New Brunswick needs more charity

Charity may begin at home but it certainly doesn’t end there. The latest Statistics Canada data on charitable donations is concerning.

I have to start by saying religious institutions account for the bulk of charitable donations in Canada and the data released by Statistics Canada in this table does not show where the donations are going. I raise this because there could be sizable differences in the trend of charitable between religious and non-religious groups. At some point I will try to dig out this data.

But, in general, the trends aren’t good.

As shown in the chart, the percentage of taxfilers making a charitable donation in New Brunswick is down fairly strongly between 2010 and 2017. Only a little less than 18% of taxfilers in the province (or less than one in five) claimed any charitable donation on their tax form in 2017. The trend is downward for all locations in New Brunswick.

If you look at the percentage change in the relative number of taxfilers claiming a charitable deduction the drop is largest in Moncton where there has been a 20% decline. Saint John saw the smallest decline at 11%.

 

Moncton is also at the low end for median charitable donations. Again, the church donation thing may be clouding the data, but in general the median donation in Moncton is substantially below Fredericton and Saint John.

 

The other concern in the data is the drop in the relative share of young people who make charitable donations. In 2017, persons aged 25-34 accounted for only 7% of the total who made charitable donations down from 10% in 2010. Some of this relative decline is related to demographics but this does not account for the full story. Moncton, saw the largest decline in this age group. In 2010, 13 out of every 100 donors was in the 25-34 age group and by 2017 that had declined to only 8 per 100.

 

So how do we compare to the rest of Canada? Are we charitable? The data shows a mixed bag. The table below shows where New Brunswick jurisdictions rank out of 166 CMA/CA and Non-CMA/CA jurisdictions across Canada. Moncton ranks well below average among the 25-34 age group, well above average among the 35-54 age group but average and below average for over 55.

Saint John, interestingly, also ranks very low among the youngest cohort but much higher than Moncton among the 55-64 age group (29th out of 166). Fredericton is better, on average, than either SJ or Moncton but performs slightly worse in the 45-54 age group. The other three small urban areas – Miramichi, Campbellton and Edmundston have very high rates of donorship (relative to other areas in Canada) among the 55 and older age group but among the lowest in Canada at the younger end of the spectrum. Again – some of this is accounted for by demographics – there are fewer young people – but this does not tell the whole picture.

 

The bottom line here is that we are donating less to charitable organizations, the amount we donate is not keeping up with inflation and young people are donating even less than they were before.

For me this is an important issue. I haven’t analyzed the volunteerism rate lately (a cousin to charitable giving) but the last time I looked the numbers were trending downward – among younger NBers as well.

We live in a global age. If you look at the media and entertainment content consumed by the average young New Brunswicker – almost all of it is external to the province. In an era where putting down roots and caring about the local community is more important than ever, we are seeing a greater disconnect – less and less people care deeply about the place they were born.

When I was writing the economic growth plan for the provincial government a few years ago, I put a whole chapter in on encouraging more volunteerism and charitable giving. My logic was simple. We have a wave of people retiring that will likely live another 20-30 years on average and they will have time on their hands – why not find ways to encourage them to volunteer their time to good causes? At the same time, we want Millennials and young NBers to engage in their local community. But the whole chapter was removed I think because it didn’t paint a very rosy picture of charitable/volunteer activity in the province. I was disappointed as there is so much potential to engage NBers in making their province a better place – economically, socially and environmentally.

So what do we do? I think we need to target young people in particular. No one is asking them to become Mother Theresa but if everyone does a little bit – 5 hours a week volunteering, maybe a few hundred dollars a year in donations – we could help address many of the thorny issues.

My own interest lies in economic volunteerism (quelle surprise!). I’d like to see boomers with specific skills – financial, engineering, leadership use these skills in a volunteer role to help a social enterprise, etc. I work with a lot of not-for-profits and many times they can’t afford to pay for these competencies. I’d like to see more retired business leaders volunteering time to help young entrepreneurs. I’d like everyone to volunteer to help ensure newcomers are properly integrated into our communities.

