Managing Success: Making the Most of British Columbia’s Economic Growth

British Columbia is thriving. Renewed confidence in the economy has led to broadly based growth in economic activity.

Budget 2006 includes measures to ensure that British Columbians are able to take full advantage of the province’s strong economic growth. These initiatives will support a dynamic job market that creates well-paying, exciting job opportunities and ensures economic growth is sustained into the future.

The pace of growth in the provincial economy is reflected in many of the key economic indicators. British Columbia’s real gross domestic product, a broad measure of economic activity, has been expanding at above the Canadian average pace in each of the last four years, including current growth estimates for 2005. British Columbia had the highest rate of job growth in Canada in 2005 while the province’s unemployment rate fell to lows unseen for more than 30 years.

With British Columbia faring very well in broad economic terms, the government is now turning to policies that will ensure the provincial economy achieves its fullest potential. This will increase the opportunity for all British Columbians to reach their employment goals.

In the not too distant past British Columbia did not fully reap the benefits that come from economic growth. Instead, British Columbia’s productivity growth was relatively sluggish compared to other North American jurisdictions. Productivity is a measure of the quantity of goods and services that can be produced with a given amount of resources. Productivity depends on many factors, including the quantity and quality of labour, capital and technology that is used to produce goods and services, as well as how successfully these factors can be combined in the production process.

Productivity grows when we can increase the amount produced with the same amount of resource inputs — doing more with less. Productivity growth is important because it represents the primary source of long-term improvements in incomes and the general standard of living. Growth in real GDP per capita is a widely used measure of an economy’s productivity performance and relative living standards.

During the 1990s, Canada’s real GDP per capita growth was roughly in line with its southern neighbour while British Columbia’s growth rate was falling behind. In other words, British Columbia’s living standards were not keeping pace with the Canadian average nor that of the United States.

Recent efforts to revitalize the British Columbia economy have begun to payoff. Between 2000 and 2004, British Columbia recorded real GDP per capita growth well above both the Canadian average and the pace set by the United States. This means the province is beginning to regain the ground lost in the previous decade. But much more needs to be done to ensure growth in the economy and living standards is sustained into the future.

The Keys to Future Jobs and Rising Living Standards

Productivity growth means making the best possible use of British Columbia’s dynamic work force and abundant natural resources as well as accessing the best new technology. This will help sustain employment growth and spur long-term increases in living standards.

Productivity growth is the driving force behind higher wages and the rising business profits that spur investment. In turn, growth in investment feeds greater productivity improvements, resulting in an ongoing cycle of rising wages, profits, investment and living standards.

What are the keys that unlock the potential of productivity growth? Workers must have the tools and opportunities to work smarter and employers should be able to find employees with the skills they need to meet their business goals. For government, this means promoting opportunities for training and skills development. It means the government must maintain policies that enhance the province’s international competitiveness so that job growth continues into the future. It also means British Columbia employers should be able to count on modern efficient public infrastructure to help move their products to markets.

Budget 2006 is designed to maintain the current momentum in the provincial economy and ensure the province’s workers share in the rising prosperity and increasing living standards that come from a revived, thriving economy. These policies will help ensure British Columbia is ready to adapt quickly to the ever-changing expectations and opportunities in the global economy.

Promoting Training and Skills Development

The rapid pace of growth in British Columbia’s economy has generated a quarter-million new jobs since December 2001 while the unemployment rate has fallen to long unseen lows. But behind these positive statistics is mounting concern amongst the province’s employers that a shortage of skilled workers is beginning to dampen growth. The skills shortage is not solely the result of demands generated by a strong economy but also reflects the effects of demographic change, rapid technological development and rapid growth in new industries. Over the next 12 years, British Columbia is expected to have one million job openings but only 650,000 young people will be coming out of the province’s school system.

The government is taking action now to address future skills shortages.

The government will set aside $90 million over the next three years for a new program of tax credits to help meet the demand for skilled workers. The program will encourage employers to step forward and create new opportunities for people to acquire the skills they need to fully participate in the economy. The credit program will be designed in consultation with industry representatives from around the province.

The budget includes $39 million over three years in additional funding for the Industry Training Authority, the provincial agency that governs British Columbia’s industry training system. These funds bring total expenditures to $90 million annually and will support apprenticeship training through private and public institutions.

In addition, the government will consult widely on labour market conditions and the skills required by employers to ensure that the province’s education and training system is responsive to employment needs. The Province will work with groups representing businesses and workers to ensure that labour market information is up to date and accurate and so that strategic investments made by government and industry are targeted to both short and long term employment needs.

The government will also look for recommendations and advice on labour market trends from advisory bodies such as the Premier’s Technology Council, the Conference Board of Canada, the British Columbia Competition Council, the Small Business Roundtable and the Asia Pacific Trade Council.

The province has untapped potential from groups that are not currently full participants in the labour market, including aboriginal people, youth, women and immigrants. The government will work with employers to encourage recruitment from these groups. Employers will have improved access to information about the availability and skills of immigrants, aboriginals, disabled and older workers. In addition, employers’ familiarity with agencies and programs that allow greater access to these under-represented groups will be improved.

