Immigration as a driver of economic growth

I keep hearing folks ask the question “how come we need more immigrants when we have high unemployment and young people moving out west for jobs”?  The answer to this question is one of the keys to us getting our economy back on track.

Most of us will not remember the last time there was a real, sustained immigration wave into New Brunswick because it was around the middle of the 19th Century.  We had  a little spike right after WW2 as war brides were brought over and other immigrants were still trying to leave Europe.  But that quickly dropped down to levels well below the average for the country as a whole.  We had a little spike in immigration in the early 1970s (an average of nearly 2000 per year between 1972-1976) which worked out to a rate of approximately 250 per 100,000 population (still well below the country as a whole).  Then we dropped right back down to less than 100 immigrants per 100,000 and stayed there for more than 20 years – even as immigration into Canada remained at a steady and even growing pace by the 1990s.

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If you are of a certain age you may remember the product of that mini-wave in the early 1970s.  Some of those immigrants ended up working in government, some started successful businesses and others set up successful farming operations.

Now we had relatively high unemployment rates in the early 1970s.  We also had young people “goin’ down the road” to find work in Toronto.  We also had a wave of young people joining the workforce every year.  Yet we still allowed in immigrants and many of them stayed and are here today.

In 2015 we have relatively high unemployment (although low by the standards of the mid 1970s) and we have young people going down the road.  What we don’t have is a wave of young people joining the workforce every year.  In fact, the young workforce is shrinking and has been for years.

Labour and capital are the two main drivers of economic growth.   For most industries capital follows labour (think ICT). For a discrete number of industries labour follows capital (think Fort McMurray).   If you think about many of New Brunswick’s key industries – from sawmills to fish plants to manufacturing to contact centres – if the labour pool dries up – so will the capital.

So, immigration becomes key to our economic renewal.  Not necessarily Phds or highly skilled labour (although we will need some of that) – we need labour to fill the needs of industry – across the wage and skill spectrum.  And, by the way, not just to fill the needs of existing industry but we also want to grow the economy and employment base of the province.

The next time someone tells you we don’t need more immigration, you now have some food for thought.

 

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New Brunswick, if……

The Economist magazine has an interesting segment this week called “The World, if….” which provides a series of stories similar to its The World This Week but only at some point in the near future after Hillary Clinton is President.  It is a fun but serious look at one possible future.

It got me thinking about New Brunswick.  Specifically, New Brunswick, if we are able to address some of our foundational challenges in the next few years.  What would New Brunswick look like….

-If we get serious about immigration and demographic renewal.
-If we create an environment where high growth potential entrepreneurs want to build their businesses.
-If we address systemic challenges with the workforce.
-If we shed our fear of multinational firms and embrace the fact we are part of a global economy.
-If we are able to strategically develop our natural resources with a limited environmental impact and a high economic return.
-If we evolve our partnership with the federal government to one with a bold vision of growth for New Brunswick – not one of “ensuring comparable public services” through transfers.

If we got these fundamentals right, New Brunswick would be a different place than it is today.  It would be a place of growing multiculturalism, where dynamic and ambitious entrepreneurs from Minto to Mumbai would want to come and build export-based businesses. Where key export-oriented industries had certainty that the future workforce would be in place giving them clarity for their business and investment plans. Where the resources sector would be creating high paying jobs and high value tax revenue for governments. Where are urban centres would be growing and thriving. Where communities around the province would be growing and grappling with the problems of growth – not the problems of decline.

Where the provincial government could be looking to cut tax rates as a dividend arising from growth not increasing them as a response to stagnation and decline.

Yes, housing costs would be rising. Yes, wages would be rising. Yes, some industries might be more challenged than others. But, in the end, New Brunswick’s challenges would be related to managing economic growth not – as is the current reality – managing economic stagnation and population decline.

What kind of New Brunswick do we want?

It’s worth more of us giving this some thought.

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Why are we not promoting ‘homework’?

There is an excellent article in The Economist magazine this week about the rise of the freelance ‘bughunters’.  These are folks who get paid to find bugs that hackers use to break into websites and secure networks.  There are tens of thousands of people that work in this area from home.  I know a guy in Fredericton that does it from his basement in the evenings.

This is a recurring theme on this blog.  There are now millions of jobs that can easily be done from home – some requiring limited skills and other requiring very high skills but the common denominator is that they can be done from anywhere.  New Brunswick seems to have high unemployment in certain areas around the province – why are we not doing a better job at promoting and exploiting freelance and home-based work as an economic development effort?

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Enterprise Rent-A-Car was looking to hire 100 or more people in New Brunswick at nearly $15/hour, full time work to take calls from home.  I haven’t heard recently but they were promoting in Moncton, Fredericton and northern NB but were struggling to find workers.

