ICYMI: My BTW on TFW not quite LOL

April 23rd, 2014

I have received several emails about this issue regarding the Saskatchewan waitresses that were turfed and replaced by temporary foreign workers (TFWs).    On the CBC this morning a professor was talking about how many of the 1,000+ comments to the story were starting to sound a lot like xenophobia.

Look, it’s pretty simple.  If there are qualified Canadians willing to do the job and will stick with it, etc. they should be hired in advance of TFWs.   If employers are violating the rules of the TFW program, it should be addressed but I would say there are many cases where it is not that cut and dried.   A number of employers I have talked to that have felt they have needed to use the TFW program have cited problems like ‘lack of motivation’ among the local workforce.  They will hire people, get very little work out of them and watch them quit after only a few weeks or months.

Of course there are New Brunswickers that are qualified to work retail and assembly line manufacturing but they don’t want to work those jobs.   I’m not sure how else to say this.  If the feds tighten the criteria even further around the TFW program, it will hurt these businesses.   I guess we can cavalierly say we don’t want those jobs anyway but I’m not convinced that is the right attitude.  For generations, immigrants (and I know the distinction with TFWs) have come here to work in front line service, retail and assembly line jobs across Canada (not as much here in recent decades).   For many of them, that is a big improvement over their past life.

Anyway, not to rehash my argument on this.  It’s on these pages in black and white.  I think we need a substantial infusion of new immigrants – to foster economic growth and renew the population around New Brunswick.  For me this imperative is not at odds with efforts to get New Brunswickers working.

For those who worry about xenophobia, I wouldn’t spend too much time worrying.  Canada is an immigrant nation and it is a tolerant place.  Sure there will be some friction when cultures collide (i.e. when folks from Albert County interact with folks from Kent County) but in the end that will only make New Brunswick stronger and richer as a place to live.

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Whither manufacturing in New Brunswick?

April 23rd, 2014

From a recent TJ column:

In 1978, according to Statistics Canada’s Labour Force Survey, a total of 156 out of every 1,000 workers in New Brunswick were employed in the manufacturing sector. By 2013, the percentage of the province’s workers employed in manufacturing had been cut in half.   

In just the last decade, the statistics agency’s survey of employers shows a 35 per cent decline in manufacturing employment in New Brunswick.

Wage rates in the industry are stagnant. Between 2007 and 2013, average weekly wages in the manufacturing sector increased by only 1.3 per cent per year compared to 2.4 per cent across the total economy. Food manufacturing witnessed an absolute decline in average weekly wages over the six year period. This means that adjusted for inflation, the average worker in food manufacturing has taken a significant pay cut.

There are several big challenges holding back the manufacturing sector.

One challenge is the relatively low level of labour productivity. Historically, the availability of cheap labour in New Brunswick (relative to the North American labour market) and employment growth-based government incentive programs led to labour-intensive manufacturing firms.  With the increase in global competition, firms had a harder time making a decent profit in New Brunswick. Either they found ways to become more productive through investments in equipment, technology and training or they went out of business.

Last week I had a conversation with a guy who provides equipment to the manufacturing sector and he is quite concerned about the state of the industry. In his opinion, few firms are upgrading their equipment or investing in new technology. For him, the sector is in a holding pattern.

Another challenge is firm size in the manufacturing sector. According to Statistics Canada’s business registry, out of the nearly 1,000 manufacturing establishments across the province, there are only 77 with more than 100 employees. If you remove the forest products and seafood production sector there are only 27 establishments with 100 or more employees.

Only three of the furniture and related manufacturing establishments have more than 100 employees. None of the 29 firms involved in plastics-related manufacturing have more than 100 employees. Of the 52 firms in the printing sector, 47 have fewer than 20 employees and none have more than 50 employees. Twenty-one of the 22 retail bakeries in the province have fewer than 20 employees. It’s pretty hard to imagine these small firms dominating national let alone global markets.

What would it take to see another 15-20 manufacturing firms break out and become globally competitive champions?    Do we need more of our manufacturers to take on external growth capital?  Do we need more mergers and acquisitions? 

It’s not all doom and gloom.

