Trudeau’s million new jobs? Thank immigrants for that.

There have been over a million net new jobs created since the Liberals came to power.

But the Tweets and advertisements do not tell the whole story.  Only 20% of that employment growth was from people born in Canada.  The rest of the jobs were filled by immigrants, non-permanent residents (and a fraction from Canadians born outside Canada).   That is approximately 800,000 net new jobs filled by immigrants and non-permanent residents since JT took office.

Immigrant employment didn’t come at the expense of those born in Canada.  The unemployment rate among those born in Canada has been steadily on the decline from 6.8 percent in August 2015 to only 5.5 percent in August 2019.

There are barely enough young people born in Canada right now (and others not in the labour market) to offset those leaving the labour market by retirement – so if you want to grow the labour market you will need immigration.  In provinces like New Brunswick there are not enough – the born in Canada workforce here is in decline and has been for a number of years.

So the next time you hear the politicians talking about a million new jobs, remind yourself of where the vast majority of those new workers are coming from.

Without immigration, our labour market would stall and our economy would sputter.

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Develop Nova Scotia: A good place to start

I wasn’t familiar with Develop Nova Scotia until recently and I still only know what I see on the website.  Its mandate is “To lead sustainable development of high potential property and infrastructure to drive inclusive economic growth in Nova Scotia.”

It seems to be focused only on developing real estate and infrastructure.  Its project list includes:

Queen’s Marque
Internet for Nova Scotia Initiative
Peggys Cove Master Plan
Big Boat Shed
Zwicker Wharf
Dartmouth Cove Master Plan
Harbour Islands Visitor Experience Strategy
Lunenburg Waterfront Master Plan
Boardwalk North
Nathan Green Square
Bedford Waterfront Lands
Telford Bridge
Dartmouth Harbourwalk
Sands at Salter
Sackville Landing

Coming back to my meta-theme of economic development focusing on developing a community’s unique or strong assets and attributes, real estate and geographic location are obvious examples.  I think a concentrated focus like this makes sense.  But I think we should not restrict the focus to prime real estate (although prime real estate is a really good asset and, for example,  I don’t know why there is no public sector focus on developing the New Brunswick side of the Bay of Fundy for tourism investment opportunities.  A few resorts and cottage clusters along there wouldn’t kill the place.)

Why wouldn’t we take the same thoughtful, deliberate developmental approach to industrial clusters?  To tourism development opportunities?  To the development of a specific natural resource?  To the attraction of targeted immigrant entrepreneurs (in cybersecurity or farming, for example)?  To the attraction of international students?  To the leveraging of specific R&D capabilities at the local university? These are all ‘products’ that can be packaged up and sold – if there is a strong ROI to do it.

Most economic developers will respond that “we do this” – at least in a few instances – but I would argue that very few – if any -see this as an organizing principle for economic development.

But if you aren’t trying to clarify the value proposition and the industries that your community should be really, really attractive for investment – who is?

If you are not targeting entrepreneurs to take advantage of a specific opportunity that benefits from your assets and assets as a community, who is?  You happy leaving this to chance?  Then welcome to structural underperformance.

There is information asymmetry between the opportunities in your community or province and the businesses and entrepreneurs that might be able to profitably exploit those opportunities to the benefit of them and you.

You need to fill that gap, economic developer.

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Are waves of people leaving New Brunswick for greener pastures?

A lot of people ask me if we are losing even more young people to outward migration now than in the past or has the reduction in the unemployment rate led to more staying here?  I also hear that “immigrants just come here and leave”.

I was in Ontario last week and must have met a dozen people or more with roots in New Brunswick (I also got in a heated battle about the difference between New Brunswick blueberries and the high bush variety you get in Ontario but that is a story for another day).

The evidence indicates that inward and outward migration to/from New Brunswick and other provinces has been fairly stable for basically 30 years.  In the 1960s, the average quarterly population lost to outward migration was an estimated 5,900.  By the 1990s that had declined to 3,100 and since then has basically stabilized at around 3,000-3,100 per quarter.  Inward migration was much lower in the 1960s, was actually higher in the 1970s and has remained a little lower since the 1980s.  Between 2015 and Q1 2019, there were 106 outward migrants for every 100 inward migrants to New Brunswick.

