Canada West Foundation Blog

By: Roslyn Kunin

A new list of the world’s most livable cities has just been released by the Economist Intelligence Unit (EIU). With three cities in the top 10 (Vancouver, Toronto and Calgary) and four in the top 20 (Montreal, ranked 16th) Canadians can be proud. Proportionally, western Canada can be even more proud. And Vancouver, the highest on the list for Canada, can be proudest of all, even if it is in the now familiar bronze position in world rankings.

Vancouver has a long history in the top ten of this list, often in the first position, but petty crime, traffic congestion and housing affordability have now pushed it down to third place.

But some readers may recall another headline just this past July saying that Vancouver was no longer in the top 10 of the world’s best cities. The confusion is due to the fact that the EIU’s list of “best” cities is different from its list of “most livable.” The list of cities examined for the “best” list is much shorter (70 compared to 140), and does not currently include Calgary or Vancouver. Toronto was the only Canadian city included in the best cities competition (it ranked eighth).

This points to the importance of understanding the methodology behind these lists.

For example, neither the livability index nor the best city index includes consideration of the opportunity to make a living. Since everyone who is not independently wealthy must take this into account, often before all other factors, when choosing where to live, this strikes me as a significant oversight.

This is the reason why Dacca in Bangladesh sees streams of incoming population in spite of the fact that it is at the very bottom of the livability list. Many Bangladeshis see Dacca as the place where they have the best economic prospects. And this strong in-migration no doubt contributes to reduced livability as congestion increases and infrastructure is strained.

Closer to home, Vancouver consistently outranks Calgary on the livability index, but does not appear to be keeping up when it comes to opportunities for making a living. Those who vote with their feet seem to be choosing Calgary. Over the last year in Vancouver, house prices, which have been largely unaffordable, have fallen 12%. This would not be consistent with a strong influx of population. Calgary, on the other hand, has seen house prices rise by 27% over the same time period.

Maybe we need an index that looks at making a living as well as enjoying living?

By: Michael Holden

“The fiscal restraint that many expected from this budget is more akin to paper cuts than deep wounds.”

The 2012 federal budget was, for all intents and purposes, the first delivered by the Conservative government under majority rule. It was expected to give us our first glimpse at how the Conservatives intend to govern over the next several years. Many assumed that the result would be a fairly dramatic shift toward fiscal conservatism and smaller government. The reality, by contrast, is decidedly middle-of-the-road. The Conservatives have delivered a prudent budget, one that largely fails to live up to the hopes of strong fiscal conservatives, but also largely fails to live up to the fears of their opponents.

To be sure, specific elements of the budget, such as delaying Old Age Security (OAS) and Guaranteed Income Supplement (GIS) benefits until age 67, are bound to attract controversy and spark debate over the coming weeks and months. There are also deep cuts in some areas, among them foreign aid and the CBC. However, the budget also contains several initiatives that are either welcome or overdue (eliminating the penny leaps to mind). But in the final analysis, while the budget itself is a thick document, filled with a wide range of initiatives, this is, on the whole, a cautious and incremental plan. This is true especially considering initial expectations that the budget would pare back government spending in a big way.

In terms of the priorities outlined in the budget – once again called an “Economic Action Plan” – there is a clear emphasis on measures aimed at promoting economic growth and job creation. In particular there are several programs and initiatives that are recognizable as clear priorities for western Canada. These are discussed further below.

Budget Overview

As expected, the budget established an accelerated timeframe for eliminating the deficit and restoring fiscal balance, primarily focusing on the expenditure side of the equation. In last year’s budget, the deficit for the current year was expected to be $32.2 billion, a figure amended in November to $31 billion. Owing to a combination of resurgent revenue growth at the end of the year, spending restraint and lower-than-expected interest payments on the national debt, the deficit for this year is expected to be $24.9 billion. Moreover, the federal government now plans to balance the books in four years (2015-2016), one year ahead of the schedule laid out in last year’s fiscal plan. In fact, barring an unexpected downturn in economic fortunes, the budget will most likely be balanced within three years.

One of the big items that everyone was waiting for in this budget was news on the extent to which the government would be cutting program spending in the years ahead. This is the part of the budget where, depending on their point of view, people will be either the most disappointed or the most relieved.

