You love getting your government cheques, come on, admit it

Some one asked me one time to give them some Canadiana.  What is interesting about this place?  I rattled off Tim Horton’s, moose, lobster, canola, the Rockies, etc.  but I also said getting cheques from government.  I had just read somewhere that the government cuts something like six cheques per capita per year to individuals across Canada.   This was a while ago. It was puzzling to me on a practical basis – what an administration process – but the politics of it are juicy.   It’s nice to get that little shot of dopamine every time the government sends you a few hundred dollars.  Even with direct deposit now, we look forward to it, plan what to do with it.

I have been helping my young adult children with their taxes and they get the little jolt of cash from government multiple times per year. HST rebates, my daughter even got a cheque from the Ontario government for something.  The cheques keep coming. Someone was handing out application forms recently in my parents’ church that would give them a little cash uplift.  They filled it out and sure enough a few weeks later, $300 came in the mail.  Families get cash for their kids.  In fact, that money is rolling in these days.  Our PM is practically ecstatic about it:

Maybe I am just jealous as  I have long since stopped getting government cheques.  In fact, I have to send the government multiple payments every quarter as a small business – payroll deductions, HST payments, prepaid corporate income tax payments, and usually a bunch of penalties because I filed late or wrong.

The government could easily structure these programs as tax deductions.   You would get the same money.  The only difference is that in most cases you wouldn’t get periodic cheques from your friendly neighbourhood politician reminding you of their munificence.  I know, I know, for the amateur tax policy analysts among you some of these cash transfers go to families that pay no income tax at all.  But lots of countries, including the U.S. have ‘negative’ income tax rates – in other words you would get a cheque once after filling out your taxes each year.

In New Brunswick nearly 461,000 people reported getting direct cash payments from government in 2017.  This was substantially more than the number earning employment income (415,000).   And, of course, many New Brunswickers get multiple cheques from government: EI, HST, Child tax credit, etc.

In recent years the number of people getting direct cash from government has risen significantly both because of more retirees (OAS) and more receiving family and child benefits. In New Brunswick the number collecting workers compensation is up 10% even as the number with employment income is down 1% over the decade (2008-2017).

In terms of absolute dollars in 2008 New Brunswickers in total received $0.24 in cash transfers from government for every dollar earned in employment income. By 2017 it was nearly $0.28.  For those of you arguing this is mostly Canada Pension Plan income which is paid into by Canadians, nah.  The CPP represented 29% of total government transfers in 2008 and just over 29% in 2017.

Total employment income has risen by 21% while total government transfer income has risen by 50%.  Federal child benefits are up 80%, workers compensation up 43%, provincial child and family credits up 600%.  Even total EI (employment insurance) income is rising faster than employment income, up 28%.

Overall, New Brunswickers received $4.7 billion in direct government transfers in 2017 or nearly $20,000 on average per household across the province.  Even without CPP the amount was $3.3 billion.

This doesn’t include the employment income of the 80,000 or so local, provincial and federal government employees – which at even a modest $50,000/year on average would mean a payroll of $4 billion.  These people, of course, also get cheques from government, but this is different as they are workin’ for a livin’. Still it does add to the stock of government cash flowing directly into households – close to $9 billion per year in New Brunswick.

Don’t expect this to change under any government.  Those periodic cheques from the Prime Minister are a little reminder of the importance of the government to just about every Canadian.  Simplifying things in a way that would see you get the same benefit but without the ongoing stream of payments would make you forget about the important role of government in your life.

Tax reform and lower income support models that don’t require multiple cheques during the year are not on the cards.

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It’s all about the product: Putting the ‘development’ back in economic development

I was in a meeting this week where we were having a good conversation about how to revive a local economy.   We need more people.  Check.  We need to better promote ourselves.  Check.  We need to support startup companies.  Check.

My only contribution to the discussion was to remind the room that we actually need a ‘product’ to sell, too.  In fact, product development should be the core of our economic development strategy – unless, as I have said before, you already have an amazing product or products to sell.  In that case (rare) get out there and sell.  For the rest of you, put more thought into what you are selling.

As another reminder, I don’t believe that product development has to be the 1970s style champion development approach.  In that world you protected industries with high tariffs and large subsidies.  That is a ‘product’ but it has turned out to be not a particularly successful model in the long run.

Although, as an aside, this is what Andrew Carnegie argued about the steel industry in its infancy in the United States.  He said the British steel companies could always dump cheap steel on the U.S. market but shouldn’t we build a local steel industry in the U.S.?  This argument was made by many of the Robber Barons and they, indeed, did build local champions in transportation, steel, etc.  protected by government policy.  Would the U.S. have been better off if those industries were not protected in the early years?  You can think about that.