In the end, strong communities are key to successful countries. In Canada, volunteerism/charitable activities has been a third leg of the stool – along with government and the business sector – to ensure we have strong communities.
If we give up and say “who cares about Edmundston? If things get worse, I’ll just move to Kelowna.” I think we are hurting not only our communities but also ourselves. If we care more, we will get better outcomes.

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Should Toronto be worried about retention?

The conversation about ‘retention’ – whether referring to immigrants or those born in Canada – is virtually the first thing that comes up when trying to have a conversation about efforts to expand the number of people in the New Brunswick labour market.  Why do we need immigrants?  We should just keep people already here from moving.

The reality is that labour mobility is as Canadiana as Tim Horton’s and Don Cherry.  We have a country where it is relatively easy to be mobile.  Some economists have said that the migration of people within Canada is one of its strengths and, in fact, some economists have advocated for public policies to incentivize even higher rates of interprovincial mobility.

Sparsely populated places like New Brunswick with small urban centres are even more susceptible to this issue.  Lots of young people want to see the world.  Lots do not want to work the jobs on offer in New Brunswick.

We need to stop wringing hands over this.  Look at the data for Toronto.  The orange bar shows the net intraprovincial migration numbers for the Toronto CMA (that is the city and all the surrounding municipalities such as Brampton, Vaughan and Mississauga).  Every year it is negative – more people move out than in (interprovincially) by the tens of thousands.  Is there widespread hand wringing in Toronto?  No.  Look at the immigration numbers.  For every one lost through intraprovincial migration they get three back from immigration.

That should be our focus too.  For every one out the door to migration, we need to bring in 2-3.

This doesn’t mean that retention doesn’t matter.  It matters a great deal and communities and governments should do a lot to encourage people to stay – but too much obsession with retention leads to fewer immigrants, fewer international students, and distorted incentives to stay in New Brunswick.

That is not the solution.

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The early 70s economic boomlet in New Brunswick

The early to mid 1970s might have been know for social, economic and geopolitical upheaval around the world as well as bell bottoms, wide ties and Watergate but there seems to have been something interesting going on in New Brunswick.

Between 1971 and 1976 GDP per capita increased more quickly than any other five year period in 90 years.

The population grew by more than 60,000 or 10 percent between 1970 and 1076.

There was a spike in immigrants – just a short lived boost from 1972 to 1976 – then the numbers mostly went back to the traditional lows.

Did the draft dodgers lead to NB’s mini boom?  Maybe attracting disgruntled Yanks is the right strategy?  What else was going on at the time?

According to Richard Wilbur’s New Brunswick: An Annual Review, 1960-2006 (essential reading if you want a quick survey of NB history over that period), the early 70s was a period of economic turbulence in New Brunswick.  The pulp and paper industry was expanding during the period, the port in Saint John and, of course, the infamous Bricklin manufacturing facility started up but the economy in northern NB was struggling.  Public spending expanded too during the period with the province’s first billion-dollar budget in 1975 (combined with a record deficit of $64 million).   There is no indication from his writing that the province was booming but the Stats Can data indicates otherwise.

Anyway, I was in short pants during that period so I kind of missed NB’s early to mid 1970s economic boomlet.

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New Brunswick’s population conundrum in six charts

The following is a summary of New Brunswick’s population conundrum in six charts.

New Brunswick’s population increased for the most part every year between 1926 and the 1990s.  Lots of young people = lots of young families = lots of children.  But as the chart shows population pretty much flatlined way back in the early 1990s at around 750,000 – it is up only marginally since.

But New Brunswickers were familiar with ‘goin’ down the road’. They knew that at least some of their kids would leave because of high unemployment and a perceived lack of opportunity at home. The chart shows the net interprovincial migration from New Brunswick in five year increments.  The last time we had a positive migration by this measure (more moving in that out from other provinces) was in the early 1970s.

The population essentially stopped growing in the 1990s but it also started to age more rapidly.  The median age went from 23 in the 1970s to around 45 now.  As shown in the chart in the early 1970s there were 2.4 births for every death.  Now there are more deaths than births in New Brunswick. 

