Derrick Penner, with files from Jonathan Fowlie, Vancouver Sun
Published: Tuesday, October 21, 2008
On the bright side of the current economic gloom, British Columbia is heading into a period of economic uncertainty with a provincial budget that is in good shape and an economy that is performing well, says the Institute of Chartered Accountants in B.C.
B.C.'s still-low unemployment rates, with competitively low tax rates and a business-friendly regulatory regime, will stand the province in good stead, Richard Rees, the ICABC's CEO, said in an interview.
"If you're going to have markets evaporate and things like that, you're in a much better position to weather the storm than if you've got large amounts of government debt to service," Rees added.
B.C.'s forestry sector, for example, has already taken a significant hit, which Rees said was a factor that influenced a decline in after-tax corporate profits that the ICABC measured in its BC Check-Up report, an assessment of provincial economic performance
In the meantime, B.C.'s tax rates and regulatory environment "are not going to be disincentives to those who would do business in B.C."
The Check Up report measures factors in three general areas: quality of life, work and investment, and especially how these factors performed over 2007.
B.C. saw an a 3.1-per-cent increase in disposable income in 2007 through a combination of higher wages and lower inflation than comparison jurisdictions, which was first among provinces, the report said.
On the work side, the ICABC noted that B.C. reported a record-low unemployment rate of 4.2 per cent in 2007, a year that saw 70,800 new jobs created.
However, in 2008 the job market has softened, the ICABC added, with only 500 net new jobs created in August and an unemployment rate that has risen to 4.6 per cent.
The construction sector was a major generator of employment, the report added, and Rees said a significant number of public-sector capital projects in the works should help the building sector weather the uncertainty ahead.
As well, there is hope that efforts being made by governments in the U.S., Europe and Asia to bolster their financial sectors will help free up capital for private-sector projects.
However, the B.C. economy is not doing so well when it comes to the competitiveness and productivity of its workforce, the ICABC said.
B.C.'s labour-force productivity increased by 1.3 per cent from 2002 to 2007, the report said, which lagged the national average of 4.5 per cent.
The nature of B.C.'s economy, with the big roles of the resource sectors and construction in its growth, played a role in the poorer performance, said James Brander, an economist in the Sauder School of Business at the University of B.C.
Brander said that when a province hits a period of strong economic growth, as B.C. has, it attracts lots of new workers to the workforce, and those new workers are not as productive.
Brander added that B.C.'s lower level of post-secondary education attainment (the ICABC report found that 28 per cent of British Columbians have some post-secondary education compared with 37.7 per cent in Ontario) also helps explain the lower productivity.
However, Brander believes the province's efforts to expand post-secondary education will help close the gap, but those will take time.
Premier Gordon Campbell told The Vancouver Sun on Monday that his government is pursuing a number of policies to raise productivity as B.C. emerges from the resource boom into tighter times.
Campbell said the province eliminated the corporate capital tax in B.C. and reduced taxes on machinery and equipment to encourage businesses to reinvest.
"All of that has been done to try and encourage productivity," he added.
"As resource revenues start to go down it will make it more important for us to pursue those."
As for education, Campbell said the province has focused on making it easier for people to access education, by expanding spaces and allow people to go to school while working, while citizens have focussed on capitalizing on good economic times.
"We've been trying to meet people's educational needs, as opposed to having people meet institutional educational needs."
depenner@vancouversun.com
© The Vancouver Sun 2008