Watch this one

I know most of you have no patience for the national media crapping on New Brunswick. I wouldn’t either except that I realize national policy makers (elected and bureaucrats) read the national papers. They do not read Al Hogan.

I have been tracking an increasing trend of national stories in the Globe and Post that are not that positive for good old NB.

Here’s one from this AM. This story has been covered before, just not in the Globe and Mail.

I would like to see the national papers take more of a ‘here’s what could be done’ angle. We know full well that we have much higher structural unemployment. We know we are increasingly dependent on Equalization. We know that we have among the worst rates of out-migration in the country. And we know what that is doing to our economy.

We have just had a change in government. Let’s start being solutions-oriented.

‘Lotto 10-40′ and the decline in jobs
Globe & Mail

October 11, 2006

OTTAWA — Here’s a skill-testing question: Why does Maine, with neither oil wells nor car assembly plants nor stock exchanges, now have an unemployment rate of 3.9 per cent? And why does New Brunswick, a mere flap of the flag away, now have an unemployment rate of 9.1 per cent, more than 130 per cent higher? The state and province share a common border, common assets (forests and fish) and common economic characteristics (lower incomes, slower population growth).

They differ in one important way. Maine’s unemployment insurance program is owned and operated by the state, which requires it to pay its own way. New Brunswick’s is owned and operated by the federal government. Could the difference in ownership and management of these programs explain the extraordinary employment gap between these neighbours?
Well, yes, and now we have the academic research confirm it. Using Maine and New Brunswick as “a dynamic natural experiment,” two economists have analyzed the unemployment history of these jurisdictions across 50 years. Chris Riddell (Queen’s University) and Peter Kuhn (University of California at Santa Barbara) conclude in a report published earlier this year that Canada’s notoriously generous UI benefits are indisputably responsible for New Brunswick’s higher level of unemployment. The report is more proof that you get more of what you subsidize — including voluntary unemployment.

Messrs. Riddell and Kuhn observe that, historically, Maine had higher levels of unemployment than New Brunswick. Canada’s UI programs began in 1941 when the provinces ceded the job to the federal government. In the 1950s, Ottawa expanded UI benefits; by 1953, New Brunswick reported a higher unemployment rate than Maine. In the 1970s, the government expanded UI benefits again; and New Brunswick’s unemployment rate increased again — this time lodging at 12 per cent or higher. In Maine, the corresponding rate was 8 per cent. In these years, many Canadians came to regard UI as “Lotto 10-40,” meaning you needed to work for only 10 weeks to collect UI payments for 40 weeks — and to do so without penalty year after year.

Maine, on the other hand, has operated its UI program with minimal changes in the past five decades. The state requires people to work a full year before becoming eligible for UI, pays lower benefits for shorter periods and reduces benefits for repeat claimants.
For direct comparisons, Messrs. Riddell and Kuhn usually take unemployment numbers from Maine’s six northern counties, most similar to New Brunswick. By 1980, they found, 10 weeks of work a year in New Brunswick, on average, produced (with UI benefits included) 33 weeks of income; in Maine, the same 10 weeks produced 13 weeks of income. By 1990, 6 per cent of men in Maine worked less than six months a year; across the border, 20 per cent of men worked less than six months a year. In Maine, 14 per cent of women worked less than half the year; in New Brunswick, 26 per cent.

Messrs. Riddell and Kuhn report this astonishing calculation of UI incentives: For every 10-per-cent increase in UI income for New Brunswickers who worked less than half the year, 10 per cent more people reduced their work to less than half the year. In both Maine and New Brunswick, seasonal work has always been a part of rural subsistence. In Maine, seasonal work has declined. In New Brunswick, it has increased. Messrs. Riddell and Kuhn say Canada’s UI benefits for seasonal work have “preserved a way of life forced into extinction by market forces elsewhere.”

By 1990, UI income had become so pervasive that one male worker in four received UI. UI payments produced 6 per cent of New Brunswick GDP; in Maine, 1 per cent. It accounted for 25 per cent of all government income transferred to New Brunswickers (including medicare); in Maine, 5 per cent. Messrs. Riddell and Kuhn conclude Canada’s UI program “can account for virtually all New Brunswick’s decline (absolute and relative) in full-time work among men.”

Ottawa purported to reform UI in 1996. It did change the name (to EI). Mr. Riddell says the changes were so insignificant they “weren’t worthwhile incorporating.” And the work gap remains. With a labour force now of 385,000, New Brunswick has 35,000 unemployed. With a work force of 735,000, Maine has 29,000 (using August, 2006, numbers). Transfer New Brunswick’s jobless rate to Maine and the number of unemployed workers rises to 65,000.

