Millennial self-employment in export-oriented industries: An NB challenge

I have been thinking a lot lately about entrepreneurship among Millennials. If we want a vibrant and durable economy moving forward we need the next generation of ambitious and growth-focused entrepreneurs to step up.  Over the past decade we have witnessed a substantial boost to the government supported services meant to support entrepreneurs – and we have seen an expansion of the private capital available to them.  Governments have invested millions in support and expanded the small business investor tax credit program to encourage more investment in startups.

Unfortunately the most recent data we have is from the 2011 NHS but that paints a rather bleak picture of self-employment among Millennials in New Brunswick.  The chart below tells the story.  It is an index where the country’s workforce as a whole is represented by 1.00.  Anything above the line means NB has a higher share and anything below the line means we have a lower share compared to the national workforce.  For self-employment in occupations that are only focused on the local market (Lawyers, doctors, vets, accountants), we have a higher share of young people that are self-employed compared to the national workforce but among those occupations that tend to have high concentrations in export-focused industries we are well below the line.  Across the country 8.5%  of IT workers are self-employed.  In New Brunswick it is 2.3%.

In the manufacturing sector (not depicted in the chart) only 30 young people out of the 5,200 working in the sector are self-employed.  Across the country there are 4x as many young people in the manufacturing sector classified as self-employed.

Hopefully the numbers have improved since 2011.  However, Dr. Haan’s statistic looms large in the background.  Those who leave the province are twice as likely to own a business as those that stay.

self

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New Brunswick’s missing 35 to 44 year olds: A lesson in demographics

There is a view that youth out-migration is something that can be fixed – like you would fix an old car.  The reality is much more nuanced.  The following chart shows the New Brunswick population by age cohort relative to the national population.  As an example, in 1971 New Brunswick had 8.5% more 0 to 4 year olds in its population (as a share of the total) than Canada as a whole and 3 percent fewer 50 to 54 year olds.  If you look at the graphic you will see that not much has changed in the last four decades.  New Brunswick still has a higher share of its population under the age of 24 and a higher share of its population over the age of 60.

The population overall has significantly moved to the right – i.e. both NB and Canada are much older now and it has grown much faster across Canada –  but the mix in distribution has not changed much.

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In 1971 New Brunswick’s largest population gap with Canada as a whole was in the 35 to 44 year old age cohort.  In 2015 it remains this cohort and remarkably almost by the same exact percentage share.  In 1971 we had 15 percent fewer 35 to 44 year olds in the population than Canada as a whole and in 2015 we had – you guessed it – 15 percent fewer 35 to 44 year olds in the population.  44 years later.

The reality is that this phenomenon is similar in other small provinces and U.S. states.  Small jurisdictions end up losing a lot of young people to the large urban centres.  The small jurisdictions – such as Manitoba and Saskatchewan – are those that are seeking a significant of inward migration to counter the outward effect.

That may seem counter-intuitive to some people. Why try to bring in younger immigrants when your young sons and daughters are leaving?  We have 40+ years of making that same argument.  We don’t need immigrants because we have youth out-migration.  How has that worked out so far?

As I have pointed out many times before – Toronto has a high net outward inter and intra provincial migration rate.  They make up for the loss with 95,000 mostly younger immigrants every year.

No matter how hard it is to get our heads around it is my view that a big boost in immigration should actual lead to more jobs for young, Canada born New Brunswickers.   Many of the new immigrants will fill positions that are not being filled now and that should boost output and create more jobs in the local economy.

You would think that 40 years of data would lead to a little new thinking.

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New Brunswick’s $250,000 problem

New Brunswick has 59% fewer people who earn $200,000 per year and 63% fewer people who earn $250,00 per year compared to Canada as a whole.

To put that into some kind of context, you would have to look far and wide to find any major social, demographic or economic indicator where New Brunswick had a 60% spread with the rest of Canada.  Not literacy, education, poverty or health outcomes.  Not median income or any other main economic indicator.

But when it comes to ‘high’ income earners we have a huge gap.  And the gap is widening at least at the highest level.  In the past five years the national growth rate of those earning $250,000 was 50% faster than New Brunswick.

Does this matter?   Well, I think it does.  By my estimate just getting to the national average for higher income earners would add some $200 million in provincial government tax revenues each year.  And that is grossly understated because it doesn’t account for other sources of tax revenue that would be derived from the economic activity generated by those high income earners (I only looked at the direct taxes off the additional personal income).  In other words it pushes the tax burden down the income pyramid.