So what is product development circa 2019?  It still involves communities figuring out what they are good at.

Post-secondary education is a ‘product’.  If you attract a thousand more students, you boost provincial GDP by $25 million/year and support 300 jobs across the economy.  Plus you boost your talent pipeline for the future.  Win-win, right?   Well, have a look at the enrollment numbers at our universities.

Product development is blueberries, maple syrup and other natural resources.  Do we have a resource?  Can it be developed profitably?  What government policies could support this effort (assuming there is a strong ROI on the effort)?

If you have a little cluster of insurance firms (e.g. Greater Moncton), product development is asking those firms what kinds of initiatives would help that cluster grow?  Does it need more workers?  Would university-based research help strengthen the cluster? Are there gaps in the supply chain that could be developed here?  Are there government policies that hinder growth?

If you have a university-based research centre that is really good at something, that can be part of product development.

On and on.  People always ask me should we have one or two big sectors that we focus on.  My answer is no.  If you have some big opportunity that could be transformational (think Alberta oil sands circa the mid to late 1990s), sure go after it.  But you can cross home plate with small ball the same as with the big, booming home run. A bunt single, stolen base, passed ball and sac fly still gets you a run.

The key is ROI.  If you can spend a buck and make $10, why not?  Why only focus on the opportunities that cost $1,000 with the potential to make $10,000?  If it takes little effort to bring 100 immigrant farmers to New Brunswick why not do it?  If there are huge challenges to make that happen, then focus elsewhere.

I know for some of you even this kind of soft economic development makes you uncomfortable.  You want to ‘leave it to the market’.  The role of government is to keep taxes low, ease the regulatory burden and then let the market do its job.

I’m a huge fan of capitalism.  I have written many love letters to the the concept of free and open markets as the arbiter of what kind of ketchup wins the war.

But communities can’t just sit back and wait.  They need to define what they want and then work collaboratively – government, industry, education, and other stakeholders – to shape the future.

No large structural subsidies.  No protectionism.  Just efforts to make sure we leverage what we are good at and make sure entrepreneurs and business leaders get to see our story.

Easy-peasy.

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Start with good data: You are not as average (or median) as you think you are

One of the most misunderstood statistics out there is the average or median income stats.  People will look at that data and scratch their heads.  How can the median income only be $31,000 and the average income only $39,141 in New Brunswick (Census)?   That makes no sense.  The problem is in the definition.  That statistic includes everyone that earned any kind of income in 2015.  If you look at average employment income for full time, full year workers the median is actually $46,349 and the average is $54,011.

The same holds for household or family income.  The median total income of all Census families in 2015 was $72,354.  A lot of folks look at that and say, hey, my household income is higher than that so I am doing better than most.  But, again, consider the data.  A Census family includes every family – from 19 year olds living on their own to 80+ year old widowers.  If you look at couples with children, the median income in 2015 was $98,521.  By now likely over $100,000/year.  Again, for those families with kids trying to pay for hockey, music lessons, trips, the minivan and, maybe, trying to put a little aside, $100,000 may not be a lot but it is much higher than $72,354.

This matters because a lot of government policies revolve around this type of income statistic.  Take the previous government’s free college and university tuition program.  It only kicks in if you have a gross family income of $60,000 or less. I was told the idea was the half the households in New Brunswick would be eligible.

When I pointed out the above statistic, I was met with consternation.  Apparently no one told the politicians that the average household/family income among those with children – at least the couple families – the actual targets for such a program – was closer to $100,000 per year.

Now, I’m not questioning the cut-off (at least not in this post).  But I am questioning the vision that half of your households will be eligible for the free tuition because this is only true if you roll in grampy and grammy, the intransigent bachelors and the spinsters.

Among those couple families with children, only 20% earn less than $60,000 per year (median income).

Let’s try and make sure when we are shaping important public policy that we are using the right data.

For example, we are fixated now on making sure we retain immigrants (which we should be, to a point).  We are tracking medicare numbers and trying to figure out how best to determine who is leaving when we have a pretty good data point sitting out that that has been used for decades.  It’s called net interprovincial migration.  Sure it doesn’t separate out immigrants but if we are losing folks – immigrants or locals – what’s the real difference?  In the past two years New Brunswick’s net interprovincial migration (combined) has been positive.  That’s right, more moving in that out on a net basis.

At least for the past couple of years there isn’t the mass exodus predicted by some.

