Getting to know New Brunswickers: Our household spending priorities

For your viewing pleasure, I have compiled a list of the household spending categories where New Brunswick ranks #1 among the 10 provinces (i.e. the highest share of household income going to the expenditure compared to other provinces) and the ones where we rank 10th.

Use this at parties.  Impress your friends.  No attribution required (but the data is from Statistics Canada’s Annual Survey of Household Spending).

Without further ado, the data awaits (with my comments in brackets).

New Brunswickers spend the highest in Canada among the 10 provinces (as a share of total household spending)
Cereal grains and cereal products (I hope Tony the Tiger appreciates this)
Electricity for principal accommodation (not because rates are higher but because we are far more reliant on electricity – politicians forget this at their peril)
Pet expenses and pet food (less kids, more pets – the perfect metaphor for our demographics right now)
Washers and dryers
Clothing accessories (women and girls aged 4 years and over)
Gas and other fuels (all vehicles and tools) – Very little public transportation and a dispersed population.  If you want to go to Costco and you live in Neguac?  Stop at the local Irving first.
Private health insurance plan premiums – interesting one – would require more work to understand why
Cigarettes – over use or taxes or combination?
Charitable contributions – generally NBers are good folks.  A lot of this goes to churches.

New Brunswickers spend the lowest in Canada among the 10 provinces (as a share of total household spending)
Mortgage paid for owned living quarters – nice.  Use this in your promotional materials
Purchase of telephones and equipment – lower cost? or lower usage?
Household furnishings – take a look around your house, it may be time for an upgrade
Rugs, mats and underpadding – maybe allergies are a bigger deal here?
Dishwashers – we spend the least on dishwashers but the most on clothing washers? – makes sense to me.
Children’s wear (children under 4 years) – strange given the demographics – maybe granny ponying up for the grandkids?
Clothing and cloth diapers (children under 4 years)
Public transportation – see #1 in spending on gasoline above
Taxi (including tips) – see #1 in spending on gasoline above
Airplane – not because of lower prices, less usage.  NBers need to see the world more.  It might help us with perspective.
Dental plan premiums.  Hmm, the most on health plans but the least on dental plans.   You tell me.
Home entertainment equipment – maybe it’s time upgrade your 1972 hi-fidelity system.
Televisions and other video equipment and accessories
Education – hmm.  Not one we should be proud of unless it is because government and employers pay a larger share.
Tuition fees – ditto.
Alcoholic beverages – this one is strange to me – must be more beer and less hard stuff
Contributions and dues for social clubs and other organizations
Government services – this makes sense to me but it also annoys me.  I’m a believer in direct pay where it makes sense.

Any of these  surprise you?

Posted in Uncategorized | 1 Comment

Economics for dummies: Debt to GDP ratio

I get asked once in a while why I don’t talk about ‘economics’ in a blog called It’s the economy, stupid!”.   It is true that mostly I talk about economic development – but truth be told “It’s the economic development, stupid!”  doesn’t have a nice ring to it.  Plus I stole the title (to be more accurate David Jonah stole the title) from Bill Clinton’s advisor James Carville from a long time ago.

But just to ensure my bona fides, here is a purely economics concept.   There has been a lot of debate recently about the federal debt (and provincial for that matter) and it usually involves debt hawks decrying “no serious plan to eliminate the deficit for years!”.  The other school of thought (adopted by Trudeau and Morneau) is that as long as your GDP growth is faster than your debt growth, it doesn’t really matter.

For example, think about your household debt.  If your household income is $100,000 per year and you have $1 million in household debt you will be crumbling under the weight of interest (even at today’s rates) and principal payments.  But if you earn $1 million per year and you have $1 million in household debt – it’s of very little consequence (except, the debt hawks would say, for the reasons below).

So, consider the following simple chart.  It is based on an annual GDP growth rate of 2% and an annual growth in the federal debt by 1%.  Let’s not quibble about real versus nominal prices, this is a thought experiment.  You can clearly see in the chart that the federal debt grows every year.  The government hasn’t balanced the budget once in 80 years and yet the amount of government debt as a share of GDP is cut by more than half.  To be more specific, the government’s ability to service the debt is improving every single year even though debt is rising.   The Trudeau/Morneau team will point to long term GDP growth rates and say this is not unrealistic.

