Making the – somewhat feeble – case for manufacturing

After hearing the provincial government announce 200 call centre jobs in the Miramichi to replace manufacturing jobs, I got to thinking. Why is it so hard – it seems – to attract good manufacturing jobs to New Brunswick?

Some people say that the manufacturing sector is in decline – but that’s a myth. There are certain types of manufacturing that are being moved offshore but there are many manufacturing sectors in North America that are experiencing strong growth. In fact, when I look at Site Selection magazine’s database of new announcements last year, the majority are manufacturing! Semiconductors, plastics, wind turbines, biodiesel, auto parts, aerospace, some metal fab – all in growth mode.

So why not New Brunswick? There are a few old, tired excuses about our distance from major markets – but the fastest growing manufacturing centres in the U.S. are far from the ‘major’ markets as well.

I think we haven’t really thought it through.

Certainly energy costs are huge for the manufacturing sector. Yet, NB Power would rather export surplus electricity than figure out how to develop an incentive rate structure that would attract specific manufacturers. There has been $1.9 billion in wholesale electric power exports over the past 10 years. No one ever asks the question whether or not it would be better to use that power to stimulate economic development in New Brunswick rather than ship it to support economic development in the U.S. One would think that the wholesale rate for electricity would make a good incentive rate for large users (but I don’t know the wholesale rate for sure).
Then there was the aborted attempt to build a natural gas-based energy park in Sussex attempting to attract manufacturers that need low cost natural gas. No, it would seem that we think the best use of that gas is to get it out of New Brunswick as fast as we can.

Some economic developers will say that we just don’t compete on ‘incentives’ (whether that’s power rates or training grants or other incentives). I don’t know – we used to compete (think Michelin in Nova Scotia) and we still do when an industry is almost dead (think pulp mills). But to craft an aggressive incentive program for a manufacturing firm with a good business model doesn’t seem to get the interest of anyone these days in New Brunswick at least.

The truth is that substituting manufacturing jobs with call centre jobs is a potentially dangerous public policy in a place like New Brunswick. Manufacturing jobs – the type backed by multinational firms – tend to be much more capital intensive than call centres and that makes them less vulnerable to closure (you invest $500 million in a plant, it’s hard to turn around and close it). By contrast, the long term sustainability of call centres is somewhat questionable. They will always be needed (at least in my lifetime) but as more and more of this work shifts to the Web, they may be needed less. In addition, there is the whole outsourcing thing.

At a social level, we are just forcing our blue collar workforce to leave for Alberta. Some will get retraining but most will not leave a $25/hour mill job for a $12/hour call centre job. They will leave. This will put increasing pressure on the workforce and it will be hard to attract immigrants and migrants into $12/hour call centre jobs.

So, why haven’t we tried to take a real crack at nearshore manufacturing? Shaping energy policy to attract manufacturers. Shaping economic development policy to encourage – say alternative energy manufacturers. Shaping educational policies to encourage people to move into this sector. Look at attracting immigrants into manufacturing.

Presumably manufacturing is suited to smaller city and town environments which would bode well for Miramichi, Bathurst, Campbellton, etc.

What’s the economy going to look like when it is 30,000 call centre workers, 30,000 tourism workers, retail/wholesale, biz/personal services and the public sector?

I could be wrong but I’d like to think that manufacturing is still a viable alternative for New Brunswick. Let’s not take the troubles being felt in certain segments of manufacturing and extrapolate that to the whole industry. There are opportunities but they are highly competitive (most jurisdictions understand the wide ranging spinoff potential of manufacturing). New Brunswick would have to make key investments and become highly focused on a few sub sectors where we have some advantage if we wanted to compete.

Just hanging out a shingle and running the flag up the flagpole ain’t gonna do it.

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0 Responses to Making the – somewhat feeble – case for manufacturing

  1. mikel says:

    You are implying that somehow it is public policy to close down mills and replace them with low wage jobs. That ‘may’ be true, but I doubt it. They are simply taking what they can get.

    Governments do what the loudest voices tell them to. If you want to know who that is, just go look at the legislation. The reality is that Irving and McCain and the few large players certainly don’t want to see competition.

    But for NB Power the simple reality is that it has a large debt. The only way to pay that is to ‘make money’. That comes from selling abroad. You are right that its a public policy decision, however, increasingly the loudest voices are demanding public utilities ‘run like a business’.

    Again, all those policy decisions take work to get onto the table. In New Brunswick, apart from the occasional letter from a union, this stuff is not on the table.

  2. Anonymous says:

    Ahh, it is wonderful to see government and policy mentioned in the same discussion. Sound policy development is a lost art; this is why task forces, committees, and consultation efforts are a waste; in the abscence of these being inputs for policy development, why bother?

    It has been 20 years since our leaders, federal or provincial, turned to experts in policy development and counted on them as key confidents. Instead, they surround themselves with political junkies, vote buyers, sh*t disturbers and researches tasked to proactively identify the next issue that could torpedo them (not to resolve it but to research it so they can defend themselves).

    Why? Becuse the voters are indirectly asking for this behaviour. Commissioning a study or forming a task force is not policy development; it is merely data gathering. Let’s demand sound policy development (including effective research) and get this province back on the recovery track the Frank McKenna initiated.