Certainly more work could be done to determine who is coming and leaving (young, old, immigrant migration within Canada, etc.). Certainly the demographic shift is playing a role –  but for those of you expecting a significant increase in outward migration to other provinces as we attract more immigrants – so far that hasn’t been the case.

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Don’t fear New Brunswick’s version of the Travelling Wilburys

I had to chuckle.  I got several emails from folks concerned about the new company set up by Shawn Graham, Norm Betts, Donald Arsenault and Andrew Dawson that will work to attract companies to set up in New Brunswick.  Dawson says it is like “privatizing Opportunities New Brunswick”.

Don’t worry about New Brunswick’s version of the Travelling Wilburys.  If they can make a buck by promoting New Brunswick to foreign companies, why not?  I have often said that if companies can make a buck doing economic development and if the public interest is served (and not jeopardized), why not?

It should go without saying that any leads developed by the Fab Four should not be treated any differently than other projects.  If there is a company in China or Germany or Idaho that would benefit from setting up an export-focused operation in New Brunswick we should be trying to attract them here.  With an average annual GDP growth of less than 0.5% per year we need the investment.

We need all hands on deck when it comes to economic development.

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Living in Subterfugia: The land of the euphemism

I’m not going to go as far as to describe our times as Orwellian but they do seem to have an Alice in Wonderland-like quality.  The Premier of Alberta tweeted out the link to a video that was an unabashed defence of the oil and gas industry in Canada but after watching the 2+ minute, slickly produced video – I had to listen again.  The entire clip never mentioned the words ‘oil’ or ‘gas’ (the word oil was used once but not in the context of the Canadian oil and gas industry).   By contrast the words ‘energy’ and ‘resources’ were used constantly.  If you closed your eyes you might think you were listening to a video about the wind energy sector.

Why can’t we say the words oil and gas?  Why when we talk about pipelines we talk about energy and resources?  Are we planning on putting soybeans or wood pulp in the pipe?

The PM last week tweeted out a link to this press release “Creating clean growth and jobs in British Columbia’s energy sector“.   The first paragraph reads:

Canada’s natural resources drive our economy and support thousands of middle class jobs. Building modern infrastructure and clean technologies in the resource sector is part of the Government of Canada’s plan to get our resources to new markets, spark economic growth, and accelerate Canada’s clean energy transition.

I had to read and then re-read this press release to really figure out what was going on.

The Canadian government is providing financial support to help the dramatic expansion of B.C’s natural gas industry and the hydraulic fracturing of natural gas.  The $40 billion LNG export terminal will ship Canadian natural gas to Asia for decades and be conduit for the extraction of billions of cubic metres of natural gas.  Yes, the Canadian government’s dollars will be targeted to ensure that green electricity is used in the extraction and distribution of the natural gas but, relative to the overall incremental emissions, this is a secondary issue.

Now, if I was writing the PM’s press releases and tweets, I would have said that fracked BC gas will be used to reduce the need for coal-fired electricity generation in Asia resulting in a significant net-reduction in GHGs globally over the next 40-50 years’ life of the LNG export terminal.

But that doesn’t fit neatly into the narrative.  Why speak plainly when tarted up euphemisms might trick a few folks into thinking this is something other?

Will  the PM be in New Brunswick soon to announce federal government support for fracking in New Brunswick to provide gas for the proposed LNG export terminal in Nova Scotia that will serve European markets and reduce the need for coal-fired generation there?  Right now the plan is to bring all that gas in from Alberta and the United States and skip right over any local supply.

I realize in this social media era, we are tempted to let the big policy issues get lost in the sea of tweets about Trump, the Kardashians and other ephemeral issues but we should have serious conversations about oil and gas, about immigration, about environmental stewardship, about global warming, about governments and fiscal sustainability over 20-30 years, rural development in the coming years,  etc.