Now, of course, the debt hawks will say we can’t be sure that GDP growth will rise in the future as in the past.  And, this doesn’t take into account recessions or depressions where governments have to run huge deficits (or feel they have to).  If you are running deficits in the good years, you lose your wiggle room in the bad years.  And, they say, even if you can run structural deficits every year, wouldn’t it be better to cut taxes, etc.?

Quite frankly, on a personal basis, I am more concerned with the growth side of the equation.  In New Brunswick we were running significant deficits with no real GDP growth so the provincial debt to GDP ratio rose from a low of 25% in 2009 to 38.6% in 2018.  In absolute terms the net provincial government debt more than doubled.

Governments are not passive bystanders when it comes to economic development.   They need to work on the numerator of that equation – public debt – but they can’t ignore the denominator – GDP.

Without at least modest economic growth, the province will struggle to provide good quality public services and infrastructure (the one-time federal transfers boosts are nice but not guaranteed).

Posted in Uncategorized | Comments Off on Economics for dummies: Debt to GDP ratio

OECD principles on effective rural economic development

The OECD has published a list of principles to guide effective rural development.   There are at least three interesting things about these principles – two good and one curious.  The first is the focus on leveraging local competitive advantages.  Somehow this most basic of economic development concepts – going back hundreds of years – has gotten lost or at least minimized in the developed world.  At a very fundamental level, long term economic development has a lot to do with the assets and attributes of the local community.

The second interesting thing is the idea of “adapt and respond to emerging mega-trends (digitalisation, globalisation and trade, climate change, population ageing, and urbanisation)”.  Again, I wonder just how much serious thinking in New Brunswick is focused on the impact of these mega-trends.  There are some things going on – to be sure – but a focused effort to see how these can be leveraged to support longer term growth?  Not much, IMO.

The third, and most curious, is the lack of any mention of the the shrinking labour force, immigration – or anything related to attracting people.   This may be deliberate – maybe the OECD wants to encourage urbanization in the advanced countries so it doesn’t want to espouse principles that would counter this.k  I would argue this is a curious and strange omission.

I’m a big fan of urbanization.  Read my stuff.  But hollowing out smaller communities to the point there is nothing left is not a good economic development policy.  Even smaller communities need to think about the population growth policies needed to ensure they can survive and thrive into the future.   Places like Sussex, or Chipman, or Neguac should have a future.  Fifty years from now those communities should be relatively small, but thriving local economies.

Posted in Uncategorized | Comments Off on OECD principles on effective rural economic development

You are entitled to your own opinion, not your own facts: Calgary redux

I got a few sharp comments on the Calgary post from a few days ago (comments on LinkedIn and direct messages). The gist is that Calgary is in deep economic trouble and I am cherry picking my facts.

Let me restate. Alberta is in a challenging time. There are two main facets: 1) a government fiscal crisis due to the price of oil and resulting less royalties (and other knock on effects) and 2) an investment crisis because that sector is the main driver of investment in the province. These are impacting Calgary and a main reason for some of the issues such as the office space vacancy rate.

But, one person suggested there was a vast outmigration of people from Calgary.

Not true.

In 2017, Calgary had the 4th highest immigration rate among the 33 CMAs across Canada at 144 immigrants per 10,000 population. It had the second highest five year population growth rate between 2012 and 2017 at 14.1%. In fact, you could easily argue the reason why Calgary’s unemployment rate remains quite high is because it has been attracting a lot of folks. Not as many as when its economy was firing on all cylinders but, again, compared to other urban centres in Canada, it is doing quite well.

My main point is that I don’t see the value in making the economic situation in Calgary seem worse than it is. I understand why politicians talk in these terms – that is how they get elected -but for pundits, economists, journalists, etc., they should be focusing on facts and the facts are that Calgary has a higher than desireable unemployment rate and is feeling the effects of the low price of oil on public services, spending and investment. But it remains a growing economy with significant inflow of population and growth in the labour market and in total employment.

