Let he who is without a vested interest cast the first stone

I was reminded again recently about how easy it is to criticize attempts to attract industry and grow the economy. An economic developer friend of mine was commenting on a certain corporate interest in the province and why they have little real interest in supporting real economic development. After all, he said, if we bring in a large multinational firm they will steal away this firm’s best workers with better pay and benefits.

I have always felt that one of the benefits of attracting large, multinational firms to your province is that it forces up overall wages over time. I have seen this in practice in New Brunswick over the past 15+ years. IT workers being paid $30k per year until a larger firm is brought in that is paying $45k per year for the same workers. Call centre workers’ wages have increased from an average of $10/hour in the mid 1990s to $16/hour how. Manufacturing workers paid $8.50/hour with no benefits and laid off during slow season. After a large manufacturer comes in paying $17/hour for basic machine operator skills (plus benefits), local firms needing to raise wages to compete.

I’m not criticizing these firms. Wage rages are organically set in virtually all markets. In New York City, I am not sure investment analysts would be paid an average of $650,000 per year if the companies didn’t feel they needed to pay it to attract and retain workers.

You cant’ just say “raise your wages 20% for the good of the province”. There needs to be market forces inching up wages over time and local firms need to get more competitive in other areas of their business so they can compete. I think attracting good firms in bolsters wage increases.

And in a similar vein, I had government manager once tell me, while explaining why public sector wages were so high compared to private in New Brunswick, that it was the role of government in weak economies such as New Brunswick to set the bar for wages. If a government secretary is paid $18/hour, he said, that would force the private sector to raise wages over time.

While I found his logic a bit weird, when I look at the Fredericton market, for example, he seems to be correct. Recent Wage Report data indicates that indeed secretaries, administrative workers, bookkeepers, janitors, etc. all get higher wages in Fredericton than elsewhere in New Brunswick.

So come full circle to the vested interest bit mentioned in the title.

If you were a large manufacturer in small town New Brunswick paying $9/hour for assembly line workers and laying them off during down time, would you want the province to bring in a Michelin plant and plop it down in your community? Probably not.

If you were a firm that employed 25 IT workers in a large New Brunswick city at $30k per year and the province brought in a large IT firm that paid $45k per year and they raided all your workers, would you like that? Probably not.

This is a common theme in the blog. Governments need to rise above the fray and balance all of the issues when making decisions. The local business lobby is one voice. A voice that can be a positive force or a negative force for development (sorry to all my Chamber friends).

That small town needs another plant. It needs more economic development. It needs to not be so reliant on one or two large employers – even if they are held up as the bedrock to New Brunswick’s economy. At the end of the day, Joe Q. CEO will put his firm’s interest ahead of any altruistic objectives 99 times out of a hundred.

Governments – economic development folks – need to put the community’s interests ahead of any one company or individual – even if that individual scares the pants off them.

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0 Responses to Let he who is without a vested interest cast the first stone

  1. Anonymous says:

    Excellent points.

    This is how the folks who like to bash the Irvings and McCains need to think. If you are concerned about them having too much power and influence, the answer is not to knock them but bring in competitors for our resources.

    The companies that scream loudest about increased wages are likely the ones with the biggest productivity issues; the ones investing least in equipment, processes and training. Attracting more quality companies will improve our productivity performance due to increased wages and competition for resources. It will also help with the immigration and out-migration issues by providing employment opportunities.

    A key factor in attracting companies has to be the existence of a competitive advantage; companies cannot locate here merely for cheap labour else their competitiveness will not be sustainable. Proximity to markets, proximity to suppliers, access to stable labour, competitive tax rates, competitive energy rates, bilingual workforce,and leading edge ITC infrastructure are possibilities.

    Without a doubt, the single most important action our government can take to help with many of our economic challenges is to bring in a large, quality employer that is motivated to utilize NB resources,suppliers and workforce and interetsed in exporting. This company should locate where they have the best chance to maximize their success and the province should help suppliers and workers adjust to be able to competitively supply to them wherever they locate in the province.

    This will take guts; a willingness to overcome political pressures, a willingness to have a business mentality, a willingness to be assertive. Bringing in loser companies interested only in the incentives with no other competitive advantage except that they will locate in a politically advantageous riding is not what will help NB in the long run.