Workplace and Employee Survey Compendium

I know we have talked about this ad nauseum in this blog but there is another report out today from Statistics Canada that should once again raise the flag of caution about spending 95% of our economic development time trying to ‘foster local entrepreneurship’.

Before I state the specifics, let me reiterate my position. Small local businesses play a vital role in the local community (I now own one – my little consulting practice). They fill in holes that are not covered by larger firms and they offer services that are needed in communities. But the vast vast majority of them never break out of the local community and if your goal is economic development or growth you need to have businesses that are export-oriented. If you have 10 small carpenters in a community and they service the local market and you add one more carpenter – the economic activity just gets split over 11 carpenters – no net new growth.

This report the Workplace and Employee Survey Compendium looks at wages and benefits in Canada against a variety of metrics including benefits offered. Only 8% of businesses under 19 employees offer any kind of pension program – compared to 72.5% of businesses with over 500 employees. Only six percent of the large firms offer no non-wage benefits compared to 54% among the small businesses. Take it from me – non-wage benefits matter in a person’s overall compensation.

There are other interesting facts in this report like the fact that of the surveyed companies in Atlantic Canada 90% of their business is only in the local market. Only 1.6% of the firms’ collective slaes are to the United States – and the percentage is down since 1995.

Again, I am not slamming small biz. It has its place but I get very annoyed when economic development types say things like “80% of growth is from within” or “we need to focus on our local entrepreneurs rather than try and attract industry”.

That doesn’t make sense. You attract a pulp mill and that creates the economic activity for 100 small businesses. You don’t create 100 small businesses (hair dressers, consultants, plumbers, etc.) and that leads to a new pulp mill.

Economic development is fundamentally about new business investment and good paying jobs. It’s about expanding the pie. It’s about migrating from old industries to new industries. And, again fundamentally, it’s about determining a proper role for government and the local community in this effort. We can’t engineer business investment but we can engineer some of the community-level factors that lead to the community becoming a good place for business investment.

Don’t romanticize the small business. Understand the role they play in the local economy. Also understand the role that large, anchor businesses play in setting the bar on wage rates, offering non-wage benefits and anchoring overall economic development.

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0 Responses to Workplace and Employee Survey Compendium

  1. mikel says:

    Let’s not romanticize EITHER. Benefits ARE important, but picking pulp mills is a BAD move. Go ask those guys working in Nackawic about their benefits (then ask the guys who are no longer working about their pensions).

    Just because a large company pays big ‘on paper’, doesn’t necessarily mean that’s what they pay out. Any coverage of union negotiations will show you that.

    But let’s look at the report. We can also notice in the first table that 1 to 19 employees BY FAR creates more jobs than the largest. At its peak in 2001, the small companies created 27 jobs, with a job destruction rate of just 6. The largest had a job creation rate of only 5.4, with an estimated 2 destruction rate. That’s 21 new jobs to 3. (most years in the survey had higher job creation in smallest vs. largest, but that’s not true of every year, particularly 2005).

    However, its pretty much a given that apart from the public sector, small companies don’t have nearly the benefits-depending how they are arranged. The result of that is the higher turnover in small business than in large.

    Large companies are generally more stable, but keep in mind that much of that is that large businesses are essentially ‘backed up’ by government. For other ‘benefits’, when a small business DOES go under, it doesn’t take an entire community with it.

    There is a difference in pay scales depending on size, but not a huge one, and it depends what is meant by an ’employee’. For example, a large corporation is likely to have a lot of executives, who tend to make a LOT more than workers, which means when the average shows almost $30 per hour, that doesn’t mean EVERYBODY is making that much.

    But its true that in a large company non union workers make an ‘average’ of $8 more per hour. That’s not huge though, for a unionized worker the difference is only about $3. Plus, you may have noticed that there is almost as large a difference just depending where the company is located-ontario companies pay out up to $6 more per hour.

    But there are more of those benefits David mentions. Those large companies are also more likely to pay performance bonuses, let employees participate in stock plans, and are more likely to have employee participation in ‘some’ workplace decisions.

    But keep in mind that many of those ‘problems’ can be dealt with outside of work. If corporations paid their fair share of taxes, then government could provide all those services which employers now help defray. That’s been a benefit to canada for health care, what is not often discussed here or elsewhere is how beneficial it could be for all kinds of industries. Imagine if your drug costs were covered, or your eyeglasses were covered. Corporations would pay more tax, but wouldn’t have to off all those benefits packages.

  2. richard says:

    “Benefits ARE important, but picking pulp mills is a BAD move. Go ask those guys working in Nackawic about their benefits (then ask the guys who are no longer working about their pensions).”

    Picking any plant or industry will at some point ‘be a bad move’, as they all go through cycles. If you are unfortunate enough to be on the receiving end of tough decisions during a down cycle, that’s too bad, but it does not mean that on average those employees are not better off than their colleagues in a small business.

    Union jobs in large plants are sought after for a good reason; they provide more stability than small businesses and higher pay, not to mention benefits. Just as important, such jobs have more upward mobility with less risk than those in small businesses.