Although many of the details still have to be ironed out, the federal government announced that its review of department spending will yield ongoing savings of $5.2 billion per year by 2016-2017. This total represents about 6.9% of the spending that was subject to the review process, but only 2% of overall federal spending. In addition, about 19,200 federal government jobs will be cut, about one third of which will be through attrition.

While these cuts represent real reductions for individual departments and agencies, it’s important to keep in mind that, in the aggregate, they are based on spending levels that have grown dramatically in recent years. Since the first Conservative minority government in 2006, federal spending has increased by 38.7%, while the federal public service expanded by 15.3% (adding more than 60,000 jobs in the process). When viewed in that context, the proposed budget cuts do not exactly suggest a broad-scale withdrawal of the federal government from the public arena.

In addition, other components of federal spending, like transfers to the provinces and to persons, will be rising throughout that period. Old age benefits are the obvious exception, but those changes don’t even begin to kick in until 2023. As a result, the overall effect of the government’s spending restraint will not be a decrease in total program expenditures as much as a slightly lower rate of growth over the forecast period.

Specific Programs and Initiatives

For the most part, the federal government’s fiscal plan delivers on the expectations set out in the Canada West Foundation’s pre-budget commentary. Perhaps most notably, it includes a commitment to modernize the regulatory system for major project reviews with the goal of a “one project, one review” approach. This approach is designed to reduce duplication, the administrative burden on businesses and the timelines for approval. While the specifics are still to be determined, this is a welcome development for western Canada, provided that it does not result in an abdication of government responsibility in the area of environmental stewardship.

The budget also contains measures aimed at job creation and addressing labour shortages in western Canada. These include some modest reforms to the Employment Insurance program, an enhanced youth employment strategy, hiring credits for small businesses and improvements to the Temporary Foreign Worker Program. The budget also mentions improvements to Canada’s immigration system, focusing on economic migrants that meet the labour needs of specific provinces and territories. However, there are few details on what that might mean.

Perhaps most significant for the West is new money for First Nations infrastructure, education and measures to improve training and incentives for the on-reserve Aboriginal population to enter the labour force. In its various consultations and roundtable discussions, the Canada West Foundation has heard repeatedly from western Canadian business and policy leaders that more needs to be done to improve living conditions on reserves as well as to improve Aboriginal participation in the workforce. In contrast with the aging population generally, the Aboriginal population is young and growing quickly. As such, they represent a significant, relatively untapped resource of labour in the West. On this issue, the measures contained in the 2012 budget represent a step in the right direction.

As we looked for in our pre-budget commentary, the 2012 budget also targeted spending cuts to specific areas and avoided cross-the-board measures that might have penalized effective or valuable programs. To be sure, there were few details, as usual, offered in the budget as to which exact programs would be affected by the plan, and as noted earlier, some will be unhappy about the areas that were targeted relatively heavily. But in general, the spending cuts reflected a gradual reshaping of government priorities and not a thoughtless chopping exercise.

The budget also emphasized measures related to innovation and research. This focus was signalled widely in advance of the budget, but the approach taken differed from the norm of recent years. Productivity improvements in Canada have been much sought-after, but elusive as previous government initiatives like lower corporate taxation and tax credits failed to deliver on that promise. With this budget, the government has signalled that it is changing tack. In a “Back to the Future” kind of way, there appears to be a return to more direct government involvement and incentives for high-risk venture capital and business innovation. While this type of direct involvement was (and still is) derided as the government getting into the game of “picking winners and losers,” the initiatives proposed in the budget echo many of the suggestions that we heard from business and policy leaders during our most recent series of Honourable James A. Richardson Roundtables this past autumn.

Another recurrent theme was a continued focus on trade and accessing new markets. In a sense, the budget offered nothing new on the subject; it mostly just restated the government’s recent accomplishments and highlighted the various trade- and investment-related initiatives currently underway. Although there was no new money for trade (in fact, foreign diplomacy and aid received disproportionately heavy cuts in funding), this budget signals that international trade remains a high priority for this government.

There were also some policy issues on which, in our view, the budget was disappointing or disappointingly silent. As noted above, in spite of the fact that trade and market access are stated priorities of this government, financial support for foreign affairs and diplomacy was cut. In addition, the budget includes no significant new measures or financial support relating to environmental protection, conservation, curbing greenhouse gas emissions or renewable energy. There was also disappointing silence on the subject of a Canadian energy strategy. Finally, there were no significant new funds for urban or trade-related infrastructure. While the federal government has made significant investments in this area in recent years, there remains a large infrastructure deficit in many parts of the West.

