It’s The Economy, Stupid

I am going to try and do a little decade in review over the next few days and posts.   A lot of the 2009 data will not be out until well into 2010 but I’ll use the most recent data I can find.  I’ll start today with population.

Between the first quarter 2000 until the first quarter 2009, there has been a net out-migration of 14,000.  This is the interprovincial migration.

In 1999/2000, for ever death in New Brunswick, there was 1.26 births (the natural growth rate).  By the 2007/2008 timeframe, that had dropped to 1.11 - the second lowest in the country.  It’s worth pointing out here that people in Alberta age at exactly the same rate as in New Brunswick.  The main reason they have 2.3 births for every death is they are attracting young families and young workers to the economy. Out-migration from Atlantic Canada is primarily young people.

Birth to Death Ratio

Source: Statistics Canada.

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Just back from a two week vacation that involved Orlando, Savannah, Virginia and Hartford.  Lot’s of kms on the minvan.

I saw this billboard on the way to Florida.  I think there were several but I am not totally sure as I was trying to keep my eyes on the road.

I think a “Who is John Galt” billboard pretty well sums up what is going on right now in the US of A.   Galt was the hero of Ayn Rand’s Atlas Shrugged - I was introduced to Rand’s thinking when I had to write an essay on her back in university.  

There is a rising backlash in the U.S. over what many people see as socialism.  The Tea Partiers are more liked than both the Republicans and the Democrats.

The Yanks are going through another of their periodic existential crisis points.  It’ll be interesting to see how it turns out.

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It’s fun to watch the Population Secretariat report on the quarterly population numbers and talk about getting closer to that goal of a 6,000 person increase by the end of this year. According to the CBC report, they are close - 5,400 people.

“That puts us just under 400 people left to go to achieve that goal of 6,000 by the end of 2009, so certainly [it's] very positive news,” said Brendan Langille, spokesman for the province’s Population Growth Secretariat.

We have the worst growth rate in the country and the spokesperson calls it “very positive news”. 

The other wild card that should force Mr. Langille to be a little careful is the “residual deviation” from the population estimates.  Check here for the recent adjustments.  Essentially the quarterly estimates are just that and have to be revised every few years.   The annual numbers have been revised downward every year since 1991.

The average downward adjustment per year since 1991 has been -905.  Assuming the same residual deviation continues, the province’s actual population growth since the Libs took power would be more like 2,700 persons and not 5,400. 

The point is that the province needs to be creating good paying jobs.  If it does that, the people will follow the jobs.  I’m not saying that there is no need to ‘work on population growth’ but without the jobs why does it matter?

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Further to my column this morning, a couple of charts worth considering.  I do not support a significant increase in government focus on tourism.   Again, I reiterate that there is a role for government to play in coordination and support for the tourism industry but I think that in a time when we have to make hard choices, I wouldn’t place more resources here.

The reasons are both economic and workforce related.  On the economic front, tourism jobs are low paying and therefore generate limited tax revenue for government.  On the workforce front, I don’t think we can expect people to stay in New Brunswick and work in tourism jobs.  This sector is already feeling the pain of a tightening labour market - I have talked with several industry players that cite the lack of a workforce as a major problem.  There may be some potential to fill the gap with immigration but, again, do we want to create jobs that generate a couple of thousand in tax dollars for the provincial government when it costs the government over $20,000 per employed person to pay for public services in the province (including debt servicing)?

New Brunswick is not overly exposed to the tourism sector.  If we group the employment of the two sectors most associated with tourism (Arts, entertainment and recreation/Accommodation and food services) we see that New Brunswick has slighly below average reliance on these jobs.

Tourism Jobs per 1,000 Employed Persons (2008)

Source:   Statistics Canada. Table 281-0024 - Employment (SEPH), unadjusted for seasonal variation, by type of employee for selected industries classified using the North American Industry Classification System (NAICS), annual (persons)(4,14).

New Brunswick can`t afford to directly support the creation of lower paying jobs.  The average wage in New Brunswick is still second lowest in the country.  We need to focus on higher wage jobs. These can be in the manufacturing, services or technology sectors but the litmus test for sector focus should be wage rates.

Average Hourly Wage (all workers) - 2008

Source: Statistics Canada. Table 282-0072 - Labour force survey estimates (LFS), wages of employees by type of work, North American Industry Classification System (NAICS), sex and age group, annual (dollars unless otherwise noted) (table), CANSIM (database).

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My visit to Disney World has convinced me more than ever that tourism cannot be an economic anchor. The wage levels are just too low.  My column on this subjec this morning in the TJ.

