Winners and losers

I have discussed this issue a number of times but I think it should be revisited and examined because I don’t think we discuss it enough.

I am talking about the winners and losers when it comes to economic development.

Most economic developers talk naively about the rising tide lifting all boats. That is, a strong economic development plan will benefit most actors in the economy.

We know that not to be true. In fact, a lot of folks are left behind. Rising house prices/rental and other costs disporportionately impact people working at or around minimum wage.

There are environmental and quality of life impacts arising from strong economic development.

But my mind these days isn’t even focused on those issues. I am more interested in the impact on the influential types in a community.

As I have blogged on before, many local businesses have no self-interest in economic development. If I have a candy plant and I pay my workers $9/hour and lay them off part of the year, why would I want you to bring in another manufacturing plant, offering $20/hour and full time/year round work? That would be against my self interest. I have seen and you can think about many sectors of the economy – that rely on cheap labour and lower costs would have limited interest in a solid economic growth curve that pushed up those costs.

But lately some discussions I have had push that logic out to many of the professional classes of workers in a place like New Brunswick. If you are a doctor or a federal government worker or a number of other occupations, your wages are considerably higher relative to the average than they may be in a larger, most costly urban market. Therefore, your disposible/discretionary income is much higher than it would be in Toronto. Take housing as an example. You can by a castle in Moncton for $500,000. In many larger urban markets (increasingly Halifax), that gets you a three bedroom bungalow in a nice neighbourhood. If you have serious economic development (meaning the creation of higher wage jobs in the local economy) you get upward pressure on a wide variety of costs from housing to insurance.

So why would a doctor, federal bureaucrat, etc. want economic development? They are in a really nice niche – high salary/low cost community – and economic development -serious economic development – will shake that niche. In fact, I have stated here before that on average the public sector in New Brunswick gets paid the highest premium over private sector workers among the 10 provinces in Canada (a Fraser Inst. study in 2005).

So on a personal level to many in the business and professional classes, what is the incentive to want economic development (beyond, of course, a maintenance level)? Now, of course, people don’t sit around undermining economic development because there may be some impact on their cost of living down the road. I am not saying that at all. What I am saying is that a lot of the people that I think should be champions of economic development (i.e. that local business with the $9/hour employees and the local doctor) may not see it in their best interest.

Why is this important? I really don’t know. Except that I have personally run into people over the last few years that were actively trying to undermine economic development and when I evaluated the potential reason for this – stubborn self-interest seemed to bubble up.

The local insurance business that lost five IT workers to an IT company that was brought to the city. They were being paid $30-35K/year but wanted to stay in Moncton. The new IT company lured them away with salaries of $50k and up. The manufacturing company that was able to pay $9/hour and offer seasonal jobs because the workers had no alternative.

If we are to see the creation of a disporportionate number of high paying jobs in a place like New Brunswick – it will erode the cost of living advantage of some individuals in the province.

But, in my opinion, we still need to drive ahead. Basing our company or our personal economic success at least in part on the failure of the overall economy may be personally gratifying but will do very little for the community at large.