If you want good policy, start with good data.

 

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Super Mario’s world: From entrepreneurial risk to reward

In his soul, Mario Thériault is an artist. He started out as a poet but that doesn’t pay the bills.  In another time he might have been a revolutionary but instead he turned his creativity to the marketing and communications sector.  He made a good living as a mad man but found his way into the political realm when his brother, Camille, took a run at the leadership of the Liberal party and became Premier.   After a short stint as a political guy, Mario started ShiftCentral in 2000.  Fast forward 19 years and ShiftCentral was just sold to an outfit in Los Angeles.

Politics runs deep in the Thériault family.  Mario’s father, Norbert, was a top provincial government cabinet minister and lieutenant of LJR in the 1960s and ultimately was appointed to the Canadian Senate. I heard great stories of Norbert staring down business tycoons in an era of big and important changes in this province. In his 80s, he told me the key to his longevity was eating fish.  In his youth they would eat it for breakfast, lunch and dinner.

Entrepreneurship runs deep in the Thériault family, too.  As I recall, several of the clan owned their own businesses.

There are basically two kinds of entrepreneurs.  For some, it is all about the big idea.  They are working for another firm or hacking in their basement and they come up with a big idea.  They take the idea and turn it into a business.  The second kind is the pure entrepreneur.  It doesn’t matter what the idea is, they have the soul of an entrepreneur – they don’t like working for someone else. They enjoy taking on risk.  They are tenacious and determined.  Mario is the second kind of entrepreneur.  It really didn’t matter the business – I always said he could be manufacturing furniture or chocolates – for him it was about building something of value.

I got to know Mario when he recruited me in the late 1990s to come and work for him.  I only found out later he had no way to guarantee my salary.  In its first year the firm had burned up virtually all of the seed money he and his partners had put in and they were now running on fumes.  I spent nearly six good years helping Mario build the business into a profitable shop with an expanding client base in Canada and the United States.

The original idea – to provide high value professional services to small businesses – died quickly when Mario realized small businesses had no money.  He quickly pivoted to a new vision.

It was, and is, a neat idea.  At the time ShiftCentral was founded there were a lot of new Web-based tools emerging help with searching content.  In fact, the late 1990s, early 2000s was the era when that came of age.  We would attend conferences with seminars covering topics such as semantic searching and how to best search the vast amount of unindexed content.  But Mario’s insight was that busy organizations didn’t want their staff spending hours scrolling through content for the nuggets of relevancy.   ShiftCentral would have a human do that for them. Instead of a bank or law firm having hundreds of staff spending 10 hours a week surfing the Web, they would get relevant content served up to them on a daily basis.  Kind of like a smarter version of media monitoring.

At the time many people thought this was a stupid idea.  But, stupid or not, Mario built a business around it – growing to more than 30 staff with clients across North America and beyond.

There were several times early on when ShiftCentral nearly went under.  Mario pleaded with the bank to extend credit.  He cashed his RRSPs. He made late night calls to hustle emergency angel funding.  I have no idea how many weeks he went without paying himself.  A lot of people like to complain about entrepreneurs – but Mario is the example – the entrepreneur gets paid last – after employees and suppliers, if there is anything left over – that is what goes to the owner.

He was tough but also a very good boss.  I learned a lot in those years.

I’m not sure what’s next for Mario.  Likely a new big idea.  He has been involved on a variety of community boards and initiatives so I expect he will be in that realm as well.

We need more Marios.  The pure entrepreneur looking to build something of value. Not just a lifestyle business owner looking to generate a comfortable income.  People who want to leave their mark.

I’ve been thinking a lot lately about self-discipline.  What motivates people to get off the couch and leave the NetFlix and Cheetos behind?  For most people these days it’s easy to live a life of leisure.  But some people want more.

And it’s those people that move our society ahead.  They are the ones that pursue the entrepreneurial dream.  They are the ones that tackle the big challenges.  They are the ones that make the world a better place.

Congrats to Mario and his team.  I hope the new tie up with the LA-based firm leads to more growth here.   New Brunswick’s future economic growth will depend on its entrepreneurs developing export markets and then integrating into global supply chains.

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Do you have the most livable city? You will thrive.

I know, king of statistics and all that jazz.  But this one matters.  A lot.

We need to attract more people to New Brunswick but the best data source on who is coming and staying, the Census, doesn’t paint a good picture.  It is important to point out that the Census was taken in 2016 and we have had a fairly strong increase in the inward flow of immigrants since.