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0 Responses to Watch this one

  1. Anonymous says:

    Oh boy, do I love trashing this kind of stuff! And its so EASY! In fact, I’m thinking of sending a letter to the Editor of the Globe and Mail.

    This is a quote from the the study:

    “The undesirable effects include large and uncontrolled differences in culture and the economic environment, major differences in data collection procedures, and the widespread use of one-dimensional “summary” indicators of program generosity which neglect important
    details of how policies work”

    The above are the ‘types of data’ that these guys chose to ignore. In other words, everything BUT the hypothesis they were looking to prove was excluded. NIIIICE!

    They even admit a main problem: “Unemployment insurance has implications for other dimensions of labor supply, including labor force

    And we can look at the data to show that New Brunswick has always had a higher participation rate than Maine. In other words, Mainers who can’t find work, simply play no part in the labour economy. We should also note that there has been a very loud and viable protest movement in Maine which sees their UI system as not only inadequate, but completely discriminatory. Check out the ‘living wage’ movement for details on that.

    Yet one more blatant problem is that the study concludes in 1991. No surprise that this is when drastic changes were brought into the EI program, changes the paper sees as ‘inconsequential but for a name change’. If they think those fisherfolk were rioting and burning down buildings because of a name change, they are seriously delusional.

    However, the most glaring error is that the study uses only the six NORTHERN parts of Maine. Come now, we ALL know that the industry most dependant on EI or UI (in Maine) is FISHING. So for an accurate study you exclude all the counties which are near the ocean???? Man, do I wish I could make some of the money these academics make…clearly many of these fisherfolk, even those who can barely read, should be writing academic papers! Some common sense would be a welcome addition (or maybe not).

    Next, we can look at some of those economic indicators outside the EI system. Quite obviously, if y ou want EI to accomplish something, you not only provide disincentives to the program (which only go so far) but some incentives to move into another industry. With no other industry to move to, well, duh, what do you think people do? Obviously people want to stay close to where they live.

    That leads us to the next glaring point, staying close to where they live. Here, you can look province wide or state wide for opportunities. Here’s where it really hits the fan.

    So for example, you can do a search of David’s blogs and somewhere in there I did a study on how much money Maine recieves from the federal government. I can’t find it right now, but federal spending was FAR higher in Maine, however, most of it was spent on INDUSTRY. Namely, keeping a world class navy shipyard going which is the largest employer in the state, and of course spins off many manufacturing and service related jobs.

    In Canada, while billions go into the automotive sector we see virtually NOTHING going into industry in New Brunswick. While government was a lead player in the oil and gas sector in NS and NFLD, it seems that energy that stays in Canada, such as nuclear and wind in PEI, simply don’t deserve investment.

    The much maligned ACOA is now used mainly as some few funds for small companies, in many cases you can see at their website the money goes to fixing bridges and wastewater services in rural areas.

    Comparing apples to apples, however, we can look at shipbuilding in New Brunswick, where the Prime Minister, a shipowning businessman himself, paid the Irvings,the only shipbuilders in the area, to close down their facility in New Brunswick. We can note its just at the time when we now may wish to utilize shipbuilding ports (which Irving still owns in Nova Scotia and PEI) for building navy vessels.

    So ‘other economic data’ plays a VERY real and significant part. In fact, looking at the populations, federal investment in economic development accounts for MORE than ‘all’ the data!

  2. scott says:

    That’s all fine and dandy, but what does it tell us that we didn’t already know about our over dependency on governemnt? Nothing.

    I’m with you David, I’m tired of hearing all the reasons why we have failed (btw, Riddell and Kuhn left out few other reasons, however, I guess they had to focus. lol)

    It’s high time for business leaders, lawmakers and stakeholders to move forward in a solution based manner. They know the challenges, they have been well documented.

  3. Anonymous says:

    Uh, they know the challenges but what do you expect them to do? Irving is using massive subsidies to ‘upgrade’ their mills to print glossy paper. If you don’t think that new technology will decrease workers you’re crazy.

    The ‘business leaders’ have no interest in New Brunswickers, why do you think their behind AIMS Atlantica idea? Their idea is, as mentioned above, make EI so miserly that New Brunswickers simply move. You don’t solve a problem by eliminating the people. If that were the case, then simply find anybody that gets a government dime and tell them to get the *&^% out. That’s of course what they do in the states and its hugely successful-except for the people involved.