Now let me be clear.  If the price to get more higher income earners means less income for those lower in the income pyramid (i.e. creating more inequality) – that is not acceptable.  But I am talking about generating relatively high incomes from creating new wealth from entrepreneurial activity, risk taking and hard work.

How do we do that?  We need more ambitious entrepreneurs looking to build markets outside New Brunswick and we need world class companies willing to step outside their comfort zone and take risk.

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Energy and mining export values down, gypsum, aquaculture and peanut butter up

A quick look at the international export data for the first four months of 2016 reveals that the value of energy-related exports is down significantly this year so far. The total value of refined petroleum exports, gas exports (mostly LNG) and NB Power exports is down by $869 million this year so far. You have to be careful with this, however, as the lost ‘value from refined petroleum exports could be upstream as the value of oil and gas imports is down by $636 million during the same period.  The decline in Canaport exports to New England is likely due to the mild winter.

Other decliners including non-metallic minerals (potash) – no surprise there – and the rest of the declines are quite marginal and could be due more to currency fluctuations than production declines.

International merchandise exports – Biggest declines (Jan-April 2015 to Jan-April 2016) – in CDN $000s
exports1
Source: Trade Data Online.

On the winners side, Gypsum product exports are up (but in absolute terms by a fairly limited amount).  Aquaculture exports are up strongly by $35 million in the first four months.  Peanut butter exports are rolling along (snack food).  The value of seafood exports is up by $30 million.  The value of pulp million exports are up by $31 million.

International merchandise exports – Biggest increases (Jan-April 2015 to Jan-April 2016)  – in CDN $000s
exports2
Source: Trade Data Online.

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Learning from Leicester City

I think there are lessons to be drawn from the Leicester City Foxes who recently won the 2015-16 English Premier League. The Foxes were 5,000 to 1 to win on the season’s opening day.

I can’t help but take a little jab at my Edmonton Oilers – a team I have followed since they joined the NHL in 1979 (I was 12 at the time).  In many country professional sports leagues (like the EPL) whole teams can be demoted if they don’t play good enough to remain in the top league.  I suspect if the NHL had that approach (i.e. the Oilers as a team would get demoted to a lower league) you would have far better hockey because teams would be extra vigilant to make sure they put a quality product on the ice.  These days teams like Toronto and Edmonton can languish in obscurity and still turn a nice profit for their owners (in fairness I have no idea if Edmonton has been profitable).

One of New Brunswick’s biggest challenges relates to how a small jurisdiction positions itself in a world that is more open and global than ever before.  Capital, talent and ideas are more mobile than at any time in our history (at least until the Trump Express hits the Whitehouse) and New Brunswick risks being left behind.

Leicester City shows that an innovative approach, a little luck as well as a version of the Tortoise and the Hare story can help elevate underdogs.

I am a little concerned that New Brunswick is too under the radar from a national economy perspective.  If Ontario had our province’s economic performance over the past eight years it would be an international issue.  When Alberta’s economic growth fell to zero (and slightly below), the nation’s media was awash in stories.   When NB has zero growth for seven straight years (on average) no one notices or they shrug their shoulders and say “that’s just New Brunswick”.

Why this matters is that we need the federal government to be concerned about NB’s economic trajectory and help where it can – in areas such as immigration, our share of national innovation funding, helping promote NB around the world using its global network of trade and investment officers, etc.

We need to attract national and international investment – like we have in the past – if we are too under the radar that becomes more difficult.

We need to attract a lot of talent in the coming years.  That too requires a focused effort.

The Economist magazine, after several articles extolling the virtues of Leicester City and drawing much broader lessons for the economy – has piece concluding that “underdogs are overrated”.

That too is an illustration of the challenges we face moving forward.

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Brasileiros em New Brunswick: Will a wave of Brazilians help rebalance our demographics?

A YouTube channel that describes itself as “dedicated to Brazilians wish to one day live in Canada” recently featured an hour and 12 minute conversation with Sergio and Kaísa who recently moved to Moncton where Sergio is taking a course at the NBCC.  They would like to stay in Moncton after he finishes his course and the conversation was very positive on New Brunswick and Moncton – both Kaísa and Sergio could see themselves building their careers here.

The YouTube conversation has been viewed over 2,000 times (sorry, folks, its 100% in Portuguese – although they do talk about a new kind of Chiac – their word not mine) that is half English, half Portuguese.