The Census is the best source on attraction and retention because it shows the number of people who were living in New Brunswick at the time of the Census who lived in another province five years previous.  There is no estimation.  No trying to track immigrants through medicare cards.  It shows the number in 2016 that did not live in the province in 2011.  The truest measure of attracting people (it’s not the best measure of the net change in population via interprovincial migration as it doesn’t consider those moving out).

The figure below shows the number (population aged 5+) living in New Brunswick in 2016 who lived outside the province in 2011.  It also shows the same figure for 2011 and for 2006.  In a nutshell we are hardly attracting any more now than we were a decade ago.  We have more immigrants but that is offset by a decline in interprovincial migrants.

This is not tenable.  We will need to grow the population of younger people in this province and it will require a big boost in the number moving in.  If we are seeing a decline in the number moving in from other parts of Canada, almost down 7,000 from 2011 to 2016, we will need an even larger boost from those moving in from around the world.  There are lots of folks looking to come to Canada.  We need our share.

But we also need to focus more on how to keep them here.  BTW, this is not inconsistent with my view that we shouldn’t be obsessed with retention.  Some immigrants will leave – for many different reasons – they have less holding them here than those born here, with family and roots here.

But to better retain immigrants we need to:

Do a better job attracting those with the skills and interests to work the jobs on offer (or take on available entrepreneurial opportunities).

Do a better job of building and supporting ethnocultural communities.

Do a better job of ensuring we have the right mix of housing.  Developers are building as if the demographics aren’t changing right in front of them.

Do a better job of encouraging immigrants to engage with social organizations, churches and other entities to help them put down roots.

Do a better job of being an excellent place to live.

The last point is a catchall but and important one.  Those moving here – from elsewhere in Canada or from around the world – have moved at least once.  They can do it again.  City and town halls need to make livability even more of a focus – yes the plumbing of the city needs to work – garbage removal, snow removal, public safety, green spaces – but these are just table stakes.

We need to think about what would be compelling reasons for people to stay?  What would they brag about when talking about their city to friends and family back home?  That the garbage was picked up?

I went to the antique car event in downtown Moncton last night.  There had to be 25,000 or more people squeezed into the downtown.  There were two live concerts, one at each end of of the event.  Food trucks.  Kiosks.  The place was just throbbing with noise and energy.  And as I walked around I saw a lot of immigrants in the crowd.

We need to foster spaces for interaction – the new and the old, the old and the young.  From neighbourhood meet and greet picnics to massive festivals.  I would recommend communities large and small host many of these gatherings – one every couple of weeks or so.  They don’t have to be expensive – just find some innovative such as Saint John’s Moonlight Bazaar.  Such a simple idea but something people will remember and look forward to.  Bring people together.  They will laugh.  They will talk.  Collisions will happen.  Good things will happen.

And figure out winter.  We can’t ignore the fact we are not southern California.  And we can’t ignore the fact that most people coming here from abroad have never even seen snow.   Assuming they will hunker down and survive – is not a particularly inspiring vision.

The Brazilian community in Moncton wants to organize group events in the fall to teach people how to ice skate.  Giddy up.  I would recommend finding very specific ways to nudge newcomers to get out in the snow – skate, slide, ski, snowshoe, ice fish.  Bundle up!  Many will end up liking it.  And they will talk about it with friends and family back home.

As shown in the chart, we will continue to attract lots of folks from elsewhere in Canada.  We should focus on them too.  Many of the same rules apply.

 

 

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It’s time for a charm offensive. Calling Terry O’Reilly, Part 2

It’s not like we haven’t had disagreement on public policy in New Brunswick over the past 150+ years.

In Richard Wilbur’s annual review of the New Brunswick between 1960 and 2006, he uses the word ‘protest’ 115 times or an average of more than one use of the word every three pages.

There were protests in the 1960s against municipal tax reform (deja vu, anyone?).  In 1967, three schools were burned in protest “over delays in welfare cheques” and a government wharf was burned by local fishermen confirming my long held suspicion that New Brunswickers are the nicest folks you will ever meet, until we aren’t.  If you hurt our feelings, watch out.

In 1969, we had this little incident in Fredericton:
“five hundred men, mostly employees of the Irving-owned Saint John Shipbuilding and Dry Dock Company, wrote another chapter in New Brunswick’s colourful and often stormy political history. Their rowdy demonstration, ostensibly to protest increases in motor vehicle registration fees, forced the House Speaker to call in the RCMP to clear the gallery – an unprecedented action. The angry, and in some cases drunken, mob dispersed, but not until they had ripped one of the huge Legislature doors off its hinges.”

