Nova Scotia is a ‘low-wage ghetto’?

From an article today:

Nova Scotia is a “low-wage ghetto,” according to a co-author of a report released today. Larry Haiven, a professor at Saint Mary’s University, said the report he wrote for the Canadian Centre for Policy Alternatives shows while productivity has increased over the past 20 years, Nova Scotia’s wages are lagging far behind. “If workers have been contributing to an overall productivity increase, then what have they gotten out of it? The answer is nothing.”

But if workers are more productive at low wages, and the province’s economic growth is healthy, who’s getting the money? Haiven said they crunched the numbers and realized it’s the business owners who are cashing in. “What’s happened is none of it’s going to labour, on average, and all of it is going to business owners.”

I find the CCPA actuall does some good research and explores areas that need to be explored but then they go to far and layer on a huge heap of ideology that belittles the value of the research.

Consder that last line about “all of it going to business owners”. What does that mean? Cripes. I have seen reams of data that shows Maritime business owners are far less wealthy on average than those in Ontario or the richer provinces (with a very few notable exceptions). The bottom line is the chronic lack of private sector business investment in Atlantic Canada had led to much lower private sector wages, less R&D and less productivity.

But to try and frame this as a few CodFathers milking the poor in Atlantic Canada is a distortion and not based on good research. In fact, in the little research I have done in this area, the large businesses that are Maritime owned pay considerable higher wages than their counterparts on the SME side of things.

We need to get serious about attracting our share of FDI. We need to get serious about finding mechanisms to get our SMEs more interesting in risk taking and moving out of their comfortable tiny local markets. As long as our local business leaders (small and medium) show little interest (in aggregate) in expanding beyond our borders and as long as we lag behind in FDI, we will never get the kind of economic impetus that leads to real wage increases, wealth creation and ultimately sustains population and our communities.

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0 Responses to Nova Scotia is a ‘low-wage ghetto’?

  1. mikel says:

    Hmmm, ‘good research that heaps on ideology that belittles the research’. Now who else could that statement be applied to…?:) Any ideas?

    You should put more details down to support your claim, because from the above it is YOU that is making ideological hay out of the article. From what is stated above, they are simply stating what the research shows…that business owners are reaping the benefits while workers wages are stagnant.

    That, by the way, is not symptomatic of just Nova Scotia or the maritimes but is true over much of North America. It is true of the world in general, but in North America its a real standout. In the US the country is quite simply back in the 20’s as far as wealth inequality goes-that’s not even debated anymore, the data shows it and its even admitted in ‘right wing’ commentaries.

    So by the experience of the past twenty years simply because there are more exports from the maritimes means nothing for workers, or even small business owners. You prove that yourself with your last blog on large scale projects and energy.

    So, unfortunately what it comes down to is a thought not often expressed here, namely that with an increase in workers rights we see an increase in productivity, growth, wages, and the tax base. This was very evident during and just after the war when the government essentially RAN the economy. Growth rates went through the roof right up until, well, bretton woods and the deregulation of banking and currency.

    There can be FIFTY more Irving corporations, but that doesn’t ‘necessarily’ mean anything positive for the economy except better numbers in the export column. Another refinery will make it LOOK like the province is absolutely awash in wealth (in fact the current exports make it look like that), when the reality will be that IRVING is awash in wealth.

    It’s a good article and a good blog, but again, the ideology belittles your analysis. We know you are somewhat schizophrenic when it comes to ideology, but it is a simple fact that ‘the rich are getting richer’ (and few of those are ’employees’), and Reagan’s failed policies of ‘letting them get even richer so that maybe they will pay their workers more’, is an economic theory that has been proven time and again to be unsuccessful. I know the fear of communism still reigns over this generation, but sometimes you’ve got to call a spade a spade.

  2. Anonymous says:

    We can only hope NB can generate 50
    Irvings. Hell, one more Irving would be a great help.

    Mikel, since you hate Irving (or from the tone of your other posts, any profitable private enterprise,) Ontario is welcome to have the $8, 12-week tourism jobs and $10 call center jobs.