Since Sergio and Kaísa’s  free promotional plug for New Brunswick the group’s Facebook site in Moncton has been pinged by numerous Brazilians asking more about New Brunswick and expressing an interest in moving here.

I think it would be kind of cool to attract more young Brazilians here – New Brunswick could use a little more samba.

I’ve taken to preparing quite a bit of Brazilian food – feijoada, feijao, farofa, pao de queijo, mousse de maracuja, etc.  It’s good.

But I do wonder about the cold winters.  Speaking from experience, most Brasileiros are not hardwired for 30 below winter days.

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Growth in the provincial workforce and GDP by Premier

Between 1987 and 1997, the years when Frank McKenna was Premier the provincial workforce expanded by 32,000 people and total employment increased by 29,800.  Real GDP grew by 11.3%.

Between 1999 and 2006, when Bernard Lord was Premier, the workforce expanded by 21,400 and total employment grew by 24,700.  Real GDP grew by 17.8%.

Between 2006 and 2010 when Shawn Graham was Premier the provincial workforce expanded by 10,400 and total employment by 7,700. Real GDP grew by 2.1%.

Between 2010 and 2014, during Premier Alward’s term, the provincial workforce shrunk by 1,300 and total employment dropped by 4,200. Real GDP declined by 0.7%.

Between 2014 and 2015, the provincial workforce has declined by 2,800 and total employment is down 2,100. We don’t know the final tally for 2015 GDP yet – we are expecting a marginally positive number but not outstanding.

I wonder how many people out there still don’t see a connection between the trajectory of the workforce and economic growth?

By the way, if I put up the national numbers you would see roughly the same correlation – the only difference is the workforce nationally has been growing rapidly in line roughly with GDP growth.  Between 2008 and 2015, New Brunswick’s workforce declined by 4,100.  The national workforce increased over the same timeframe by 1.16 million.

And most of the net growth was made up of immigrants. FYI.

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Are women or men more at risk from the coming automated economy?

After a Davos conversation there have been a number of stories recently about which gender is most ask risk from the coming automated economy – driverless cars, robots, etc.  It’s an interesting conversation.  I took at look at the occupational differences between women and men in New Brunswick to add a little local context to this debate.  Most of the findings are not overly surprising but there are a few eyebrow raisers.

For a methodology, I took the share of employment for males and females and then compared the the two with male employment as the base (= 1.00).  Simply, anything less than 1.00 means that the female workforce has a lower share compared to men and anything above means they have a higher share.

The table below shows the highest level summary for the top level NOC codes 1-9.  As would be expected, females have fewer people in management relative to men (36% less) but they have 2.6 times as many working in business, finance and admin occupations.  There are 4.4 times as many females working in health occupations compared to men.  On the opposite end of the spectrum, there are 70% fewer females working in natural and applied sciences occupations, almost none in trades and transportation, very few in natural resources occupations and less than half – relatively speaking – in manufacturing occupations.


chart


The more detailed breakdown (link below) reveals some interesting findings at the more granular level.  There are significantly more females in senior management roles in health, education and social services compared to men; 33% more financial managers, 95% more HR managers, 43% more banking, credit and investment managers, and three times as many managers in health care.

Females are more heavily employed in administrative occupations (three times as many compared to men).  The main outlier – there are 61 times as many females working as medical admin. assistants than men.

There are far fewer women in science-based occupations except biologists where there are 15% more women compared to men.  There are 84% fewer female civil, mechanical, electrical and chemical engineers; 85% fewer computer engineers; 59% fewer architects and 77% fewer computer programmers compared to men.

Women kick arse in health care – except for NOC 311 Physicians, dentists and veterinarians – where there are 27% fewer females than males.  However, there are 35% more female veterinarians, more optometrists, 73% more pharmacists, nearly six times as many females in therapy-based occupations, 5.5 times as many in med. tech occupations.

There are slightly fewer female university professors (21% fewer) but more college instructors (+27%).  There are more than 3 times as many teachers.

There are 22% fewer female lawyers compared to men and 70% fewer police officers.

There are 66% more female bartenders – who knew?

There are very few women working in the trades and transportation occupations. 96% fewer working as machinists or related workers.  98% fewer plumbers, 98% fewer carpenters, 96% fewer heavy equipment operators.

There are far fewer females working in virtually all natural resource-based occupations except nursery workers (67% more) and harvesting labourers (83% more).  More women work in fish plant occupations (12% more) and labourers in fish and seafood processing (75% more).