IMO, this is a golden opportunity.  We need more people working in New Brunswick, paying taxes and contributing economically to our communities.  That is the fundamental challenge for our economy and ultimately for the fiscal sustainability of our province moving forward.

If we don’t want people to move to the jobs, we should bring the jobs to the people.  There are millions of jobs that could be done in New Brunswick from home and – as the NHS data shows – we are at the lower end of the spectrum for home-based work.

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On higher wages and more taxes – a few thoughts

I have interesting conversations in my role here with GNB.  Lots of folks offer a wide variety of commentary on what government needs to do to get the economy moving in the right direction.

Most people talk about the need for “high wage” jobs to “keep our young people home”, etc. etc. etc.  but they don’t have a clear idea what that really means.  The following table shows the number of workers by sector in New Brunswick (3-digit NAICS) and how average employment income in that sector compares to the provincial overall average employment income.

You will notice that eight of the top 25 sectors by employment are publicly funded industries.  You will further note that all but two of them offer well above wages.  We can have an argument about why this is the case but at the end of the day it is really hard to see how you will see any employment growth in those sectors without overall population and GDP growth.  Public services respond to growth in demand which should correlate to population growth over time (with adjustment for demographic trends).

You will also notice the 16,000+ high wage professional services jobs in New Brunswick – again mostly serving local demand in New Brunswick.  If the population is not growing, don’t expect the demand for lawyers and doctors and electricians to increase.

This bolsters my case for a big increase in the population under 40 in New Brunswick.  As I have argued many times before – while there are some chicken and egg challenges here at the end of the day 1,000 new families creates the demand for somewhere in the range of 900 new jobs – nurses, doctors, teachers, electricians, lawyers, etc.

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The other statistic that I wanted to share with you this morning is the average income taxes paid by age cohort in New Brunswick as this also bolsters my argument that we need to see a significant boost in the population under the age of 40 in New Brunswick.  The prime tax paying years for the average New Brunswicker are between the ages of 35-54.  The number of people employed in those age cohorts is dropping as well as in the cohorts that will be moving into those age brackets in the coming years.  We need to back fill the pipeline of younger workers that will provide the lion’s share of taxes in the years ahead.
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Attracting high growth potential entrepreneurs (HGPEs) to New Brunswick

I just read that there is an incubator in Colorado focused on start-ups developing products and services for the emerging cannabis industry. This makes sense given Colorado’s laws related to the industry.  It is a strategic advantage that most other states do not have.

I have written about this before but I think we need to evolve our thinking about start-up incubators/accelerators to reflect this trend towards specialization.  There are incubators supporting green technologies, social media, the industrial Internet, food, and many others.  In most of these cases a targeted value proposition is developed to attract high growth potential entrepreneurs not only from the local area but from across the country and beyond.

Imagine a smart grid incubator in New Brunswick that was attracting entrepreneurs from across North America to test their smart grid ideas here?  That would be a smart way to leverage the NB Power/Siemens partnership for greater economic value for the province.

In truth we could look at other regional advantages – how about wood-related startups?  Or fish?  Or social media?  Or contact centres?  We have the highest concentration of contact centre workers in North America and very few technology-based start-ups (if any currently) developing products/services to fill niche spaces in that market.

Ultimately my concern is simple.  If you have all this incubation and support infrastructure around the province but a limited pipeline of HGPEs we won’t realize the potential.

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Looking for the rumours of glory

I’m reading Bruce Cockburn’s biography this week so I have his music running through my head – hence the title of this blog.  Anyone of a certain age will know the song and its meaning.

I’ve been grappling with the concepts of optimism as a precursor to economic growth.  My old friend David Jonah tells the story of the “Greater Moncton: We’re Okay” campaign from the mid to late 1980s.  They had an acute awareness that in order for Moncton to turn itself around the people of the community needed to have an optimism about the future. If entrepreneurs were optimistic, they would invest. If people were optimistic they would stay and build their careers.  If governments were optimistic they would invest to support future private sector growth.

There is a lot of negativity in New Brunswick these days. It’s coded into social media and even mainstream media.  Yet at the same time we read that 99 percent of Riverviewians are satisfied with their quality of life in New Brunswick.

So there are at least two competing narratives here.

First, things have never been better in New Brunswick.  As the boomers head into retirement they have more money than any generation in history – less than their counterparts across Canada – but still more than the past.  The unemployment rate (and the employment rate) is low by historical standards and I would argue if you back out the seasonally unemployed (not the same as seasonally adjusted employment but I’ll save that for another day) the ‘real’ unemployment rate is much lower (i.e. the share of the adult population that is ready, willing and able to work at any given time).