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The average household expenditure data is out for 2008.  The summary categories are found here.  This does not mean New Brunswick has a low cost of living - per se - this means we have lower average household income which translates into lower average household expenditures.

This is interesting.  It shows the top level expenditure data by income quintile.  People at lower income levels pay far more for shelter (as a percentage of income) and far less on taxes.  Households at the lowest quintile spend 2.9% of their household income on personal taxes.  In the third quartile, it is 19.7 and in the top quartile it is 29.2 percent.  This is a powerful reason why we must be focused on economic develpment policy designed to foster higher wage jobs.

For those obsessed with the NB power thing,  you could buy the full series and get the electricity cost data for 2008.

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We have talked about data centres in Ireland before but someone sent me this and I thought it was worth sharing.

Verne Global is a wholesale data center developer based in Keflavik, Iceland, and Washington, D.C. The company is a joint venture between Novator and General Catalyst Partners. Our mission is to develop data centers in optimized geographic areas that offer the best total cost of ownership (TCO) and 100% renewable power without a price premium. Our Icelandic facility embodies that mission. Capitalizing on Iceland’s favorable natural attributes and our unique relationship with the national government, we are building the country’s first large-scale, mission-critical data center. This green data platform near Reykjanesbær will leverage state-of-the-art infrastructure design, Iceland’s cool climate, and sustainable hydro and geothermal energy sources to capitalize on the country’s attractively priced renewable energy and free cooling opportunities.

All of Iceland’s electricity comes from affordable, sustainable geothermal and hydroelectric energy. There’s no “greenwashing”" here. These resources are 100% renewable, with no green energy price premium. The price is low, and production is free from both the atmospheric emissions of fossil fuels and the potential hazards of nuclear power.  With Verne Global’s access to long-term power commitments, you’re guaranteed a supply of continuous, high-quality electricity at a fixed rate. You can lock in a low, inflation-protected rate for up to 20 years and shield yourself from any escalation in global electric power prices.

What caught my eye, given the current debate in New Brunswick, was the comment about locking in a “low, inflation-protected rate for up to 20 years” and ’shielding’ yourself from escalation in global electric power prices.

So I looked at their model.  From this white paper:

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The are saying that a 3% increase in electicity costs is ‘inflation-protected’.  The deal between NB and Quebec will result in far less cost increases than in Iceland - the inflation rate they are predicting in Ireland is 50% than the inflation rate in New Brunswick over the past decade (1.9% since 1994).

Some inflation protected.  Having said that, few can compete with Iceland on their cost per MW.

Geothermal production costs range from US$15–25 per MWh, only one-quarter of the world average. As of 1 January 2009, base load contracts with Iceland’s largest electricity supplier were available at US$29.59–33.45 per MWh.

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Why can’t there be a win-win in the NB Power/HQ deal?  If you look at the broad strokes of the deal it can be a win win.  We get cheaper, cleaner power and HQ gets a good market for its hydro and another access route to the U.S. market.

That is my analysis but the bulk of respondents to this blog and elsewhere think it’s a crappy deal for New Brunswick and now the eminent Montreal Economic Institute is telling us it’s a crappy deal for Quebec.

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Someone told me today that something like 40% of Moncton’s call centres are now using home agents to augment their workforce.  I have heard about a number of other companies that are now using workers from around the province.  Lexitech uses freelance translators from around the world.

We need to get a real handle on this.  Someone should hire a consultant (ahem) to try and get some formal numbers to see if this is a small trend or a big one.  I remember discussions back in the mid 1990s about using telecommunications to create an innovative model for urban/rural development.  New Brunswick is still one of the most rural provinces in Canada and there was some talk back then about instead of forcing urbanization we might be able to have a new model with urban hubs and distributed work to homes or pods in small communities.

Maybe it was a pipedream.  I see that as of the 2006 Census, we had less people (as a percentage of the workforce) working at home than the national average.

But something might now be brewing and it would be interesting to get some data on it.

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You will be happy to know that my little spammer friend has found a way to bypass my IP blocker and he is sending me 10 posts a day.  I guess he has an innovative streak.  Ocassionally he posts interesting stuff that is not franco-phobic or racist (see the comment he makes about the fact that NB Power has 2.5 times as many employees as the average electricity utility.  I think this type of statistic is valid but has to be set in context.  New Brunswick doesn’t have the concentration of population of - well virtually every province and state in North America - the largest urban area in New Brunswick only has 17% of the population.  As a result, you likely need more NB Power employees to service this distributed system.)

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