  3. mikel says:

    That’s just a silly post not worth replying to, but I will. I don’t ‘hate’ anybody and I am no bureaucrat or doctor, I’m a small businessman and my aim is to make profit. There is nothing wrong with SOME profit, but its been shown time and again that any large corporate interest in a small economy is detrimental to business.

    The case in Woodstock is the most recent example, but there are numerous others-too numerous to mention. Catering to Irving on the LNG terminal is a perfect example, gas companies have been bribing municipalities up and down the eastern seaboard to try and get a terminal located there. In Maine they pay ten times the property tax Irving does and will provide 50 more jobs, all at guaranteed salaries of over 50 grand.

    Oil refineries pay 15 times more property tax in the US than Irving does. Their pulp mill just finished blackmailing the province for 9 million, and this is after years of benefitting off of Lord’s quarter of a billion technology tax credits. Not to mention the energy rebate lately in the news.

    So again, there is little evidence that public policy aimed at satisfying the whims of corporations has any long term effect-certainly not as long as the investments in education and training that happened in the fifties, sixties and even seventies.

    The evidence is very much what NBT points to-a small group of companies that are forever being supported by YOUR tax dollars because they are ‘too big to fail’. And keep in mind that this is exactly the condition that Adam Smith warned about when he espoused his system of capitalism.

    The most successful economies weathering the recent storm have been the european countries with strong government investment in resources, its no coincidence that most of europe doesn’t just have a different political system, but a different taxation system aimed at taxing resources, not income.

    That response is far more than is deserved, there are lots of blogs where guys sit around slinging insults and by lines at one another, this isn’t one of them. For ‘hatred’ of Irvings you can go check out Charles Leblanc’s blog and rail at him and his cronies all you like.

    I haven’t read the CCPC report, but what is good about them is that they do offer ‘alternatives’. That is where the critical commentary should be, not criticizing them for daring state the obvious. If their ‘alternatives’ are unrealistic or even just debateable then it would be good to see a blog commentary on them. But just to end on a critical note, I’ve read this blog a long time, and don’t think I have EVER seen a positive blog on a CCPA report, only a few critical ones, but usually nothing. So IF Mr. Campbell has read some of their stuff and liked it he has kept it to himself. I mention that because its unfortunate, like Green initiatives or as we saw, NDP policies, they are often moderately close to what Mr. Campbell is saying, and usually at least they are seriously talking about the issues.

  4. David Campbell says:

    Mikel, you disagree with my overall approach and that is fine. I am not going to give the CCPA a stage here because at a fundamental level they have shown a hostility to my basic premise – that we need more international business investment here. Most of the ‘solutions’ that I have read tend to be government-based solutions. I don’t agree. I believe there is a strong and important role for government but when it comes to economic development (and that is only one priority of any government) the focus should be on catalyzing private sector investment over time in the region. Let me ask you a question. What organization is on the other side of the fence? We know exactly where the CCPA stands. Almost everything it publishes has the exact same ideological thread. Who is out there promoting the other side? AIMS? Not on your life. Advocating no role for government in economic development is not a model. National think tanks? Not even close. APEC? Not in my opinion. Policy alternatives – it would seem definitionally – should not all be tilted to the left of the spectrum. I am trying in a small and not particularly robust way to promote policy alternatives that tilt towards stimulating more business investment and the resulting job creation, productivity enhancements, wage increases and stronger public finances.

  5. mikel says:

    This is just criticism, its not ‘personal’. Usually you keep ideology out of it, which is why its one of the best sites around for public policy. Ideology is simply another word for religion.

    There is a difference between ‘giving a voice’ and simply commenting. You have no trouble criticizing the Irving media, but that just serves the purpose of keeping their ideas at the forefront. So let me ask you this, IF there are ‘some studies’ of CCPA that you like, what is wrong with mentioning that? Just because they disagree with you on some points? So does Irving, but you comment on them.

    The benefit of CCPA is that they are policy ALTERNATIVES, and very rarely are they ‘left’, in fact you can go to their website and much of their political economic studies come directly from AIMS, especially in the maritimes because they only have on affiliate in Nova Scotia.