Posted in Uncategorized | Comments Off on You are entitled to your own opinion, not your own facts: Calgary redux

Putting the ‘development’ in economic development

I got a few comments on the recent post about focusing economic development and strengthening the value proposition for economic opportunities where your community or province has some core attributes.   The comments fall into two camps: 1) business incentives are good and necessary; and 2) how (and who) decides what is an opportunity?

Good questions.  To the first I will reiterate my longstanding view that I am not opposed to governments and communities provide relatively small scale incentives to attract industry if they are required to be competitive.  I just don’t think they should dominate the value proposition.

To the second, I will reintroduce a concept I have put forward on multiple occasions.  As far as I know not a single economic development organization has taken up my idea which could mean it is a terrible idea or it could mean that it’s an idea whose time has not come.

There are over 400 distinct NAICS industries and those can be even subdivided again.  I have suggested in the past that economic development organizations should go through all of the industries in a systematic way and determine if there is potential for development in the jurisdiction.  This potential can be based on a local attribute (s), market trends, existing cluster of activity,  etc. or a combination of these.  If the first cut indicates potential, then we determine how much potential and whether or not it is worth to pursue as an economic development opportunity.  Even small opportunities can be important if the relative cost of their development is low.

The following shows a few examples – not necessarily real examples – but to illustrate the point.  I have lifted a few NAICS industries as examples.

 

 

 

 

I am told that Quebec loggers are doing a lot of work in northwestern NB because it is hard to find local loggers (this is anecdotal).  If true, they take their labour income back to Quebec and we lose the economic benefit.  Why not attract international loggers to move to the region and keep the high value economic benefit in New Brunswick?

 

 

Why does Nova Scotia have nearly three times as many people in this category?  Is the scenery better?  Is the food better?  Are there stronger institutions?

 

 

Okay. Not really interested here but it is curious and, in fact, there are a number of countries for which flowers are a major export.  Globally the exportation of flowers is a billion dollar industry.  Just not sure how it applies to us.

 

 

This is an ongoing trend.  Are we okay with it or should we pitch a place like Moncton to the firms shipping in pastries from Quebec?

 

 

 

 

This is not necessarily true I just wanted to point out that the construction workforce can be an ‘export’ opportunity.  As far as I know we have never even considered this as a province.

 

 

 

One of a few sectors where traditionally NB has been very strong.  Are we going to let it wither away because of a lack of truckers?

 

 

This one is pretty straight forward.  I would also say that our nuclear energy plant needs molybdenum and if we are to develop SMRs in this province – maybe our molybdenum deposits become a little more interesting.

 

 

 

This is interesting.  NB has a far larger forest products industry but on the wholesale side Nova Scotia is killing it.  Why?  Who cares?  I care.  This could be 400-500 good paying jobs.

 

 

 

 

I guess we are just giving up on this sector.  Maybe for good reason (?).  I’d like to at least have a clear answer as to why.

 

If you have survived this blog to this point, I hope I have presented this idea clearly.  The problem is there is no private sector player or firm that has an interest in doing this work.  Individual firms or entrepreneurs may spot an opportunity (remember my blog about VistaPrint and business cards being exported across North America from  small town in the midwest US) but no one really has an interest in the big picture.

Except, government funded economic development agencies.

Posted in Uncategorized | 1 Comment

Shifting away from firm-focused economic development

Question:  At the most conceptual level what is the best model for government and community-supported economic development?  Do you a) offer programs and services to help individual firms invest and grow or b) do you work on broader actions that strengthen a jurisdiction’s value proposition for investment in specific sectors and opportunities?

I would suggest that most of the focus of economic in Atlantic Canada has been on individual firms with considerably less focus on broader opportunities.  I wrote about this a few years ago after I had completed a survey of economic developers working at the local, provincial and federal levels in New Brunswick.

I asked these folks – more than 30 in total (excluding management) – to describe what they did in a typical day.  Excluding management and administrative tasks, the vast majority of them worked in some way with individual firms to provide them funding (grants or loans) to help them accomplish some task – grants to hire new staff, develop a new market, subsidize an export development trip, implement a productivity program, etc.   Many of them were involved in the process of evaluating grant proposals, due diligence, following up on outstanding funding to ensure compliance, etc.