I’m not convinced we will ever have a serious conversation about natural gas development in New Brunswick or Nova Scotia.  Attitudes have hardened.  Politicians won’t want to fight that battle.  I’m not sure about other natural resources-based development – mining, aquaculture, etc.

Resist the temptation to boil things down, tweet out pablum at 4:30 pm and hope the public doesn’t notice.  Let’s have serious conversations about the future.

Alice in Wonderland was just a story.  No one really wants to live there.

 

 

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What can Kamloops teach us about immigration?

New Brunswick’s demographic challenge is pretty easy to define.  The population aged 13-22 is a good proxy of the local talent pipeline for the workforce over the subsequent 10 years.  Some will join the workforce right out of high school, some will go on and finish post-secondary education and some will move to other provinces but the vast majority of these folks will end up in the labour market at some point within 10 years.  Similarly, the workforce aged 55 and older represents roughly the number of people who will exit the workforce over the subsequent 10 years.  Some will stay in beyond 65, but for the most part this group will eventually retire and leave the workforce.

As shown in the chart below, in the 1970s New Brunswick had five young people aged 13 to 22 for every one person expected to leave the workforce in the subsequent 10 years.  In the 1980s that ratio dropped a bit to around 4.5 young people for every one person who would leave the workforce in the near future.

This demographic dividend provided a wave of workers that entrepreneurs engaged to create and expand businesses in a wide variety of industries.  In fact, as is well known, we had too many young people entering the workforce and some felt compelled to migrate elsewhere in Canada.

Fast forward to the 1990s.  There were still an average of four young people aged 13-22 for every one person expected to leave the workforce in the following 10-year period.  But in the 2000s the demographic situation in New Brunswick shifted dramatically right under our noses. From 2000 to 2009, the ratio of 13-22 year olds to upcoming retirees went from over three to one in 2000 to only 1.4 to one in 2009.  By 2019, the ratio dropped below 1:1 and is now 0.9 aged 13-22 for every upcoming retiree.

To put it another way, the population aged 13-22 has declined by more than 22,000 in the past 20 years while the workforce aged 55 and older has increased by over 59,000.  Accounting for migration and other factors, the local talent pipeline is and will be thousands short every year.  In other words, there are not nearly enough young people joining the workforce to replace those leaving it.

Take a look at the following chart.  All net growth in the national workforce has come from immigration.  Between 2012 and 2018, there were 893,000 immigrants added to the workforce across the country while the number born in Canada (net) declined.  The number also declined in New Brunswick over the same period but we did not attract even enough immigrants (and others) into the workforce to break even let alone grow as was the case across the country.

What is to be done?  This is probably the most significant public policy challenge of our time.

One of the simplest and obvious answers is to grow the young talent pipeline.  If there are 22,000 fewer in the pipeline now compared to 20 years ago, why not build it back up?

Which brings me to Kamloops, British Columbia.

I’ve been to Kamloops a couple of times over the years. It’s located about a two hours’ drive northwest of Kelowna and 3.5 hours west of Vancouver.  It’s a nice but fairly sleepy city in the BC interior.  The urban population is 112,000 which is only about 2.3 percent of the provincial population.  In comparative terms it would similar in size to Campbellton in New Brunswick.

Despite its relative isolation and size, in the third quarter of 2018 Kamloops had the distinction of having the most international students per 10,000 population of any urban centre in Canada.  According to data published by Immigration, Refugees and Citizenship Canada there were more than 5,000 international students (study permit holders) who were intending to study in Kamloops in 2018-2019.

That was the same amount of international students as Fredericton, Saint John and Moncton combined.  Adjusted for population size, Kamloops had 2.6 times as many international students as did Fredericton, three times as many compared to Moncton and six times as many compared to Saint John.

Traditionally it was the largest urban centres that benefitted mostly from international students.  Now it is Kamloops.  Welcome to 2019.

It’s a pretty simple strategy, if you think about it.  We lost 22,000 young people aged 13-22 over the past 20 years.  Could we dramatically boost that population again by attracting international students?