There were significant protests and vandalism against the Mactaquac dam and head pond.  A lot of folks were opposed to the development of a nuclear power facility.  There were almost constant public sector strikes and actions during the early years of former Premier Frank McKenna.

Despite this, I think in the past few years something has fundamentally changed in the public discourse.  Anger and frustration aside, there were arguments to be made for and against the big ideas.  Now, you are “either with us or against us”.

I heard it again this week on municipal reform.  If we want to change people’s minds on this issue, we need to make strong arguments and then get out there and sell, sell, sell.  This is a democracy.  But I hear many leaders on this issue just dismissing those who disagree with them, basically, as idiots.

Now you tell me.  If you want to change someone’s mind, do you think you will be successful by calling them an idiot?

There are people in this province that don’t understand why we need more immigrants.  There are those that are deeply concerned about global warming and others who aren’t.  There are those who would like to see oil and gas development in the province and those stridently opposed.  There are those who want municipal reform to ensure fairness and stronger local government, and there are those who couldn’t be bothered.  There are those that want to turn inward and ‘take care of our own’ and those who want New Brunswick to be even more globally focused.  Social issues, bilingualism – you pick any big and important idea out there right now and the strategy seems to be to dismiss opponents as stupid.

My recommendation to the advocates – on any side of issues – is to get back to the subtle art of persuasion.  As I have said before, we need more Terry O’Reilly (of Under the Influence fame) and less of this stridency.  Even if you are right – on whatever issue – I doubt you will get much traction.  No matter how shrill you get – people will just tune out.

Let’s have a charm offensive.

Sure, your case has to be based on facts and good arguments – but it is clear that isn’t enough.

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Bulletproofing your economic development organization

I have worked with over 60+ economic development organizations over the past decade and I would say the majority of them have faced serious questions about why they exist and if they are adding any value – if they are worth the tax dollars invested.  Many spend an inordinate amount of time justifying their value to funding partners, they always have the Sword of Damocles hanging over their heads.

And they ask me, directly or obtusely, what to do.

I don’t have a magic wand.  There will always be people that question the value of spending on economic development either on ideological grounds (although this is usually not well thought out) or on an inability to connect the dots between the spending and results.

I do have some advice, for what it’s worth, to proffer.

One, always remember you have shareholders and shareholders are normally not particularly concerned with what you do, they are concerned with outcomes.  If they invest $1 million and they get back $2 million they don’t care if you stood on your head and spit nickels.  The shareholder wants an ROI.  A lot of economic development organizations think because they have a board, with (ahem) business leaders on it, that they don’t have to worry about the ones writing the cheque.  They do.  They, in fact, are the ones that matter.  It is not much different if you work for Town Hall or the Government of Canada.  Always think about your shareholder and what they are looking for – and it is never (almost never) busyness or process.  They are focused on outcomes.

Two, defining outcomes is tricky but necessary.  There are normally many organizations involved directly and indirectly in successful economic development.  The best economic development organizations these days are integrators – ensuring the system is strong and pulling in the same direction.

You have heard about LIPs (Local Immigration Partnerships)?  They were set up because there ended up being many – in some cases dozens – of organization involved in immigrant attraction and retention and, in many communities they almost never talked to each other.  The LIPs were set up to ensure some coordination and alignment across the ecosystem and that is exactly how economic development becomes more effective.  If you have a great sales team and no product you won’t be successful.  If you have shiny new office buildings but no people to work in them you will fail.  If you have a very strong provincial economic development team but are weak in local communities, you will struggle.

The outcomes always relate to the economy.  You can throw all your processes and activities out the window.  You need to show tangible economic outcomes and, even more important, show your role in their achievement.

For the economic development agency, aligning and catalyzing various parts of the ecosystem just might be your #1 role.

We didn’t double the number of post-secondary students enrolled in programs needed for the local economy, but we shone a light and engaged our academic partners.

We didn’t triple the number of immigrants or address the lack of rental housing – but we engaged our partners.

We didn’t double public investment in R&D related to our growth sectors, but we made the case.

Again, I can’t stress enough, when it comes to economic development you are only as strong as your weakest link.  It’s not enough to plead that your part of the chain is strong.

Three, arrogance doesn’t work.  I’ve seen this many times.  When questioned, economic development agencies respond with arrogance.  How dare you question my organization?  I have dedicated and hard working staff.  We are committed.  Again, see point #1 above.  Usually, it’s not personal – up to the point you make it personal.  Then, good luck.