There are some encouraging signs in the forest products manufacturing sector. Employment is starting to rebound. Average weekly wages for both wood product and paper product manufacturing have been increasing well above the manufacturing sector as a whole. With the recent announcement of expansions in the sector, the outlook is quite good.

Employment in the fabricated metal product manufacturing sector is up by nearly 500 workers in the past two years.  Machinery manufacturing exports are up by 50 per cent in the past two years.

Some people think the manufacturing sector in New Brunswick is destined for the scrap heap. I am not in that camp.

Adding value to our natural resources, renewable and non-renewable, should be an area of opportunity. Saskatchewan and Alberta are the only two provinces in Canada to witness a rise in manufacturing employment over the past decade mainly as a result of the value added processing of non-renewable natural resources.

Value added and time sensitive manufacturing for the North American market is showing more potential. The advent of 3D printing opens up a world of mass customization that favours a place like New Brunswick versus the remote factories in Asia.

We need to focus on getting investment flowing back into the manufacturing sector.

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Looking to the PEI bioscience cluster for inspiration

April 23rd, 2014

From a recent TJ column:

If I asked you to name the most important sectors of the Prince Edward Island economy, you would likely mention potato farming and tourism.  While agriculture and Anne of Green Gables continue to be mainstays of the economy, the bioscience sector is rapidly emerging as one of the Island’s most important growth sectors.

I was recently commissioned by the Prince Edward Island BioAlliance to prepare an economic impact analysis of the bioscience cluster. I was quite surprised by the results of the study and it raised some eyebrows among Islanders as well.

There are 37 private sector firms in the cluster along with eight supporting entities including education, research and government organizations. Collectively these firms and organizations generated $188.3 million worth of direct economic output in 2012 and employed nearly 1,000 people.  With indirect and induced employment, the cluster supported over 1,700 jobs across the province in that year.

The PEI bioscience cluster generated nearly $140 million worth of gross domestic product (GDP) on the Island in 2012 making it a more significant contributor to the economy than the seafood products manufacturing and fishing sectors combined. The bioscience sector now generates a similar level of GDP as the accommodation and food services sector – the core of the Island’s tourism industry.

The cluster is also a high wage industry generating an average annual employment income 40 per cent higher than the average for all workers across the Island.  

But what is really interesting is its growth trajectory. Since 2006, private sector revenue among bioscience firms has grown at an average annual rate of 33 per cent compared to only four per cent for the economy has a whole.

The bioscience cluster is now one of the island’s most important export sectors generating $66 million worth of product exports in 2013 up by nearly 150 per cent over the last decade. On a per capita basis, only Manitoba and Ontario generate more biosciences-related product exports than Prince Edward Island and the latter is catching up fast.

Adjusted for the size of the overall labour market, there are more biologists and related scientists on PEI than all other provinces.  For its size, Prince Edward Island has far more animal health technologies, veterinarians and chemists compared to the rest of Canada.

How is it possible that little Prince Edward Island could have fostered 37 private sector bioscience firms and the fastest growing cluster in Canada?

According to Rory Francis, the Executive Director of the PEI BioAlliance, the cluster has grown through hard work and determination. They had a long term plan and strong commitment from all three levels of government. In addition, the cluster leveraged key assets such as the Atlantic Veterinary College.

They knew from the start that if they were to grow the cluster, they would need to attract entrepreneurs, talent and investment from across North America and beyond.

An impressive 14 of the firms are early stage companies whose technologies and management were recruited from outside the province. The cluster has also attracted global firms such as Novartis Animal Health and Sekisui.

In addition, the PEI BioAlliance is a well-funded and resourced organization certainly larger than most, if not all, industry development organizations across the Maritime Provinces.   The BioAlliance is funded by both the public and private sectors and is a model for industry-government cooperative cluster development.

As New Brunswick considers what sectors of its economy have the best potential for growth, it should learn from the example of Prince Edward Island.  

Instead of looking inward for growth and investment, turn the lens outward. Bring in world class talent and attract ambitious entrepreneurs looking for a place to call home.

Instead of having thinly staffed industry lobby groups and stretched government bureaucrats attempting to work together, consider well-funded and staffed private-public sector partnerships as catalysts for cluster development.