According to IRCC data, there were 6,100 people who had permits to study in New Brunswick in the third quarter of 2018.  That was up from 4,800 in the same quarter in 2015.  Nova Scotia had 16,500 in Q3 2018.

There is no downside to attracting international students.  Our colleges and universities boost their student enrollment generating significant economic benefits through new job creation, GDP and tax revenue.   The international students get a Canadian education and a possible job in Canada after graduation.  If they can’t find one they go elsewhere in Canada or they go back to their home country.

The college system in New Brunswick is getting on the bandwagon.  NBCC Moncton has close to 500 international students this fall.  Our universities, combined, are witnessing a decline in international students.

The provincial government is encouraging the attraction of international students.  In fact, we attract hundreds per year into our high school system through Atlantic Education International.  We should do more to encourage those kids to stay, study at PSE here and join the workforce.

The last point I will make on this relates to competitiveness.  I recently had the opportunity to interview more than a dozen local managers of multinational firms with operations in Saint John and Moncton. These firms operate back offices, IT centres and related facilities here.  All of them were happy to hire immigrants.  But they didn’t understand why they are told they have to go recruit them in the Philippines or Brazil or Romania when they can hire immigrants off the street in Winnipeg, Toronto and Vancouver (exact quote from one and a paraphrase of the others).  To be more specific, none of these firms did international recruiting (with the exception of very specialized staff) in their facilities elsewhere in Canada even though those facilities had 25 to 50 percent and higher rates of immigrants in their workforce.

If we had thousands more international students in our PSE – college and university – and if they were studying courses that were relevant to New Brunswick labour market needs – it would help level the playing field in New Brunswick compared to the larger urban centres.

Because, as I have been told on several occasions, for many firms it is now easier to find workers in Toronto than here.  This is a huge issue for our competitiveness.

So get out there PSE sector and hustle. Tweak your programming to ensure you are graduating folks for the jobs available now.  University and college tuition for international students is more than double and can be triple or more in Ontario compared to here. There is no good reason why we couldn’t double our total enrollment to 12,000 or more within a few years.

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The myth of ‘focus’: Economic development’s Big Turk opportunity

One of the most oft repeated mantras in economic development is the need to focus.  “We can’t be all things to all people”.  “We have limited resources so we need to focus our efforts”.  I had a conversation with a budding politicians the other day and he told me we must focus on one or two key industries.  That would be the key to success.

I’m not so sure.  As I have mentioned before I changed my mind on this issue a decade or so ago when I was working with Clare, Nova Scotia on an economic development strategy.  During a session with tourism industry folks, I asked them to brainstorm economic opportunities they thought could work in the community.  I heard about the need for more accommodations, tourism operators such as kayaking and experiential fishing.  In all the group identified at least a dozen tourism opportunities that might work in Clare.  If the community could convince entrepreneurs to invest in a handful of these opportunities it would have provided  a small but important boost to the local economy.

So I asked which organization was working to develop these opportunities.

Crickets.

At the time there were at least seven related economic development organizations active in Clare.  NSBI had a body.  ACOA had a body.  The municipality had a body. The local tourism industry had an association.  One of the big universities had an operation in the community that helped budding entrepreneurs with business and marketing plans.  The French-language economic development group RDEE Canada had a body.  There was a regional economic development group that covered Digby to Yarmouth.  In addition, there were several other provincial government departments with some interest in tourism.

None were doing anything to proactively try and attract tourism investment to Clare.

It was my light bulb moment.  It was then and there I realized that economic development efforts should be focused more on opportunities than on functions.  Identifying opportunities would help focus efforts.  Big opportunities might require more effort but smaller, relatively limited effort opportunities were just as important.  It was all a matter of the relative cost and effort to develop them.

It would have taken very limited effort to package up those dozen tourism investment ideas into separate business cases, book a room at a hotel in Toronto and invite interested entrepreneurs to come and take a look.