Four, economic development is still about the value proposition.  I am amazed at how many heads of econ. dev. organizations ignore or downplay this fundamental issue.  They will say “it’s not my business”, I’m in the job of selling what I have to convince businesses to invest.

This is fundamental.

You Are Not A Sales Agency.

You Are Not A Small Business Support Agency.

You Are Not A Marketing Shop.

You are an economic development organization.  If the top barrier to fostering economic development is a lack of real estate, you are in the real estate business.  If the top barrier is a lack of people, you are in the people business.  If the top barrier is taxation, regulation, policies, timeliness of decision making – you are in the good policy development business.  Again, see point #1 above.

Value proposition is fundamental.  If you see yourself as a sales organization – you are destined to either fail or underperform – unless you happen to be working for Guelph or some place that basically can’t lose.  Unfortunately, for most economic development agencies that I work with, they don’t have that luxury.

In fairness, however, the bottom line is that economic development agencies should not spend half their time justifying their existence.  The ‘shareholder’ should be involved in the development of the plan, help establish ongoing metrics and then give the agency a runway to achieve results.  Normally that should be at least 3 years.  Again, this doesn’t mean hands-off.  There may need to be course correction after six months but it does mean the threat of funding cuts or some other punitive measure should not always be the elephant in the room.

Finally, I can’t end without talking about the importance of strong relationships.  If there is one thing I have learned over the years it is that it almost always boils down to relationships.  Economic development organizations need to be constantly building and strengthening relationships – internal and external.  If they don’t like you – clients, partners or funders – it will be very hard to get the results you want.

If there is one common theme among successful economic development agencies it is that they tend to be well liked by mayors, premiers, local business leaders, partner organizations, etc.  For those that are struggling, usually the relationships are frayed.  I realize this is somewhat a “which came first, the chicken or the egg?” problem but it nevertheless matters a great deal.

I’m not saying that relationships are all that matters.  Taking the mayor out on your boat and plying her with lobster will not cover up for a weak organization. But a crackerjack organization with very weak relationships will still be unstable and will be hobbled in its efforts to achieve results.

 

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Albert County: The spark that started a 170 year global economic renaissance?

There is a fascinating story in the Times & Transcript this weekend about Albert County and its role as the “birthplace of the petroleum industry”.  He is making his pitch and getting traction.  The Petroleum History Institute is “making a pilgrimage to what they consider the birth place of the industry” next week.   In 1846 an Albert County entrepreneur and innovator developed a method that turned Albertite into kerosene for lamp oil with a byproduct that was gasoline.  It replaced whale oil – the use of which had led to the near-extinction of whales.

Not mentioned in the article was the Albert County gas which powered the Moncton economy for a generation more than a 100 years ago.  In fact, I read one of the guys behind the oil and gas industry in Albert County packed up and went down to be part of the original U.S. oil and gas industry in Pennsylvania.

So it all tracks back to Albert County.  The spark that ushered in the petroleum age.  Cars, air travel, cheap electricity to drive global economic growth and prosperity.

Of course, the folks from the Petroleum History Institute may want to keep their heads down when they visit the place these days.  Oil and gas are not particularly appreciated words these days in the birthplace of petroleum.

I don’t know what I like most about this story.  Certainly, reading a positive story about petroleum these days is a miracle in itself.  My Twitter feed was filled with advertisements for the oil pipeline expansion announced last week but the word ‘oil’ was never mentioned.  The pipeline, you see, is going to get “our resources to market”.   I guess we will pump 2x4s or soybeans through that new pipe.

Of course it’s hard to be too critical of politicians.  Words these days can be both very cheap or very expensive.  Anyone that disagrees with someone else is a Nazi or a racist or a bigot – words that get tossed around with ease.

I guess the PMs marketing gurus think that people with read the word ‘resources’ and think happy thoughts.

I guess my real point is a recurring theme on these pages.  The loss of civilized debate.  There was a time when people advocating for rigorous plans to address climate change would focus on trying to convince those on the fence of the merits of the effort.  Now, anyone raising a question is an idiot.

Look at the offshore oil and gas industry in Newfoundland and Labrador.  I was over there last week and I asked people in the hotel, in the coffee shop and the taxi  what they thought of the industry – overwhelming support, even excitement about the possibility of a big expansion of the industry. Try that here. Now before you retort that fracking has received a frosty reception in Newfoundland as well, I will preempt you by saying this is exactly my point.

When it comes to the biggest policy issues of our time: climate change, immigration, mining, oil and gas development, globalization, economic fairness, the fiscal sustainability of public services, whatever – we need to get Don Draper, et. al. in the room.  We need to get back to civilized debate, the back and forth that is needed in democracies.