Finally, take a long term view but develop measurements to ensure you are progressing towards the goal. There are many examples in New Brunswick of industries that were identified back in the 1990s as having growth potential that was never realized.

Sometimes we need to look far away for inspiration. In the case of the bioscience sector, we only have to look in our backyard or, at least, across the Northumberland Strait.

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I miss selling the soap

April 17th, 2014

I was making a presentation the other night over in Charlottetown to a group of business and government folk and was told there was a senior manager from a big multinational firm in the crowd and they were pitching him on the merits of doing business on PEI.

I sat by him at dinner and got right into the thick of the ‘pitch’.   I have to say it was a lot of fun.  I used to be in the sales business years ago – selling New Brunswick as a location for firms to expand their operations.  It was a pretty good feeling when you pursued a firm and got them to invest in the province.

I’ve told this story before but it is worth a second look.   I was the lead guy in Moncton trying to convince an IT firm to set up here.  The folks in Fredericton called me to say there was no chance they would put an operation in Moncton and that I shouldn’t worry about it.  But we made the case. They set up here (back in the 1990s).    A year or so later I was in a church meeting and a guy gets up and says he is so thankful that he was able to get a job with this same firm and that he wouldn’t have to move to Calgary.   His young daughter had leukemia and was being treated at the IWK and he wanted to stay close to family and friends here in Moncton.

That made it real to me.

Nowadays I spend my days pontificating and trying to sound intelligent.  At the end of the day, what really matters is that our economic development efforts should be providing people the opportunity to stay and build their careers here if they so choose.

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Federal grinchiness and economic growth in New Brunswick

April 14th, 2014

New Brunswick Tory MP John Williamson in Saturday’s TJ:

“MLAs from both provincial parties have approached my office to ease the employer requirements under the temporary foreign workers program, something I will not do”.  He “maintains the program is meant to be lengthy and burdensome, with employers required to pay a decent wage, travel costs and cover health insurance for foreign workers.”

To be honest, I am getting more fatigued by this issue by the day.  A few of us are trying to get politicians to think strategically about the role of immigration to foster population renewal, cultural vibrancy, entrepreneurialism, ambition and economic growth in New Brunswick and the politicians want to recite rote talking points.

Now, lest you want to slay my argument with examples, put away your sword.  I am not talking about individual cases but the principle.  When I talk to a trucking firm in New Brunswick and am told that it is easier to get TFW approval in Toronto than in Moncton for a trucker and therefore the firm will be hiring in Toronto for jobs that could be easily and preferably done out of Moncton, I am concerned.  When I hear the LMO process went from 2-3 weeks to 6-8 months for the exact same job in just a year or two, I am concerned.  When I hear that employers here are told they have to pay a national average wage rate in their sector in order to bring in TFWs and that would put the TFW wages above current employees, I am concerned.

But those are all side shows to the real issue.  The real labour market is starting to tighten – in the urban centres and in rural areas – despite relatively low rates of employment and continued net outward migration.

The federal government’s evolving view seems to be predicated on the view that if they clamp down in New Brunswick on immigrants and TFWs, that will force employers to push up wages or do whatever it takes to get recalcitrant unemployed NBers to go to work.  The issues related to skills, mobility, interest, etc. are not relevant to this view.  You tighten the screws and employers will respond.

That may work – and I stress may – with those employers that base their business only on the local market but for those in traded/export industries, they are likely to just move their investment elsewhere further exacerbating the problems in New Brunswick.

Minister Carr soldiers on saying he is focused on getting NBers the right skills for the jobs and doing better matching.  Good for him but there are ample signals all over the place that things are getting worse and we now hear there are thousands of jobs on the horizon – good paying jobs.  Who knows what will happen?

It would be nice for the federal government to actually take an interest in New Brunswick’s plight.  The fact that it’s economy has performed worse than all other provinces in Canada for six years should have bureaucrats and NB interested politicians in Ottawa reaching for their Sharpies and whiteboards instead of grinning like the Grinch and saying now is the opportunity to force the bums into work.