As a concluding note, it seems appropriate to devote a final thought to bidding adieu to the much-maligned penny which will cease to be minted in April, and stop being distributed later this year. Over the years we’ve all complained about the space pennies take up, we’ve gotten into trouble in school for flicking them at classmates, we’ve thrown them in fountains, used them for ill-advised science experiments and we’ve refused to pick them up when they lie alone and half-forgotten on the street. And now they will be no more.

Goodnight sweet penny. No longer will you fool me into thinking I’m rich based on the thickness of my wallet. May flights of angels sing thee to thy rest.

By: Michael Holden

The 2008-2009 recession and the still-fragile economic recovery in western Canada have amplified the urban-rural divide in regional labour markets. That large cities have been responsible for the majority of job creation in the West is hardly a recent development—the region’s nine Census Metropolitan Areas (CMAs) [1]have accounted for nearly 80% of all job growth in western Canada since 1997. However, the gap in employment growth between those nine cities and less populous areas has widened in recent years.

Not only did the West’s largest cities, on average, emerge from the recession relatively unscathed, but they have since posted much stronger job gains as well. From its pre-recession peak (November 2008) to the lowest point of the economic downturn (August 2009), western Canada lost just over 110,000 jobs. Even though our nine CMAs were home to about two thirds of all employment in the region, they accounted for just one third of those losses. Conversely, when the region began to add new jobs, it was mostly in the large cities. Since August 2009, there have been 119,000 positions created in western Canadian CMAs compared to 42,100 elsewhere in the region. In fact, smaller urban centres and rural areas have, on the whole, yet to recover their pre-recession employment levels. Meanwhile, the CMAs collectively did so in August 2010 and have been expanding ever since.

Of course, this is not to suggest that all the region’s big cities have been engines of job creation. Two cities—Vancouver and Edmonton—have been the primary drivers of employment growth, creating more jobs post-recession than all other CMAs combined. Regina and Kelowna have also posted impressive job gains, although their smaller population base means their affect on regional job creation is somewhat muted. At the other end of the spectrum, Calgary, Victoria and Abbotsford-Mission have all seen strong employment growth within the past 12 months, but there are still fewer people working in those cities today than before the recession began. In Saskatoon, there have been only modest job gains in recent months and employment remains well below pre-recession levels.

Even though most new jobs in western Canada are being created in big cities, this does not mean that employment prospects elsewhere in the region are necessarily bleak. In Manitoba, for example, employment growth outside of Winnipeg has been a lot stronger than in the province’s largest city since even before the recession began. Similarly, job creation outside of Alberta’s major urban centres has kept pace with the 4.3% average employment growth rate in Edmonton and Calgary over the past two years.

Moreover, as much as employment in western Canada’s CMAs has been rising, this increase has been counterbalanced by strong population growth; through the combined forces of urbanization, immigration and interprovincial migration, people continue to flock to our cities. Employment gains in our major centres since August 2009 has been just sufficient to absorb the growth in the urban working-age population in western Canada. Meanwhile, while job creation has, broadly speaking, been slower elsewhere in the region, so too has population growth.

These concurrent trends have created a favourable balance in western Canadian labour markets. While there remain pockets of weakness in some areas, the general situation is one where excess labour capacity in the region is moving to our major cities to absorb the growing demand for workers. As a result, the unemployment rate in urban and rural areas in western Canada has been virtually identical for several years.

1. In order of population size, western Canada’s nine Census Metropolitan Areas are: Vancouver, Calgary, Edmonton, Winnipeg, Victoria, Saskatoon, Regina, Kelowna and Abbotsford-Mission.

Three new publications from the Canada West Foundation highlight the variety of views western Canadians have about environmental, energy and water issues. The results from a survey commissioned by the foundation are compiled in three separate reports under the Attitudes to Energy and the Environment Initiative.

Reading the Meter: Western Canadian Opinions on Energy Issues outlines the variety of views western Canadians have about energy issues including the economic importance of the energy sector, support for green energy, and the future of the oil sands.