The government will actively recruit immigrants to settle in the province and work to ensure that well-qualified immigrant workers are able to transfer their credentials from their homeland so that they can be fully employed in British Columbia. These efforts will benefit from the ability of British Columbia’s strong and vibrant immigrant communities to help attract and retain workers from around the world.

The budget includes $4.8 million per year for Skills Connect, which attracts matching funding from the federal government. This program provides training and services to new immigrants to facilitate early integration into the job market. In addition, the government’s International Qualifications Program assists employers and new immigrants to obtain faster recognition of foreign training credentials.

The government is also developing a mentoring program for women who are entering or re-entering the workforce after a lengthy absence.

The Province will invest $17 million over two years to extend computer access and training to 117 First Nations communities to build computer literacy and expand opportunities for the people in these communities.

The government will continue with the expansion of the Mining Education and Skills Development Program, a mineral exploration and mining training program. Also, the Prospector and Environmental Teams program, directed toward youth and First Nations in remote communities, will provide hands-on experience in prospecting and environmental remediation.

The government has succeeded in helping over 44,000 income assistance recipients find and keep jobs since 2001. These efforts will continue with up to $72 million annually for various employment programs over the next three years. One program, the BC Employment Program, will annually assist 14,000 British Columbians on income assistance to become independent through sustainable employment.

Similarly, the Employment Program for Persons with Disabilities will help British Columbians with disabilities by providing job training and placement, technical equipment, physical accommodations and support. In addition, the Minister’s Council on Employment for Persons with Disabilities advises the government on strategies for increasing the employment, employability and independence of persons with disabilities throughout British Columbia, particularly through partnerships with business and industry. One of the Council’s programs, Workable Solutions, is aimed at increasing the employment levels of persons with disabilities in British Columbia. Government programs for clients with multiple barriers, such as addictions, homelessness or mental illness, will help individuals improve their quality of life and participate more fully in the community.

Enhancing British Columbia’s International Competitiveness

One of the most effective ways a government can promote growth and prepare the economy for the future is by keeping its financial house in order. Sound and sustainable fiscal policies provide a stable financial environment that attracts and retains international investment, a key ingredient for high-paying employment opportunities. A sound fiscal situation also gives the government the flexibility to initiate the measures necessary to boost British Columbia’s future productivity and living standards.

The government succeeded in turning the unsustainable fiscal situation of the late 1990s into a sustainable balanced budget by 2004/05. This is reflected in the independent credit rating agencies’ appraisal of the province’s fiscal direction and sustainability. British Columbia now maintains a stronger credit rating, as confirmed by recent upgrades from all three credit rating agencies. In 2004/05 Standard and Poor’s upgraded the province from an AA- rating to AA, Moody’s Investor Services upgraded the province from Aa2 to Aa1, and Dominion Bond rating Service upgraded the province from AA (low) to AA.

In Budget 2006, the government continues its commitment to sustainable fiscal polices with surplus budgets and a declining trend in the provincial debt-to-GDP ratio over the three-year fiscal plan.

The government has also made significant strides in making the province a more attractive place to live, work and do business. British Columbia now has one of the most competitive tax structures in Canada, including the lowest personal income tax rates for the two bottom tax brackets. Efforts to restore confidence in the British Columbia economy include eliminating the corporation capital tax for general corporations and exempting production machinery and equipment from provincial sales tax. In addition, the general corporate income tax rate has been reduced by 27 per cent since 2001.

The government is continually reviewing the province’s tax structure to ensure British Columbia remains competitive. Budget 2006 includes initiatives totaling $733 million over the next four years to improve fairness, reduce taxes for individuals and improve the climate for investment and job creation. These initiatives include:

• exemption from the provincial sales tax for service charges related to the maintenance and modification of computer software;
• a three-year extension of the BC Mining Flow-Through Share Tax Credit to December 31, 2008 to provide capital for mineral exploration within the province;
• broader eligibility for the machinery and equipment sales tax exemption by extending it to businesses that primarily provide manufacturing services to businesses eligible for the exemptions; and
• extension of the eligible uses for coloured fuel to all vehicles that are not licensed to operate on a highway.

The government recognizes the importance of a modern, streamlined regulatory system that encourages prosperity, innovation and opportunity, while preserving regulations that are effective in protecting public health, safety and the environment. Cutting red tape in British Columbia has streamlined the regulatory system making it more responsive and flexible, and making it easier and more efficient for businesses to operate in British Columbia.

Government exceeded its multi-year target of a zero net increase in regulatory requirements set in June 2004 by decreasing requirements an additional 4.1 per cent.

Major achievements in recent years include the new Business Corporations Act , which makes it easier, faster and more cost-effective to operate a business in British Columbia. Amendments to the Partnership Act have modernized the legislation and brought British Columbia into line with business practices in other parts of North America.

Similarly, the Forest and Range Practices Act provides a more streamlined planning process for forest and range management and, in addition, Mineral Titles Online uses modern internet technology and state-of-the-art mapping software to bring claim acquisition and title maintenance into the digital world.