This aging population has substantial labour market implications.  In the early 1970s there were 4.3 people under the age of 25 for every one person over the age of 60.  In other words there was as substantial surplus of labour that was used to drive economic growth – entrepreneurs set up businesses and national firms moved operations here – and there was still enough of a surplus that led to a outward migration and above average unemployment (although unemployment has always been exaggerated because of seasonal EI).

So what do we do?  While the rest of the country (overall) saw a big increase in immigration in the 1990s right after David Foot’s book predicting a demographic crisis.  New Brunswick pretty much didn’t do anything on the immigration front until the early 2000s.  The 2001 Census found New Brunswick’s population had declined between Census periods for the first time since the Great Depression.   The government set up the Population Growth Secretariat and there was as small uptick in immigration.  Around 2011-2012 companies started to report serious concerns about the lack of workers and then we started to see a big increase in immigration. We are still well below the national immigration rate per 10,000 population but heading in the right direction.

But as a thought experiment think about how many young people under the age of 25 we would need to get back that ratio in the early 1970s – that lead to the rise of a number of new industries in New Brunswick.   If we wanted 4.3 young people for every one  person over the age of 60 we would need an additional 728,000 people under the age of 25.  Crazy, huh?   Even if we wanted to get back to the ratio just in 1997 – we would need another 232,000 people under the age of 25 immediately.

That should put it into perspective for you.  Just to replace retirees and provide workers for a very modest growth in the labour market, we will need to get our immigration levels up to 10,000 per year or higher, IMO (from around 4,000 today).

The last chart is a little more controversial.  Most economists do tie the lack of urbanization in New Brunswick to our economic and population challenges.  From WWII until the early 1970s we ‘urbanized’ at a fairly strong clip.  Then we went backwards and we are still below 50% compared to over 80% nationally.  As I have stated many times this is not because we haven’t emptied our rural areas fast enough – it is because we haven’t grown urban centres fast enough.  Across Canada the number of people living in rural areas has increased since the 1950s.  The difference is that across the country the urban population has risen by something like 18 million. 

There you go, New Brunswick in six charts.

 

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Avoiding the binary decision trap in public policy development

A few days ago I was reading a screed about the evils of the forestry industry.  To the writer cutting down trees was immoral, wiping out animal habitat forever and for what?  Greed and avarice.  The symbolism was stark.  How could New Brunswick morally sanction a forest products industry?

Then, just yesterday, in my Twitter feed, I saw a story about the new use of wood to construct high rise buildings and it was called ‘green building‘.    I did a little more searching and found this story with the title How Wood High-Rises Could Save the Planet.

Which is it, folks?  Cutting trees as an immoral act equivalent to animal genocide or an important tool to move the planet towards sustainability?

It’s kind of interesting.  PEI was initially almost entirely covered with trees (as was most of eastern North America).  The trees were permanently cut down to create agricultural land and now we have a romantic image of the farming sector.  But because New Brunswick didn’t cut down all its trees to make agricultural land (there are interesting reasons for this which I have shared before but have to do with the terrain and soil) we take heat (not for being one of the most forested jurisdictions in North America and Europe) because we cut down between 1% and 2% of the trees each year.

Of course we should have vigorous debates about the amount of old growth forest to set aside.  We should debate how much Crown land to harvest each year and how.  We should have good policies related to silviculture and forest management.  And wildlife habitat is a big part of the equation.

But someone drives by a clear cut and then pens a scathing bit of prose on the evils of the forest industry?    It’s too easy, folks and intellectually lazy.

My fear here is that we are moving into a world where people want the big policy issues of our time to have binary choices.  One right answer.  One wrong answer.  You are either with us or against us.    On the left and the right.

Take the removal of carbon from our economy.   It should be a major policy goal for our society. But those that are too strident against the oil and gas industry (and heavy industry in general) are coming up against a counter-movement that is now becoming equally strident against efforts to address carbon emissions.    Instead of a negotiated, democratic process to address this issue we might end up in a binary decision trap.  We will get either a) a dramatic response to reduce emissions or b) virtually nothing.   I’ll let you decide where we might be today.

You know where binary choices are routine?  In dictatorships.  The guy at the top (and it is almost always a guy) gets to decide.  In democracies we like negotiation.  We like lively debate.  We hope good ideas win over time and bad ideas lose.