    So again, this propaganda is NOT the story, it is just that-propaganda. New Brunswickers are lazy and shiftless with too much dependance on government. Well who do you think bankrolls the Ontario economy? The Alberta economy? But when the government gives some pittance to actual people then the claim is that “they rely too much on government”.

    Again, nobody is stopping Irving or McCain from creating massive new jobs, people would love it! In Maine their gas terminal will employ 60 people, in New Brunswick 8. Irving certainly didn’t have to do that, and where is the hue and cry that ‘business leaders actually employ some people’. Irving does it for the same reason every business owner does anything-they are looking out for their interests. It always makes me laugh to hear people begging business leaders to accomplish something their government won’t do, as though these people are social workers or something.

  4. to it and at it says:

    dear Anonymous:

    I’d love to see you write a letter to the Globe.

    PS – why not register a pseudononymous account so we know which anonymous we’re talking to?

  5. Anonymous says:

    I just finished the letter, forgive the repetition:

    I would like to respond to your article on the EI program in New Brunswick and Maine. In the cited study, the authors use only the northern counties of Maine. One of the main beneficiaries of EI is the fishing industry. By excluding Maine’s coastal counties which offer a comparible labour environment to the control group, the researchers throw the entire study into disrepute.

    The authors admit not incorporating “large and uncontrolled differences in culture and the economic environment”, and consider this an advantage! Maine’s EI is state run, but its economy is not. The state’s largest employer is Bath Iron Works, the sixth largest shipbuilding corporation in the United States. In the 80’s it had close to 12,000 workers, more than all New Brunswick forestry jobs. In 1997 the company, which chiefly builds destroyers for the US Navy, had a payroll of $285 million, and bought from over 1000 contractors.

    Federal investment in NB is primarily transfer payments and EI. ACOA now serves primarily to bankroll municipal services the province is too poor to provide, such as repairing bridges and waste water plants in rural areas. The Irving family was actually paid fifty million dollars to close down its shipbuilding yard. Now ship spending may increase, yet there is no more building dock there.

    Federal spending in Ontario acts similar to Maine, propping up industry sectors. Billions in subsidies have recently been shoveled into the automotive sector, while EI plays a large role in training workers for that industry. Research and Development also receives massive subsidies. With only one large scale university, no medical school, and a community college infrastructure that can’t be tied to any industry New Brunswick receives little of this funding.

    This has been a maritime complaint since confederation. It was exacerbated in the second world war when CD Howe relocated manufacturing industries to Ontario. An EI program needs two things to function-living expenses, and something else to transition to. While many proclaim that economic factors are ‘supply and demand’, such is not the case. The fishing industry suffered from massive deregulation and subsidization that favoured technology and foreign competition over local industry. The maritimes has no ‘wheat board’ guaranteeing prices, no bailouts for their version of ‘mad cows’, and no protections under NAFTA such as the Ontario centred financial services received.

    The European Union proves the case. In the sixties Ireland was given preferential treatment in order to change it from an economic backwater. It was permitted to make taxation and policy changes no other country could, and the result has been the ‘celtic tiger’. Such programs are non-existent in Canada, and Ontario and Quebec representatives ensure that ‘percieved preferential treatment’ is a non starter. New Brunswick has serious economic problems, but they should be solved by industry allocation, not by impoverishing New Brunswickers until they leave.

  6. scott says:

    The ‘business leaders’ have no interest in New Brunswickers, why do you think their behind AIMS Atlantica idea?

    I don’t know why everyone demonizes Atlantica and AIMS’ Brian Lee Crowley.

    He was just in the hornets nest [Calgary] speaking at “The Calgary Congress: Renewing the Federation” and he put the wood to a number of unfair questions by the firewall boys’ on Atlantic Canada’s dependency and lack of economic growth. Who else is sticking up for our interest versus the western goons? That is since McKenna has retired. The answer is nobody. That’s right, nobody.

    Check out September 30th, 2006 at the 41 minute mark here.

    Quote of the day by Crowley at the 45.30 minute mark: “If you took the net transfers into Atlantic Canada between 1971 and 2003 and instead of spending that money as we did, you had invested that money into the TSX index, and reinvested all the dividends….Does anyone know what would be in that account today? (pause for guesses)

    2.2 trillion dollars. Enough to retire the entire National debt four times over and still have 200 billion dollars left over.”

    Later he quotes Frank McKenna [49 minute mark] when he said, “dependency has become a narcotic to which Atlantic Canadians have become addicted.”

