high should it go?   Computer systems design and services (the main IT industry) is another interesting example with wages now basically on par with Ontario.

An interesting counterpoint is insurance.  This industry is booming in New Brunswick as national firms are expanding their operations in this province serving clients across Canada – but the work is mostly back office and customer support which is not high wage which is why the index is going the other way.   This is a good thing in this case.  Would you rather have a few high paying jobs serving just the local market or a large, export sector bringing in several hundred million in revenue but with jobs that don’t pay as much?

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Of course there are usual caveats here.  Average weekly wages are not the same as starting wages.  But it certainly looks like Ontario is able to more easily fill jobs in the $12-$15/hour range than New Brunswick these days.  This is likely due to the high flow of immigrants and also likely why the Wynne government is moving to a $15/hour minimum wage to force up wages at the lower end of the labour market spectrum.

Rising wages are a good thing if they are tied to productivity and overall industry profit growth.  But in tight margin industries without productivity gains, the jobs that are mobile (i.e. those that can be done elsewhere like trucking) will leave if wage rates get too high.

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Are we fostering ‘fake’ startups? Separating fact from hyperbole

Diane Francis loves to stir the pot. Her column, Grants to ‘fake startups’ won’t build Silicon Valley North. They will only spawn Bombardier-like boondoggles, got a lot of blood boiling – particularly in Atl. Canada for whom she lobbed some particular verbal grenades.

All I can say is that in the past few years, this region has done – the Maritimes – has done particularly well when it comes to the contribution of the IT sector to GDP growth. New Brunswick and Nova Scotia had a few years in the valley but between 2014 and 2016 the two provinces are leading the country for IT GDP growth.  Note that I excluded telecommunications (the C in ICT) because most of that GDP is from your spending on Netflix and cellphones.  I also exclude IT manufacturing (computers, etc.) because like just about all other non-natural resources-based manufacturing it is most done in Quebec and Ontario.

With these caveats something seems to be working right now in the Maritimes – fake companies or not. Maybe it is fake GDP?it2

It is important to put  things in perspective.  The entire IT sector in New Brunswick (as defined above) contributed $370 million in real GDP to the province in 2016 – or 1.4% of total GDP.    To put that in context, if the IT industry doubled its GDP contribution in a single year it would only boost provincial GDP by 1.4%.   We need, IMO, to get back to 2-3% GDP growth per year in this province so don’t expect the IT industry to do the heavy lifting.

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Engineering economic development: Who’s got the power?

I see that Quebec City-based Englobe Corp. has bought Crandall Engineering following a trend of national and international firms scooping up New Brunswick-based engineering firms (ADI, etc.).    It might just be me but it seems that an increasing number of New Brunswick firms are being scooped up by national or international firms.  New Brunswick’s dairies are now all owned by Quebeckers but we are seeing this trend in vision care, funeral homes, insurance brokerages, etc.

The engineering sector is a particular concern because at least some of the firm were actually doing export-based work from here.  In other words, the engineering sector was a high value, export sector bringing in several hundred million in export revenue each year fueling the salaries of highly paid engineers.  I hear Hatch has already left Moncton and there is a fear that over time Englobe will do more and more of the work that Crandall used to do in Moncton from Quebec.  They will keep a physical presence here but less and less highly paid engineers.

So far the Fredericton example is mixed.  I am hearing that some administrative and management functions in the engineering sector have moved to Toronto and Calgary but the Statistics Canada data suggests there are more engineering-related workers in Fredericton today then there were back in 2006.   In fact there are 27% more in 2016 than in 2006 as shown in the chart.

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That is not the perfect statistic because at least some of these engineers work for government in Fredericton. But if you look at industry employment there are 1,115 persons working in NAICS 5413 Architectural, engineering and related services in the Fredericton CA (2016) up from 1030 in 2006.   We can’t get more granular than that with the industry data.  So, the industry is still growing in Freddy Beach but not as fast as the rest of Canada.  In 2006, 49 out of every 10,000 people working in this sector across Canada were in the Fredericton CA.  By 2016 that had dropped to 45.

The truth is that companies based outside New Brunswick have less affinity to New Brunswick (quelle surprise!).  So they will, over time, do the work where ever it makes best sense.  We need to make sure it ‘makes best sense’ to do engineering work in New Brunswick – not just local market but export market work as well.