Let’s tamp down the rhetoric.  Even if you believe the world will end in 12 years, an ever shrill response is not apt to get you where you want.    My old friend Aldea Landry says in law school they told her “If you have the facts on your side, pound the facts. If you have the law on your side, pound the law.  If neither, pound the table.”

There is a lot of pounding the table these days on a lot of issues.  Democracy works better when we pound away with facts and law.

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Why can’t New Brunswick benefit from the ‘a-marketing’ sector?

When I was a kid my parents used to read me a nursery rhyme that included the phrase “went a-marketing” which I took to mean go buy stuff at a store.  The term has evolved over the decades to mean the business of promoting and selling products or services.

For long time readers of this blog, you will know my frustration about the marketing industry in New Brunswick.  New data does not cheer me up.  Total industry revenue from advertising, public relations and related services in New Brunswick in 2017 was $31.8 million down slightly from 2013 while most provinces witnessed growth over the same period.  In Nova Scotia, industry revenues are up 12% and in Ontario up 26%.

On a per capita basis, New Brunswick has the second lowest revenue from this industry of all 10 provinces.  The standard argument is that we are ‘too small’ and larger firms from away scoop up lucrative NB clients and we can’t compete in export markets.  Well, maybe, but Manitoba, Saskatchewan and Nova Scotia generate substantially more industry revenue and are not much larger than NB.

The GDP contribution is an even more relevant statistic because it points to the economic value from the industry that stays in New Brunswick.  The GDP from advertising, public relations and related services has actually declined over the past decade (real GDP expressed in 2012 dollars) by 22% while rising robustly in most other provinces.

I had coffee last week with a very interesting guy in the marketing and communications business who moved here from half way around the world and brought some of his client work with him.  When you do work in New Brunswick for a client outside the province that is an export activity.  Including both interprovincial and international export revenue, New Brunswick firms did generate about $8 million in 2015 (the most recent year data is available) but adjusted for population size that was dead last in Canada among the provinces.  Look at Nova Scotia – generating almost 4x as much export revenue compared to New Brunswick (per capita).

We have hashed the debate over and over.  The loss of NBTel hollowed out the industry.  Government tourism business contracted outside NB.  Fragmentation in the market.  No interest from economic development organizations.  An industry-led effort to work cooperatively a few years ago fizzled.

But the bottom line is that there are a lot of creative types in New Brunswick – and many, many more – leave to do this kind of work in Ontario and elsewhere.  I suspect that many of them would be just as happy to do that work in New Brunswick.

Maybe it is time to take another look at this sector.   How has Nova Scotia been successful in this area?  Even Newfoundland has double the export revenue.  Why?  Can we import more talent like the guy mentioned above?  If so, is there a way to package up a bunch of small players and sell services cooperatively?

 

 

 

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Economic development: Deeper truths

Sunday morning sermons can be a little bit frustrating for people who actually pay attention.   You will hear a steady stream of counter-intuitive axioms such as “the first shall be last”, “to live you first have to die”, “to be rich you need to be poor”, “to save your life you first have to lose it”, etc.    When confronting my man (or woman) of the cloth these get defined to me as “deeper truths”.  Concepts that require more thinking beyond the superficial.  It’s fairly easy to see how a millionaire is rich.  It’s harder to see how mother Theresa was rich.  But if you grasp the second you are closer, as they say, to real riches.

Sorry to pivot from the sacred to the secular, and relatively pedestrian, but there are similar truths that apply when looking at economic development.  One deeper truth is that the economies that have the workforce to fill ‘lower paying’ jobs tend to be stronger in the longer run.  Particularly since the Boomers started to retire and the national economy started to completely rely on immigration for labour market growth.

Take a look at three examples: tourism, administrative and support and transportation.  All three sectors are not particularly high wage or high skilled but are growing strongly in Ontario, British Columbia and to a lesser extent Manitoba.  Now it is important to point out this is a short sample – three years – and from the Job Vacancy survey which would not be as robust as, say, the Census.  But it is important for illustrative purposes.