 

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The Curmudgeon’s Guide to Getting Ahead and related random thoughts

April 13th, 2014

I just finished Charles Murray’s The Curmudgeon’s Guide to Getting Ahead: Dos and Don’ts of Right Behavior, Tough Thinking, Clear Writing, and Living a Good Life.  It’s a short book and actually targeted at 20 somethings just starting out in the world (a fact I didn’t realize when I bought the book).  Murray is an American right-of-centre political and social scientist and his last book, Coming Apart, was a very good read.  It was a data rich commentary on the causes of the widening gap between the rich and poor in the US.

The Curmudgeon’s Guide is his view of how a young person today should start out on their own and has some interesting tips and ideas but I couldn’t help thinking that Murray (71 years old) is actually talking to my generation (40s).   Some of the stuff he talks about I think has actually mutated once or even twice since he was starting out.

The most interesting thing for me, as a Canadian from a small urban area in New Brunswick, is his advice to the middle upper class young people that are reading his book.  They were pampered by their parents, went to all the right schools, worked internships but never grunt work.  The way he describes these kids – as if they had never been in contact with the rest of us.  He recommends they work a part time job in a restaurant or work in a resort as a waiter for a summer.   He wants them to immerse themselves in the lives of the ‘rest of America’.  This is actually a theme coming out of his last book.

For me this is a strange narrative.  I went to all the wrong schools, scrubbed toilets and flipped pizza all the way through university and then climbed my way from a temporary, two-month job at $12/hour working in government to a reasonably successful career where folks pay me a fairly good amount of money to provide my thoughts and ideas on various subjects.

I did have one interesting ‘internship’ that is usually reserved for high rollers. I’m not sure how it happened but I was a page in the Legislative Assembly of New Brunswick in 1991 and the other pages were high rollers.  One is a big time lawyer in Moncton and previously rumoured candidate to take over from Shawn Graham.  I’ll let you figure that one out.

This kind of mashing together rich, middle and poor in New Brunswick (and much of Canada) has definite benefits.  We don’t have the hard and fast class distinctions as in the US.  I went to school with all kinds.  I was kind of poor as a kid (not dirt poor) but I didn’t know it.  My dad always drove a new car and we lived in decent housing.  My kids today all have friends from all ‘classes’ such as that is in Moncton.  This is probably a big reason why we don’t have as much an issue with class distinction and social mobility.

But at the same time I worry there is a tendency to drop expectations to the lowest common denominator.    When a high school brings in a program for the ‘advanced’ kids, it is frowned upon by some.  When we do anything to separate excellence out of the pack, we have this gnawing feeling that we shouldn’t be leaving the rest behind.

But we need some folks to stand out.   To be excellent in business, entrepreneurship, the arts, etc.  We need to be a society where everyone has the chance to pursue their dreams but we can’t resent the folks that end up outperforming everyone else.

There has to be a Canadian way where you can have a good Gini coefficient and have an environment where some folks excel.  If the bookends are a highly stratified society where only a smaller and smaller group get into the top and a completely equal society where everyone waits in bread lines in their single pair of shoes, I think we have to find a middle way.

 

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Cruise control is a better deal in New Brunswick

April 10th, 2014

I’m in Ontario this week.  I have worked on five projects in the last year or so up here.  I’ll have to set up an office….

Anyway, driving mid-day on the 401 for about 90 minutes and I hardly was able to use the car’s cruise control.

Contrast that with the Moncton-Fredericton or Moncton-Saint John highway.  There are many times I set the cruise speed just outside of Moncton and do not touch it again until Fredericton.

Not sure what that says other than cruise control isn’t much use on some of these highways in southern Ontario.   Oh, and it also means those four lane highways in New Brunswick could use a little more traffic.

I think it was the Biz Council’s Susan Holt that recently said NB has the infrastructure for two million people.    That’s probably about right.

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New Brunswick’s GDP growth chimera

April 10th, 2014

I see TD was in Moncton yesterday predicting that New Brunswick’s GDP will increase to 1.5 percent next year after running at 0.5 percent this year.   Later in his speech he talked about how the province’s population will be in decline between here and 2021.

I continue to come back to the fundamental question – maybe the chimera – what level of economic growth does NB need over the next decade and what, if anything, can we do collectively, to influence that rate of growth?

I can’t get anyone to commit to a number.  Is it 2 percent per year?  Three percent? Four?