    My comment though was specifically on what you said. I don’t disagree with your ‘theme’, in fact I’ve posted enough that if RIM or any other corporation saw fit to make a big investment in NB, I see no problem with that, that would be great news.

    But again, there is a slight schizophrenia here. If you DON”T think solutions are ‘government based’, then why do you spend 95% of the time criticizing government and politicians? As you’ve stated, the business environment in NB is just as good as, if not better, than most places in the western world, so why aren’t mining corporations and Irving and McCain and Moosehead and Molson the target of more blogs? Its because government sets the tone-what kind of tone is of course the issue.

    I didn’t understand the final points. Are you seriously saying that AIMS and APEC come from the ‘left side of the fence’? I must have read that wrong, but for readers who may not know, the ‘left’ side of the fence would be government taking over ALL industry and those industries being controlled by the workers within the organizations. THAT is ‘left’, and NO organization is saying that, certainly not CCPA, which at most wants regulations concerning just how much ‘looting’ corporations can do in a place. That’s hardly ideology, in fact its the very essence of capitalism.

  6. mikel says:

    I can see why you wouldn’t like this particular study. We know that Nova Scotia is often a model that is presented for New Brunswick to follow. This report, and I can add a few websites along the lines of NBT from Nova Scotia, make that model seem less than desireable.

    The report starts off noting that Nova Scotia’s growth rate between 1981 and 2006 actually outstripped canada.

    Most importantly though, the report makes the point that worker productivity is also up, however, a standard economic measure-that the more productive a worker is, the more earnings they should see, has not followed suit.

    Productivity is the chief debatable term here. While NS has increased productivity at the same rate as canada, it still lags about 20% lower. The report points out that that is not because ‘workers are lazy’ but because of technological investments don’t keep pace in the east with the west-and it further notes that that is not the fault of workers (and not necessarily even the fault of employers, but they certainly have more responsibility in this area than workers do).

    Its also noteworthy that the studies point out that SOME economic statistics are even worse for NS than NB. They note that Nova Scotia has the third highest percentage of low paid workers in the country, behind PEI and NFLD (ahead of NB). Of course that could be because NS is not as brutal on the poor as NB is.

    For weekly earnings for 2007 it should be pointed out that according to the study, weekly earnings are lower in NS than NB, in fact in NB they are higher even than Manitoba, and just short of NFLD. Of course that could also be because of a polarization, there are a lot of VERY wealthy people in NB, which brings the average up.

    Next, the study looks at Net Domestic Profit, in other words taking taxes out of the equation to show how much of the corporate profits are spread to workers. That number has dropped radically, only rising a bit once in 2000. Workers are seeing less and less of the ‘pie’.

    The report also points out what I said above, which is that this movement of wealth away from workers is not exclusive to Nova Scotia or Canada, but is worldwide. The richest 5% now control over 93% of the world’s wealth.

    As for ‘ideology’, that only comes in the conclusion, however, their statement taht ‘inequality and poverty should be everybody’s concern’ is hardly contentious. More pertinent to ideology, the conservative economist argues that low wages act as a spur to productivity, but this and other research is showing exactly the opposite.

    This has little to do with this blog, I’ve never heard Mr. Campbell claim that we have to give more money to Irvings so that maybe everybody else will get more. In fact, I’d say there is a probably a good argument that the economic successes, namely the pursuit of ‘high end financial backoffices’ and research firms like RIM, are the types of initiatives that have the highest probability of changing the ‘productivity gap’.

    So this report certainly doesn’t get in the way of the main theme of this blog, we have to remember that while NS has those new backoffice success stories, it is still a maritime province mired in many of the same resource extraction and service industries that have long held the maritimes back.

    I encourage readers to check out the study, and others at CCPA.ca because they simply don’t parrot the AIMS, and other corporate party line-that if its good for a corporation then its good for society. And they fit in quite well with the main ‘themeS’ of this blog. That doesn’t mean everybody will agree on everything, but who does?

  7. Anonymous says:

    I haven't read the report, but your comments and Mikel's left me thinking about something. To what extent could NS failure to transfer wealth to its workers be explained by the restructuring of the forest (and other labour-intensive) industry?