In fact, I remember (and wrote about) one GNB employee telling me that if “we didn’t have the cheque book, companies wouldn’t let us through the door”.

This is not to say there was nothing being done at a broader, value proposition level but it turned out, IMO, to be fairly thin.  ‘Sector development’ was a euphemism for developing a brochure that said we were good at “value added wood products” or something similar.  Again, this is too harsh – there were (and are) some bonafide efforts to strengthen the value proposition in certain areas but for the most part I would argue the vast majority of focus was (and even now is) on helping individual firms with direct incentives or other support.

When I started as Chief Economist in GNB I wanted to shift the focus from firm-level support to strengthening the value proposition for investment in areas (I clunkily called them opportunities) where New Brunswick had a core or nascent value proposition.  We have the right microclimate for wild blueberries, we have a ton of maple trees, we have a very long coastline and potential for new aquaculture, we have very interesting research capacities at our universities that could be exploited, we have strengths like official bilingualism, we have small but interesting clusters of activity that could be amplified.  We have agricultural land that could be better exploited  (maybe immigrant farmers?).  We have R&D infrastructure such as RPC that could be injected with steroids (not Eric Cook specifically, the organization).  We have one of the largest insurance back office clusters in North America as measured by LQ value.  We have a lot of natural resources that have not be developed at all.  We have one of the smallest tourism sectors measured by GDP contribution even though there are vast areas of untapped potential.  We have a small but interesting cluster of tech entrepreneurs.  On and on.

For the most part the response to this was either a) “that sounds like picking winners and losers” and we don’t like that; or b) it won’t work, New Brunswick can’t compete at a broader level, let’s just do what we can to help our firms grow.  If they are committed to New Brunswick we should do what we can to help them.

Don’t get me wrong, government did move in my preferred direction on several opportunities – cybersecurity, cannabis, etc. where there has been a very deliberate effort to build a wider value proposition and story that is supplemented by firm-level interventions but, in my opinion, I was unable to instill this at a cultural level in government and I look at the debate in the media today and feel we haven’t made much progress.  Part of the technical problem in government is that my model required cross-departmental cooperation which was, and is, challenging.

You can talk all day about ‘helping small business’ but, after my 25 years’ experience, the real issues are broader.  Are we a jurisdiction that encourages and supports entrepreneurial risk at a cultural level?  Are we properly differentiating between the thousands and thousands of lifestyle local businesses that serve local markets and have no real interest in growing beyond the borders of New Brunswick and those high growth potential entrepreneurs that want to start here and conquer the world?  Do we have a  proper focus on the entrepreneurship pipeline?   The evidence across North America is clear.  When you evaluate where most entrepreneurs who ‘conquer the world’ come from they either come out of an existing large firm (they got disgruntled with, think Nortel, BlackBerry, IBM, etc.) or they have a really cool idea incubated in an institutional setting such as a university.

We do want to ensure we have a good environment for lifestyle entrepreneurs/businesses in Minto and Neguac to thrive because strong local economies have lots of local competition for goods and services. We want many different pizza restaurants in Neguac to compete with each other.

But the focus should be on ease of entry and quickness of exit.  As I have said before this should be viewed as the Serengeti Plain.   Good entrepreneurial ideas should win and bad ideas should lose.

New Brunswick needs a surge in talent attraction.  I would double or triple the enrollment of international students in our public and private colleges and do a much better job of aligning that student base to the demands of the labour market. If we need hundreds of workers in our insurance, hospitality and other back office industries – then train people to work in those industries.  If our IT firms are calling for a specific set of skills, lets focus on that.  If our tourism industry needs workers, ditto.

In a perfect world almost all of our immigrants would come through the education system here.  I realize that is not practical but it would solve a ton of current problems with the system – the inability of small firms to recruit internationally, the time it takes to get people here, the significant bureaucracy involved, etc.  Essentially firms would hire out of schools, colleges and universities just like they do today.  The only difference would be the accent of the new employees.

Beyond that fundamental requirement for growth, I still urge those in charge to revisit the idea of ‘opportunities’.  If you don’t like the term, find another but there is pent up opportunity latent in our university research institutes, in our natural and human resources, in our geography, in our tourism potential, in nascent clusters, etc. that is getting little focus because the 400+ people paid to do economic development at the local, provincial and federal level in New Brunswick are mostly focused at the firm-level.

