Stranger Things: New Brunswick labour market edition

Statistics Canada recently published a report stating that the growth in paid employment in New Brunswick is highly correlated to the growth in the working age population.

Quelle suprise.

The article seems to imply the causality is one way.  If you have lots of jobs, the people will come to the jobs.  If you lose jobs you will lose people.   But as I have pointed out before there are jobs that have that magnetic effect and jobs that do not.  New Brunswickers will move to Alberta for $100k+ jobs but are less likely to move to Alberta for minimum wage jobs.  So, Alberta has boosted the number of immigrants in recent years and many of them are going into services and other jobs that it would be hard to get people from the rest of Canada to move there to take.

The truth is that there are a lot of jobs in New Brunswick right now that are going unfilled or that are really hard to fill.  These are not ‘magnetic’ jobs – for the most part Canadians will not move to a community to work in a fish plant, a <$15/hour manufacturing facility or customer contact centre and a host of personal services, retail, food and accommodation jobs.

This is what puzzles me about the CBC article.  It quotes one of my favourite migrants – Dr. Herb Emery as follows:

“Whereas, governments are increasingly focused on adding people first and hoping that that will drive labour demand by potentially driving capital in or unlock business potential where there’s perceived labour shortages, this study really points to the fact that it really is labour demand which ultimately comes from the export sector, which is driving everything,” he said. He pointed to examples of government strategies to bring more people to Atlantic Canada, like the Atlantic Immigration Pilot, that is aimed at bringing more immigrants to the region to stimulate the economy.

Emery knows full well the Atlantic Immigration Pilot was set up specifically to deal with existing and real labour demand not primarily to bring in people willy nilly.  In fact, the AIP’s explicit purpose is to avoid bringing in immigrants without a job and economic prospects.

The fact of the matter is that we have anecdotal and statistical data showing a decline in employment in many export-focused sectors because of a lack of workers.  I just heard this week that one of the larger foreign-owned fish plants is close to shutting down because their TFW allocation is down to 15% of the workforce and they are really struggling to fill the other 85%.  While the jobs are not high paying by any stretch and they are hard work too – if that plant shuts it will have a seriously negative effect on that local community.

This is the definition of labour demand.  Now, there is a good point about productivity and efforts to drive up wages.  This is good but not at the point it pushes firms and their export revenue out of New Brunswick.

Dr. Emery is right when he says:  “What we could be doing is focusing on making business conditions in New Brunswick more favourable for investment, which really means that even at whatever the world prices are for lumber, timber, fish, whatever we’re going to produce, that our producers are competitive”.

If we increasingly can’t fill the jobs on offer it will (and is) have a dampening effect on the economy.  We can wait around for mining and higher high wage jobs to come back to New Brunswick but I’m not willing to sit around and do nothing.

Bring in immigrants.  If some leave so be it.  As I have said many times before human capital is starting to look a lot like financial capital.  If it becomes too scarce it is a barrier to growth.

 

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Be a little careful with the youth unemployment data

Youth unemployment is back in the news after new data suggesting we still have a high unemployment rate among the young. The government just announced a whack of money to alleviate the pain of high youth unemployment.   While high unemployment rates are not a good thing it is important to always put statistics in context.  That is hard to do in the modern world of infographics and the need to cut through the clutter with a killer stat.

If you look at the unemployment rate among youth in New Brunswick it is mostly concentrated in the 15-19 year old cohort of which 84% are still in school.  We have to differentiate among the unemployed that are living at home with their parents and going to school and young people that are starting to build their careers and struggling to find work.  The 20-24 age group is more of a problem as only 42% of them are in school but the unemployment rate among that group is down to 10.3% – still too high.  The real concern for me is the 9.6% unemployment rate among the 25-29 year olds.  By the time you get to the 30+ the workforce unemployment rate is down to 6.4% – well below average.

