I had a long, winding conversation this week with someone on the topic of why some local firms seem hostile to economic development efforts. From Salesforce.com to Molson Breweries to UPS and dozens more – when there are efforts to attract industry to New Brunswick inevitably there will be someone in the media suggesting it is a bad idea.
At one level this seems counter-intuitive. In the US, for example, many Chambers of Commerce mount investment attraction teams and are actively out recruiting business to move to their city. I recently read a book that talked about the Chamber in Pittsburgh and its efforts to attract industry way back in the late 19th Century. Doesn’t a rising tide lift all boats?
For some local companies, attracting firms here means more competition. Not for local markets as – with very few exceptions such as Costco – economic development groups are not out looking to bring in competitors for local market activity. They are seeking export-based businesses.
The competition is for labour and other resources and if economic development efforts are successful it does lead to rising costs and can make things uncomfortable for incumbents. One business leader told me recently “I am all for attracting industry to New Brunswick – just not in my industry”.
So, to summarize there are firms that directly benefit from investment attraction and new job creation (i.e. construction firms, retail, services, etc.) and there are those that may feel a somewhat negative effect (those that may have their workforce raided, for example). The latter, unfortunately, can be expected to resist – publicly – efforts to attract industry.
I have tried to convince these folks of the importance of clustering and building a broader labour pool and supply chain. If you attract Google it is good for the whole IT industry and this is primarily true but there will be some firms negatively impacted.
But the bottom line is that New Brunswick needs economic growth, business investment and good paying jobs. If the local business community is creating enough economic activity from within to generate the tax base to pay for public services that would be sufficient but it is not – and guess what – there are few locations in the world that are self-sufficient at a local level. Even New York City is aggressively trying to attract industry.
I can’t deny that successful economic development leads to rising wage levels. Between 1991 and 2006, the wage spread between customer service workers in Moncton (i.e. receptionists, accounting clerks, etc.) and the average wage in the region was cut in half by the call centre industry. The average wage in 1991 hovered at around a couple of bucks beyond the minimum wage. Now it is nearly $8 above the minimum wage. That did put pressure on local firms that needed to hire this class of workers – no question. This was somewhat part of a national trend, however.
The last point is on the use of incentives. Some firms will say they have no problem attracting industry but they don’t like giving taxpayer money to them. As I said in my column this week, that is a reasonable position but one I don’t agree with. If all Canadian provinces and US states got together and banned the use of incentives I would be the first one up cheering but until they do, I support incentives – as long as there is limited risk to the taxpayer money and a strong ROI on the investment. In other words, if the government puts in a million and gets out ten million in tax revenue over ten years, that is a positive ROI.
I would just say to my friends and colleagues in the local business community to keep an open mind about this stuff. New Brunswick needs economic growth and do you want to be the one seen as standing in the way? Healthy economies across North America get that way through a mix of dynamic, local entrepreneurship and good quality national and international firms. We need that here as well.