Green Expectations: Western Canadian Opinions on Environmental Issues highlights a fundamental tension in the public mindset: Canadians need and want energy but worry that energy production and consumption are damaging the environment.

Water Worries: Western Canadian Opinions Toward Paying More for Water shows that western Canadians are worried about the long-term supply of fresh water and that they are willing to pay more for water if doing so results in more conservation.

“As westerners, we know that the energy sector helps butter our economic bread by providing jobs, stimulating investment and generating government revenue,” notes the survey’s principle investigator Robert Roach. “At the same time, there is a strong degree of apprehension about one of the country’s (indeed the world’s) largest natural resource assets—the Alberta oil sands. While outright opposition to the oil sands is quite low in the West, large numbers of westerners would like to see better environmental results, even if this means slowing the pace of development,” adds Roach.

The results examined in these three publications are drawn from a survey conducted by Environics Research Group Limited. The survey was conducted by telephone in late 2010 with 1,202 western Canadians (300 per province) 18 years and older. The results are accurate +/-2.8 percentage points 19 times out of 20.

Attitudes to Energy and the Environment is part of the Canada West Foundation’s Powering Up for the Future Project, which focuses on public policy challenges at the interface of the economy, the environment and energy.

To download the Attitudes to Energy and Environment publications, click here.

by Robert Roach

There are many ways to ruin a cocktail party. One tried and true way is to bring up the environment: “Are you aware that the pork in that pig-in-a-blanket you are eating creates toxic run-off that contaminates our rivers?” “No, but it sure is tasty!”
This is why we did not start this series of articles on changing Canada’s economic DNA with a piece on the importance of thinking and acting green. However, while it may be a buzz kill, addressing the environmental piece of the economic competitiveness puzzle is critically important.

This is especially true because we are nowhere near where we need to be when it comes to environmental efficiency (see what we mean—what a buzz kill). We have an economy that is really good at exploiting the environment and we are trying to stick this square peg into a round environmental hole. There has been progress: recycling has become commonplace, dumping industrial waste directly into rivers  has been banned, and we have greatly reduced the use of ozone-depleting hairspray. Despite these and other minor adaptations, our basic economic DNA is black and red (as in black and red ink) rather than green.

The point here to not to be ashamed of what we have accomplished as a civilization. The modern economy and its roots in transforming the land and harvesting the earth’s resources have taken us out of the stone age. For most of us, at least, this is a good thing.

Nonetheless, we don’t want to become an economic dinosaur staring into a future where we are just a bunch of bones in a museum. We have to move beyond tinkering at the margins of how our economy operates and embrace a completely different approach to how we weld our economy with the short-, medium- and long-term health of the planet.

The first thing we have to admit is that this will not be easy and it will not come without short-term costs. It will pay off, but like anything worth having, it requires sacrifice. There will be winners and losers, and the losers are not going to be happy. If we plan for this rather than think that the transition to a green future will be painless, our chances of success will be much greater.

The second thing we need to understand is that one-off reactions to the crisis of the day—be it greenhouse gases, oil spills, birds getting chewed up in wind turbines, or the disappearing rainforest (remember when we cared about that?)—will not get the job done. It is like training a duck not to quack—you might have some success, but it would be better to change the duck’s genetic code so it has no need to quack.

As an economy, we need to change the basic equation of exploiting land, labour and capital to a much more complex algorithm that incorporates the value of ecological goods and services, establishes the primacy of creativity and innovation, and erases the notion that “protecting” the environment is either a cost or a moral obligation. Sustainable practices must be as natural as breathing. If they are only the result of laws, guilt or religious fervour, they will always be on shaky ground and open to fierce opposition

We need business practices, investment strategies, production systems, accounting methods, entrepreneurial norms and market signals that integrate both the efficiencies that can be gained from green economics and its respect for the natural processes that sustain life.

A change of this magnitude is a massive undertaking, and for this reason alone it cannot be centrally controlled. It has to happen at the level of the individual firm, investor, entrepreneur, worker, parent and teacher.

Two things make this transformation increasingly likely: first, there are many potential advantages to a greener economy including lower production costs and higher profits; new jobs in the green services sector; a decrease in onerous government regulation and the related compliance costs; and less money spent on reacting to environmental challenges (thus leaving more money in the hands of consumers).