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We can use Census data to dive a lot deeper on this issue.  When you look at the actual number of unemployed in the 15-19 age group around New Brunswick you find only 150 unemployed in the Moncton CMA, only 100 in the Saint John CMA and only 140 in Fredericton.  If you drive around each of those communities you will find help wanted signs in restaurants, retail stores, etc.  I’m just trying to put the 18.6% unemployment rate in context.

Among those 25-29, when you look regionally the absolute numbers are also quite small.  There are lots of potential reasons why the unemployment rate among that cohort is too high including a mismatch between skills, interests and the jobs on offer in local communities.  The EI system is likely boosting those numbers a bit.  A new immigrant I chatted with recently lost his job and was told “not to run out and get another job to hastily” and to “take your time and enjoy the time off with your family”.  He ignored that advice and got a job in a few weeks.

My fear, of course, is that the perceived (and actual) higher unemployment among young people in New Brunswick will keep us from focusing on addressing real labour shortages around the province.

If you look at the unemployment rate by major occupational group you will see that unemployment among most occupational groups in the province is quite low and comparable to the national average.  It’s only when you get into the trades, trucking, natural resources and manufacturing occupations where you start to see a substantially higher unemployment rate.  Again the influence of seasonality is probably driving up the rate in these sectors.   Yes, I admit that conceptually it is hard to justify high unemployment rates and labour shortages at the same time but that is a New Brunswick reality.  Person X works in a seasonal manufacturing or natural resources job while company Y can’t find year round workers in manufacturing or natural resource jobs.

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Shediac: New Brunswick’s most cosmopolitan municipality?

As you know I have been crunching a lot of Census data recently and have stumbled on some quirky stats.  The latest relates to the megalopolis of Shediac.  The Census provides information on population mobility – specifically asking where people lived five years before.  They break the data into non-movers and movers.  Among the movers, the data is broken into migrants and non-migrants and among the migrants, the data is shown for internal migrants (moved within the same municipality, intraprovincial migrants – those moving in from other parts of the same province, interprovincial migrants – those moving in from other provinces and external migrants – those moving in from other countries.

Among the population 5+ (for obvious reasons), Shediac is the only municipality in the top 10 for intraprovincial, interprovincial and external migrants among New Brunswick’s municipalities (I only looked at those with at least 3,000 population).  All told, nearly 25% of everyone 5+ living in Shediac in 2016 did not live there in 2011 – just five years’ previous.  That is pretty remarkable.  Contrast this with Shippagan where only 5% lived outside the municipality in 2011 or Tracadie where only 7% did.

Want to know if your city, town or village made the cut?

Shediac featured the highest level of intraprovincial migration followed by Sussex.  Despite the challenges of the potash mine closure a lot of folks are moving to Sussex.  We don’t know from this data if it is retirees or folks living in Sussex and working in Saint John or Moncton.  The Studholm Parish is also adjacent to Sussex.  Why is everyone moving to Greater Sussex?  Moncton in this case is the Parish – not the city.  Cheaper taxes. Up mostly on a hill.

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Which municipalities attracted the most people from outside New Brunswick? Oromocto, of course, but it is an outlier.  Why 10% of the Burton population is from outside New Brunswick is a mystery. Nearly 500 people live in Burton now that lived elsewhere in Canada in 2011.  Likely the Oromocto effect (?).  Great to see Woodstock here and also in the external migrant (immigrant) top 10.  Woodstock is becoming an interesting place – a bit under the radar.  We have friends that moved there recently for work. Overall nearly 1 out of every 5 Woodstockians in 2016 did not live there in 2011.  Also cool to see St. Stephen as it has been pushing to attract folks from elsewhere in Canada.  It’s working, folks!

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On the immigrant front, Fredericton leads the with Woodstock a close second – giddy up. Moncton, Saint John and Dieppe rounding out the top five.  Good to see Edmundston in this list – the percentage is low but moving in the right direction. For now only Woodstock and Edmundston are attracting any level of immigrants – outside the big three urban centres and their surrounding municipalities.

