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Economy

As trusted economists and policy advisors to business and government leaders, the Council relies on sound, evidence-based analysis to inform its policy recommendations. Through diligent tracking of BC’s economic performance, we help identify the opportunities and challenges the province must navigate in order to reach its full potential.

 

Presentation:
Ken Peacock presentation to Construction Council of Vancouver Island
Building BC for the 21st Century

On May 13, 2015, BCBC Chief Economist Ken Peacock presented to the Construction Council of Vancouver Island's first annual Capital Project Forum in Nanaimo. In his presentation, Ken makes the case for increased infrastructure investment due to its strong economic impact and the role infrastructure plays in enabling access to foreign markets and improving quality of life. With the current climate of low interest rates, now is an opportune time to borrow capital in order to finance essential infrastructure projects. The presentation also looks at a variety of financing options from both the private and public sector, and notes the need for a long term infrastructure development strategy to ensure we keep pace with the global economy and our shifting demographics here at home.

This presentation is based on the Business Council's November 2014 whitepaper on infrastructure policy and financing, Building BC for the 21st Century, authored by Ken Peacock and Jock Finlayson.

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How Big is the Underground Economy?

Statistics Canada recently published new estimates of the size and composition of the “underground” economy. According to the agency, “underground” or “hidden economic” activity amounted to some $42 billion in 2012, equal to 2.3% of Canada’s gross domestic product (GDP). There is some variation among the provinces. In Prince Edward Island, the underground economy is pegged at 3.3% of GDP, while in Alberta it is less than 2%. The figure for British Columbia is 2.7% of GDP, which is somewhat higher than the national average.

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Economic Growth and Tighter Labour Markets in BC: Some Implications of the Demographic Shift Ahead

Most people are aware that the population in Canada and other western countries is aging, that longevity is increasing, and that the front‐end of the large baby boom generation has started to retire. Fertility rates have also fallen, which means the future supply of workers will be restricted.   But how quickly will the population grow, and age, in the coming decades? Will there be a dramatic shortfall of working‐age people?   

This issue of Policy Perspectives briefly reviews current population projections for BC, shining a spotlight on a few key demographic variables. The findings underscore the steady aging of the provincial as well as the national population.   It is also clear that immigration plays a significant role in the changing demographic landscape – within a decade, it will be the only source of population growth for both Canada and BC.  Immigration can also help temper the pace – but not reverse the reality of – population aging.

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Finlayson Op-Ed: Tax policies discourage small business from getting bigger (Troy Media)

The latest federal budget confirms and reinforces what seems to be an enduring belief among many Canadian policy-makers that it is better for enterprises to stay small than to build up their top lines, bottom lines and employee head counts.  According to Budget 2015, the Conservative government plans to lower the federal small business income tax rate from 11 per cent to 9 per cent by 2019.  The rate reductions will come in four half-point steps, starting in January 2016.  There is to be no change in the general federal corporate tax rate on income above the small business threshold level ($500,000) – that rate remains at 15 per cent.

All of the provinces follow the same general approach as Ottawa, by setting their small business tax rates below the rates charged to medium-sized and larger firms.  British Columbia, to take one example, presently levies a 2.5 per cent small business tax, while imposing an 11.0 per cent tax on earned income above the threshold amount.  The net result is summarized in the accompanying table: the combined federal/B.C. tax rate on small business income is currently about half of the rate on other income, with the gap set to widen over the next few years. 

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Finlayson Op-Ed: Workers’ bargaining power to rise as labour shortages proliferate (Business in Vancouver)

The critical role of skills in a modern economy and the fact that many employers continue to report difficulties in finding qualified personnel raise questions about the future supply of workers.  A number of business leaders have voiced alarm about current and/or potential labour shortfalls. Some worry that the overall economy could be de-railed by widespread shortages of workers.

In thinking about this topic, it is useful to begin by considering the larger economic picture and the lessons from past experience.  Concerns about labour shortages are not new, tending to wax and wane with the state of the economy.  Temporary labour supply-demand imbalances in particular occupations, regions, or industries are not uncommon.  But as an empirical matter, serious and persistent shortages of workers have been rare in Canada.  The reason is that the emergence of imbalances in parts of the labour market typically leads to institutional, behavioral and policy responses that, over time, serve to eliminate or mitigate the effects of shortfalls in the supply of workers.

