It's The Economy, Stupid

For a number of years, the N.B. government has been ‘talking’ about immigration but doing almost nothing. In the last five years, we have received only about 1/3 of the immigrants that came to New Brunswick in the early 1970s (I covered this in a previous blog). Further, Nova Scotia and many other provinces actually have a plan to attract immigrants – unlike New Brunswick.

But now, in the new budget we have $1 million in new money to help attract immigrants. Sounds like a good number until you realize it is only a fraction of what our neighbours in Nova Scotia are spending.

But let’s be optimists. A colleague of mine suggested that we should have a lottery – all immigrants get a chance to win $1 Million just by immigrating to New Brunswick. You would have a 1 in 700 chance of winning!

In addition to the lottery, New Brunswick provides other benefits to potential immigrants including:
*Not having to work for eight months of the year (the government just enhanced the program – why not promote it?)
*Lots of cold weather recreational activities – but if the immigrant is not interested in the outdoors, that’s fine. We aren’t either. New Brunswick is the least physically active province in Canada. There are lots of in-door activities such as cable TV, bingo, bridge, etc.
*Finally, we could give all new immigrants a framed, autographed picture of Bernard Lord.

In the absence of a real plan, I think this one just might work.

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I know I have talked about this subject before but after the new Lord budget promising additional small tax cuts to individuals and small businesses, I felt it appropriate to raise the point again.

Bernard Lord was elected in 1999 and chose to pursue a Mike Harris-style approach to government. Cut spending (except education/health), cut taxes, get out of the way and let businesses grow the economy. As I have stated before, New Brunswick is not Ontario. After five years of this philosophy, we have seen a net out-migration of almost 6,000 people (compared to 17,000 net in-migration in Richard Hatfield’s first five years), the second worst rate of immigration in Canada (compared to a healthy rate during Hatfield’s first five years), the second worst rate of job creation, and GDP growth below the national average all but one year (and predicted to be lower for the next three).

This approach to governing is clearly not working. They brag about cutting spending in all areas except education and health. What could possibly motivate them to promote this? Is government only about education and health? They brag about their small business tax cuts. Well, they have the second worst rate of small business growth in Canada. They talk about income tax cuts. We already pay, on average, the second lowest total income taxes of all provinces. Not because our rates are low, but because our income in low and therefore taxed less.

And they brag about balanced budgets. This one always confused me – I must admit. We need between $3,000 and $4,000 for every New Brunswick (per person) in Ontario and Alberta taxpayer dollars just to cover basic government services and they talk about balanced budgets. That’s a bit like a money losing division of a corporation braggin about how good they are doing. They can brag but ultimately, the company will shut them down.

In Canada, we don’t ‘shut down’ provinces. We just let them die a slow death.

And with Lord, that slow death has been accelerated every so slightly. The average New Brunswicker doesn’t really inform themselves about out-migration, about GDP growth, about industry closure. Oh, look honey, another plant closure in Tracadie. That’s too bad. Now move on to Brad Pitt’s latest fling.

But the government should know better. They should see these numbers, realize that the Mike Harris-style is not working (and the billions in deficits in Ontario suggest that maybe it didn’t work so well there either – the effect just lagged a bit). They should dramatically change course, now.

But you can’t teach an old dog new tricks. Especially when Fido is looking to upgrade to a larger house in Ottawa.

So hunker down. Get ready for the CFIB to praise the government’s small business tax cut while an increasing number of small businesses go under. Get ready for all the gloating and preening about ‘prosperity plans’ and the wonderful success of the government. Then, as I do, take a quick look at the real economic numbers, sigh, and go about your business.

Hatfield was in for 17 years. Frank was in for 10 and could have stayed in for 20. New Brunswickers don’t like to change government.

I’ll probably be whining 5-6 years from now about the same topics.

…wait a minute, that sounds like fun!

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Today, we test your knowledge of government subsidization of industry (AIMS, Frasier and CTF employees ineligible to take this test). Only one answer is correct. The question is: What is Canada’s most subsidized industry (by governments)?