Second, we know more today that we used to. Some will say that we have only rediscovered what some ancient cultures already knew, but either way, the next generation of Canadian entrepreneurs, investors, managers and workers are much more savvy about the need for, and value of, greater balance between harvesting the earth’s bounty and ensuring that it continues to be bountiful.

Canada can take the lead. Or, we can become the dinosaur as Germany, the US, and yes, even China, push us out of the way.

This article is based on a forthcoming book entitled “Rewriting the Code: Changing Canada’s Economic DNA” by Todd Hirsch and Robert Roach. Robert Roach is the Senior Researcher at the Canada West Foundation and Todd Hirsch is the Senior Economist at ATB Financial.

by Robert Roach

This post is based on a forthcoming book entitled “Re-Writing the Code: Changing Canada’s Economic DNA” by Todd Hirsch and Robert Roach. 

In the bad old days when people were sent to poorhouses for falling on hard times, there was a job called “picking oakum.” Prisoners were forced to untwist old bits of hemp rope by hand until their fingers bled. The resulting product was then used for other purposes such as stuffing mattresses. As such, picking oakum was a value-added industry: a raw material was processed and, in turn, value was added and “jobs” were created.

 It is easy to imagine a local oakum producer stressing how much better it is to untwist the hemp locally as opposed to exporting it in its raw form. 

Picking oakum is an extreme example, but it highlights the need for economic strategies that go beyond simply promoting more value-added activity. A new meat packing plant, bitumen upgrader or auto parts factory are not going to maintain Canada’s economic prosperity in the global economy of 2010 let alone 2025 or 2050. We have to aim higher—much higher—than the modern equivalents of picking oakum. 

This does not mean that we should not make more pasta, furniture and or other value-added manufactured products here in Canada when and where it makes economic sense to do so. What it means is that we need to fully understand that “making things” (especially things that our competitors can make cheaper) will not keep Canada prosperous. 

For example, we have lots of oil and natural gas that we could turn into plastic patio chairs. But the reality is that, even after shipping the chairs across the sea to North America, the Chinese can still make plastic patio chairs cheaper than we can (assuming we don’t try to compete by dramatically lowering wages or loosening environmental standards—something we definitely do not want to do). As a result, when some guy in Florida needs a patio chair, he buys the one made in China. And at $10 each, you have to sell a lot of patio chairs to fuel your economy. 

So where does this leave us? Believe it or not, it leaves us in a very enviable spot. The Chinese officials who know that their country’s long-term economic future will be bleak if it involves making stuff that ends up in dollar stores would love to have the advantages that we have in Canada right now: a modern service-based economy with a high level of education, a relatively low level of poverty and infrastructure galore. We have everything we need to aim for the top of the global value chain. 

The good jobs of tomorrow and the industries where we have a chance to develop a comparative advantage are largely at the upper end of the value chain. You don’t want an army of workers assembling iPads. What you want is workers who design iPads and other marketable innovations. You want businesses that not only figure out how to extract oil and gas here in Canada, but that sell their expertise to drilling companies around the world. 

We might make lots of pasta out of our wheat or we might ship it elsewhere for processing, but what we really want is to corner the market for designing the strains of wheat and other staples that will help feed the world’s growing population. 

We have the ingredients—wealth, education, previous successes, entrepreneurs, great cities and so on—to play at the upper end of the value chain, we just need to make this our focus. Exporting natural resources and “making stuff” will remain key components of our economy, but if we don’t aggressively go after the profits and jobs to be found in medical research, education services, financial services, biotech, IT, entertainment and so on, we will find our standard of living falling as our competitors get better and better at both the bottom and top ends of the value chain. 

The Canadian economy needs to be driven by ideas, innovation and the practical knowledge that takes ideas and innovation and turns it into good jobs and economic growth. 

One caution: the bursting of the dot.com bubble showed us that economic activity at the top of the value chain still has to have real substance. If it is just a bunch of young people playing pool in the lunch room and getting paid in soon-to-be-worthless stock options, it won’t work. We need good ideas that are turned into real innovation and real value. We have the ingredients to do this, now is the time to stir the pot and make it happen. 

Robert Roach is Senior Researcher and Director of the West In Canada Project, Canada West Foundation and Todd Hirsch, is Senior Economist, ATB Financial.