A new take on things

You hear mostly the same old hash on these pages – rehashed a lot. That’s because I am trying to repeat over and over until I get traction (unlikely, hey Mikel?).

Anyway, I just had a very interesting conversation (albeit short) with a bunch of business people from a rural area of NB.

Here’s their comment. The government for the last 20 years has tied virtually all funding programs to new jobs created. Jobs. Jobs. Jobs. So companies had no incentive to automate or move to productivity through expansion. Rather, if they created more jobs, they got government funding.

So now they have inefficient, labour intensive operations and that is keeping wages depressed, leading to worker shortages, etc.

They are arguing now that government should flip that on its ear and have incentives to become more efficient and less labour intensive which would allow them over time to raise wages and be more competitive.

In effect, they are saying that direct government policy – federal and provincial – has directly contributed to the depression of private sector wages in New Brunswick – at least in the sectors where government has been active with financial support (imagine the sound of teeth gritting, that would be NB Taxpayer) such as manufacturing, tourism and even high tech industries. If you have money out there to give to companies but it is predicated only on job creation, you will get more jobs.

I have taken a considerable amount of time to think about this (30 minutes) and I can see a thread of common sense here. Quite frankly, I think we have spent a lot of time and effort looking at little things like a few bucks for this firm, a few bucks for that firm -without an overall strategy and plan for the future. For example, has all of this funding (and again relative to other provinces we are below average so let’s have perspective) led to real, sustainable growth?

The e-Learning industry is a sector I keep coming back to. It was highly subsidized by government either through direct funding programs or government contracts. This, at least theoretically, doesn’t bother me. A lot of Ottawa firms that are now very successful got their start with large government contracts. But you have to draw those straight lines. I have often said that the government should have spent a few bucks on a post mortem of the e-Learning sector to tell us exactly what went wrong. This isn’t small change. I estimate that close to 2,000 jobs were wiped out in that sector and millions in government funding.

So, that is a bit off track but still relevant. If the government wants to support industries (not just gravy either even tax breaks, infrastructure or R&D funding), it should be linked to a success strategy. And it seems to me that those bright policy makers in Fredericton should have realized that a jobs, jobs, jobs approach might have led to more labour-intensive, lower wage outcomes.

But back to the jobs, jobs, jobs, thing for a moment. We are in population decline – as it is. So for government to come out and say we are shifting our focus and looking to help companies become more efficient and we will applaud those that shed jobs, would be counter to the broader goal of sustaining our communities.

So, again with just a small amount of mindshare, I would suggest we still need to focus on attracting industries to this province in a smart and coordinated way. And we need to make strategic investments in infrastructure, training and other tools to help New Brunswick become a top destination for certain industries. As for the local entrepreneurs and SMEs, I think (in conjunction with the first approach) that policies should be tuned towards efficiency, productivity and clear, sustainable competitive advantage over time and not just on jobs, jobs, jobs.

You know this stuff. I just fear that a ‘policy’ shift away from job creation will end up being the entire focus and dragging everybody down.

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0 Responses to A new take on things

  1. nbt says:

    Teeth? What teeth? lol

  2. mikel says:

    That is ‘sort of kind of’ true. However, it really shows what a monopoly on the media can really do if a group of business people think that is the real problem with the economy.

    Think about it for five seconds more. Where are the biggest government subsidies? They are in the resource sector, NOT little penny ante businesses. In forestry they come in the form of massive handouts and tax credits for technology initiatives to be ‘more competitive’.

    Keep in mind that ‘more competitive’ always means ‘get rid of workers’. Simple as that. So forestry gets billions, while slowly eradicating the forests and laying off workers to the point there are almost no people working in the forests.

    And again, that has a consequence. Hell, at local specialty food stores there are all kinds of high priced food products that people here line up to get at. Just for fun I shop around these places to find some NB products, but never any luck. One time one farm had some blueberry sauce and thats it. In the meanwhile, my dad always tells me about how maple syrup at the duty free shop in Woodstock comes from Waterloo, Ontario.

    For small businesses it is true that money is tied to jobs, but certainly not always. Fatkat has hired dozens of people, but as I mention below they got a grant from the feds for almost a hundred grand to ‘update equipment to become more efficient’. In other words, buy more computers.

