Exports, Skills and Incomes

July 31, 2013
Jock Finlayson

Small open economies depend heavily on trade to stimulate growth, provide employment and sustain incomes. The development of competitive export-oriented industries is particularly important for small regional economies that, by definition, aren’t able to reap the economic advantages associated with having large internal/domestic markets. British Columbia is a good case in point.

Academic and applied policy research highlights the vital role played by clusters of “traded industries” in driving economic and income growth, particularly in small jurisdictions. The ability to take advantage of greater export opportunities yields many economic benefits. Exporting allows local companies to achieve economies of scale and scope as they expand production by selling to more customers. The evidence from across the developed countries indicates that export-oriented industries tend both to pay higher wages than the overall private sector average, and to employ more highly-skilled workers. Engaging in trade is also known to accelerate the adoption of new technologies and leading-edge management practices and to spur innovation at the firm level. Together with the tendency of exporters to pay higher wages, this reinforces the impact of export industries in raising the skill-intensity of the overall workforce.

This discussion is relevant in the BC context given concerns here over employment quality and the challenges related to the growth of well-paying jobs. If policy-makers, community leaders and private sector decision-makers want to boost the number of high-paying jobs, then more attention should be given to creating an environment that supports the creation and expansion of export-oriented firms.

How does BC stack up as an exporting powerhouse?

The answer is that our record is mediocre at best. The accompanying table ranks the ten provinces according to the value of their exports of goods and services on a per capita basis. Data is provided for the calendar year 2010 and for the decade ending in 2010. Here, exports refer to the dollar value of export sales of both goods and services to all external markets – other countries as well as the other Canadian provinces.

As shown, BC is far from being a standout performer. In 2010, we ranked 8th among the ten provinces in the value of per capita exports. Cumulatively over the ten years ending in 2010, we also ranked 8th. Of interest, Alberta emerges as Canada’s export superstar, with a level of per capita exports almost twice as great as BC. It’s probably not a coincidence that Alberta also has the highest wages and the biggest household incomes in the country.

The lesson is that BC needs to up our export game. And this, in turn, requires that we make more progress in strengthening the province’s competitive position so that BC attracts more investment in industry sectors that are geared to serving not just local markets, but the larger North American and global marketplaces.

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