A. Aerospace/transportation equipment (Bombardier, Bell Helicopter, etc.)
B. Automobile manufacturing (GM, Ford, Toyota, etc.)
C. The fishery
D. Agriculture

If you answered D, give yourself a pat on the back. Yesterday, the Federal government announced another billion in support for the industry – on top of the billions (plural) already given in the past two/three years. Now, don’t get me wrong, the other sectors have been subsidized in a significant way. Consider the billion for the auto sector this year and the hundreds of millions for aerospace/transportation equipment in Quebec. But agriculture takes first prize as, by far, the most subsidized industry in Canada.

We are given a rationalization for this, of course. Farmers can’t control the weather. They can’t control world grain prices. They can’t control international trade barriers. We owe in to them.

I guess that New Brunswick furniture manufacturers do control the U.S. currency, imput costs, trade barriers.

Obviously, you see the absurd nature of this arguement. No industry controls those external factors. Each are affected by things beyond their control. It’s just that farmers, for some reason, are a great political target for support.

I sometimes wonder why. If we imported our milk from low cost producing nations, it would be half the cost it is today (at the same quality). Yet, our public health people say that kids don’t get enough milk to drink because the price is too high. That high price is set and supported by the very government (another department) saying kids don’t drink milk enough.

I also wonder why three of the four top subsidized industries don’t have much presence in New Brunswick. I wonder why we feel the need to use federal dollars to subsidize an industry that is primarily based in Alberta – the richest province/state in North America. Wouldn’t those billions be better spent trying to support and stimulate economic development in the poor areas of Canada such as Atlantic Canada, the Gaspe and Northern Ontario?

No, I guess the billions in EI is our reward.

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I sympathize with the writer of recent letter to the editor of the Times & Trash-script entitled N.B.’s poor need help. The gentleman laid out a well articulated case for increasing social assistance to New Brunswick’s poor. The cost of living has gone up substantially since 1997 but the assistance paid to the poor has not.

Now, the government knows that we have the third highest rate of people on social assitance of any state or province in North America. It also knows we have tens of thousands on seasonal EI – a variation on the welfare theme (income paid by governments to individuals that they did not earn). I suspect there is some in the Tory camp that feel making social assistance too ‘lucrative’ would only encourage more usage.

The real issue here comes back to the economy. I know that I drag that out as the cause of all our ills – but that is the purpose of this blog afterall .

Seriously, the strongest economies in North America have the lowest rates of welfare – it’s that simple. Also, with some notable exceptions such as Alberta, the stronger economies tend to have the best social assistance programs (even in the U.S).

This chronically underperforming economy directly leads to systemic welfare and EI dependance as we now see in New Brunswick.

I, for one, would ask Premier Lord to not give us a $20 tax break and up the social assistance rates. If he is not going to do anything to fix our economic problems, he may as well use Ontario and Alberta tax dollars to prop up the programs that more and more will be needing.

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I most likely am going to take some flak for this blog from my good friends in the public service. Most of them are credible, highly qualified and competent workers trying to make the world a slightly better place from their actions and I commend them for it.

However, I feel compelled to point out a few facts. I don’t believe that you can solve your economic problems by hiring more government employees and paying them higher wages. Ultimately, government workers are paid for out of the economic activity generated by the private sector so hiring more of them and paying them higher wages will eventually cause significant stress on the economy rather than benefiting it.

For example, not many people realize that there are 80 government employees (employed in Government Service Industries) for every 1,000 workers in the economy as a whole (employed persons as of the 2001 Census). This, of course, doesn’t take into account education, health care and other government-funded industries – just direct employees of government. That compares to only 57 per 1,000 Canada-wide. That means there are 39% more government workers in New Brunswick than Canada as a whole.

Further, government workers in New Brunswick are paid 44% more, on average, than the average annual income of all workers combined. That compares to only 27% more Canada wide. While we are on the subject, elementary and secondary school teachers are paid 14% more, on average, than the average worker in New Brunswick compared to 11% nationally. Translation, New Brunswick teachers are paid more, relative to other workers in New Brunswick, than teachers outside the province (I can think of at least three people that have taken me off their Christmas card list as they read this).