The Moncton CMA already has one of the lowest concentrations of engineers and as I mentioned Hatch closed its Moncton operations (I’m told).  This is frustrating as 5-6 years ago they were talking about putting a ‘centre of excellence’ in Moncton.

As the national economy moves towards more of a services economy, exporting high value services is the next big driver of the Canadian economy.   Small places like NB are at a disadvantage but we have a proven track record of firms that can export services – accounting services, engineering services, business support services, IT services, etc. We are not good at exporting legal services, marketing/PR services, language translation services, etc.

It behooves local and provincial economic development agencies to build a strong relationship with the national and international engineering firms here and try and figure out what it would take to ensure they keep growing here.

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Competition is good, comrades!

I’m watching Comrade Detective on Amazon Prime Video while on the treadmill these days.  It’s a fascinating thing to behold.  The show is a Romanian detective show from the 1980s that is completely laced with socialist propaganda.   All dialogue and sets/scenery is meant to scorn the West and capitalism and boost the ideals of Leninism.  But the result is a kind of odd comedy.  There’s a scene where the two cops are in the U.S. embassy and they watch two very, very fat men sloppily eating a tray of Big Macs while reading the magazine “Guns & Ammo”.

I wonder what Romanians actually thought/think of that show then – and now.   It’s an entertaining show and Amazon says millions of Romanians tuned in every week to watch.

But it got me thinking that competition is good – competition in markets and in the marketplace of ideas.

When you don’t have competition it can lead to sclerosis.   If your house is burning down it forces you to act.  If the Soviets are knocking at the door, it focuses the mind.  BTW when I went to school in the U.S. in the mid 1980s they were still having nuclear war drills in schools.  I was never quite sure how cowering under you desk was going to help you escape the mushroom could, but I digress.

New Brunswick needs a little shakin’ up. Right now there isn’t much competition for new ideas.

We need a lot more immigrants.  We need more openness to natural resources development.  We need to be able to get things like municipal reform done.  We need to have an honest debate about health care.  I heard some economist throwing around the term 25% HST this week – in reference to NB being able to fund health care.  It’s not going to happen.  I am pretty sure the economy will collapse long before tax rates got that high – unless the 25% HST is across the country then people and investment have nowhere to hide (at least in Canada).

Competition, comrades, is good.

 

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Stranger Things: New Brunswick labour market edition

Statistics Canada recently published a report stating that the growth in paid employment in New Brunswick is highly correlated to the growth in the working age population.

Quelle suprise.

The article seems to imply the causality is one way.  If you have lots of jobs, the people will come to the jobs.  If you lose jobs you will lose people.   But as I have pointed out before there are jobs that have that magnetic effect and jobs that do not.  New Brunswickers will move to Alberta for $100k+ jobs but are less likely to move to Alberta for minimum wage jobs.  So, Alberta has boosted the number of immigrants in recent years and many of them are going into services and other jobs that it would be hard to get people from the rest of Canada to move there to take.

The truth is that there are a lot of jobs in New Brunswick right now that are going unfilled or that are really hard to fill.  These are not ‘magnetic’ jobs – for the most part Canadians will not move to a community to work in a fish plant, a <$15/hour manufacturing facility or customer contact centre and a host of personal services, retail, food and accommodation jobs.

This is what puzzles me about the CBC article.  It quotes one of my favourite migrants – Dr. Herb Emery as follows:

“Whereas, governments are increasingly focused on adding people first and hoping that that will drive labour demand by potentially driving capital in or unlock business potential where there’s perceived labour shortages, this study really points to the fact that it really is labour demand which ultimately comes from the export sector, which is driving everything,” he said. He pointed to examples of government strategies to bring more people to Atlantic Canada, like the Atlantic Immigration Pilot, that is aimed at bringing more immigrants to the region to stimulate the economy.

Emery knows full well the Atlantic Immigration Pilot was set up specifically to deal with existing and real labour demand not primarily to bring in people willy nilly.  In fact, the AIP’s explicit purpose is to avoid bringing in immigrants without a job and economic prospects.

The fact of the matter is that we have anecdotal and statistical data showing a decline in employment in many export-focused sectors because of a lack of workers.  I just heard this week that one of the larger foreign-owned fish plants is close to shutting down because their TFW allocation is down to 15% of the workforce and they are really struggling to fill the other 85%.  While the jobs are not high paying by any stretch and they are hard work too – if that plant shuts it will have a seriously negative effect on that local community.