But no one did it because for most economic development is not about proactively developing and pitching ideas, it is about waiting for the phone to ring (or the email to arrive).  Once a potential entrepreneur is interested, then there is an army of support.  ACOA has funding. NSBI has funding. BDC has funding. The university will help with a business plan.  The regional agency will help.  The tourism industry association will help.  The municipal economic development officer will help – an army of support – after the entrepreneur walks through the door.

You might call this the Big Turk approach to economic development. The Big Turk is a Canadian chocolate bar.  It ranks in the top 20 in Canada but isn’t exactly Smarties.  I can’t find annual volume for the bar but I would be surprised if it generated more than a couple million in sales per year across the country.

Why would Nestlé, a company with more than $90 billion worth of annual sales and over 300,000 employees, ‘focus’ on the Big Turk? Why the Big Turk and its 0.0033% of global sales?

Following the wisdom of the economic development gurus they should put all their effort into Kit Kat.

In reality, Nestlé  offers thousands of smaller regionally focused products because they see opportunity.  The issue is not the volume of sales.  It’s the profitability of the opportunity. And there are other benefits such as shared overhead, distribution, R&D, packaging and other costs.

There is a lesson here for economic developers.

Developing the maple syrup sector in Albert County is not a billion dollar opportunity but it could be a $30 million opportunity.  Attracting 50 immigrant farmers is not a billion opportunity but could help strengthen an important industry in the province.  Identifying tourism investment opportunities in and around the Fundy Trail is not going to save the New Brunswick economy but it might yield important economic benefits.  Promoting the development of tourism-related housing along the Bay of Fundy and convincing the Yanks to buy (or fractionally own) these houses creates a permanent base of tourists that visit here multiple times per year.

Determining if there are firms doing warehousing out of Montreal that would have a better economic case to do it out of Moncton isn’t going to solve the province’s long term demographic crisis but it would be taking advantage of a core economic asset of the hub city.

I used to joke that there must be economic opportunities along the Plaster Rock-Renous highway.  There must.  But who is looking at it?  No one.  If a budding entrepreneur just happens along then the whole system kicks in with support but no one is seriously poking around the swamps of central New Brunswick looking for opportunity.

Again, I’m not suggesting that governments own businesses or provide significant subsidies to industries they like or anything so heavy handed.  I’m saying there is information asymmetry between the potential opportunities and the potential entrepreneurs/investors and economic developers would be better off playing in this intermediary space.

Obviously there needs to be a rigorous focus on ROI.  If it costs $1 million to develop a $50,000 opportunity, don’t do it.  But what would be the cost to develop a program to attract 50 immigrant farmers to the Salisbury area?  What would be the cost to flesh out new tourism investment opportunities in Greater Saint John?

I have said, somewhat facetiously, in the past that we should go through all 900+ NAICS industry codes.  Do we have a business case for NAICS 712120 – Historic and heritage sites?  Is there some historical or geographic attribute we can exploit?  Where are NAICS  624310 – Vocational rehabilitation services happening?  Who is getting the economic benefit?

Are we losing out of NAICS 623110 – Nursing care facilities opportunities?  My wife suggested there should be a mini-assisted living facility in Upper Blackville so that elderly people don’t have to leave the community.  Maybe?

Do we have enough NAICS 541215 – Bookkeeping, payroll and related services providers or are we losing business to other jurisdictions?  Is there opportunity for NAICS 487110 – Scenic and sightseeing transportation?   Do we need more NAICS 311811 – Retail bakeries or are we satisfied bringing in fresh bread and doughnuts from Montreal?

Is there any potential for NAICS 112410 – Sheep farming? Okay, this one might be a stretch.

I can tell you right now that a lot of old timers in the economic development biz are rolling their eyes as they read this.

But I truly believe the competition for investment, entrepreneurs and people attraction is more heightened then at any time in the past.  We can try and go after video game development firms or film production or aerospace manufacturing just like everyone else or we can focus on the opportunities that make the most sense in our community – large or small.

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The best places to live in Canada, hmm

I know this is going to sound like sour grapes, but so be it.