I am not trying to heighten controversy but I do find it a little bizarre that in New Brunswick, a government job is considered ‘hitting the jackpot’. I know of a number of people that would like nothing more than to get a government job.

Contrast that with the United States (always a good benchmark) where government workers are paid less – sometimes significantly less – than the private sector. In fact, I attending a government recruitment seminar while attending university in Virginia and the recruiter started his presentation by saying “You will never make as much working for government as you would in private industry but you will have the satisfaction of working for the public service and making your communities a better place”.

Well, in New Brunswick you get both – better wages and the ability to work for the public.

To finish this thought, I’ll make a couple of closing remarks. The current government’s approach to labour relations has been to talk tough, act belligerent and then basically give a good deal to the workers (I think the Stenos; however, got the shaft). This was documented by someone recently who said that public servants in New Brunswick received the highest increases in wages in the past five years of any province in Canada.

So, Premier Lord, in his savvy, political way (looking tough on unions but giving in at the same time) is practicing a decades old tradition in the province of trying to bolster the economy with government work.

I think government workers should be paid well – in line with the private sector. I think that the ratio of government workers to private sector workers should be way more in line with the national average. Finally, I think government should be more active trying to stimulate private sector job creation than using government jobs as a proxy.

James Foster in the Times and Trash-script this weekend wrote an article supposedly about our high level of taxes but ended up being overtly positive – talking about the increasing disposable income among New Brunswick workers compared to the national average since 1981. I would ask him to back out government workers and see if the rest of us have achieved such growth in disposable income.

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I have been a vocal critic of the lack of focus on economic development in the province over the past number of years. I believe that it has led directly to the population crisis, the EI problem, youth out-migration and the other results of economic stagnancy, namely increasing dependence on EI, the education gap, decaying infrastructure, etc.

However, I can’t believe that the PC Party of New Brunswick isn’t sounding the alarm. At their convention last year, there was almost no attention to economic matters and the Premier himself openly brags about cutting spending in all areas except health care and education.

Well, cutting spending on economic development, highways, etc. has its effect on the New Brunswick economy.

Just for fun, I looked at the first five years of the last PC Premier, Richard Hatfield from 1971-76. During that five year period, there was a net in-migration of 16,700 people (that is the difference between people moving in and moving out). In addition, there were over 9,000 immigrants. Now fast forward to the first full five years of Premier Lord. There has been a net out-migration of -5,600 people and only 3,600 immigrants. From Hatfield to Lord, we have gone from thousands of people moving here to thousands of people moving out (net). Despite record levels of immigrants to Canada in the past five years, only 1/3 of the number of immigrants settled in New Brunswick from 1999-2004 compared to 1971-1976.

I am curious why the Tory party itself isn’t sound the alarm and cracking the whip – forcing Lord to start actually doing something. Sooner or later the abysmal economic performance of New Brunswick is going to sink in with the general population and the Tories will be bounced from office.

Too bad we couldn’t roll out the bones of Hatfield to provide Lord with some advice. It would be better than what he is getting now.

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I just started reading a new book called Boomtown USA – 7 1/2 steps to big success in small towns. In this book, the author looks at over 300 small, rural towns, picks out the successful ones and then trys to distill it down to a few key elements that can be replicated in other small downs. Judging by the early success of the book, he may be on to something. The author has been on the road all over America getting paid large sums of money to impart his wisdom to small communities from Tennessee to Oregon.

But as I read the opening chapters and his basic assumptions about small towns and rural communities, I couldn’t help think that I am not sure they apply in the Atlantic Canadian context. I don’t mean to be rude or hostile but I am just not sure. For example, here are some of his assumptions:

1. Small towns are known for people with a very strong work ethic that will work 12 hours a day or more without complaining.
2. Small towns are much more cheaper to do business than large ones.
3. Small towns are open and friendly to foreigners moving in.
4. Small towns have a much stronger sense of community.
5. Telecommunications provides a level playing field for small towns.
6. Small towns are eager to support new business and economic growth.

