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Want good middle-class jobs? Let the resource sector flourish

Mark Milke: Rising incomes in Canada have been closely tied to one economic sector. Naturally, it’s the one facing implacable opposition.

Imagine yourself in one of Canada’s most isolated regions, one of the three territories up north: Nunavut, or Yukon, or the Northwest Territories. You may have moved to Canada’s north for splendid isolation, a job, or both. However, once there, you find the cost of living nosebleed-like high.

Examples: Yellowknife residents pay among some of the highest rents in Canada—about $200 to $300 more every month than already high-cost Vancouver and Toronto; up north in winter, some residents have monthly heating bills of $1,000; groceries are also expensive: in Yellowknife, one litre of milk can cost you $3.67 compared with $2.28 in Vancouver.

Recently, someone wrote to me from the Northwest Territories about just this issue. He asked if I had any policy ideas on how to get such prices down. My honest answer: It’s difficult to bring down prices for consumers in a geographically isolated region with a tiny population. The cost of transporting goods up north (or producing them locally) magnifies the per unit cost. That’s difficult to change. (A caveat: I’m assuming full competition is already in play.)

Of course, if I were an interventionist-minded politician, I might rail against corporate greed, impose rent control (a bad idea—see my last Orca column), or start an expensive royal commission to investigate possible price-fixing.

At the end, northerners would end up either back at the start—high prices still, or with marginally lower prices but a shortage of basic goods. Businesses and the people who work for them cannot produce and sell a good or service below what it costs to create it. And the input costs include labour, raw material, transportation and utility expenses, and also taxes among others.

Force a business to offer something for less than the cost of production and you’ll end up with shortages a la East Berlin under 20th century command-and-control Soviet-era “economics.”

Want more affordable lives? Try higher resource-sector incomes

But if it’s nearly impossible for a government to bring about lower prices, the only other way to make life more affordable is to boost incomes.

Here too, governments cannot wage a magic wand – but what they can do is allow for entrepreneurs to create jobs in multiple sectors.

In Canada, the most obvious example is the resource sector, now under constant attack from Atlantic Canada to British Columbia. As an example of great-paying jobs that go begging when potential oil,  gas, mining, and forestry projects are delayed to death (or just stopped), consider some data from Statistics Canada a few years back.

The national statistics agency crunched through the most recent census data from 2015; the decade-over-decade comparison was telling. It revealed how median Canadian household income rose to $70,336 by 2015, up almost $6,900 from $63,457 in 2005 or nearly 11%.

The provincial breakdown revealed the story of how great-paying jobs are created and often concentrated far away from Canada’s urban populations and also far away from political decisionmakers, which might help explain why they so often miss such important facts.

Hello northern British Columbia and higher incomes

For starters, Statistics Canada found that for British Columbia, median income was $69,995 in 2015, or up 12.2% since 2005. By comparison, median income in Alberta was $93,835 in 2015, up 20%.  Median income rose by 29% in Newfoundland and Labrador, and by 37% in Saskatchewan in that decade.

Dive down into B.C.’s statistics and what’s noticeable is where incomes soared. Hint: Not Metro Vancouver. Vancouver’s growth in median income in 2015 to $72,662, up 11.2% was, as Statistics Canada noted drily, “somewhat below the provincial rate,” i.e., the 12.2% provincial growth rate in median incomes since 2005.

In contrast to Vancouver, median income growth was low in Powell River, Port Alberni and Quesnel (less than 2%--blame troubles in forestry among other issues, but ten times or more that growth rate in Cranbrook (+21.8%), Prince Rupert (+23.2%), Terrace (+24.6%), Fort St. John (+27.5%) and Dawson Creek (+31.6%).

Most of those provinces or communities where median income soared are heavily dependent on the resource sector. In B.C., Fort St. John and Dawson Creek are ground zero for the province’s burgeoning natural gas sector.

This resource-rich, higher-median-income story was noted by Statistics Canada when it surveyed the provinces. It pointed out how “An important factor in the economic story of Canada over the decade was high resource prices.” The agency further observed how “that drew investment and people to Alberta, Saskatchewan and Newfoundland and Labrador, boosted the construction sector, and more generally filtered through the economy as a whole.”

Quebec: Resource-rich regions thrive

In contrast to those then-booming provinces, median incomes in central Canada took a hit. Quebec was up (8.9 %) with Ontario up only 3.8% between 2005 and 2015.

There were exceptions even in provinces such as Quebec, where the resource sector was allowed to thrive: Statistics Canada wrote of how “several metropolitan areas in resource rich areas had relatively higher income growth.” They include Rouyn-Noranda (+20.4 %), Val D'or (+18.0 %) and Sept-Îles (+13.4%).

In late 2014, oil prices began to plunge which hurt the communities and provinces more dependent on that commodity. However, by 2016, as oil prices began to recover, investment in that sector stalled and fell in Canada while it began to rise in the United States.

I corrected a journalist recently (Stephen Maher) on just this point when he flippantly blamed Alberta’s five-year woes on the 2014-2016 crash. He either did not grasp or did not know that investment in Canadian energy has been sinking while rising in the United States. That has much to do with a general anti-pipeline policy from the federal and B.C. governments. (And one late-inning purchase of the TMX pipeline by the federal government hardly counts as pro-pipeline after its other anti-pipeline policy.) The usual assortment of anti-resource activists also had a role to play.

The minority who reflexively oppose oil, gas, mining and forestry, or even those who support those sectors, need to be careful not to over-demand or tie up resource projects. It’s people in their own rural communities who suffer the most from such job-killing activism and de facto vetoes.

Back to the territories: The same Statistics Canada survey remarked on how overall median income growth rate of the territories was 22.4%. It ranged from 18.9% growth in the Yukon, to 24.5% in the Northwest Territories, with Nunavut median income soaring by 36.7%. For Nunavut, the statistics agency said the high growth in median income resulted from “more workers in the resource sector and government sector over the decade.”

Unless politicians think that everyone should work for government in a territory (where such high-paying jobs also help dramatically boost overall statistics in a lightly-populated northern territory), the message from Statistics Canada data was clear: High-paying jobs and higher incomes in Canada often result from flourishing resource communities.

Mark Milke is an independent public policy analyst. His newest book is The Victim Cult: How the culture of blame hurts everyone and wrecks civilizations.