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Dr. Strangebedfellows or: How I Learned to Stop Worrying and Love Amazon

Over the Christmas season I had a craving for Cherries Jubilee, a decadent dessert featuring a warm Bing cherry sauce served over vanilla ice cream. I went online, downloaded the ingredient list and went to the grocery store. One ingredient, cherry extract, was not available in the store so I went to another and then another with no success. I went home and finally found a small health food store that offered cherry extract.  I drove to that store, bought the product and came  home.  The elapsed time from the start of my quest for cherry extract to securing the product? Nearly 2 hours.

I could have just as easily went to Amazon.ca and used my Prime subscription to order cherry extract from multiple sources delivered to my door in 2-3 days at the same or a lower price.

This is why more and more people are just ordering online.  I recently ordered Keurig coffee pods online.  In fact, if you look at the 20-30 of my most recent Amazon purchases – it is likely that a local store here in the Moncton region carried those products likely at a similar price.  Why can’t I find them online?

I think all retailers – particularly smaller ones – should be online and linked to a platform like Amazon.  Like eBay I should be able to find the products I want – general or niche – from a local supplier and not have to order from Toronto or even the U.S. for basic goods.

Further, those retailers selling highly niched products – birch bark essence for example – should be based here and selling those products around the world.

I’ve always found it strange.  I know that these little retailers would need to have some form of online-linked inventory and shipping system but there must be off the shelf systems for reasonable prices.

Most people would prefer to patronize a local shop to buy goods and services but they want convenience and are sensitive to price.  We can either give up that growing segment of the market or we can embrace it.

I think we need to embrace it.

 

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Men Are from Mars, Women Are from Venus: Workforce edition

One of my problems is distraction.  I’ll be crunching data for a report or presentation and stumble on a tangential piece of data that is interesting.  For example, the new annual Labour Force Survey data for 2017 recently came out and includes some interesting trends.  But I decided to go back 40 years to look at long term trends. In 1977, I was 10 and used to walk to the convenience store in lower Lincoln near the airport to buy grape and orange flavoured potato chips.   I suspect only a handful of my readers will remember that short-lived but interesting snack food trend.

Since 1997 as you would expect, the male and female workforce in New Brunswick has essentially converged.  In 1977 there were 181 men working in New Brunswick for every 100 women.  In 2017 it was 103 men for every 100 women.

But most of the net growth in the female workforce has been concentration in a few sectors.  As the table below shows, 40 years later than are 5,300 more men working in health care and social assistance but more than 33,000 more women.  If you think there are more men in education these days you would be wrong.  The distribution may have changed (i.e more male high school teachers) but the overall number of men in education has not changed in 40 years while the number of women has risen by nearly 9,000.

There are fewer men working in public administration in 2017 as there were 40 years ago.  women have accounted for all the net employment growth in public administration over 40 years.  In fact, if you add health care, public administration and education there are just under 5,000 more men working in those public sectors but nearly 49,000 more women.

Women still are not going into construction and manufacturing in any serious way.  The incremental number of men in professional and business services has out-paced women over the 40 year period.  Along with construction, those three sectors are the only industries where men have outpaced women in net growth.

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The exogenous shock theory of economic development

In the early 1990s when I first started thinking about economic development I had a chat with a Quebec consultant who was helping the provincial government there develop economic growth strategies.  He was convinced the only way to grow was through ‘exogenous’ shocks which he defined as a big scale, brand new industry where substantial national and international investment flows into a province contrasted with organic growth by trying to encourage local firm expansion.

This was the reason Quebec put the most aggressive tax breaks/R&D support for pharmaceutical development in the 1980s and 1990s and, presumably, why they have the most lucrative incentives for digital media in North America.  I read somewhere that one firm, Ubisoft, has benefited from $200 million worth of incentives.

The natural resources boom in Saskatchewan is an example of this.    Market prices for commodities rise, the province puts in support for the industry and boom – uranium, potash, fracked oil, etc. power Saskatchewan to one of the fastest growing provinces or states in North America (BTW NB has natural gas, potash and uranium deposits).