Payroll employment growth in the accommodation and food services sector has been robust in Ontario and BC and that has pushed up the national growth rate to seven percent over the three year period – seven times faster than New Brunswick.  This is not all tourism-related, of course, but a good proxy.

Then look at administrative and support services employment which includes contact centres, travel agencies, and a variety of other fairly low wage administrative-related employment.  Booming in Ontario.  Down in New Brunswick.

Then look at transportation and warehousing.  Fairly straight forward – truckers, warehouse workers, dispatchers, etc.  Employment is up strongly across Canada and barely budged in New Brunswick.

The typical response is: “why do we care”?  Let Ontario have the ‘low end’ jobs but this is where the deeper truth comes in.  If you aren’t filling those jobs, in the longer run you dampen economic activity and risk holding back growth in higher wage sectors like health care, education, finance, etc. that rely on a growing economy and population.

Now, the good news from the Job Vacancy survey is that finance and insurance jobs in New Brunswick are actually up strongly in the past three years (discussed in a previous blog) but that is heavily related to export-based activity and not local market activity.  Health care and public administration jobs are up 12% and 13% respectively over three years but, again, those sectors at least in the longer run are tied to overall economic and population growth so can’t sustain out-sized growth indefinitely without broader economic growth.

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Want a strong economy? Don’t mess with the Serengeti Plain

There has been a few stories in the media recently about business closures in New Brunswick.  Does it portend doom?  Is the economy about to collapse?

Relax.  Within two years of starting, 11.4% of all businesses across Canada go out of business.  This is known as the business exit rate.  Across Canada, almost 130,000 businesses will go out of business within two years of starting.  The better metric is business starts.  If the entry rate is higher than the exit rate for a prolonged period of time that is one sign of a strong economy.  If the exit rate is higher, it could be a warning sign.

The private sector economy is best viewed as a kind of Serengeti Plain – a wild place where the strong survive and the weak die off quickly.  This Schumpeterian dynamism is important.  We want to be a place where people can quickly test new business ideas – get in the market quick – fail fast – get out, start over.   It can be painful to see an entrepreneur go out of business but that is the nature of a dynamic economy.  We would never get innovation without the Serengeti Plain.  We would never see a focus on productivity and prices would be bloated without the Serengeti Plain.  Many economists suggests that wealth consolidates in even fewer hands if there is no competition to beat down excessive profits (although there may be less wealth to begin with).

I haven’t seen these numbers for New Brunswick.  I have taken a look at other data that suggests the Serengeti Plain is not as alive in New Brunswick as elsewhere. More incumbents, less business churn.  I’m not sure about this and it would take more research but if this is the case it is not a good thing.  From the individual business perspective being in a protected or sheltered industry or being in a geographic location where no competition arises feels good but for the economy and the public interest overall it is not particularly good.  Less innovation, higher prices and – more importantly – firms ill equipped to tackle external competition when it comes.

A few years ago I used the example of business cards.  When I started this business more than a decade ago I paid over $100 to get a box of business cards from a local vendor.  Now I can order that same set of business cards for 84% less from a vendor in the United States – thousands of kilometres away.

Government policy should be structured to encourage the Serengeti Plain.  There should be enough risk capital around to absorb the losses associated with the Serengeti Plain.  National banks should have the same risk tolerance in New Brunswick as they do in Ontario (ooops, can anyone confirm this?).  Governments should certainly not pump in more cash to try and keep a firm alive just because they were an initial contributor and are worried about being associated with a loss.  Let it go under.  Likely the entrepreneur will get back up and get back on the Plain (unless she is blackballed because of one failure).

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Insuring New Brunswick’s economic development

Statistics Canada surveys businesses to assess employment levels.  Guess the fastest growing industry in New Brunswick in the past five years?  No, you cynic, it is not funeral services business.  In fact for some reason employment in the funeral services business in New Brunswick is down over the past five years.  Either that industry is getting more productive or it might have something to do with the consolidation going on in the industry. Yes, I keep my eye on the funeral services business too.  It’s not macabre.  For a purely economic rationale.  Still a bit creeped out by that Molly Parker movie.  Google it.