Regulatory efficiency and service delivery improvements for the oil and gas sector in British Columbia are worth up to $36 million per year in cost savings for industry. Ongoing work could provide for an additional $20 million to $40 million per year in savings.

Investing in Growth-Promoting Infrastructure

Government investment in modern infrastructure is a critical ingredient in the province’s efforts to take advantage of emerging markets and other opportunities in the global economy. The Province’s multi year transportation infrastructure plan has funded several major capital projects in recent years. Many of these projects are collaborative efforts between the provincial, federal and municipal governments and in several cases utilize innovative financing arrangements with private sector partners.

Construction continues on the Canada Line, also referred to as the Richmond-Airport-Vancouver Line or RAV. This rapid transit project, jointly funded by the provincial and federal governments, TransLink and the Vancouver International Airport Authority, will expand Greater Vancouver’s alternative transportation infrastructure and help reduce congestion, improve travel time and support the region’s tourism sector. The provincial contribution is $435 million.

The Province has also joined with private sector partners to complete extensive improvements to the safety and reliability of the Sea-to-Sky Highway between Horseshoe Bay and Whistler. This $600 million project is targeted for completion in time for the 2010 Olympics.

Construction is also underway on the William R. Bennett Bridge, a new five lane bridge to replace the three lane Okanagan Lake Bridge in Kelowna. The span will improve travel time and safety on the province’s most congested stretch of highway outside of the Lower Mainland, thereby increasing tourism and providing for more efficient movement of goods and services. The project, costing $144 million, will be delivered as a public-private partnership.

The government has also provided an additional three years of program funding to support the Heartlands Oil and Gas Road Rehabilitation Program. The program works to eliminate seasonal road restrictions and extend the winter drilling season for the province’s oil and gas sector.

In addition, continued contributions by the Province and the federal government toward the Border Crossing Program are improving the free flow of goods through busy border crossings.

As the Yoho (5-Mile) Bridge Project (Phase 1) nears its scheduled completion date of Fall 2006, construction has begun on the estimated $130 million replacement of the Park (10 Mile) Bridge in Kicking Horse Canyon near Golden. The project, which includes the upgrading of approaches to the new bridge, is expected to be completed in 2008/09 and will provide improved safety and increased capacity on a critical provincial and national gateway. This project will also be delivered as a public-private partnership.

Working with the federal government, the Province launched the Pacific Gateway Strategy in October 2005. The project’s shareholders include the trucking industry, railways, ports and airports as well as the commuting public. In the Lower Mainland, the strategy provides for a $3 billion investment plan for improving British Columbia’s transportation network to reduce congestion and ensure the province’s goods can be efficiently delivered to domestic and international consumers.

Among the major components of the Lower Mainland plan are improvements to roads and bridges referred to as the North Fraser Perimeter Road, which includes the new Pitt River Bridge and Mary Hill Bypass, estimated to cost $400 million; a new South Fraser Perimeter Road with a projected cost of $800 million; and, the twinning of the Port Mann Bridge with an estimated cost of $1.5 billion. Tendering for the Pitt River Bridge is expected in the fall of 2006.

The Province has also joined with the federal government and private sector partners to develop a container facility at the Port of Prince Rupert, which is the closest North American port to Asian markets. This opportunity to take advantage of growing Asian markets is supported by the rail option between Prince Rupert and Chicago. The relatively underutilized rail line between Prince Rupert and Chicago has the safest grade through the Rockies and products can be delivered to Midwest markets two days faster than through the Port of Vancouver. Phase 1 will deliver a port capable of handling 500,000 twenty-foot equivalent units, or TEUs, and will support the long-term goal of expanding British Columbia’s share of North American container traffic from 9 to 15 per cent by the year 2020.

The government also recognizes the importance of infrastructure to other sectors of the provincial economy. For example, the Province is contributing $273 million towards the $615 million Vancouver Convention Centre Expansion Project, which will attract new convention delegates and enhance growth in the tourism sector.

Budget 2006 provides grants to communities for investment in new municipal infrastructure including water and sewer projects that total $114 million over the 3-year period. This is in addition to the $635 million that municipalities will receive over the next five years through the New Deal for Cities and Communities with the federal government.

Conclusion

Policies introduced in recent budgets are paying off, with the British Columbia economy exhibiting broadly-based strength and the government’s fiscal position sound and sustainable. British Columbia is now in a position to better weather the pressures expected from an aging population, when workers will be called upon to help support larger numbers of the baby boom generation entering their retirement years.

Renewed confidence in the economy and provincial finances has given the government the flexibility to introduce initiatives that will ensure the economy remains strong and has the capacity to seize upon the opportunities that await — such as the huge potential of emerging foreign markets, especially in Asia and the Pacific Rim.

Budget 2006 supports continued growth in productivity and living standards with measures that promote training and skills development, enhance the province’s international competitiveness and expand growth-promoting infrastructure. These efforts give all British Columbians an opportunity to benefit from the thriving economy.