Here is the full review of 600+ occupations for New Brunswick.  Some interesting stuff in there.

I guess I don’t really address the subject of this blog but I’ll let you draw your own conclusions.

 

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Redux: Does labour follow capital or vice versa?

Should New Brunswick focus more on trying to attract jobs or on growing the population?An interesting new study out of Indiana has important implications for economic development in New Brunswick.

The researchers looked at whether or not job growth (efforts to foster more jobs) lead to population growth or did having a growing population foster new job growth.

They found that “in the 1970s people followed jobs, but by the 2000s they had stopped.”  If the economy was going to grow the workers had to be in place.  In other words, the researchers conclude that communities need to be great places to live and attract people and the jobs will come rather than trying to attract jobs to places with tight and shrinking labour markets.

That sounds a lot like New Brunswick these days.

I have been saying all along that there are some jobs that will attract labour.  Think Fort McMurray.  Sectors such as mining tend to be a magnet for workers.  But most industries are not like that.   If there isn’t a pool of labour, over time investment and jobs will decline. I would not say this is a universal fact but for places such New Brunswick (and apparently Indiana) this is the case.

The study goes further and suggests the tax incentives used to lure jobs to the state were not well spent and the money should have been used to improve the quality of place and boost population.

I wouldn’t be as stark on this point.

I still believe there is an important role for communities and governments to expose firms to potential investment opportunities in their areas.  For example, if a small community has enough local demand for a dentist and there are not a pile of dentists lining up to come, the community should build a business case and use it to convince a dentist to locate there.  Likewise if a province has opportunities in shellfish aquaculture, mining, blueberries, etc.  it should package and promote those opportunities to investors. If it has gateway infrastructure – roads, ports, airports with opportunities – it should promote these opportunities to investors. If it has low cost energy it should promote this benefit to industry.

If other jurisdictions are offering tax breaks or other forms of subsidy, we may well need to play some version of that game but I believe if we are ‘selling’ real opportunities with tangible value to investors, incentives will be less important.

The idea of trying to lure firms to New Brunswick with cash incentives even as the labour market is shrinking is increasingly problematic.  Even if the firms move in they may take workers from existing employers who will then not be able to fill the vacancies.

New Brunswick needs to focus on intentionally growing its population – it’s working age population.  This is foundational to ensuring investment and sustained GDP growth is in our future.

 

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Manitoba and immigration: An interesting case study

The Manitoba example is an interesting one for us to consider as we think more deeply about immigration and the labour market.  Even though Manitoba has no oil and gas industry and only a fairly small mining sector (less that 3% of total GDP) its economy grew robustly between 2006 and 2014.  Not to the level of Saskatchewan or Alberta mind you but still the size of the economy (real GDP) swelled by 20%.  New Brunswick, by contrast, saw its total economy grow by only 2% over the same period.

What is interesting is the drivers of economic growth.  In Manitoba, manufacturing GDP increased by 14% while decreasing 11% in New Brunswick.  Transportation and warehousing GDP up by 12% in Manitoba but down 3% in New Brunswick. The administration and support services sector (where many contact centre jobs are classified) grew its GDP by 8% in Manitoba while declining by 7% in New Brunswick.

If you look at the ‘public sectors’ in comparison to overall GDP growth you see an interesting trend too.  Health care GDP and public administration GDP grew strongly in Manitoba but less than the rate of overall economic growth.  In New Brunswick, by contrast, health care GDP grew five times faster than overall GDP and public administration GDP grew six times.
imms

 

But what is really interesting is the correlation between growing industries and immigration.  Manitoba, a province only slightly larger than New Brunswick, attracted more than 8 times as many immigrants between 2001 and 2011 (defined as those living in the province in 2011 that arrived in Canada between 2001 and 2011).

But when it comes to the occupations that support export-oriented industries, the multiples go through the roof.  Of the more than 18,000 New Brunswickers who worked in manufacturing-related occupations (NOC 9) in 2011, only 175 were recent immigrants (0.9%).  In Manitoba, it was 5,515 (one in five of every workers).  Manitoba attracted 31.5 times as many workers in NOC 9 compared to New Brunswick over the period.

imms2

It’s clear that Manitoba has been attracting immigrants for years to support economic growth.

One final point.  Between 2001 and 2011, Manitoba’s employed workforce expanded by 62,000 people.  46,000 of the workers were recent immigrants.

 

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