The second narrative is that New Brunswick is on the verge of collapse.  People can’t sell their houses, young people are still leaving the province at a fast clip, the overall population is in decline, the public sector is in a large deficit heading towards a cliff and there is no hope for the future.

Long term readers of this blog will know of my aversion to dumbing things down to binary choices – something is either good, moral, righteous, etc. or bad, evil, toxic, etc.  That is where the paid and vested interests want to take public policy arguments but the rest of us just get caught in the vortex.

New Brunswick is not on verge of collapse but we are not in the nirvana that should drive a 99% happy with quality of life rating.   People need to understand that there are deep and structural trends that will fragment New Brunswick’s quality of life proposition in the future.  If we do not get our population growing again and if the economy doesn’t start to grow again at a moderate growth rate – it will ripple through our society.

And there are ways to address this.  Maybe there are rumours of glory. Maybe we could attract a lot more young immigrants.  Maybe we could attract a lot more foreign students as a pipeline for the future workforce.  Maybe we could develop our natural resources in a way that people would be comfortable with.  Maybe we could drive an urban growth agenda.  Maybe there are ways to expand our tourism sector.

Maybe.

 

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Dispatches from the road – NYC editition: Notes on the NB brand

I’m in the Big Apple for a few days’ vacation and I stumbled across a few things of interest.  First, over the last 10 years there has been roughly $1.4 billion worth of international salmon exports from New Brunswick the vast majority to the United States.  Over that same period the total value of salmon exports from Nova Scotia has been $21 million.

Yet, three times yesterday I read on menus about Nova Scotia lox and salmon including at the market last evening.  In all likelihood 98% of the salmon from east coast Canada consumed in New York is from New Brunswick but it is branded as Nova Scotian.

Digby scallops, Maine lobster, PEI mussels, Nova Scotia halibut (yesterday at lunch) – nothing about New Brunswick seafood on any menu I can find here.

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The other interesting observation is this Poland Springs bottled water.  It’s everyone in New York City.  In fact it is by far the most dominant brand of bottled water and it is clearly identified as coming from Maine.  On the side of the bottle is a list of all the small communities in Maine where the water comes from.

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Now I understand we have lots of water in New Brunswick – we don’t know how much as I am told – but no firm is bottling it and branding it as NB water in Toronto or Montreal.  Should we be promoting water as an economic development opportunity?  The brand component comes as a side benefit.

New Brunswick is a small place – smaller than dozens of cities across North America.  But there are lots of small places that have branded themselves well particularly related to specific natural resources – food, wood, etc. Maybe we should give more thought to how we can modestly expand our brand using the products that come from here.

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Don Draper gets his mojo back: Lessons for NB

I don’t know if you watched the Mad Men series but I thought the finale was quite interesting. From the very first episode we were led to believe that the life of a mad man was intense but ultimately terminal as the show opening every week shows the silhouette of (presumably Don) someone falling to their demise off a building as advertising images flicker in the background.

The finale pushed us in that direction. Near the very end we see Don calling Peggy from a payphone and decrying his life and the meaninglessness of it all. He had gone to a hippy commune to find himself but it only got worse. Peggy suggests he shouldn’t be alone right now and worries about Don’s life.

She tells him there is a lot to live for – doesn’t he want to come back and work on Coca-Cola? For a moment we are led to believe that not only is that idea not appealing to Don – in fact it is that idea that has led him to his demise.

Then in the second to last scene, Don is doing yoga with the hippies and the camera slowly zooms in on Don’s face. We see a big grin appear on his face and, then, the scene cuts to the most famous Coca-Cola advertising campaign of all time – “I’d like to buy the world a Coke” with a bunch of hippies holding bottles of the fizzy drink talking about peace, love and nirvana.

My wife thought it was a strange ending but I thought it was perfect.

Don’s real problem was never the women, drink, etc. In the context of the show, it was that he felt he lost his mojo. In the depths of despair and in the company of those strange hippies he got his creative inspiration back – another carousel moment – the x factor that made him the king of Madison Avenue. We are left to conclude – deliciously – that he goes back to McCann and creates the most successful and famous advertising campaign of all time.

I might be wrong about this and I purposely didn’t Google it because I want to believe that was the point. How do you generate creativity – inspiration – innovation – moments of great genius? Whether it is an inventor, artist or mad man – what is the alchemy that leads to breakthrough moments?

We need this in New Brunswick. That are so many good people and organizations doing interesting things but when we look at the big picture we are in need of a breakthrough – a Sputnik moment – a Don Draper Coca-Cola moment.