This is the definition of labour demand.  Now, there is a good point about productivity and efforts to drive up wages.  This is good but not at the point it pushes firms and their export revenue out of New Brunswick.

Dr. Emery is right when he says:  “What we could be doing is focusing on making business conditions in New Brunswick more favourable for investment, which really means that even at whatever the world prices are for lumber, timber, fish, whatever we’re going to produce, that our producers are competitive”.

If we increasingly can’t fill the jobs on offer it will (and is) have a dampening effect on the economy.  We can wait around for mining and higher high wage jobs to come back to New Brunswick but I’m not willing to sit around and do nothing.

Bring in immigrants.  If some leave so be it.  As I have said many times before human capital is starting to look a lot like financial capital.  If it becomes too scarce it is a barrier to growth.

 

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Be a little careful with the youth unemployment data

Youth unemployment is back in the news after new data suggesting we still have a high unemployment rate among the young. The government just announced a whack of money to alleviate the pain of high youth unemployment.   While high unemployment rates are not a good thing it is important to always put statistics in context.  That is hard to do in the modern world of infographics and the need to cut through the clutter with a killer stat.

If you look at the unemployment rate among youth in New Brunswick it is mostly concentrated in the 15-19 year old cohort of which 84% are still in school.  We have to differentiate among the unemployed that are living at home with their parents and going to school and young people that are starting to build their careers and struggling to find work.  The 20-24 age group is more of a problem as only 42% of them are in school but the unemployment rate among that group is down to 10.3% – still too high.  The real concern for me is the 9.6% unemployment rate among the 25-29 year olds.  By the time you get to the 30+ the workforce unemployment rate is down to 6.4% – well below average.

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We can use Census data to dive a lot deeper on this issue.  When you look at the actual number of unemployed in the 15-19 age group around New Brunswick you find only 150 unemployed in the Moncton CMA, only 100 in the Saint John CMA and only 140 in Fredericton.  If you drive around each of those communities you will find help wanted signs in restaurants, retail stores, etc.  I’m just trying to put the 18.6% unemployment rate in context.

Among those 25-29, when you look regionally the absolute numbers are also quite small.  There are lots of potential reasons why the unemployment rate among that cohort is too high including a mismatch between skills, interests and the jobs on offer in local communities.  The EI system is likely boosting those numbers a bit.  A new immigrant I chatted with recently lost his job and was told “not to run out and get another job to hastily” and to “take your time and enjoy the time off with your family”.  He ignored that advice and got a job in a few weeks.

My fear, of course, is that the perceived (and actual) higher unemployment among young people in New Brunswick will keep us from focusing on addressing real labour shortages around the province.

If you look at the unemployment rate by major occupational group you will see that unemployment among most occupational groups in the province is quite low and comparable to the national average.  It’s only when you get into the trades, trucking, natural resources and manufacturing occupations where you start to see a substantially higher unemployment rate.  Again the influence of seasonality is probably driving up the rate in these sectors.   Yes, I admit that conceptually it is hard to justify high unemployment rates and labour shortages at the same time but that is a New Brunswick reality.  Person X works in a seasonal manufacturing or natural resources job while company Y can’t find year round workers in manufacturing or natural resource jobs.

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Shediac: New Brunswick’s most cosmopolitan municipality?

As you know I have been crunching a lot of Census data recently and have stumbled on some quirky stats.  The latest relates to the megalopolis of Shediac.  The Census provides information on population mobility – specifically asking where people lived five years before.  They break the data into non-movers and movers.  Among the movers, the data is broken into migrants and non-migrants and among the migrants, the data is shown for internal migrants (moved within the same municipality, intraprovincial migrants – those moving in from other parts of the same province, interprovincial migrants – those moving in from other provinces and external migrants – those moving in from other countries.

Among the population 5+ (for obvious reasons), Shediac is the only municipality in the top 10 for intraprovincial, interprovincial and external migrants among New Brunswick’s municipalities (I only looked at those with at least 3,000 population).  All told, nearly 25% of everyone 5+ living in Shediac in 2016 did not live there in 2011 – just five years’ previous.  That is pretty remarkable.  Contrast this with Shippagan where only 5% lived outside the municipality in 2011 or Tracadie where only 7% did.

Want to know if your city, town or village made the cut?