People that are opposed to you are not the enemy.  This is not the grand arena (note the reference Serenity geeks), this isn’t a struggle of good versus evil.

If you ever meet a real Nazi, you will know and you will regret having called lesser people by that name.

I’m up for the debate.  I think we will need oil and gas until at least mid-Century and I think Canada should supply its share of global markets.  I think if you have your own minerals and oil/gas resources, and you can develop them safely – relative to global best practices, you should.  Importing them doesn’t help the planet.

I also think we need a robust response to climate change.  We should use some of the economic dividend from ‘resource’ development to significantly reduce our carbon footprint, and, despite the maligning of Sheer last week, we should join with other countries to link the global effort to reduce carbon emissions to international trade and investment flows.  Why not?   I realize it will be tricky but I wouldn’t rule it out.  Just boycotting oil and gas to feel good is not the solution.  A coordinated plan is.

I think we need a whole lot more immigrants.  I realize there are those that are uncomfortable.  They, at least mostly, are not the enemy.  They need to be part of a healthy debate with facts.

I could be wrong.  Maybe in the world today the best way to get things done is by alienating everyone that doesn’t think like you do.  Maybe making enemies and drawing the line “you are either with me or against me” is the new norm.

It’s not good in a democracy.  That attitude is better aligned with fascism.

 

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Will Atlantic Canada finally become a hotbed for IT?

I still remember a speech given by former PM Jean Chrétien in the mid 1990s talking about the promise of the information technology (IT) sector.  He said that unlike manufacturing or transportation or even other services that are based on population density, the IT industry could be done ‘anywhere’.  It would help level the playing field for economic development across Canada.  The smallest urban centres could now compete with the largest.  It was a brave new world (I am paraphrasing).

After the PM’s speech, as I have written multiple times before, total IT employment in Canada actually concentrated more in the largest urban centres. Between 2001 and 2016, the Toronto CMA increased its share of IT workers from 28% to 29%, Montreal from 14% to 15% and Vancouver from 8% to 9%.   Ottawa, interestingly, saw its share decline sharply from 100 out of every 1,000 IT workers across Canada in 2011 to 73 per 1,000 in 2016, a relative decline of 27%.

The point, made by many IT experts then and now, is that while IT work can be done anywhere, like so many industries, it tends to concentrate – or cluster – in certain areas that have a strong value proposition: talent pipeline, access to risk capital, access to large potential clients (not requiring a flight and long cab ride), etc.

So when I read this week that Atlantic Canada was ranked by Startup Genome as one of the top locations in North America for startups, I get excited.  Do we now have the value proposition to fulfill the promise of the IT industry?

The data suggests that for the most part the IT industry has not lived up to the promise for smaller regions, particularly in New Brunswick where, real ICT GDP growth from 1997 to 2018 was the slowest among the 10 provinces in Canada.

Look at the number of IT firms* by province, adjusted for population size.  NB has 34 IT firms per 100,000 population compared to 100 per 100,000 across Canada. If you look at firms by employment size, NB has fewer across each employment range, although interestingly the closest gap is in the 100+ range.  New Brunswick has 11 IT firms with at least 100 workers. But it is clear New Brunswick is not churning out nearly as many small IT firms and there are not enough scaling into the 10, 20, 50+ range of employment.

Now, I always get push back when I focus on GDP, firms or employment.  The real measure, I am told, is export revenue.  Is the region’s IT sector generating solid export revenue (as opposed to serving local markets).  Well, the export data shows a fairly good picture for NB, NS and PEI compared to Manitoba and Saskatchewan but overall the picture is not as strong.  Over the 2013-2015 timeframe (the most recent we have), NB IT firms generated an average of $317 in export revenue on a per capita basis which was less than half that in Quebec, Ontario and BC and lower than Alberta.

International and interprovincial export revenue, IT commodities**

So, if we are indeed an excellent place for start-ups and scale-ups, let’s fulfill the promise.   Let’s sell this value proposition to the world.  Let’s bring in world class entrepreneurs to build their businesses here.  Let’s use this important sector as a driver of economic growth.

If the IT industry (startups) is really poised for growth, we should start to see an increase in small IT firms relative to other provinces and right now, we aren’t.