Our economy is flat. Our population is stagnant. If the demographic trend continues on its current course we are destined to lurch from crisis to crisis over the next 25-30 years.

We need to significantly boost our population – particularly the under 40 population to balance our demographic situation. We need to boost our GDP at least at a moderate level to ensure we can afford the public services and infrastructure we care about. We need more innovation, more high growth entrepreneurs – more optimism.

In 2006 the Self-Sufficiency agenda warned that we must increase our population by 100,000 by 2026. Nearly 10 years later there is less appetite for population growth now than back then. Economists and economic policy gurus were warning back then about the weak GDP growth and its long term impacts on our fiscal situation. Now we are in our seventh year with zero real GDP growth and while there continues to be some voices warning about this – there isn’t much urgency about it.

I have been writing and thinking about this stuff for years and I feel a little Draper-esque (without the side effects). I can’t seem to formulate that single, unifying concept that will bring light bulbs over the heads of those that need a light bulb moment.

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Social capital in New Brunswick: Some good and some not so good news

Statistics Canada recently published its “Trends in Social Capital” report for Canada and the 10 provinces. It is based on a wide ranging survey of concepts meant to test social capital including number of friends, contact with neighbours, participation in community groups, etc.

Positive highlights:

The ethnic diversity of social contacts: The percentage of NBers  who in the past month were in contact with at least a few friends from a visibly different ethnic group from their own rose from 37 percent in 2003 to 42 percent in 2013.  I have a hunch that if every NB-born person that is nervous about immigration sat down and broke bread with an immigrant most would drop their concerns.

We still fare quite well on the “lost wallet” test. 55 percent of NBers say  it is very likely to have a lost wallet or purse returned if found by a neighbour.  that is down slightly from 2003 and ranks behind NL and PEI only.

 

Red flags: 

In 2013, Quebec (36%) and New Brunswick (46%) were the two provinces with the lowest rates of monthly participation in group activities. Among other provinces, the participation rate varied between 51% and 55%. Civic participation is a very important concept.  That less than half of us do not participate in group activities is a concern.

Quebec (36%), and to a lesser degree New Brunswick (51%), recorded the lowest levels of generalized trust.

Social contact with friends:  The percentage of NBers who saw their friends a few times or more a week dropped from 67 percent in 2003 to 51 percent in 2013.  People who contacted their friends a few times or more a week dropped from 64% to 53%.  This was not unique to NB – this trend was pretty consistent across Canada.

Social contact with relatives: The percentage of NBers who saw relatives a few times or more a week also dropped significantly from 55 percent in 2003 to 38 percent in 2013.

Linguistic diversity is not where it should be:  The percentage of NBers who in the past month were only in contact with people with the same mother tongue as their own was 59 percent.  In a province where 44 percent of the population speak a language other than English (Francophones, bilingual anglophones and other languages) you would think that percentage might be lower.

 

 

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The paradox: Population growth could limit outward population migration

One of the reasons most cited for not ramping up our immigration efforts is the out-migration of our young people.  Why do we need immigrants when many of our kids can’t find jobs?

As always, the answer is more nuanced.  Many of the kids that leave are professionals that have university education and are not aligned with many of the available jobs in manufacturing and front line services.

My working hypothesis is that more immigration will lead to more higher end professional jobs.  First, you have to realize that most of the professional career jobs in New Brunswick are directly related to the population living in the province.  In other words, the services they provide cater to the population.  If the population is not growing, the number of jobs will not grow either.

Specifically, for every 10,000 people living in New Brunswick, there are (using NHS data):

Over 470 people working in management occupations
66 auditors, accountants and investment professionals
13 insurance adjusters, underwriters and assessors
44 engineers and architects
111 registered nurses and 30 licensed practical nurses
24 physicians
Four dentists
Five optometrists and chiropractors
12 pharmacists
11 physiotherapists and occupational therapists
143 elementary and secondary school teachers
16 lawyers (sorry, it’s true)
54 psychologists, social workers and counsellors
79 police officers and firefighters
26 welders, 27 electricians and 63 carpenters

In fact, for every 10,000 people living in New Brunswick there are 4,800 people working of which more than 3,000 are employed to provide goods and services to New Brunswickers.

A flatlined population means these thousands of jobs will not exist.

In 2006 Shawn Graham set a goal of growing the population by 100,000 by 2026.  We are now in 2015.  If we had the 50,000 population growth, ceteris paribus, we would have at least 15,000 jobs of which thousands would be in professional occupations as described above.

If you want new pharmacists, dentists, electricians, lawyers (sorry, it’s true) to stay in New Brunswick, we need to grow the demand and the demand grows through population growth.

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