MacLean’s magazine is out with its list of the 2019 best communities to live in Canada.   Almost all the best places to live are in southern Ontario and British Columbia.  Atlantic Canadian communities hardly register with Halifax ranking 131st (the highest among all Atlantic Canada communities) and Moncton a lowly 312th.  Rothesay came in at a robust 141st.  Fredericton, aghast, 244th.

They claim Atlantic Canadian cities rank so low because of high unemployment and low incomes, among other factors.

If this was a study done by academics, one would probably think there might be something wrong with the methodology.  If you have results that maybe don’t make a lot of sense, maybe you have the wrong variables or maybe the wrong weighting on the variables, or whatever.  Imagine if you did a study that ranked the best hockey players and put Connor McDavid at 131st.  Instead of gleefully announcing your great results, you might want to take a second look – maybe McDavid was injured when you crunched your data or maybe something else was going on that the 131st ranking should have raised an eyebrow or two.

But when a study conforms to preconceived ideas – southern Ontario idyllic location to live, Atlantic Canada crappy place to live, it’s probably wise to take a closer look.

I’m not saying there are not lessons to be learned here.  I would suggest Atlantic Canadian cities look at the ranking and see if there can be improvements but if we want to know truly where are the best places to live there are a few other questions that might be thrown in the mix such as:

Unemployment situation adjusted for the impact of EI, most of the Atlantic Canadian communities in this list are at or near full employment if you factor out EI and structural issues.

Cost of living adjusted income – Atlantic Canada is still lower but would come out much better.  Look at the following chart.  In Fredericton only a little over 10% of households spend 30% or more of annual income on shelter costs – almost 40% less than the #1 city to live in Canada.  Doesn’t that count for something?

Access of after hour health clinics as opposed to just the doctor metric.

Average commute time to work.  Over 40% of people living in the #1 city to live in Canada, Burlington, have at least a 30 minute one way commute to work.  In Moncton it is 10%.  Over 14% of Burlingtonians have an hour one way commute to work.  In Moncton, 2%.  What should the ‘best place to live’ weighting be for the loss of hundreds of hours per year in traffic?

According to Statistics Canada , more people moved to Moncton in 2016/2017 from Ontario than vice versa.  Of the 45 urban centres in Ontario, Halifax had a positive migration rate with 26 and a negative rate with only 14.  Why would anyone want to move from paradise to the 131st best city to live in Canada?  More people moved to Halifax from Oshawa, Hamilton, London, Barrie, Brantford, Waterloo and 20 other Ontario urban centres – than vice versa.

How about adding that to the mix?

My real concern here is that these superficial comparisons are likely going to take on more significance as more immigrants look at places like Halifax or Moncton or Saint John.  They will go online and read that Russel, Ontario ranks 123 spots higher than Halifax.

The truth is I do a lot of work these days in Ontario and there are many great places to live.

But maybe a little more thinking is needed.

 

 

 

 

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Are efforts to attract international students facing the “why would anyone want to….  …. in New Brunswick?” challenge?

A few months ago I had the opportunity to interview the general managers of multiple national and multinational firms with operations in New Brunswick.  Many of them told me they would be very happy to hire immigrants to grow their New Brunswick operations.  But they also said they hire a lot of immigrants elsewhere in Canada – but they hire them right of the street (in Toronto, Montreal, Vancouver, etc.), so why should they have to recruit internationally for their Moncton or Saint John operations when they don’t have to in the biggest urban centres?  If this is the case, I was told by several, they might as well just expand elsewhere in Canada.

Consider the following chart.  In 1976 there were 146,930 people aged 13 to 22 living in New Brunswick.  This is a good proxy for the number of people who would be joining the workforce over the next decade.  That same year there were 32,100 active in the provincial workforce over the age of 55.  These folks represent those that are likely going to retire in the next 10 years or so.  In other words, there were 458 young people who would mostly be entering the workforce for every 100 that would most likely leave it.

Now there are 106,600 heading towards retirement in the next decade or so and only 82,000 young people potentially entering the workforce.

