Transparency in economic development

I had to chuckle when I read the media reports of Donald Savoie’s ‘transparency’ and ‘openness’ in government report. It’s my experience – based on my limited exposure – that much is done to try and hide stuff. A couple of years ago I was hired to do a comparative analysis of economic development activities and results of over a dozen provinces/states. It was almost impossible to get any real data on the jobs, wage rates, investment levels of the ‘economic development’ in New Brunswick.

Sure, BNB published a number 4,532 or some such thing – the jobs created and ‘retained’ by their efforts. But a breakdown of the companies, the wage rates, the investment levels? Nada. In fact, in the reference period that I was looking at, there were 4-5 press releases announcing about 500 new jobs. I couldn’t find a whiff of where the other 4,000 were created (retained).

The best practice jursidictions that I looked at actually published the jobs – the time it would take to ramp up the jobs – the starting wages, the wages at full ramp and the total investment.

I don’t remember a press release from the government of New Brunswick actually mentioning wage levels in years. I have to admit that I don’t read every one but when I did that review, nada. And this week’s ATCON announcement? No mention of wage rates at all in the government press release.

It is incredibly important for the government to be open and transparent about the wage rates of companies they are attracting to New Brunswick. The Self Sufficiency plan calls for an overall 20% increase in wage levels and if they companies they bring in are below average, the public should no.

Now, there is one reference that I can find to wages regarding the ATCON project. Tt was in the Times & Transcript:

Dorothy Innes, communications director for Atcon, said depending on the position the jobs will pay anywhere from $45,000 or more. About 25 per cent of the jobs will be welding positions, she added.

This is a bit obtuse to say the least. Will secretaries make $45,000? Sure, the IT guys will make $45,000 but will the welders? I suspect the answer will be yes – but I am not clear from this comment.

It is likely, the overall wage levels will be lower than the UPM Mill. I don’t have a problem with that per se. But I think the public has the right to know.

I talked with a guy this week who knows someone working at the mill in Nackawic. Apparently the overall remuneration package is considerably lower than it was under the previous owner. Again, that should be front and centre.

I mentioned it before but it is worth repeating. A few years ago – I believe it was on the same day but I may be romanticizing it a bot – Bernard Lord was in a rural town announcing 50 new call centre jobs (he never mentioned the wage rates but we know they are around $9/hour). At the same time, Jeannot Volpe was announcing in Fredericton that because of his great work, all New Brunswickers making less than $15,500 would not pay any income taxes.

Now, $9/hour working 37 hours per week = annual salary of $17,500. Essentially, the Lord government was paying upwards of $7,500/job in tax dollars to create jobs that generate no income tax dollars for the government.

Now, how is that for an economic development strategy? Create jobs that don’t pay any taxes? It’s no wonder our need for Equalization has skyrocketed.

So, in closing, a note to the government. Be very transparent in your economic development activities. Be clear in your reporting. Be open about wage rates/benefits offered by firms. Be clear about the duration of the jobs (if it is a contract). Be clear about the investment amount. Be clear about how much taxpayer funding is going into the firm.

And to the media, why not ask the question? Please tell us the number of jobs by category and your expected wage rates? This should be a precursor to any public funding.

Otherwise we’ll be in the Volpe dance again where we are attracting jobs (and by the way there were at least 3,000 jobs under the Lord/Volpe regime in the $9/hour range that were funded with taxpayer dollars) that will never generate any payback on the tax dollars invested.

At least half of the jurisdictions I studied had some form of wage threshold to be eligible for incentive programs. In most cases it was something like the wages had to be 25% higher than the average full time wage in the broad sector (like manufacturing).

That might be a good model.

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0 Responses to Transparency in economic development

  1. Anonymous says:

    I agree, David. This is a usual problem with industry attraction in NB. There doesnt seem to be anyone addressing the side of the taxpayers in this. As you say, we are paying over the odds for jobs that dont make a financial return through taxation and you reach the point where the government is talking out of two different orifices at the same time. This works for the government because everyone likes good news and either doesnt understand the other side of it or just ignores it.
    There are many kickers that can be inserted into a contract but the problem in NB is that nobody seems to want to come here voluntarily. There has to be a huge initial cost involved.
    I realise that a certain percentage of positions in most organisations will be at minimum wage level but surely that can be counter balanced by higher paying positions in other areas of the company and this could be alluded to in the contract as a term of compliance. What percentage of call centre jobs pay above minimum wage?
    I am not ever convinced that jobs that have been bought at any price are stable long term jobs, especially in manufacturing or call centres because the world market dictates where companies will trade from. The resort community market is different in that it is constantly bringing in new revenue. This revenue is accessed by the immediate local economy and is thereby transferred into the provincial purse through sales tax, property taxes, income taxes, fuel and indirect taxes etc etc. If there were some form of other manufacturing industry that caused such a ‘tax rush’ then it would be worth investigating but this is the kind of thing we need as it has an almost instant effect on the economy and also leads to further economic development, entrepreneurship and new money.
    One further point on this is that these companies rarely move the operation to a different country as it doesnt lend itself to export too easily.
    We need to strategise stuff like this a little more and we also need to look to the future. Being an energy hub is a noble exercise but in these days of global warmimg, peak oil and world focus on carbon emissions and environmental systems I feel that we in NB are still labouring in the backwoods of economic doom. We need to look to the future here not back at something that suits Irving and nobody else.

  2. Danny D'Amours says:

    Good point on transparency David. I would like to see a law introduced that mandates any government subsidies must detail expected jobs and wage rates.

    I’d like to point out though that even if the gov’t can come out even with respect to incentives versus cash returned via taxes it can be worthwhile. Remember that income tax isn’t the only tax collected. Sales tax, gas taxes, property taxes all flow back to government coffers and contribute to the economy. Simply look at the profit that NBLC makes for the province. In addition as the size of the unemployed labour pool shinks, the lowest level of wages that are needed to attract workers rises. Look at Alberta, if an employer were to offer minimum wage, they wouldn’t have any employees.

    I agree that minimum wage jobs are not what we should be targeting nor subsidizing, I’ll gladly agree to help get call centre jobs to northern NB if the alternative is to have those workers unemployed or moving out to Alberta.

  3. Danny D'Amours says:

    To highlight my point about scarcity in the low wage labour market, check out this morning’s article in the Toronto Star this morning.

  4. David Campbell says:

    I am not sure what Ganong should do. Raising their wages to $7.75/hour, IMHO, is not going to be good enough. I am sensitive to the fact that $15/hour would kill the company’s profit margins. But, I am not sure that under $8/hour manufacturing jobs will survive in New Brunswick. We could look at attracting immigrants to work the $8/hour jobs but, again, consider my previous post. At $8/hour, there is not one penny of income tax generated off those jobs. We know that only 3% of the provincial budget comes from corporate taxes so we can conclude that $8/hour jobs drain social system resources without contributing a penny.