*Firms in NAICS 511211 – Software publishers (except video game publishers) 511212 – Video game publishers 518210 – Data processing, hosting, and related services 541514 – Computer systems design and related services (except video game design and development) 541515 – Video game design and development services.  Source: 2018 Business Counts. Statistics Canada.
**Includes: General purpose software [MPS511200], Fixed Internet access services [MPS517004], Data processing, hosting, and related services [MPS518000], Subscriptions for online content [MPS519001], Internet advertising [MPS519002], Custom software design and development services [MPS541501], Computer systems design and related services (except software development) [MPS541503].  Source: interprovincial and international exports by commodity, 2015, Statistics Canada.
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You want to retain population? Restrict immigration. Warning, this will come with a cost.

There is a lot of focus these days on immigrant retention.  We have a new source of data, Medicare cards, to help us track the flow of new immigrant populations within Canada.

In fact, population retention – not just immigrants – is the real goal.  If you retained all new immigrants but saw a big spike in those born-in-Canada leaving your province or city it would kind of defeat the purpose of attracting newcomers in the first place.

And we have a good data source, and timely, on interprovincial migration.  It comes out every year and estimates how the population changed based on net interprovincial migration (the difference between those moving in and out).  This, I would argue, is a key statistic on retention even though we don’t know for sure the breakdown of immigrants and non-immigrants in the flow.

What we do know for sure is that most areas that have witnessed a large increase in immigration have also seen an increase in their outward migration rates.  Please note the data below is based on interprovincial migration, not intraprovincial migration which is also an important statistic but for this analysis we are worried about people leaving the province, not the city.

Look at Charlottetown and Fredericton.   Two urban areas with significant increases in immigration in recent years (Charlottetown the highest rate in Canada, Fredericton the highest rate in New Brunswick).  However, at the same time they both witnessed large increases in outward flows through net interprovincial migration. Charlottetown lost an average of 317 per year (net) over three years and 424 per year (net) over five years. Fredericton lost 498 per year over three years and 608 per year over five years. The chart shows the rate per 10,000 to allow for comparison.

So, the wrong takeaway from this would be that we need to restrict immigration to curb outflow.  The right takeaway is that when newcomers come there will always be some that leave for a wide variety of reasons and we can’t use that as an excuse to curb immigration.  We need to have a robust retention strategy for immigrants (which starts with better targeting those with the best potential for retention in the first place) but we can’t retain them all.

Both Charlottetown and Fredericton have strong population growth in recent years in large part as a result of immigration so they are retaining a lot (see below).

And for those that are worried about the impact on outward migrants on the rest of Canada, don’t fret.  All of the outward migration from Atlantic Canada is basically a rounding error when it comes to the three large urban centres (presumably the destination of many of Atlantic Canada’s outbound migrants).

Campbellton, Miramichi, Bathurst – all have positive net interprovincial migration in the past three years.  But this is not necessarily good, very few are leaving and very few are coming.  Edmundston’s three year average annual net interprovincial migration is -14 (actual number, not the rate).   On a regional population of over 24,000, net interprovincial migration of 14 means there isn’t much there.  Now the good news for Edmundston particularly is that its population ticked up in 2018 slightly compared to many smaller urbans that are losing population.   It seems to be attracting more from elsewhere in New Brunswick and it does attract a few immigrants each year.

The gold standard is Halifax which has seen an increase in immigration and has a positive net interprovincial migration rate.

So don’t ignore interprovincial migration. It does matter.  Greater Moncton’s very low negative net interprovincial migration rate is interesting given it has seen a steep increase in immigration.  The chart below shows the relationship between net interprovincial migration and immigration.  Charlottetown has lost 16 per year over the past three years (net) to interprovincial migration per 100 new immigrants attracted (please remember these interprovincial migrants are not necessarily immigrants).  Fredericton has the second highest rate of lost population to interprovincial migration, expressed this way, but again, look at its immigration rate.  It’s high.  The trick is to boost immigration and retain population (limited net interprovincial migration).  That is hard but Halifax has done well, Moncton well too -although it’s immigration rate will likely require a boost if it is to continue growth in the coming years.  Saint John’s outward migration rate is better than Charlottetown and Fredericton but likely because it has attracted fewer immigrants to lose.

Ultimately, what are the fastest growing urban centres in Atlantic Canada?  For the most part, those with the biggest increase in immigration.  You can fret about the immigrants that have left Charlottetown or you can celebrate the fact the urban centre has the fastest population growth in all of Canada, among urban centres with a minimum 25,000 population.

So, what are we to deduce from all this data?  You can’t make an omelette without breaking a few eggs.  We need a lot more immigrants in this region. Some will leave.  Let’s put in place world class retention efforts.  Let’s embrace our new neighbours with a great big bear hug (except certain cultures).  But let’s not use the fact we lose some to the large urban centres as a reason to limit immigration.

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