    The global trend towards corporate taxes seems to be downward. The real problem that reduces revenue for expanding government benefit programs is the erosion of the progressive personal income tax system. Consequently, those less well-off seem to be paying an increasing proportion of tax. And that makes stable employment and benefits programs even more important to those on the lower end of the income scale.

    The advantages and benefits to industry of national health care systems is, by the way, well-documented and well-discussed.

  3. mikel says:

    That’s an added criticism of David’s plan-unless of course you get those large employers all together, but then one of the recent themes has been large industries in rural centres.

    One thing missed here is the devils details. Is it that important that Fatkat started out from one guy and built up to over 100 employees, or is it ‘preferable’ that a corporation ‘from away’ sets up in Miramichi to do animation and has over 100 employees?

    The distiction ‘for the present’ comes down to economics-which ‘costs less’ for the province and adds more money. That’s why the FDI and ‘home grown’ debate is often simply ideology.

    However, it is instructive. IF FatKat can start out with one guy and grow, then there is no reason that can’t be duplicated. You can go to Fatkat and see their clients include ‘the family guy’ and ‘happy tree friends’. In other words, emphasis on ‘home grown’, where policy can actually be controlled, makes more common sense than the idea that ‘perhaps’ with enough ‘work’ that maybe animation companies from elsewhere can be brought to the province. One is a controllable variable-the other is not. Mpst importantly, one results from the other. IF the companies existed, then partnerships and a labour market would be an additional incentive to outside investment.

    Next point, people have to remember that although there are business ‘cycles’, there are also business ENDINGS. Wooden shipbuilding went through a number of ‘cycles’ in NB, depending on variables in international commerce, however, once steam engines came along, it was pretty moot to be talking about wooden shipbuilding as just ‘being in a downward cycle’. The same could EASILY be said about auto manufacturing-or pulp mills.

    More importantly, as for pulp, there is quite a bit of evidence that even when it was ‘good times’, pulp was a poor choice of value added product for the province. Even during the best years the amount of employment continued to decline, the pollution didn’t measureably decrease, and the companies didn’t use their profits for any meaningful investment.

    As for corporate taxes, again, there is ‘real world’ and there is ‘real world’. The pace is certainly downward, but as usual all eyes are on the US. Everybody SHOULD know by now just how thin a thread the economic system is hanging. It will be interesting to see american reaction to the latest bailout. It’s interesting because mainstream media of course ignores that the White House just vetoed a bill calling for 7 billion to be invested to insure everybody has health care. The government said they couldn’t afford it, but now is announcing 700 billion to bail out the richest people in the world.

    That’s literally spitting in the faces of people, so we don’t know how that will go. I recommend the Democracy Now podcasts, just listening for a week will really open your eyes-and Dan won’t seem so extreme.

    As for economic development, its a complex issue. David calls for more FDI, and by that we can assume that for policy he wants something like the NSBI, or just wants them to ‘work harder’.

    However, policy wise you can also look at legislation that helps exports. Pumphouse is my usual example, because I love their beer, but again, it came into ontario once, sold out, and was never back again. I highly doubt they are purposely avoiding markets, they probably just can’t afford that much expansion for the bank’s fees-or else they don’t want to become a public corporation (maybe don’t know how).

    Provincial policies or direct subsidies can help with those, and again, there’s no difference between giving them some cash and giving Irving lots of cash-except that smaller companies usually have more growth.

    So again, a sensible policy looks at both, but there are recognizeable immediate ‘goods’ in focusing on a local market. It is politically controllable, may lead to outside investment, and at the very least education helps people advance in their careers even if they aren’t at home. But once again you can look at what the NB economies are, and you can see WHY education ranks so far down. Industry needs workers, and resource, construction and mining industries want cheap plentiful labour, so thats where the political lines are drawn. Right now, there is no offensive counter to industries cries for cheap labour, so of course thats where political attention will go.

  4. richard says:

    “However, it is instructive. IF FatKat can start out with one guy and grow, then there is no reason that can’t be duplicated”

    Well, perhaps it can be duplicated, but not likely to be triplicated. Seems to me it is just as likely that pulp and paper will be around longer than FatKat and generate more jobs to boot. When the animation industry changes and cycles downward, what then. All industries go through cycles; some adapt and change, others disappear. The idea that there is some secret recipe out there that will create ever and forever jobs in a particular sector is a non-starter.

    The rest of your post was, ahmm, difficult to follow.

  5. mikel says:

    Read it slow or ask specifics, I’ve no trouble trying to say it better.
    As for animation, Fatkat has grown faster than any pulp industry has ever DREAMT of. Ten years ago nobody heard of it, now just go to their website.

    I’d have to disagree and I’ll point out the evidence. How many pulp mills have closed? Both Nackawic and Atholville no longer even produce paper, they produce rayon for the Indian market. Edmunston is barely solvent, has only made money by being able to defray taxes.

    Irving stays in business primarily by government largesse. The only reason the entire industry even operates is because of the government.