In the long run, the term ‘comparative advantage’ is what ensures that jurisdictions can thrive.  We need to reground our economic development thinking in this principle.

 

Posted in Uncategorized | Comments Off on Shifting away from firm-focused economic development

Calgary’s lament: Don’t cry for me, rest of Canada

The new Labour Force Survey data finds Calgary has the highest unemployment rate among large urban centres in Canada at 7.4%.  This fact has led to an outpouring of angst on social media and in the press.  How could the mighty Calgary have fallen so fast?  It’s time to separate from Canada and flourish!

Relax.  This is a clear but a bit strange case of people using statistics to bolster their narrative and ignoring other statistics that might counter their views.

Here are some other facts:

First, I don’t like the monthly LFS data particularly for CMAs.  Let’s use the annual data to see some trends:

Employment in the Calgary CMA swelled by 34,100 in the past two years (between 2016 and 2018) – better than all other metros except the big three (MTV).

The number of unemployed people in Calgary has declined by 16% in the past two years.

The unemployment rate in Calgary has been dropping – from 9.4% two years ago to 7.7% today.  Sure. Over an 7% unemployment rate is not good but is the story the rate or the big decline in recent years?

The longer term picture shows an even more interesting trend.  Between 2010 and 2018, the Calgary CMA added 117,000 jobs – again better than all other metros except MTV.  To put that into some perspective, the Calgary CMA created more jobs than 18 other CMAs combined….

Now, lest I be accused of doing the same thing, I’m not suggesting that everything is rosy in Calgary right now although the Conference Board GDP estimates for 2017, 2018 and 2019 are fairly good.  The office space vacancy rate is too high.   And the bigger issue of the price of oil – which drives government revenue – looms over the provincial economy.

But to imply the Calgary economy is going over a cliff right now is not based on facts.

 

 

Posted in Uncategorized | Comments Off on Calgary’s lament: Don’t cry for me, rest of Canada

Don’t care about your legacy? That’s can be a self-fulfilling prophecy

One of the things that bugs me about New Brunswick politicians is just how many of them will tell me “they aren’t interested in their legacy”.  “I’m not worried about that.” is the common answer when I ask the question.  If you don’t care about your legacy you risk not having one.

I’m not saying politicians should be obsessed with how they will be viewed in history.   I’m not talking about Winston Churchill level clarity.  But mayors, MLAs, Premiers, MPs, council members – should get into politics looking to make a difference – looking to address some of the big issues of the day.

In your mind think about a few politicians that you know.  What will they be known for?  Did they fight for some big need in the town?  Did they work tirelessly to address a problem?  Public housing?  Immigration?  Economic development?

By the way I’d say the same for business and other community leaders.  We want college presidents, university presidents, business leaders, to all think about how what kind of province, city or town they want to leave behind and what their role might be in making it happen.

This is the stuff that strong communities are built on.  If we just let things play out without any direction or interference – then we are just blowing in the wind.

 

 

 

Posted in Uncategorized | Comments Off on Don’t care about your legacy? That’s can be a self-fulfilling prophecy

Think immigrants don’t stay in NB? There are 25,000 examples proving you wrong.

Over the past few years I have received a fair amount of feedback from New Brunswickers about immigration.  Among those that have concerns about immigration, when I scratch the surface a little I usually find what they really think is “why would anyone want to purposely move here?  We can’t even keep our own young people?”.  In other words, they have a jurisdictional self-esteem problem.  New Brunswick is the end of the world.  Who would want to live here?

According to the 2016 Census, there are just under 25,000 immigrants living in New Brunswick that came to Canada before 2010.  Over 11,500 of them came before 1981.   And they are still here.  Yes, 25,000 immigrants.  Settled in New Brunswick and presumably like it here (or at least like enough not to have moved).

The truth is New Brunswick is a perfectly fine place to live.  The cost of living, crime rates, commute times, recreation, coastline, food – all pretty good.  Sure, there are great places to live all over the place but New Brunswick is fine.  It is a small place with the largest urban centre having only 150,000 people so, just like Idaho, Iowa and Manitoba and many other small places, lots of folks leave because their career paths take them away but for those who can pursue their careers here – it’s a pretty fine place to do it.