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Digital Infrastructure will continue to transform the Way People Work and Interact

The internet and wireless communication networks have become an essential part of society’s infrastructure in the 21st century.  It has altered the way people work and interact and the way businesses operate and serve customers. And the transformation has been very rapid considering that in less than two decades the commercial internet has become fundamental to business operations. Already about 2.5 billion people are connected to the internet, a third of the world’s population; projections point to 4 billion users by 2020, equal to more than half of the global population 

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Amid an Oil Price Collapse…The Harper Government Delivers on its Balanced Budget Promise

The steep drop in the price of oil and related impact on federal finances prompted the Conservative government to delay bringing down the Budget. But despite a $6 billion hit to Ottawa’s revenues, Finance Minister Joe Oliver was determined to meet the government’s commitment to balance the operating budget by fiscal 2015-16, after seven years of red ink. Doing so required adding some modest amounts from asset sales and shrinking the contingency reserve, but in the end the government managed to erase last year’s small deficit ($2 billion) and is forecasting a razor-thin $1.4 billion surplus for 2015-16.

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Businesses and Public Policy in Canada…Apparently Smaller is Better

The latest federal budget confirms and reinforces a prevailing belief among Canadian policy-makers that it is better for enterprises to stay small instead of expanding their top lines, bottom lines and employee head count.  Budget 2015 signals that the Conservative government plans to lower the federal small business income tax rate from 11% to 9% by 2019.  The rate reductions will come in four half-point steps, starting in January 2016.  There is to be no change in the general federal corporate tax rate that applies to income above the small business threshold ($500,000) – that rate remains at 15%.

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RELEASE: Business Council of BC welcomes Canada's balanced budget,
notes caution on the country's economic outlook

The Business Council of British Columbia welcomes the Government of Canada's balanced budget which includes several new budget measures to support a diversified economy and to advance economic growth for the country. The government deserves credit for moving steadily toward a balanced budget, although with a slim $1.4 billion surplus in 2015-2016, following the global financial crisis of 2008-09 and the current period of relative economic uncertainty.

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A Brief Look at the Environmental Goods and Services Sector in British Columbia

There are substantial challenges with establishing a coherent measure of the environmental goods and services (EGS) sector, not only in terms of definitions but also as a proportion of Gross Domestic Product, trade and employment in British Columbia.

For the most part there has always been an EGS sector. Its contribution to the economic activity is already embedded within the system of national accounts (SNA) used by statistical agencies in Canada and other countries. Two examples are water and wastewater treatment, whose contribution to economic activity is already counted as part of utilities or infrastructure spending. Other examples include technologies designed to improve vehicle fuel efficiency or to reduce emissions from power generation; these are captured in the existing data on manufacturing and utilities production and spending. Activities such as consulting and engineering services and hazardous waste management are also included in the SNA.

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Rising Exports will Support Strong Economic Growth in BC

Exports are vital to sustaining and increasing BC’s standard of living because they allow us to pay for imports of goods and services not produced locally, they support hundreds of thousands of jobs, and they provide local firms with opportunities to grow and benefit from economies of scale. The discipline of having to compete in the international marketplace encourages firms to invest in productivity enhancing equipment and processes. In turn, this means that export-oriented industries tend to have above-average levels of productivity and therefore are able to pay above-average wages/benefits.

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Growth and Greater Diversity in BC's Export Base
A primer on BC exports

As a small, open economy British Columbia has always depended on and prospered from its international connections. These linkages have been steadily enhanced and supported by improved global transportation and communications; expanding cross-border flows of goods, services, capital and technology; expanding the growth of international travel; and rising numbers of international migrants.

