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Contributed
According to a new report by the Chartered Accountants of B.C., productivity and wages continued to lag in 2008, well before the impact of the economic downturn began to take effect.
Without addressing these indictors, recovery in the province will be slow, negatively impacting the standard of living for all British Columbians.
“As it stands, B.C. is at the bottom of our comparison for most investment indicators, and when looking at the province’s performance to date in 2009, there isn’t much to be optimistic about,” said Richard Rees, FCA, CEO for the Institute of Chartered Accountants of BC.
“However, the introduction of the HST will help to improve productivity, providing relief to key export sectors, and maintaining a competitive taxation system.”
According to the study, in 2008, B.C. saw a decline in productivity (-1.7 per cent), the value of exports per worker (-9.1 per cent), and corporate profits (-0.3 percentage points). While Alberta, Ontario, and the national average also saw some of these indicators decline, overall B.C.’s performance was at, or near, the bottom of the comparison.
The report found that B.C.’s lagging productivity had a negative effect on workers wages. While B.C.’s real wage rate ($23.43 in 2008) has been rising, it is still lower than Alberta ($26.32), Ontario ($23.94), and the national average ($23.52).
When comparing the first quarter of 2009 to the same period in 2008, wages and salaries in goods-producing industries decreased by 7.7 per cent, dragged down by agriculture, forestry, fishing and hunting (-19 per cent) and manufacturing (-12.8 per cent). While services-producing industries saw wages and salaries rise slightly, by 2.3 per cent, this was driven mainly by increases in public sector administration jobs, not the private sector.
“While it is obvious to everyone that B.C. is in a recession, it should also be obvious that improving the business climate so our industries can rebound as quickly as possible is crucial to how we come out of this downturn,” said Rees. “B.C. has made some tentative steps towards improving productivity, mainly through government investment in public infrastructure and tax changes. However, the economic downturn clearly shows how tenuous our foothold on prosperity is, and underscores how much more needs to be done.”
“When B.C. moves to an HST, businesses will save nearly $2 billion in production costs, and $150 million in tax compliance costs. In the short-term, these savings should provide some welcome relief to a beleaguered economy and help preserve existing jobs,” continued Rees.
“In the long-term, these savings should improve the productivity gap, as businesses invest in new machinery, new technology, and improved training for workers. All of these things should lead to higher wages and an improved standard of living for all British Columbians. In order to ensure B.C. maximizes the benefits of this tax change, we urge the provincial government to set up an advisory committee of tax experts to aid in the transition and implementation of the HST.”
The BC Check-Up looks at the province as a place to live, work, and invest. The report, along with publication-quality photos of Richard Rees, is available online at: www.bccheckup.com.