Shediac featured the highest level of intraprovincial migration followed by Sussex.  Despite the challenges of the potash mine closure a lot of folks are moving to Sussex.  We don’t know from this data if it is retirees or folks living in Sussex and working in Saint John or Moncton.  The Studholm Parish is also adjacent to Sussex.  Why is everyone moving to Greater Sussex?  Moncton in this case is the Parish – not the city.  Cheaper taxes. Up mostly on a hill.

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Which municipalities attracted the most people from outside New Brunswick? Oromocto, of course, but it is an outlier.  Why 10% of the Burton population is from outside New Brunswick is a mystery. Nearly 500 people live in Burton now that lived elsewhere in Canada in 2011.  Likely the Oromocto effect (?).  Great to see Woodstock here and also in the external migrant (immigrant) top 10.  Woodstock is becoming an interesting place – a bit under the radar.  We have friends that moved there recently for work. Overall nearly 1 out of every 5 Woodstockians in 2016 did not live there in 2011.  Also cool to see St. Stephen as it has been pushing to attract folks from elsewhere in Canada.  It’s working, folks!

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On the immigrant front, Fredericton leads the with Woodstock a close second – giddy up. Moncton, Saint John and Dieppe rounding out the top five.  Good to see Edmundston in this list – the percentage is low but moving in the right direction. For now only Woodstock and Edmundston are attracting any level of immigrants – outside the big three urban centres and their surrounding municipalities.

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Dr. Strangebedfellows or: How I Learned to Stop Worrying and Love Amazon

Over the Christmas season I had a craving for Cherries Jubilee, a decadent dessert featuring a warm Bing cherry sauce served over vanilla ice cream. I went online, downloaded the ingredient list and went to the grocery store. One ingredient, cherry extract, was not available in the store so I went to another and then another with no success. I went home and finally found a small health food store that offered cherry extract.  I drove to that store, bought the product and came  home.  The elapsed time from the start of my quest for cherry extract to securing the product? Nearly 2 hours.

I could have just as easily went to Amazon.ca and used my Prime subscription to order cherry extract from multiple sources delivered to my door in 2-3 days at the same or a lower price.

This is why more and more people are just ordering online.  I recently ordered Keurig coffee pods online.  In fact, if you look at the 20-30 of my most recent Amazon purchases – it is likely that a local store here in the Moncton region carried those products likely at a similar price.  Why can’t I find them online?

I think all retailers – particularly smaller ones – should be online and linked to a platform like Amazon.  Like eBay I should be able to find the products I want – general or niche – from a local supplier and not have to order from Toronto or even the U.S. for basic goods.

Further, those retailers selling highly niched products – birch bark essence for example – should be based here and selling those products around the world.

I’ve always found it strange.  I know that these little retailers would need to have some form of online-linked inventory and shipping system but there must be off the shelf systems for reasonable prices.

Most people would prefer to patronize a local shop to buy goods and services but they want convenience and are sensitive to price.  We can either give up that growing segment of the market or we can embrace it.

I think we need to embrace it.

 

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Men Are from Mars, Women Are from Venus: Workforce edition

One of my problems is distraction.  I’ll be crunching data for a report or presentation and stumble on a tangential piece of data that is interesting.  For example, the new annual Labour Force Survey data for 2017 recently came out and includes some interesting trends.  But I decided to go back 40 years to look at long term trends. In 1977, I was 10 and used to walk to the convenience store in lower Lincoln near the airport to buy grape and orange flavoured potato chips.   I suspect only a handful of my readers will remember that short-lived but interesting snack food trend.

Since 1997 as you would expect, the male and female workforce in New Brunswick has essentially converged.  In 1977 there were 181 men working in New Brunswick for every 100 women.  In 2017 it was 103 men for every 100 women.

But most of the net growth in the female workforce has been concentration in a few sectors.  As the table below shows, 40 years later than are 5,300 more men working in health care and social assistance but more than 33,000 more women.  If you think there are more men in education these days you would be wrong.  The distribution may have changed (i.e more male high school teachers) but the overall number of men in education has not changed in 40 years while the number of women has risen by nearly 9,000.

There are fewer men working in public administration in 2017 as there were 40 years ago.  women have accounted for all the net employment growth in public administration over 40 years.  In fact, if you add health care, public administration and education there are just under 5,000 more men working in those public sectors but nearly 49,000 more women.

Women still are not going into construction and manufacturing in any serious way.  The incremental number of men in professional and business services has out-paced women over the 40 year period.  Along with construction, those three sectors are the only industries where men have outpaced women in net growth.

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