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Canada’s Environment for Entrepreneurship Compares Favourably

Entrepreneurship is an important source of innovation, economic growth and job creation. As such, greater attention is being paid to the role of public policy in fostering entrepreneurial activity.  Governments and international organizations are working to better understand and measure the factors that influence and support entrepreneurial activity.  The Organization for Economic Coordination and Development (OECD), for example, has developed a framework – Indicators of Entrepreneurial Determinants – that outlines some of the different factors it has identified as influencing entrepreneurship.  The framework provides international benchmarks for factors linked to business entrepreneurship.  Recognizing the need to better understand and quantify entrepreneurship, Industry Canada has prepared a research series that applies the OECD framework to the Canadian context.  The first in the Industry Canada series examines how Canada performs on two of the OECD’s six categories: Regulatory Framework and Market Conditions. 

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Women in Small Sized Business in BC

Small businesses make up ~98% of businesses in Canada and provide more than 50% of the private sector payroll.  The figures are very similar for British Columbia. It is not a large leap to discover that small businesses support a significant number of jobs and contribute a great deal to our GDP – about 26% in the case of BC.  

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Finlayson Op-Ed: The Sobering Reality Behind Business Incentives (Troy Media)

Recent news stories from both sides of the Canada-U.S. border highlight the growing role of business incentives and “subsidies” in shaping the climate for corporate location and expansion decisions. 

The big three U.S. automobile producers are in the midst of downgrading their presence in Ontario as they build new plants in various American states as well as Mexico. Asian and European automobile producers are also stepping up capital spending in the U.S. and Mexico.    

One of the factors behind this trend is the rich incentive packages provided by U.S. state and local governments keen to secure auto-related manufacturing plants and jobs.  While Ontario and the Canadian government have also been prepared to spend taxpayers’ money to lure automobile investment, so far they have been unwilling to match the stupendous sums on offer in states such as Kentucky, South Carolina, Tennessee, and Michigan.

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Small Jump in BC’s Minimum Wage Makes Sense

The province has decided to hike the statutory minimum wage to $10.45/hour, effective September 1, 2015. This amounts to an increase of 20 cents/hour from today’s level. Going forward, the government proposes to adjust the minimum wage based on inflation, as measured by changes in the all-items Consumer Price Index – an approach which the Business Council of BC has previously recommended. Assuming that inflation averages around 2% per annum, BC’s minimum wage can be expected to climb by a little over 20 cents per year. Within five years, the minimum wage would be roughly $12/hour.

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Statement: Business Council supports new minimum wage policy

“The Business Council supports the government’s decision today to implement a modest increase of the statutory minimum wage of $0.20 to $10.45 and to index future increases to the consumer price index as the Council has previously advocated,” said Jock Finlayson, Executive Vice President and Chief Policy Officer, Business Council of British Columbia.

“This brings British Columbia’s minimum wage policy in line with most other jurisdictions in Canada and provides a fair and predictable approach to future increases that businesses can plan around.

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Whitworth Op-Ed: Liquefied Natural Gas is a Generational Opportunity (Vancouver Sun)

The debate about the future of liquefied natural gas in British Columbia is generating plenty of heat, but often too little light. A casual observer can be forgiven if he or she is just a bit confused about whether LNG will come to B.C.

Strip away the rhetoric, however, and a truth remains: In a growing world economy hungry for cleaner forms of energy, the market for B.C.’s natural gas remains strong.

As CEO of Seaspan ULC and chair of the British Columbia Business Council, I think it is important we remember this when considering LNG’s potential to shape our province for the better.

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Forest Sector Remains a Vital Economic Engine for BC

British Columbia’s forest industry is an integral part of our economy and remains one of the most important economic engines for the province. It generates tens of thousands of jobs directly and supports many more jobs in other sectors that sell goods and services into the different elements of the forest products cluster.

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The Intersection of Environmental Policy and Economic Growth

The argument often goes: increased environmental regulation makes for a better society and facilitates economic growth. Some in the business community may disagree. To date there have been academic studies in support of both sides of the discussion but the answer has remained elusive. There is no doubt that much environmental regulation helps shape the conduct of individuals and firms by creating limits and articulating responsibility for actions and performance. But a proliferation of poorly designed and badly implemented regulations may have negative consequences for the economy, deterring investment and undercutting the competitive position of affected firms in trade-exposed industry sectors.

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