Now, in many ways, these basic assumptions seem correct. However, let me point out a few observations.

1. After having interviewed dozens of small businesses and entrepreneurs in rural Atlantic Canada in recent years, I can say that, in many cases at least, small towns in this region are not known for a strong work ethic. In fact, they are more known for the ‘big stamp’ and for striking against their employers than for strong work ethic (again not to generalize but in many cases).
2. I am not sure that small towns in Atlantic Canada are cheaper to do business. My experience is that some employers have had to pay an ‘EI premium’ wage to attract workers to work year round. A call centre tried to set up in rural NB (and another in rural PEI lately) paying $9/hour + benefits and onsite daycare and they couldn’t get workers. They moved to an urban centre and found workers.
3. Again, without generalizing, I have heard the term ‘come-from-awayer’ an awful lot in recent years. I am not convinced that all small towns in New Brunswick welcome people with open arms – especially those with coloured skill or an accent.
4. I am not qualified at all to comment on this one but my observation would be that some communities are not very community-minded.
5. This is the biggest fallacy of them all. Senior government officials in the mid 1990s in Canada said that telecommunications would level the playing field and open up rural communities for population growth as people fled the cities for more pristine environs. Well, since the mid 1990s we have seen the opposite. In New Brunswick, the out-migration started accelerating at about that time (although this may be more tied to the other elements here).
6. All I can say is that I have heard small town councillors and mayors say things that would not indicate much interest in attracting new businesses.

I am not trying to be mean or bash small communities. I am from a small community. My parents live in a small community. I frequent small communities. I also fundamentally believe that if Boomtown USA’s basic assumptions about rural communities were accurate (in the Atlantic Canadian setting) we would see much more economic and social success.

Remember, in Boomtown USA, these were his basic assumptions. He holds these true for all rural communities. He then goes on to develop the main additional keys to rural economic success.

It sounds to me like we need to work on getting the basic assumptions right before we do anything else.

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I recently finished reading Jarod Diamond’s new book, Collapse which is an in depth look at why societies, in his words, choose to succeed or fail. His angle is mostly environmental – deforestation, depleting of natural resources, soil erosion, etc. with a few wars and other elements thrown in for good measure. Ultimately, of course, he draws some conclusions for us in the modern day and our need to be better stewards of our natural resources, control global population and the other key themes of the environmentalists.

Debating those subjects is for another day.

I just wanted to point out that long term planning is a relative term. After reading this anthropologist talk about ancient societies that had forest, agriculture and natural resources management plants for hundreds – and in some cases thousands – of years, it made me put things in perspective.

New Brunswick’s economy has been in ‘decline’, in my opinion, since sometime in the 1960s. If you look at the figures, our population growth decline (i.e. the slowing of population growth) started around 1970 and continued dropping for the most part until 1998 until we actually feel into negative territory – population decline – which is where we sit today. But, in addition to a declining population growth rate there were a number of other elements that have contributed to where we are today. Our traditional sectors started to wane and governments countered not with robust economic development but with seasonal work and EI. The out migration of our best and brightest accelerated. The education gap between us and other provinces started to widen and we did nothing. Our infrastructure and openness for new investment started to decline and we did very little. The successful economies embraced immigration and fostered it while we stood by and did nothing.

Welcome to 2005.

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Whenever someone mentions language in Moncton, people bristle. It’s a taboo subject. Everyone’s worried that any kind of analysis will erode the many positive steps that have been taken in the past few decades to make Greater Moncton a vibrant and bi-lingual, bi-cultural place.

So it is with some trepidation that I write this blog. However, I think some of this stuff needs to be debated in the public space.

