By Jock Finlayson, ICBA Chief Economist
Confronted with a string of record budget deficits, a soaring provincial debt, and a business community that lacks confidence in much of its policy agenda, the re-elected NDP government has the urgent task of recalibrating its approach to the B.C. economy. Instead of viewing government as the main driver and shaper of economic activity, policymakers would benefit by reacquainting themselves with a few basic facts about what makes the province tick.
First, despite more than seven years of NDP rule, British Columbia remains a market-based economy. Our diverse private sector accounts for almost four-fifths of employment, generates more than 75 per cent of economy-wide wages and salaries, and provides more than 90 per cent of B.C.’s exports as well as a large majority of all new residential investment. Entrepreneurs and small and medium-sized businesses are a vital part of our economy. Many of them are groaning under the heavy weight of high taxes, punitive regulations and frequent government interventions into the province’s economic affairs. Government can play a supportive and facilitating role in managing the economy and in encouraging business growth; but without a thriving private sector a large cadre of ambitious entrepreneurs, the economy will languish. That message needs to be understood by every member of Premier Eby’s new cabinet.
Second, the government should frankly acknowledge the unhealthy imbalance that has developed between public and private sector job creation. Since 2019, B.C. has seen historically meagre increases in private sector payroll employment, while employment in the broadly defined public sector has roared ahead by almost 30 per cent. According to Statistics Canada, private sector payroll jobs hardly grew at all in B.C. between 2019 and 2023. They have risen slightly year-to-date in 2024, but the actual number of such jobs is only a smidgeon higher than it was almost five years ago. Of particular concern, B.C. has posted much weaker private sector job creation than the other major provinces since 2020. The incoming NDP government should ask itself why this has occurred and think hard about what can be done to bolster job growth in the business sector.
Third, land-based industries remain at the heart of B.C.’s prosperity, even though much of the population today resides in urbanized regions that often seem far removed from the natural resource economy. Combined, natural resource industries involved in primary extraction and downstream processing supply two-thirds of B.C.’s exports and more than half of all manufacturing shipments. They are also responsible for a large share of total non-residential investment. The energy, mining, forestry and agri-food industries are mainstays of jobs and business activity in most parts of British Columbia. Because 94 per cent of all land in B.C. is owned by the “Crown,” government policies affecting access to public lands and resources strongly influence investment, industrial production, and employment across the various industries that operate on the Crown land base. In recent years, B.C. has advanced a series of policy initiatives which – even if well-intentioned – have had the effect of destabilizing the regulatory frameworks governing Crown lands, “sterilizing” a growing portion of the public land base, and discouraging investment. Through its decisions, the government has made it harder and more costly for companies to do business across the entire natural resource economy.  That needs to change, quickly. The new cabinet should commit to a rebalancing of policies affecting Crown lands and put a higher priority on sustaining and enhancing the competitiveness and commercial success of the province’s natural resource sector.
A final challenge is productivity, which measures the value of economic production per hour of work across the economy. The good news is that B.C. has caught up to Canada on this important measure of economic success.  The bad news is that Canada itself has been lagging well behind the U.S. and other peer jurisdictions in productivity growth over most of the last 25 years. Whereas productivity in Canada generally hovered between 85 and 90 per cent of the U.S. level in the 1980s and early 1990s, by 2023 Canada had fallen to only 70 per cent of the relevant U.S. benchmark. This also captures where British Columbia stands today relative to our largest trading partner. Last year, B.C. suffered a 0.3 per cent decline in productivity (output per hour) in the overall business sector. A pattern of lacklustre productivity growth – if it persists – has dire implications for the growth of real incomes and employee earnings over the long-term.  This is why policymakers at all levels should be turning their attention to Canada’s (and B.C.’s) “productivity emergency,” as recently noted by the Bank of Canada, and searching for ways to create an economic and business environment that stimulates investment in productive assets and activities and incentivizes entrepreneurial growth and wealth creation. Without a stronger productivity performance, politicians’ talk about boosting the “middle class” and improving living standards will continue to ring hollow.