No, the fastest growing industry in New Brunswick between 2013 and 2017 (2018 data not out yet) is the insurance carrier sector. Between 2013 and 2017 the industry added 2,100 new jobs. This was more than hospitals (1,900) and public administration (2,000).

There are now over 5,000 people working in this sector and most of it is export activity.  A lot of the employment is in Greater Moncton – Wawanesa, Medavie, Cooperators, etc. but also Saint John anchored by TD Insurance.  New Brunswick now has more employment in the insurance carrier business as a share of the labour market than all other provinces except Manitoba.   There are over 5,000 people processing insurance claims and other back office work from across Canada.  I’m not sure how much higher end work is being done (actuarial, etc.) but at least some of that work is done here too.

We should do all we can to nurture this business. I understand CCNB now as a course that graduates folks with skills in the insurance sector.  I would double down on this.  Let’s pump hundreds through insurance-related college programs and stream them right into the insurance carrier sector.  Same with UNB and UdeM.  Let’s teach the business grads more about the insurance business because they can start their careers right here in New Brunswick with some of the best known firms in the business.

How about university research?  We have chairs in cannabis, big data, cyber, etc.  None are even close in terms of employment impact in New Brunswick.  How about putting our researchers to work thinking about the future of insurance and customer interaction?  How about global warming and the impact on P&C insurance?

How about startups?  There must be dozens of good ideas that could align with the insurance sector.   Instead of waiting for the insurance industry to knock on our door, why not barge in and ask?

This is a good thing.  Let’s wrap around the insurance carrier industry a value proposition so strong that even more will want to invest and grow here.

 

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Out of gas: Sable R.I.P.

A little over 20 years ago I was asked to a meeting at Moncton City Hall where Bud Bird and the gang at Gas NB were going to present on the exciting new opportunity that natural gas would present for New Brunswick.   I asked Bud directly would having local access to natural gas lead to more industry setting up in the province and his response was an unequivocal “yes”.

This week the tap was finally shut off and Sable gas will no longer pump into the Maritimes.

I have said before that this was likely one of the biggest lost opportunities for New Brunswick in generations.  There were no new manufacturing plants attracted as a result of cheap gas.   Lower cost natural gas did bolster the competitiveness of many of our largest industrial players but the system overall never achieved what was hoped for and in fact was mostly a huge disappointment.  The blame can be spread around – government, regulator, Enbridge, etc. all played a role in the dysfunction.

Now the problem is much more straightforward. Depending on the price of gas we will need to import $300 – $400 million or more in gas each year to satisfy the demand here and our gas users will mostly have to pay a significant premium over most other regions of North America.  Some may switch back to heavy fuel oil – a few have already done this.

Enbridge turned out to be a wily player.   They were facing the potential write down of several hundred million dollars and ended up selling to another company for what was likely a small premium.  The executive that pulled this off likely got himself a juicy Christmas bonus this year.

The new natural gas distributor has a 25+25 year license to distribute natural gas (50 years if you are math challenged) and no local source.  Gas is already being purchased in Alberta and the southern U.S. and being pumped all the way here (although some of this is virtual – the transportation costs are very real).

It is possible that more local gas will be found and start to supply local markets at some point in the future but there are lots of hurdles.

Many of the same folks that argue for self-sufficiency in agriculture and other products – that argued vehemently against selling NB Power to Quebec as we would lose control over our energy systems are perfectly content to import natural gas – which is now likely a more important source of energy for our big industries than electricity – at a long term premium.

How much?  Impossible to say but will likely be in the billions of dollars over the term of the franchise agreement.

There is a false and intellectually lazy narrative out there that natural gas is going to fade away as an energy source anyway as renewables take its place.  This is not true.  In fact, it is likely transportation fuels will decline before natural gas – industrial and residential – does so.  In fact, if we had a little bit of ambition we could have used natural gas to convert Colson Cove and Belledune – having a profound impact on our carbon emissions.

If natural gas use declines in New Brunswick in the short term it will be because industry has a) declined and moved elsewhere; or b) firms have shifted back to other more carbon intensive fuels.

Sable R.I.P.  Your demise is going to cost New Brunswick’s economy dearly.

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