I consider myself and my family fairly typical for Greater Moncton – an Anglo with a working knowledge of French married to a fluently bilingual wife (actually trilingual) with three kids – all in (or will be) French Immersion. I work in a bilingual office and I participate in bilingual community and cultural events. I fundamentally believe that our bilingualism is a key defining attribute that benefits us in profound economic, social and cultural ways. I believe that everything should be done to protect and enhance this duality.

However, I am a little dismayed, in general, with some of the Anglos in our community. As of the 2001 Census, the average income for a mother tongue English speaking person was lower than a French speaking person for the first time ever. In addition, the percentage of university graduates is higher among the mother tongue French population. Further, the arts and cultural aspects of our community tend to be dominated by Acadians – and good for them. Finally, it seems that the majority of young entrepreneurs in our community are Acadians.

So what am I saying? I think we may be seeing somewhat of a ghettoization of the anglo community in Greater Moncton. Lower incomes, lower education levels, limited involvement in arts/culture, limited entrepreneurship.

I won’t attempt to redress all of those issues in this blog except to say that the anglos need to be as proactive in this community as the Acadians have been. We need to take a page out of their book. In addition, the Acadians should welcome this. Better education, higher incomes and a better appreciation of arts/culture will benefit the entire community.

In short, I think a few steps need to be taken:
1. We need an English language university located in the City of Moncton. I know we have ABU and Mount A down the road but by my estimates over 80% of all English kids graduate high school and leave town for university – most never come back. There is ample evidence that people who attend university in a city/town have much more likelihood of settling down there (just look at U de M which has in many ways been the driving force behind much of the innovation and entrepreneurship among the Francophone community). I am not talking about a brand new university or a 5,000 person campus. I am talking about a 800-1,000 student campus of UNB, Mt. A, Dalhousie – whatever that provides English speaking graduates with a place to attend university – an option.
2. We need to get over this myth that anglos have no artistic talent. We need to foster artistic creativity among kids and find ways to better integrate the highly successful Acadian artistic community with the anglos – without forcing everyone to speak English and all of the other ‘rot’ that people think of.
3. We need to foster entrepreneurship among our anglo young people – not singled out as such but maybe there is not as much risk taking or other attributes of an entrepreneur among anglos – we need to redress this.
4. We need more leadership – examples. I know a large number of Anglophones that embrace everything that I talk about – consider former Mayor Brian Murphy. 65% of people in Greater Moncton are Anglophones (over 1/4th of them are now fluently bilingual). Further, the majority of people that have moved into Greater Moncton over the past 15 years are anglophone – that’s right – the Acadian Peninsula exodus is real but the overall in-migration is predominately Anglophone and a small trickle of immigrants.

Greater Moncton is becoming (or is) the capital of Acadie. And that’s great. But it is in no one’s interest for our community to be a unidimensional place. We need a healthy and growing anglo community. We need more immigrants – many more immigrants. Sure, we should be a community where as many people as possible speak both French and English. Absolutely. And we should make that our passion. But let’s have a little bit broader view of the world. Let’s raise our kids bilingual – even trilingual. Let’s expose our people to a broad range of culture and ideas – we’ll all be better for it.

The rant’s over for today.

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I have said before and I’ll say it again – patronage and economic development don’t mix. If you (i.e. the Premier) feel compelled to give a former MLA a high paying job in government, put them in charge of parking tickets or garbage removal or some other post.

I just read about former Tory MLA Joel Bernard’s resignation from the Regional Development Corporation. In the article, Bernard admits the Premier gave him the job because he had ‘kids’ and ‘a mortgage’.

Now, Northern New Brunswick is in desperate need of economic development. It is losing population, its main industries are closing, upwards of 40% of the people are on seasonal EI and there is beginning to be a sense of real urgency.

So, what’s our Premier do? He takes a key, top economic development spot – one that should be critical to getting that economy moving again – and gives it to a buddy because he has ‘kids’ and ‘a mortgage’.

And you wonder why things aren’t getting better up there.

Mr. Premier, have the guts to hire the best economic developers from all over North America and put them up there. Pay them whatever it takes. Give them whatever budget they need.

Stop all this silliness.

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