Strong GDP performance has Achilles heel
Non-resident work force disconnects GDP growth from employment growth
Walter Strong
Northern News Services
Monday, May 26, 2014
NWT
The Conference Board of Canada released its first survey of economic data indicators for the provinces and territories based on key economic indicators. Although the data confirms the NWT's strong economic output, it also suggests that the territory may be missing out economically, and points to non-resident labour as a factor.
Construction equipment sits dormant in Yellowknife. A Conference Board of Canada report on territorial economic indicators shows labour productivity growth and unemployment lagging behind a strong GDP. Solutions point toward increasing the resident labour workforce. - Walter Strong/NNSL photo
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The NWT ranked high across most indicators, with straight “A's” on gross domestic product growth, income per capita and the inflation rate, but it lags in employment growth and labour productivity growth.
The conference board gave the NWT a “D-” for labour productivity growth, the worst in the country.
According the report writers, "Productivity growth is the single most important determinant of a province's or country's long-term GDP growth and per-capita income, and it is therefore the only sustainable way to improve standard of living."
The NWT saw a four per cent decline in labour productivity between 2008 and 2012.
Marie-Christine Bernard, Conference Board of Canada associate director for provincial and territorial forecast services, said that during the economic downturn, mining companies may have retained their workforce despite declines in production. This would help explain the territorial dip in labour productivity growth, as less value was being produced by a relatively stable workforce.
Bernard noted that those productivity growth numbers could improve as projects, like the De Beers Gahcho Kue project, come online.
The conference board report noted that employment growth has remained low, getting a "C" grade, relative to GDP growth.
This can be partly explained, Bernard said, by the territory’s fly-in-fly out, or non-resident, work force.
“With the territories, we look at output produced by (both) residents and fly-in-fly out (workers),” Bernard said. “But labour productivity is just based on residents so you could have strong (GDP) output with less (of that productivity) coming from residents.”
This means that a strong territorial GDP is not necessarily tied to high resident employment or productivity.
Essentially, Bernard explained, GDP growth is tied to output regardless of whether that output is generated by resident or non-resident labour.
Where GDP is generated by non-resident labour, you could see a corresponding slump in resident employment.
Converting a non-resident labour force into a resident labour force is part of the GNWT's strategy for increasing the NWT's population and accessing the tax base that comes with that.
Richard Dixon, executive director at the Centre for Natural Resources, Energy and Environment at the University of Alberta School of Business sees opportunities for the GNWT to develop its resident labour force through the development of small business.
When it comes to connecting resident labour to available opportunities, Dixon said, “the size of companies (involved) has implications for strategies that the government should consider.”
Encouraging the growth of small companies, Dixon said, promotes more local hiring as small companies generally cannot afford the cost of non-resident labour.
But Dixon added that another key element for enticing the current generation of non-resident workers to take root in the NWT is to give them more reasons to stay and those reasons may not be economic.
“For this modern generation,” Dixon said. “It’s quality of life. That’s how you retain people.”
Dixon said government spending on sports, arts, and culture may be just the thing the GNWT needs to consider in order to convert non-resident workers to NWT workers.”