In other words we don’t even have enough young people to replace those leaving the workforce let alone provide the talent for industries to grow.

So what do we do?  We are bringing in more immigrants and that is great – but we have the problem discussed above and the fact that the process is onerous for smaller businesses.

If we don’t have enough young people in school to replace those leaving the workforce and to provide enough workers to expand industries – light bulb moment – why not increase in the number of young people in school?  Almost all firms would hire immigrants already here and if they are getting Canadian education experience, bolstering their language skills and getting used to our winter, so much the better.

According to IRCC, in August 2018 there were 21,075 education study permit holders – folks who have the paperwork to study in Canada – with Manitoba as their intended destination of study.  There were nearly 18,000 with Nova Scotia as their intended destination of study.

New Brunswick? 6,680.

Now the number has been increasing in recent years, mostly at the college level, but we still have among the fewest international students in our schools, adjusted for population size, among the 10 provinces.

Just to get back to a one-to-one ratio of young people to those leaving the workforce in the near future (as defined above), we would need to boost the population 13-22 by around 25,000.  Why not bring them in as international students?  Why not encourage them to study courses that provide skills that are in demand and will be in demand in the very near future?

The old education paradigm was pretty simple.  Government heavily subsidizes post-secondary education and we clunkily try to graduate just enough to meet the demand of the workforce – although this is more true at the college level.

In the new education paradigm, we attract substantially more international students, train them in areas where there is demand and not be as worried about the supply-demand balance.  In the worst case, some of the students leave after graduation but we benefited from the spending while they were here.  In the best case, entrepreneurs are able to leverage this new talent pool and expand and grow in New Brunswick.

Because international students pay higher rates of tuition and because of the difference between fixed and marginal costs, international students are not subsidized by the taxpayer.

So what’s the problem?

I fear this issue is another edition of something I have identified many times before.

We used to poke fun at the provincial slogan “Be…. in this place” but at least it was aspirational.

Now, our real slogan seems to be “why would anyone want to….  …. in New Brunswick?”

We have a collective self-esteem problem in New Brunswick. I have heard from the public and leaders around the province on many occasions:

Why would anyone want to expand their business in New Brunswick? We will have to give them a big subsidy and they will leave once the money runs out.

Why would anyone want to move to New Brunswick?  We can’t even keep our own young people.  They will come here and then just leave.

Why would anyone want to visit New Brunswick? To see a couple of old lighthouses and oversized symbols of our inferiority complex (i.e. world’s largest axe or lobster)?

Now I am hearing “Why would anyone want to move here to study in New Brunswick?”

It’s time to have a little bit more self-confidence.  Lots of national and international firms have moved here and love it.  Thousands and thousands of people move here every year and most of them love it.  We attract hundreds of thousands of tourists and, I assume, most of them enjoy it because they keep coming back.

Why come to New Brunswick to study?

  • Because we are an order of magnitude cheaper than many other provinces.
  • Because we have great schools.
  • Because we have a growing demand for college and university graduates.
  • Because we offer safe communities with a relatively low cost of living.

Finally, I will point to our neighbours in PEI.  Charlottetown has the fourth highest number of international students per capita in the country among urban centres (Kamloops, surprisingly, has the most).

If PEI can do it, so can New Brunswick.  Let’s dramatically increase international PSE enrollment – double or even triple the amount (PEI has 2.5 times as many as New Brunswick adjusted for population size).

Let’s enroll them in programs that are aligned with labour market need – even if we need to develop new programs (e.g. college level finance and insurance diploma).  Let’s send a clear signal to the economy that New Brunswick is serious about ensuring the talent will be here for the future.

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The most important, overlooked role for an economic development agency

I have been studying economic development agencies and their effectiveness for well over a decade and I can tell you there is one very important role that is mostly ignored or at least glossed over.

Unless the economy is booming, when I talk with politicians and local stakeholders I always here the same thing.  How come we are investing in this economic development agency and the economy isn’t booming?