A massive inflow of people and their investment dollars can be an exogenous shock – think of the amount of flow into British Columbia at the time of the Hong Kong transfer back to China.

Of course, local firms benefit from efforts to attract exogenous investment. Many of Quebec’s most interesting bio/pharma firms are startups that evolved from the 30 year effort to attract pharma investment.

The only big example of this effect in New Brunswick was the contact centre/back office sector.  While we have attracted investment into other sectors, none really rise to the level of making a serious impact on the economy.    Aquaculture was a fast growing sector but it was mostly from within.  Blueberries too although I think the attraction of national and international investment into value added processing is likely going to be key to long term growth in the sector.

I think there is some credence to this theory.   Economies grow by increased investment and trade and the secondary effects that come from that primary growth (e.g. population growth).  Governments should be very focused on how the policy environment can support exogenous growth – although there is considerable debate about the merits of deep incentives/tax breaks as a long term economic development tool.

New Brunswick is trying this approach – at least at a moderate scale – with cybersecurity, cannabis and the Smart Grid.  There have been national and international firms investing in those sectors.   Whether any of them will get to a place where NB is known internationally is yet to be seen.

 

 

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Where are the young entrepreneurs?

We have been debating the curious lack of young entrepreneurs in New Brunswick for years. It’s hard to define the term ‘entrepreneur’ but if you look at self-employment as a proxy – New Brunswick has always had well below self-employment rates among those aged 35 and under.  Across all sectors of the economy there are 36% fewer persons under the age of 35 that identify themselves as self-employed on the Census.

When you look at high value sectors such as IT, engineering, accounting, consulting, etc. the young person self-employment rate across the board is well below average in New Brunswick.

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If you go a little deeper and look at urban centres, the data doesn’t get much better although you have to be even more careful because Statistics Canada reports employment by industry data in increments of five so for sectors with small levels of employment the numbers can be a bit out of whack.  For example, Statistics Canada reports there are no people self-employed in the Moncton CMA in software development in the age cohorts 15-24 and 25 and 34  Technically there could be 2 in the 15-24 age group and 2 in the 25-34 age group – 4 in total – and it would be showing up as zero in the Stats Can data.

With that as a caveat – and an issue facing all urban centres – New Brunswick’s urban centre still have low rates of self-employment among young people (under 35) particularly in strategically important sectors.  The following table compares the combined self-employment in three IT sectors – as a share of total employment in those sectors then compared to the national level.  Moncton and Saint John are at the low end of the spectrum.  Fredericton isn’t listed because it is not showing any under 35 self-employment in these three sectors (again subject to the increment of 5 caveat above).

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There could be problems with the data itself.  It’s hard to believe there are only a very few if any self-employed people in Fredericton under the age of 35 in these three sectors.  I don’t ask people their age but I have met a number in the past couple of years that must be under the age of 35.  But this wouldn’t be a problem in the province-wide data where the number are larger.

But the bottom line remains.  Using this data it would seem there are far fewer young (under 35) tech entrepreneurs in New Brunswick than average despite the fact that almost every city has beautiful facilities with colourful couches and young, smiling faces ready to help you reach your potential – not to mention earnest government officials with their chequebooks at the ready.

As I mentioned above we have been debating this for years.  There are many reasons cited: 1) Some say young NBers are encouraged by parents to ‘get a real job’ because of the historical uncertainty around the economy: 2) Others say we export our entrepreneurs (Dr. Haan’s research shows you are far more likely to own a business if you were born in NB and leave than born in NB and stay); 3)  Some say it has to do with the structure of the economy –  more rural, lower levels of professional employment overall – means less potential for entrepreneurship.; 4) Some even suggest – with some international data to back it up  – that a lack of entrepreneurship is self-perpetuating.  A person with a parent that works for themselves is far more likely to go into entrepreneurship; 5) Some blame a lack of immigration – self-employment rates among immigrants are higher – particularly in ‘tech’ sectors; and 6) Finally, some point to the lack of large industry ‘incubators’ that are traditional sources of entrepreneurs (for example there are DNA links between the former NBTel and something like 50% of the tech. firms in New Brunswick that have reached any kind of scale).