    Back to animation, the possibilities are endless. Technology has made it so that YOU can start an animation company free of charge (theres tons of free software), and there are relatively few subsidies necessary.

    And the appetite for the product is insatiable. Have you SEEN how big the internet is…let alone the ever increasing television universe? Every time I start up my peer to peer network I see the latest “Happy Tree Friends” episode pop up-and that goes around the world. I actually didn’t even know it was Fatkat that did it until recently.

    So not only can it be duplicated and triplicated it can be HUNDRED icated, and quite easily. Like I’ve said before, it can be made even easier if New Brunswick had a provincial television station-then it would really take off. TVO has had about sixteen children shows alone that have gone international.

    The only limit is the imagination, and perhaps that is the biggest problem. Even fatkat has said that they ‘stick with what they know’. That means there is tons of more room for professional relationships-games, CGI (getting cheaper and easier all the time-Fatkat only does the hanna barbera type of animation), black and white, instructional, historical, educatonal, the possibilities really are endless. There are animations now heavily tied into music videos. The surface has BARELY been tapped.

    Then of course there are the business opportunities. There are thousands of NB ex pats out there who would love to see SOMETHING come out of New Brunswick. There are internet channels dedicated to animation, there are corporate videos, there are cell phone shows (one saint john company does ONLY ‘shorts’ for Bell Canada customers).

    And thats just for starters. If you look at Fatkat’s ‘resume’ that is not even tapping into .00001% of the commercial clientele out there. How many mill workers did UPM put out of work? Something like 1500 jobs. Thats only FIFTEEN animation companies of FatKat’s size. That’s NOTHING in comparison to the size of the potential market. The best thing of all, is that the education for them is dirt cheap, theres little pollution, and it doesn’t make the whole damn city smell like an armpit.

    To try to make my point less convoluted, take a company like FatKat (100 workers and growing), and a pulp mill (less than 400 now at Nackawic) and go to ANY ED officer of ANY city or town and ask them which ‘economic model’ or business they’d like to see. Even if it were like UPM and had 1500 workers I suspect VERY few would look seriously at the pulp mill-especially once they saw its track record.

    It MAY be different for other industries-the RIM example is a good one. That’s a large company and I suspect many cities and province’s would shoot their left foot to get them (all except NB it seems). So if somebody is going to argue whether an ED model with RIM or some financial backoffice and 2000 workers is better than a whole mess of small animators then that would be a different story.

    However, again, RIM was laying off people just five short years ago. Vermont is a good example, it has a state made up of medium sized towns with mostly medium sized companies-however, a larger proportion of them are export oriented. There is ONE town in Vermont that grew way too fast-because IBM set up shop there. Now IBM is closing, which is decimating the town.

    So again, thats a very important political decision which way people want to ‘gamble’ their economic future. My point is that nobody is OFFERING to set up a huge animation shop employing over 500 ANYWHERE in New Brunswick. In fact there are no companies OF ANY KIND that are making that offer.

    However, provincial policy can look at the people in the province and build an industry based on that-its easily possible, in fact every industry has been built on that. The ‘powers that be’ looked at the forests and said “we can make shitloads of pulp here so people will have jobs”. And they did it. They spent taxpayers money to do it. Now all that needs be done is those powers looking at the PEOPLE and say “there are shitloads of stories that can be told”, and put taxpayers money into THAT. Politicians alwasy SAY they are interested in that, but like they say, its policy that matters.

    However, again, we come back to political representation. Andy Scott doesn’t give a rat’s ass that NB’s population is going down, or even that wages are 20% less than in ontario even though people have to pay more out of pocket expenses for medicine. He cares that he got some buses to Quebec and headed up a Commons committee on native affairs that had ZERO impact on policy and was a complete waste of money (never mind that the liberals had over a decade before that to work with natives). So until people work to get THEIR interests in there, politicians will continue to serve their REAL constituency (industry).

    Whew, sorry thats so long, hopefully its clearer.

  6. richard says:

    “As for animation, Fatkat has grown faster than any pulp industry has ever DREAMT of”

    That’s irrelevant and like most of your post, misses the point. The point being that cycles occur in every industry and you are in no position to say when the end has been reached. Perhaps the days of pulp and paper are over, perhaps FatKat will collapse next year. There is no permanent solution and no miracle around the corner.

    David’s points were that large operations more so than small business are in the export business and that large operations are in a better position to offer higher wages and better benefits to employees. The fact is those jobs are what people here want; politicians would be foolish not to want to respond to that desire.

    Neither David nor myself has said that animation is evil or undesirable, especially when those companies are exporting products. Nor has anyone condemned small business in general. It is simply a fact that large operations are anchors that provide many spin-offs. You keep quacking about Vermont; I suggest you look at a map. Many of those small and medium-sized businesses in Vermont do work with anchor plants in NY and MASS.

    “VERY few would look seriously at the pulp mill-especially once they saw its track record.”

    You make that comment, then proceed to point out that RIM and IBM have had problems too. If FatKat fails, will you then condemn the entire animation industry and urge ED officers to stay away from animation? Your post just makes no sense.