A decade ago we could at least expect 1.5 to 2 percent real GDP growth in an average year.  Since 2008, it has averaged around one half of one percent.  I contend that New Brunswick’s economy will be highly unstable at a long term growth rate of under one percent.  By this I mean it will be virtually impossible to balance the provincial books, keep a good quality of public services and limit outward migration of workers.   I suspect if anyone actually crunched the numbers we likely need in the range of 2.5 percent per year when all things are factored in.

And this population issue.  How can you have moderate GDP growth with a declining population when 60% or more of your economy is related to household spending?   It seems to me virtually impossible to have strong GDP growth in a declining population environment – unless you are Newfoundland and are pumping massive oil and plowing billions into a tiny economy each year.

We need to get some fundamentals right and then we need to have a long conversation with New Brunswickers.

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Bronze Age corporate tax breaks

April 7th, 2014

I’m reading an entertaining book right now called 1177 BC: The Year Civilization Collapsed.  I had to chuckle this morning when I read about the Egyptian kings around 1,300 BC exempting ships bringing traded goods out of foreign lands from paying taxes.  There are several examples of this written down.

Imagine that.  Corporate tax breaks to incentivize trade and investment over 3,000 years ago.

You can almost see an ancient version of Kevin Lacey from the Canadian Taxpayers’ Federation lobbying the Pharaoh to stop the horrible practice of corporate tax breaks and complaining about the growth in the size of the state.

The more things change, the more they stay the same.

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Cooke-ing with gas: Firm size and ambition

April 3rd, 2014

Long before natural gas started to be used in New Brunswick as an energy source (at least in its current incarnation), my father used the expression “now you are cooking with gas” when he was talking about something gaining momentum.  I asked him recently what he meant by that and he replied it was an old expression he had heard from his father.

It turns out that most folks with a natural gas oven/stove tend to prefer it much more than the electric alternative.  Again, a rarity in New Brunswick, in many places around the world, natural gas is the dominant source of residential energy.

I digress.  I was trying to explain my title to this blog and suggest that Cooke Aquaculture is now “cooking with gas” as it now says global sales are approaching $1 billion per year.  in the finfish aquaculture industry, that makes them a major global player.

I started my column in the TJ this week with this:

I have observed over the years the bigger a firm gets in New Brunswick, the more of a target for criticism it becomes. This is not just a problem in our province, but it does seem to have even greater resonance here.  For the most part, we romanticize small business. The small firms are helmed by altruistic, hard-working, roll-up-the-sleeves entrepreneurial New Brunswickers who live alongside us in our local communities, drive trucks and drink Tim Hortons’ coffee. By contrast, the big firms are headed by rapacious, “one per cent” millionaires always using their power to put it over on the rest of us.

I was on News 91.9 this morning explaining myself.

In fact, I did receive two emails after the publishing of this column suggesting that Cooke was a bully, an abuser of the environment and a purveyor of low wage, low skilled jobs.

I’m not here to defend Cooke’s business practices.   I have been told by folks that should know that the firm is well respected in its industry and has been doing a lot to ensure it limits the impact of its environmental footprint.   But that is not my point.

My point is that New Brunswick’s economy is roughly $28 billion per year (GDP in real terms).   It is not strong enough to support the population here in terms of providing enough jobs nor is it strong enough to generate enough tax revenue to pay for public services and infrastructure.  Therefore, we lose young people every year to outward migration and we rely heavily on the federal government to help pay for public services and infrastructure.

We need to grow the $28 billion.  In a perfect world, we would have an economy large enough to pay for public services without equalization and give young people the opportunity to stay at home and build their careers if they prefer.

The lesson of Cooke is that we need more of them.   If we had 100 more firms bringing in $250 million or so each in export revenue each year that would boost the GDP by roughly 60 percent and we would be living in a different province.

So we need to think about the 100.  Where will they come from? IT firms?  Services?  Natural resources? Manufacturing?  Imports? Home grown?

Small businesses, as I have said ad nauseum,  are critical to the health and vibrancy of local economies but if you want to grow your economy you have to bring more money/investment in and that doesn’t happen by recycling more of the existing business activity.

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