Who knows.  It could be, and likely is, a combination of all these factors and more.

But the bottom line is that we are not seeing the next generation of ambitious entrepreneurs arising in the province.

Just to be clear this is not just about ‘young’ entrepreneurs. Overall rates of self-employment (all age groups) are also lower.  For the IT sector, there are 58% fewer self-employed in Saint John, 67% fewer in Fredericton and 44% fewer overall in New Brunswick when compared to the country as a whole.

Instead of spending all our time studying the ecosystem itself – sources of funding, incubators, cluster effects, etc. I think we should spend a little more time on the front end – where do entrepreneurs come from?  And what role, if any, should governments, educational institutions, the research community, etc. have to influence this pipeline?

We need to see more high value IP-based startups coming out of our universities (Dr. Shukla is working on this in Fredericton as one example).  We should see if our large industrial players have any potential to foster high value startups in their supply chains (Dave Grebenc, et. al. working on this) and we need to see if there are high value entrepreneurial opportunities that could emerge as the result of New Brunswick being a really good place for certain growth industries (cybersecurity, smart grid, etc.).

Maybe we need to attract a lot more entrepreneurs to our shores.  I know that will sound like heresy to some but if we are exporting entrepreneurs – like Haan surmises – maybe we should start thinking about importing a few.  Then the question becomes why would they want to come here?  Now we are starting to have a real conversation about economic development.

 

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Turning the big 5-0

This week I turned 50.

Reading those condescending  LinkedIn posts about the young HR managers taking a ‘chance’ on the 50+ workers now takes on special meaning.  One I read today talked about his great success hiring 50+ workers because they “bring their own lunch” and won’t switch firms for a “two dollar/hour raise”.

IMO people should be just hitting their career stride by 50.  I have had an interesting journey that involved a job where I was part of a team that attracting 30+ multinational firms to New Brunswick; I helped a young startup company increase its sales by 8x and its staff by 4x over a six year period; I started a successful consulting firm with clients in six Canadian provinces and two U.S. states; and I completed a 2+ year stint as Chief Economist with GNB.   On the side I have been writing a column with the Telegraph-Journal for over a decade (excluding the GNB stint); was a research fellow at the Donald J. Savoie Institute and got to collaborate with the Conference Board of Canada on multiple occasions.  I also have written articles/commentary for seven magazines and was a contributing author for three books.

I was born in December 1967 – the year of Canada’s Centennial which I suspect was a little less tense than the 150 seems to have been.  Lester Pearson asked all Canadians to have a centennial project – plant a tree, etc. My parents had me.   I was a gift to Canada.  To all my Twitter trolls out there – there are no refunds.

And just to confirm David Dingwall’s “I’m entitled to my entitlements” ethos was alive and well in Canada 50 years ago, my mother’s doctor suggested he would induce birth (I was due in early January) if she wanted so they could get whatever child tax credit that was available back then.

Almost 15 years ago a trusted friend told me if I wanted to ‘make it big’ I would have to speak to a national audience.  New Brunswick was too small.  I started writing briefly for the Globe & Mail’s Economy Lab (online) but after a year or so I gave it up.  I had several good job offers in Ontario.  I have resisted because I like it here and I like my little niche fighting the battle for hearts and minds here.

While I now generate more consulting revenue outside New Brunswick, my goal is still to try and positively influence change right here in the little old picture province (or drive thru province?).

Have I had any influence on New Brunswick’s economy and economic development policy?   It’s hard to say. I fought and lost the fracking battle.  I was on the wrong side of a number of big policy battles over the past 20 years.  I have played a small role, I think, in a greater focus on accountability and measurement in government economic development activities.  Although I worry now that some – particularly municipal – governments are putting too much focus on metrics – particularly those metrics that are out of the control of economic development organizations.