And immigrants have figured this out, too.  25,000 of them.

So if you are sour on New Brunswick and would like to move away, fine.  Canada has one of the most mobile populations (interprovincial migration) among advanced economies.  It is easy to move in and move out.  If you want to leave, you are free to do so.

But there are hundreds of thousands of people who are building their lives here and like it a lot.

Do we have work to do?  Absolutely.  Do we need to get better at people attraction and workforce alignment?  Absolutely.

But don’t impose your insecurities on new immigrants.  If they can settle here, find an economic opportunity that aligns with their skills and interests and build social networks – they will stay and thrive.

Just ask the 25,000 who came here in the 1970s, 1980s, 1990s and early 2000s.

 

Posted in Uncategorized | Comments Off on Think immigrants don’t stay in NB? There are 25,000 examples proving you wrong.

Respectful debate, open minds and democracy

When thoughts rush by
And your signals seem to fly
Keep it open
Keep it open
And help me keep mine open too

Some will lie behind
But we needn’t be unkind
Keep it open
Keep it open
And help me keep mine open too

Sun stoned in the east
In our eyes let there be peace
Keep it open
Keep it open
And help me keep mine open too
Bruce Cockburn – Keep It Open (1970)

One of the reasons I love to travel is getting exposed to a different cultures and attitudes.  Ever since my university days I have been suspect of ideological stridency.  It’s not that I don’t have strongly held views it’s just that I feel that we would be better off if we understood the perspective of those that don’t see the world as we do.  If we walked a mile in their shoes, so to speak.

When I first went to Virginia for university in the mid 1980s I was surprised to find there were still Baptist churches in the south with smoking rooms in the church.  How could that be possible?   Well, it turns out many of the tobacco farmers were Baptists.  I was also surprised at the ongoing discomfort that some people down there felt towards racial integration.  There was still quite a bit of at least low level racism in the mid 1990s.  I didn’t get it. My best friend was an African American and easily the coolest guy I knew – then and likely now too. (sorry, LP Gauthier).    But, again, I tried to put myself in their shoes.  What if I had been raised in the mostly segregated south?  What if my parents had supported segregation?  What if their parents did?  It is a learned behaviour.

Now this doesn’t mean I agreed with them – at all.  But if I just completely dismissed them personally would I have any chance of helping to change their minds?

This is my fear today.  We have zealots – with deeply held views on the ends of the ideological spectrum and many of them are prone to scorn anyone who doesn’t in a full-throated way agree with them.   They are are forced to take sides – “if you aren’t with me, you are against me”.  So, instead of thoughtful debate we get a break down into hard and fast camps.  Those camps exist in their own echo chambers.

What about Bruce Cockburn’s recommendation from the early 1970s about keeping an open mind? And, if some “lie behind” we needn’t be unkind?  It could turn out we were wrong.

On my recent vacation I talked with a Peruvian taxi driver in Buenos Aires who was convinced the reason traffic gets real bad in that city at 4 or  5 pm is that all Argentinians are inherently lazy and want to get to work at 10 and leave by 4; or the other taxi driver who was convinced that President Macri was the devil incarnate – and dragging the country down fast.  I had dinner with the president of a large auto manufacturer in Brazil, the owner of a fast growing SME, and long talks with an executive with a biofuels manufacturing firm.  I also was able to have dinner with an avowed leftist and strong supporter of former president and currently jailed Lula.

My head was filled with a mass of contradiction but I listened and learned.

It’s not that I believe we should not hold strong views on important issues such as social policy, economic fairness, environmental stewardship, how to raise children, etc. but I worry that the tone of discourse is such these days that the ground for compromise and for the democratic process of working toward a solution – that may not be ideal for everyone but that resulted from a democratic process – is shrinking.  Too many people on the right and the left these days are waiting for the strongman (or woman) to come in and impose their view on the world.  That may feel good to some and it may actually be a better outcome (think China versus India) in the short run but in the long run I prefer messy democracy to clean autocracy.

 

 

 

Posted in Uncategorized | Comments Off on Respectful debate, open minds and democracy