    I am not an expert in the forest industry, but many people seem to agree that at least a portion of workers in the forest and pulp & paper industries were (and some still are) paid more than their qualifications should warrant. So if you have a reduction in the number of mills (and/or new labour agreements) but the total production increases or stays relatively unchanged, it then follows that labour productivity would be higher and the workers would be getting a pay that is more in line with their qualifications. The same line of thought would probably apply to other industries that have become relatively less labour intensive – and that, as we know, are the backbone of the region's economy.

    So would it be fair to qualify this as employer's greed? Just keep in mind where the competition is coming for the region's traditional industries (i.e. more labour-intensive developing economies). So perhaps the CCPA's findings simply reflect the fact that Atlantic Canada's economy is based on (relatively) labour-intensive industries that have gone trough some restructuring in the last few years – while at the same time the workforce has moved from these industries to lower paying jobs (e.g. call centers).

    If that is the case, what is the solution? The answer is simple. Move up the value-adding chain in the traditional industries and stimulate growth in higher end industries. And, to David's point, that's where governments have an important role to play.

  8. Anonymous says:

    I have just gone through the report 15 minutes after my previous post. I can only agree with David – and I have to say it again: Mikel you seriously need to check your Freudian desire to disagree with everyone.

    A few facts: CCAP started with funding from trade unions and their ideological bias is evident in their style of writing (definitely more to the left of the spectrum – at least in this report). You want prove of that?

    In page 24 they first quote Sharpe: “…the relative DROP IN CAPITAL INTENSITY in Atlantic Canada has played a large role in the deterioration over time in Atlantic Canada’s manufacturing productivity.” And then they go on to say that “It is increasingly evident that our province’s productivity lag has little to do with how hard and long Nova Scotians work; it has much more to do with HOW OUR BOSSES deploy capital” Mmmm, if this is not ideological, I don’t know what is. They could in fact try to do a better job by exploring further the reasons why capital investments in the region are low – not simply say that “It’s just too easy to make profits on low wages.”

    Lastly, the CCAP as a parrot of AIMS? I went over David’s comment and I think that you are seeing things where there aren’t.

  9. mikel says:

    It’s hardly a freudian desire dude, its called debate and criticism and thats what blogging is all about. I didn’t understand David’s final comment, but after reading over several times I do now, however, if you push a right wing agenda then you can’t be surprised when ‘alternatives’ are to the left. Where else are they going to be?

    I didn’t say there was NO ideological bias, only that the research and data is pretty solid. Every organization got its start somewhere, but it comes down to the data. I couldn’t find that quote on page 24, and I don’t see what the quote above has to do with a particular ideology, it seems a statement of fact, but again, its only one comment in a large study. So let’s look at another larger more important quote:

    In the 1990s, Canadian
    industry invested much less than the U.S. in machinery and equipment, especially
    the new information-based technologies, resulting in large differences in the quality
    of the capital stock. Business investment in research and development increased a bit
    in the 1990s, but remained at less than two-thirds the U.S. level. Business investment
    in worker training similarly continues to lag well behind U.S. and average OECD
    levels.31

    That is a comment that I would not be surprised to see posted as a main theme at this blog, and is very much at the root of the problems in Atlantic Canada. And although its a bad choice of words stating ‘our bosses’, when you read the report their conclusion pretty much follows from all the data. IF there is another way to intrepret the data, again, that’s why I mention to David to put down some details and perhaps talk about the content some. Usually this blog is about data, NOT ideology, if Mr. Campbell wants to turn the blog into a replica of NBT’s shrill cries against government, that’s his business, I’m just pointing out the data to readers who have come to expect more from his blog. It’s his own fault for running a professional, non partisan blog in the first place:)

  10. mikel says:

    Just wanted to point out my agreement with one point in the above anonymous quote before this post disappears-I do agree with the line that they could do more research on WHY capital investments are so low in atlantic canada (since they state that its also lower in Canada than the US and other OECD countries then it follows that the reasons aren’t simply maritime ones).

    That’s partly a political question, but an important one and that’s why I think its important to talk about studies such as this one, not ones that simply ‘agree with the main themes’. It would go along the lines of that lady whose article David featured awhile ago (but who also had points he disagreed with).