I plan on spending the next 25-30 years continuing to fight for a New Brunswick that is more globally connected, attracting more international investment, entrepreneurs and people and for a New Brunswick that is more self-confident.  And for a New Brunswick that is safely and sustainably developing its natural resources.

I believe we are at a fundamental crossroads in this province.   We have never in our history been in this place before and it will take a lot of effort to emerge as a growing and dynamic economy.  We have to treat people attraction the way we used to treat company attraction.   We need to be one of the best places in North America to migrate to.  If we can get there that will be a huge benefit as we move forward as a province.

So you can expect a continued stream of content on these pages.   I have written 3,500+ blogs over a 14+ year span.   That is a staggering amount of content.  Combine that with over 500 columns, articles and book chapters – not to mention hundreds of reports for clients – and that is a heck of a lot of content.

As a means of generating household income, it helped my wife and I raise three pretty interesting and well-rounded kids.  That in itself makes me grateful.

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Attracting international R&D: In praise of Siemens

One of the issues we discuss very little in New Brunswick is the role of multinational firms.  When we do, many people derisively talk about how we need to ‘take care’ of our own firms and they express skepticism about why international firms would want to set up in New Brunswick unless they get massive corporate welfare.

One famous NB CEO, who shall remain unnamed but you will likely figure it out, a few years ago after winning his 99th award for business excellence got up and said something like “We don’t need any outside companies coming here and saving our bacon” and then decried provincial government efforts to attract firms. I winced – this is exactly the kind of crap that holds us back.  Of course, the great irony of this story is that this same CEO is now buying up firms around the world and, one assumes, making the case that foreign investment from his firm will be very beneficial to those jurisdictions.

This is among the most frustrating issues for me as it points to our collective self-confidence problem.  The question is not why would these firms want to locate in New Brunswick it should be why wouldn’t they want to locate in our province?

But our collective self-confidence problem aside, I was looking at some interesting data this morning that points to another important role for multinational firms in Canada – as drivers of R&D.

Statistics Canada looks the amount of total in-house research and development expenditures by firms in Canada by ‘country of control’ – either Canada or foreign.

In Ontario, Canadian controlled firms spent $5.1 billion on in-house R&D while foreign controlled firms spent another $3.4 billion.  In Quebec, Canadian controlled firms spent $3.4 billion on in-house R&D while foreign controlled firms spent another $2.0 billion.

In New Brunswick?  You know the answer before I tell you.  $89 million spent by Canadian-controlled firms and only $11 million by foreign-controlled firms.  And, I suspect that one firm, Siemens accounts for a good share of foreign-controlled firm R&D in New Brunswick.

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Siemens has something like 50 staff and a major global R&D centre in Fredericton.

Despite our phobia of international firms, I think we should study the Siemens example and figure out if there are other opportunities to attract global R&D investment to our province.  Can we boost cannabis R&D here?  How about international forest products R&D?  How about international cybersecurity R&D?

We are pretty good at attracting contact centres and back offices and even the occasional IT firm.  Maybe we should sharpen our pencils and see if there is any potential to attract international R&D here.  Compared to the rest of Canada we are really missing the boat on this.

 

 

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NB’s R&D sector – no old fogies allowed?

As I have detailed elsewhere New Brunswick is primarily known for having  an older workforce when compared to other provinces.  Not so with the R&D sector where 44% are under the age of 35 – second only to PEI among the provinces and much older the country’s R&D industry as a whole.  This could be caused by a number of things such as older researchers are more likely to leave the province or the industry is growing and hiring younger talent.

The NB R&D sector did expand its employment from 435 in 2006 to 555 in 2016.  At the same time employment nationally declined by 6% so maybe this is the main reason.

The bottom line is that there are a lot of young, bright millennials in short pants running around the R&D sector.  Eric Cook, the boss over at RPC better brush up on Chance the Rapper and Snapchat.

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