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Policy Perspectives

Each issue of this newsletter is devoted to providing a robust analysis of a single important policy topic affecting BC’s economy. These are published several times a year.

Productivity: BC's Position and Why We Should Care

Over the long term, productivity levels and growth rates are the most important factors determining the evolution of the standard of living in any economy. In more productive economies workers typically receive higher wages and governments have more resources available to pay for services.

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Surge in Cross Border Shopping Weighs on Retail Sales in BC

The additional consumer purchasing power stemming from the stronger Canadian dollar, recent increases in the duty-free exemptions, and the large gap between gas prices in Metro Vancouver and Washington state have all contributed to a recent jump in cross-border shopping.

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Understanding Economic Development and Reconciliation with First Nations in BC: The Case for Accelerating Economic Engagement

Jurisdictions around the world have engaged in a wide variety of initiatives to reconcile the rights of indigenous peoples within post-colonial government and market economies.

As a province largely without ratified treaties, British Columbia has, by practical and legal necessity, developed a relatively unique set of public and private sector tools to facilitate natural resource development activity on the land base.

In this issue of Policy Perspectives, we highlight the diversity of initiatives underway in British Columbia to advance economic development on the land base. The paper makes the case that there is a promising, albeit challenging, opportunity to move progressively down a path of economic and social reconciliation that will provide tangible benefits to both First Nations and the province as a whole.

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Thinking Through the Economic Consequences of Higher Taxes

As policy-makers in various jurisdictions consider options to generate more revenue by raising tax rates, instituting new taxes, or modifying existing tax rules, it may be useful to re-consider the economic consequences of following this path.

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A Snapshot of British Columbia's International Exports: Commodities (Still) Rule

The latest issue of the Business Council’s economic newsletter, Policy Perspectives, provides a snapshot of British Columbia’s international exports over the last decade.  Resource based products as a share of total exports have increased from 76% in 2002 to 80% in 2011.

  • Metallic minerals and energy products more than doubled their share of the composition of BC’s exports with coal, equal to one fifth of the province’s merchandise exports, being a significant contributor to the overall increase
  • The value of BC”s wood product exports dropped from $9.3 billion in 2002 to $5.7 billion last year, however with a US housing recovery and the development of new offshore markets in Asia, wood products are set to rebound in dollar terms
  • With 80% of BC’s workforce in the service industry, the export of services to international markets is often overlooked. Canada ranks among the top ten global service exports and while there are significant limitations in the available data on services trade at the provincial level, estimates suggest that this could be as high as 20-25% of BC’s international exports

Maintaining a competitive environment for investment and economic development across our key resource sectors – and primary export industries - is critical to BC’s future economic well-being.

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Canada Joins the Trans-Pacific Partnership

Canada is now actively negotiating for a formal spot in what many expect will become the world’s most exciting modern trade agreement – the Trans-Pacific Partnership (TPP). This is good news for British Columbia; as the country’s Pacific province we have more to gain than most other provinces. The benefits of the TPP could include increased exports to Pacific Rim markets, a boost to the local tourism sector and the development of stronger business-business and people-people connections between our province and fast-growing Asian economies. This partnership, however, is about more than trade. It will set a course for how nations manage future economic relations with China and there will be challenges for Canada along the way.

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Up and Away: The Growth of Municipal Spending in Metro Vancouver

Policy Perspectives       v19 n2
As governments around the country struggle to address deficits and manage growing debt loads in the face of often difficult economic circumstances, local government spending is also coming under scrutiny. In British Columbia, the Canadian Federation of Independent Business (CFIB) has played an important role by shining a periodic spotlight on fiscal developments at the municipal level across BC. This paper builds on work done by CFIB by taking a closer look at municipal spending in the Metro Vancouver context.

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Manufacturing: An Overlooked but Important Industry in the Lower Mainland

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Manufacturing is a significant but underemphasized part of the Lower Mainland’s diverse economy. Because the region does not have a single high-profile manufacturing company (such as Boeing in the Seattle area) or a dominant industry cluster, manufacturing is often overlooked. However, the sector deserves attention because it occupies a sizable place in the region’s economy and is a key source of exports to other markets.

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A Snapshot of Incomes in British Columbia

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While economists often seem preoccupied with somewhat abstract indicators like gross domestic product, productivity and current account balances, arguably the economic variable of most interest to people is income. As defined by Statistics Canada (and similar agencies in other countries), income has two key components: 1) the “market incomes” received by individuals and households from employment, savings, investments, occupational pensions, rents, and entrepreneurial activity; and 2) “government transfers” such as social assistance, pensions, unemployment insurance, and the GST tax credit, which are remitted directly to households by the state.