The usual retort from the economic development agency is some version of this:  we can’t be responsible for the growth of the economy.  It’s too much to ask of an agency receiving government funding of, say, 0.02% of GDP to be expected to directly move the needle on overall economic growth.  They will then focus on the narrow stuff they are doing and try to correlate that with some form of hard or soft ROI.

For example, yes overall economic growth might be weak but we worked with 22 firms on their expansion plans.  Or we helped 15 new entrepreneurs start up companies.  Or we embarked on a marketing campaign that promoted our city or province far and wide.  We worked really, really hard and why don’t you appreciate us?  What more do you want from us?

Because the economy is in the doldrums, that’s why.

Let me use an example.  Let’s say the shareholders of a private corporation were questioning why the company wasn’t profitable.  The CEO of the company can blame a lot of things that are mostly out of her control: the general health of the economy, government, competition, consumer attitudes and other issues.  She will tell the shareholder that the employees are doing their best.  They are working really, really hard.  But the shareholder still wants a return on invested capital.

The most important and overlooked role for an economic development agency is to be clear with the shareholder (s) what it would really take to address their goal.  If a city wants 2% growth in the tax base, the economic development agency should be the organization best positioned to clearly articulate how that might happen.  If a provincial or federal government wants 3% GDP growth, the economic development folks should be the best positioned to tell them how that might happen.

Consider the private sector example again.  The shareholders want the leadership to double revenue (profitably) and grow to be within the top five firms in the sector.  The leadership of the company would then go back and do the analysis and report back to the shareholders with the following finding:  If you want that level of growth we can’t do it organically without dramatically cutting into profits.  You will need to grow by acquiring smaller firms in the sector.  Then the shareholders have a decision to make.

This is exactly what I would like to see with economic development agencies.  They should be the most knowledgeable of the local economy, the structure of the economy, the competition, the labour market, etc. and what it would take – at least in theory – to achieve the strategic goals set out by the city council or the Cabinet.

In the CEO mandate letter:  Please tell us what it would take to get our economy back to 2% growth per year on an average basis.

CEO response:  After careful analysis, we believe it would take the following steps to bring the economy back to 2% growth: 1) we need to focus heavily on sectors A and B; 2) we need to cut tax X or Y to be competitive with the fast growing jurisdictions; 3) in our analysis of other similar jurisdictions they achieved growth of 2% by doing X or Y and we should too; 4) you are investing 0.02% of GDP in economic development and the best practice is 0.04% of GDP.

Or whatever.  I think you get the point.

But economic development agencies don’t want to set themselves up for failure so they focus on narrow functions (business attraction, startups, etc.) and then cross their fingers and hope it moves the needle.

In my opinion, being the most credible advisor to government and community leaders on what it would take to move the economy forward in a sustainable way is the most important function of economic development.  More than business attraction.  More than startups.  More than workforce development.  More than marketing the community.

Because, if not you, then who?  Find me another organization better positioned to play this role.

If economic development agencies truly played this role, it could lead to exciting new thinking.  It turns out, surprise, surprise, that a single economic development agency can’t move the needle by itself so maybe one conclusion is that we need to better align the myriad of government agencies and departments that impact economic development.  Or maybe we need to do a better job of natural resources development.  Etc.

You may say, rightly, what if the conclusion is that 2% growth is not realistic?  That there are too many obstacles, cultural and otherwise to get back to a sustained level of growth?

I would respond with two points:

  1. Who, if not the economic development agency charged with fostering growth, is better positioned to draw this conclusion?
  2. Then you take it to the public. You be very clear with the public, the voters, the ultimate shareholders, that if we want to get the economy back to a sustained level of growth, we have some big obstacles to overcome.

Ultimately, this would alter the focus of economic development agencies. They would need more policy minds, more thinkers and analysts (and, shockingly, maybe even an economist or two).  Most economic development CEOs would rather invest that money in business development folks or marketing or whatever.

But my many years of experience tells me that we will never fill the gap between disgruntled politicians and exasperated economic development agencies unless we make this simple change to our approach.

 

 

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