    But the problem, as usual, is not the government, but the business community that runs it. I had a customer in Fredericton who ran a furnace store, and had eight people working there. Every few years he’d kick and scream and tell the government he’d lay most of them off if he didn’t get cash. He always did, and he always had two nice cars, boats, etc.

    But government essentially has to look at such deals with a business mind-is it worth X dollars to keep X employees working, or do you just add them to the unemployment roles?

    But that certainly isn’t the problem with the economy, like I’ve said, the system is based on corporate welfare, and the government responds to what businesses are there. IF the universities had spawned a group of companies like the University of Waterloo did, then their voice would be the one government would listen to. Believe me, its exactly the same here in Waterloo, taxpayers got taken for a ride on a new recreational park that was supposed to cost 45 million and ended up costing three times that because city council never read the fine print of the contract. It was to be the ‘millenium park’, then the employees of RIM (not even RIM itself) donated some cash and now its ‘RIM Park’.

    But there is some truth to the matter, when I was there trying to start a small business that was the line – ‘we’ll give you X dollars to hire x people’. Of course like any entrepreneur what is lacking is money, but what an entrepreneur has is TIME. But to run a successful business you are supposed to be a pro at digging up money elsewhere, which of course takes most of the time away from actually doing the business of whatever the company is doing business in-you don’t get any more ‘uncompetitive’ than that.

    However, government doesn’t see it that way. Mind you, what are the options, do you hand out money to every person who comes along and get into a caissi populaire situation?

    That’s why I agree with you about the ‘industry wide’ theme, the problem is of course finding industries and finding an industry thats going to give enough voice to make it viable, otherwise you have bloggers griping at any penny that goes to a small company and ignornig the bushels of cash handed over to the Irvings.

    So like I said before, if you really want that kind of policy then a television station is just perfect. Setting up the infrastructure leads to an industry where advertisers have more access to customers, where artists, filmakers, documentary makers, schools, animators and on and on have access to the airwaves.

    Of course like David I’ll be shouting that forever because we KNOW who makes policy in the province, and Irving didn’t buy every newspaper because it looked like a good business model. If you provide alternatives to the energy model, then obviously people are going to say “hmmm, do you really want a new refinery polluting the skies or do we want good knowledge based jobs?” That answer is pretty clear, so you have to make sure that nobody has the opportunity to ask the question.

    But yeah, it may well be a waste of time, who knows? If it were a real waste of time I wouldn’t be writing here. From tiny acorns mighty oaks grow they say, of course unfortunately Irvings are in the forestry business:)

  3. Anonymous says:

    Assuming we no longer want the jobs and pay rates of Asian countries, our economic development efforts should be focused on wealth creation, not job creation.

    We can create lots of jobs; just lower the minimum wage to $1 per hour….but I don’t think we want that.

    Unfortunately, some people want both; they would like to see low skill jobs paying $100K. Sounds nice but it cannot happen and we need to get past that before we move ahead. We need to attract businesses that provide high skill, high pay employment. For example, the engineers and technologists that operate a nuclear power plant.

  4. mikel says:

    Nuclear power is a bad example to choose. Much like mining, most of those salaries are propped up by taxpayers. You might as well talk about getting more doctors and lawyers. After all, they are also educated jobs.

    But there is one fact that shows how false the above statement is, and that is who the owners are. You CAN have jobs that pay that highly-very easily. They don’t earn 100 grand, but waiters and others in Norway earn ‘a living wage’, which is why the norwegians charge $5 for a cup of coffee (which, by the way, is its actual price).

    All you have to do is not have a small elite group at the top with an insatiable appetite. New Brunswick has the highest gap between poor and rich in the country, and has a small population. All you have to do is make sure Irvings can’t rob the province blind, and that resources aren’t hogged by a very few multinational corporations.

    The province earliest growth came from giving away land-of course it wasn’t theirs to give and most of it went to criminal legislators, however, thats not the point. Imagine if the poor or even middle class were ‘given’ access to their own resources-like what happened over a hundred years ago. A program like that is almost unimaginable, in fact tone it down and don’t even ‘give’ it away, simply ‘lease’ it, sort of like small woodlot owners.

    You’d have instant access to land to build a house. Wood to sell or build a house, an ‘asset’ which provides credit for a small business or at least nominal self sufficience.

    So really its VERY simple, but the obstacles are huge. Norway does it very easily, so the above is plainly and outrightly false. You can easily have a living wage-but not when there are people with unlimited greed.