    I don’t know about you, but I would rather side with doing something [McKenna and Crowley]over the status quo of dependency.

  7. David Campbell says:

    The only problem I have with Crowley is that he seems to be against proactive attempts to attract foreign investment. I don’t pretend to understand his ideology but I think he is one of those ‘government should get out of the way’ guys. I, on the other hand, think the government should be proactively trying to support the growth of new industries by building infrastructure, supporting targeted workforce development and attracting high quality, multinational firms that will invest in our communities for decades to come. I would assume, for example, that Crowley would be adamantly opposed to the southern US approach to attracting auto plants – even though third party studies have confirmed an economic ROI to the states from their investments in as short as five years. I have said it before. The problem with the ‘free market’ guys like AIMS is that they don’t live in the real world. In the real world of economic development, governments have played a significant role (Ireland as the most cited example) with real funding tightly calibrated to stimulate economic growth (whereas our Equalization system is tightly calibrated to reward economic failure). But on the larger issue of reducing dependency, reinvigorating communities and the population and restoring a sense of pride in our communities, province and region, I’m aligned with Crowley and McKenna 100%.

  8. Anonymous says:

    If you think AIMS is the only group that’s been arguing against centralization and maritime ‘shaftization’ (getting the shaft) you are sadly mistaken. But I know from Scott’s ideology that that is simply the person he pays attention to. To hear other organizations you have to leave the pages of the national media because they don’t get printed. This thread shows that anybody expecting better coverage than Irvings from the national press about NB problems will be wasting their time. Crowley often gets front page mention, because he is toting the party line that the national press loves – maritimers are lazy deadbeats that are too addicted to government.

    First, of course it is patently false. If it were true you’d have New Brunswick going all over Canada enticing people and companies by bragging about all the wonderful government services. What are they? Where are they? In fact there are far FEWER services. Let’s not get sidetracked, but if your insurance skyrocketed a couple years ago when you were looking for a job nationally, you might well pause in the prairies where there was no increase at all.

    That at least is a service, whether you ‘agree’ with it or not.As David has proven over and over, New Brunswick services rank at the bottom nationally. There are some little quirks, like you MAY get an MRI a little quicker, but that’s it.

    And of course even those few services are accomplished by impoverishing NBers further. THe province would be deep in deficit spending (although that hasn’t hurt NS any) if it were for video lottery and other lottery moneys.

    Anybody that takes even a cursory glance at the NB books knows that NB is just barely getting by. Education spending is a fraction what it is in most regions of Ontario, is even less than most states.

    In fact, just look at the books and pretty much ALL the government does is health and education-and it does them relatively badly.

    As for Crowley, again, many groups have been very actively championing alternatives, but AIMS isn’t interested in that. By cutting off federal government aid the region will be COMPLETELY dependant on the large corporations and will literally let them do what they want. And if you look at what they are doing now, it won’t be pretty.

    AIMS works for its contributors, just like any other organization. So again, we can look at his comments about trucking, where he says that although more trucking jobs will be created, we shouldn’t be looking a training people, but looking at immigrant work visas so that dirt cheap, non union, in fact non HUMAN RIGHTS workers can fill that void.

    That is SCARY stuff. I’m not surprised people were protesting, and I’m frankly a little disheartened by the people who will back AIMS and Atlantica even though it will essentially result in emptying out NB communities. However, some people’s sense of empathy isn’t particularly strong.

    As David says, history has pretty much proven that state intervention is necessary. In fact, I can personally go on to easily prove how it is desired in MORE sectors, but we don’t need to get off track.

    It really is a simple question of ideology, even religion. Some people think other people (and its always ‘other’ people) simple are economic clogs. When there is no source for their ‘input’ in one location, they should be willing to pack up and move to another. However, some people think economics should NOT trump human needs. That ‘work’ should serve human needs and not vice versa.

    Again, this is EASILY done, if it wants to be done, but as Mr. Savoie constantly points out, you’ve got Ontario and Quebec who won’t allow it, and who increasingly bemoan their positions as ‘suppliers’ of equalization, when they benefit from centralization.

    PS if you add up the money spent on ANY province and ‘invest’ it you’d have a lot of money. Anybody surprised that Crowley, while in Calgary, didn’t mention how much all the money poured into Alberta would yield? Because it would be a LOT more.

  9. scott says:

    I’m not surprised people were protesting, and I’m frankly a little disheartened by the people who will back AIMS and Atlantica even though it will essentially result in emptying out NB communities.