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British Columbia in the Asian Century

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It is no longer a question of if but rather a matter of when. Almost a decade ago – back in 2003, to be precise – the global economics group at Goldman Sachs drew attention to the rise of Asia and sent minor shockwaves through the US establishment with its proclamation that China would overtake America to become the world’s biggest national economy in 2041. At the time this was viewed as a credible projection, but the fact that the eclipse date was nearly forty years away meant it was still fairly abstract and was enveloped with the uncertainty that invariably attends multi‐decade forecasts. Sustained double-digit growth in China prompted Goldman Sachs to revise its projection for the crossover date to 2027 a few years later. And now, following the Great Recession and what is expected to be a subdued economic expansion for the United States, 2019 is the most widely cited year for China to surpass America in overall economic size.

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Temporary Foreign Workers in British Columbia

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Canada has a long tradition of attracting immigrants to become permanent residents. Immigration built the country and is the foundation for much of the growth in the post WWII era. The context for international migration, however, is changing and being reshaped. The globalization of labour markets, instant access to information from around the world, greater connectivity and reduced transportation costs, and the expansion of trade have all made international migration a possibility for a larger share of the world’s population than in the past. The result is a significant increase in the volume and types of movement between many jurisdictions. While permanent population movements still dominate migration patterns to advanced countries, there are now greater numbers of temporary movements for work and education-related reasons. While Canadian international migration policy remains focused on permanent settlement, the shifting global landscape, an aging domestic workforce, a large number of major projects in the pipeline, the growing need for highly specialized skills, and regional labour disparities all point to a greater role for temporary workers in B.C. in many sectors.

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Transportation Infrastructure for a Globally Conneted BC Economy

Policy Perspectives       v18 n2
Infrastructure is the sometimes invisible and seldom discussed backbone of a modern economy. A region’s infrastructure affects the quality of life enjoyed by citizens, the competitive position of businesses, and the potential for long-term gains in productivity and incomes. As a small economy, BC depends heavily on trade with other countries and provinces to generate income, employment and tax revenues. Both the profit margins on exports and the costs of imported goods are linked to the efficiency of the freight transportation system. As a gateway to the Asia Pacific, BC’s transportation sector is more than a facilitator of trade. In connecting Asian countries with other North American jurisdictions, the industry generates its own export earnings, apart from the enabling economic activity more broadly. Transportation as an industry looms larger in BC than in other provinces.

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A New World Order Takes Shape

Policy Perspectives       v18 n1
How long before a surging China eclipses a struggling United States as the largest national economy? The question takes on new significance as the world continues to recover from the 2008-09 financial crisis and economic downturn.

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BC's 2009 Recession Crimps an Otherwise Strong Growth Performance in 2000s

The recently released Provincial Economic Accounts provide an opportunity to look back at BC’s economic performance. While preliminary data had already shown the province’s economy experiencing a sizable contraction in 2009, the more complete data allows for a more comprehensive review of economic well-being, export performance and other comparative metrics. The 2009 data also brings the decade to a close, affording a longer term assessment of BC’s economic performance for the entire decade.

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How are Unions Faring in Today's Economy?

The month of September heralds Labour Day, making it an opportune time to review the place of trade unions in today’s increasingly complex economy. Trade unions remain an important factor in British Columbia. But their influence is waning, particularly in the private sector. This is starkly evident in the data on “union density” – the share of all workers who belong to a trade union. Falling union density is a well-established trend in British Columbia and other provinces, as well as in the United States. In 2006, 30.2 per cent of paid employees in BC were unionized. By 2009, the share had fallen to 29.1 per cent.

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Small Business Growth

The role of small businesses necessarily features prominently in any discussion of the structure and performance of British Columbia’s economy. It is no exaggeration to say that an orientation toward small businesses is one of the defining characteristics of the province’s economy.

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The Harmonized Sales Tax -- Through an Economic Prism

This issue of Policy Perspectives is guest authored by Jon Kesselman of Simon Fraser University. Recognized as one of Canada's leading public finance and tax policy experts, Dr. Kesselman outlines the economic benefits of the Harmonized Sales Tax which the BC government plans to introduce later this year. The Business Council is grateful to Dr. Kesselman for contributing this timely article.

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Corporate Income Tax: Getting the Economics Right

The past decade has seen a remarkable transformation in Canada’s business tax landscape. Starting in the late 1990s, both the federal and most provincial governments began to reduce corporate income taxes – the taxes levied on business income or profits. At the national level, the general federal corporate income tax (CIT) rate stood at 28% in 1999; today it is 18%, and the current government intends to bring it to 15% by 2012. Moreover, in recent years Ottawa has eliminated the income surtaxes and capital taxes that it previously imposed on large and medium-sized businesses.

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