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Saskatchewan's advantage is not oil

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Cheeky Saskatchewan Roughriders fans pose a mascot at Manitoba’s border.

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Cheeky Saskatchewan Roughriders fans pose a mascot at Manitoba’s border.

Manitobans have apparently been leaving for Saskatchewan in record numbers. In recent weeks, conservative pundits and opposition MLAs have pounded on this fact, consistently blaming high taxes for the trend. This explanation lets the NDP government off the hook. Saskatchewan's advantage is as much about better opportunities as it is about lower taxes and it's important to pound on both.

Saskatchewan doesn't just tax ordinary workers less. It's also a place where employers will pay you more. In the middle of the last decade, Saskatchewan's average weekly wage began to outpace Manitoba's. As of March 2013, the average Saskatchewan weekly wage was 15 per cent higher. That boost isn't concentrated in one industry, either -- wages are higher in both the goods-producing and service sectors. (Note: All data in this article is based on the latest month available from Statistics Canada, seasonally adjusted)

Saskatchewan is financing its growth with other people's money. Annual private investment in Saskatchewan rose to $19.8 billion in 2011 from $7.6 billion in 2003. Manitoba managed a far more modest climb over the same period, to $10 billion from $6.1 billion. Tellingly, public investment remained roughly equal in both provinces throughout that period.

Winnipeg's establishment often foregrounds our low unemployment rate as a boast of success, but it's not that simple. If Manitoba lags in total job creation, unemployment rates may be artificially low because native-born Manitobans have left, new immigrants have chosen to move and potential immigrants have chosen to start their new Canadian life elsewhere.

And Manitoba is lagging. Both provinces have low unemployment rates. But in the decade between May 2003 and May 2013, Saskatchewan -- which still has a smaller population, remember -- created 74,300 net new jobs. Manitoba created only 58,500.

Whenever anyone raises these concerns, the usual reply is Saskatchewan has oil, and Manitoba doesn't. The local establishment's cliché that "Hydro is Manitoba's oil" never comes up in that discussion, of course. We're only allowed to use the analogy as a sales pitch, not to show how poorly Manitoba is using the resources we have.

To see why "oil" is no excuse, consider manufacturing. Manitoba's economy is said to be more resilient than Saskatchewan's because of our diverse strength in industrial production. Cheap electricity supposedly reinforces this advantage.

That advantage is about to disappear.

Compare the two provinces' seasonally adjusted manufacturing sales for the last decade. In April, 2003, Saskatchewan's factory output was worth 61 per cent of Manitoba's. By April 2013, it had climbed to 97 per cent (despite higher power rates). One key driver of Saskatchewan's surge: increased sales in food processing, a sector where Manitoba could easily be more competitive if we chose to be.

Life isn't all about dollars and cents. There may be a hundred reasons to prefer Manitoba over Saskatchewan (and I can think of a dozen off the top of my head). But whether you're funding public programs or private pursuits, economic strength and quality of life are obviously linked.

Saskatchewan's success is at least partly linked to consistent, pragmatic decisions on both the left and the right to take investment-led growth seriously. Provincial officials helped to merge out complex municipal business taxes. They delivered decisive project approvals, structured resource policies to attract investment and prioritized production over consumption in infrastructure development. They've even had better focus in high-value areas like R&D policy.

To put Saskatchewan's success -- and the intellectual roots of Manitoba's relative weakness -- in context, consider one last comparison. Manitobans are irrationally obsessed with hydroelectricity, as if the province's future somehow hinges on a few more dams (or a few less).

Suppose Manitoba Hydro doubled its 2011-12 export sales of power -- a feat that in the current price environment could only be achieved with billions in public-sector debt and higher monopoly hydro rates. Doubling exports generates $363 million in new revenue annually, plus the largely one-time job benefits from dam construction and operation.

In contrast, suppose we'd spent the last decade delivering policies (not handouts) to be more competitive in food processing. Suppose we'd sought nothing more than to capture the new business that Saskatchewan has created in that sector alone. Had we done so, we'd be generating more than $300 million in direct manufacturing sales -- not just annually, but every quarter.

Manitoba can do better and the total tax bill matters to that outcome. But partisans on all sides must get past the idea "the economy" is merely a byproduct of whatever the province is taxing and its Crowns are charging in any given year.

 

Brian F. Kelcey is the founder of State of the City Research.

Republished from the Winnipeg Free Press print edition June 26, 2013 A9

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Updated on Wednesday, June 26, 2013 at 8:04 AM CDT: adds photo

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