    I’m quite certain that many of our communities, that is if they haven’t already been, are on the verge of emptying out due to lack of competitiveness on a global market. I think the Atlantica concept is a good one. I never said it was perfect, but at least it addresses many of the problems that got us to where we are today. Many of the problems caused by made in Ottawa solutions [particularly by Liberals and Liberal lite governments]. Most notably bandaid agencies like DREE, DRIE and ACOA. All created in an attempt by the government to bring about large-scale regional development. However, when you bring government into the mix, with it comes regional favouratism. So I can’t believe that any of you can sit there and state that government will act in the best interest of the Atlantic Canadians when politically we don’t hold any clout. [very few seat] That’s why I am all for lower taxes, economic openness to global markets, and invest­ment in education. Similar to how Ireland evolved from one of the poorest countries in Western Europe to one of the most successful.

  10. Anonymous says:

    Again, you can’t DO any of that without the feds. You can lower provincial taxes, that’s been done, most of NB’s taxes are the lowest in Canada, what has it done? Has it accomplished ANYTHING?

    Atlantica, the term, can mean anything, so when you say ‘as a concept’ that of course means anything. Atlantica is being pushed by specifica organizations, with specific aims. Like David, I don’t agree that we should empty out rural areas simply because they are emptying out now. Making a problem worse is not resolving a problem. If you break your leg you don’t cut it off.

    As said in the letter, Ireland was given PREFERENTIAL taxation powers, in other words those people in Ottawa who are a big part of the problem are supposed to grant the maritimes special federal concessions so that companies will locate there. It aint’ going to happen. Ontario and Quebec won’t let it.

    Again, how does bringing in foreign workers with no rights to do trucking help New Brunswickers?

    And again, ACOA etc., don’t ‘fail’, they simply don’t try to succeed. But just because a location is meeting standards doesn’t mean what little federal money that comes in is unnecessary.

    When you compare all the benefits that each province gets from the federal government, New Brunswick falls short, by a HUGE margin. By that scale, ACOA should have billions to work with, not millions.

    If Atlantica meant talking about THAT then of course people would not be protesting it. But the idea is that they want federal spending, just on things their owners like-not on what will benefit New Brunswickers. Thats been another function of Irving media, to make people think that when government gives some money to a business its a ‘subsidy’, but if they do it in Quebec or Ontario its an ‘investment’. New Brunswick needs and deserves those same investments, in fact moreso. But as you say, what do you do when you haven’t got representation, THAT is the question.

    However, the answer is NOT to side with the large corporations who will sidle up to you and say ‘hey, at least we’re talking about it’ and then make recommendations that make things far far worse. Its too look at the facts and find out how to combat them.

    Again, you can look at proportional represenation. You will NEVER see PR on the federal scene until a province has it. That’s guaranteed. PR provides an alternative political voice, and thats exactly what is needed and why it is so important that this liberal party be lobbyied to make good on that referendum.

    The above post says it quite eloquently, the problem is POLITICAL, it is not economic.

  11. MonctonLandlord says:

    from anon.:
    “The much maligned ACOA is now used mainly as some few funds for small companies, in many cases you can see at their website the money goes to fixing bridges and wastewater services in rural areas.”

    I wonder how much of ACOA’s annual budget is spent on salaries compared to money spent business development programs.

    A friend of mine once said: It is easier to get a $70k job at ACOA than a $70k loan.

    Anyway, check out ACOA’s 2007-2007 priorities, some are shocking!

  12. Downes says:

    It’s pretty obvious that Maine and New Brunswick are very different, despite being neighbours. And it’s pretty obvious that rates of unemployment are calculated very differently in the two jurisdictions. Does Main have a better economy? Possibly. Could that be due merely to being 500 miles closer to Boston and New York. Well it’s a factor, hm?

    The real question here is why these researchers would conduct the student they did, and why the author writes, “Canada’s notoriously generous UI benefits are indisputably responsible for New Brunswick’s higher level of unemployment. The report is more proof that you get more of what you subsidize — including voluntary unemployment.”

    Only an idiot would agree that UI is “indisputably responsible” for New Brunswick’s unemployment, even after having read the study. As for getting more of what you subsidize — well the federal government funded codfish for many many years, yet we never did seem to get more cod! Gee, do you think other factors might be at work here?

    I want to know, who funded this report and what did they hope to gain? And I want to know why the Glopbe would publish such biased and poorly founded research. The press has a responsibility here, and continuing to feed (very well sponsored) lies to the Canadian people flies in the face of that obligation.