Shifting the Alberta Advantage

The main thing we talked about yesterday at the ONEdmonton forum was economic development. In addition to breakouts and other discussion, we had two informative presentations that I hope to blog about over the next while. In her presentation on Diversifying Edmonton’s Economy, Tammy Fallowfield, EEDC’s Executive Director of Economic Development, touched on shifting the “Alberta Advantage”. Here’s what her slide said:

  • Remain relatively low tax
  • Not a low cost environment
  • Not a surplus of labour
  • Not a currency ‘bargain’

I think the phrase “Alberta Advantage” means different things to different people, but traditionally our low taxes, low cost of doing business, surplus of labour, and being attractive to investment, have all been considered important aspects. Here are a few notes on each.

Alberta’s low taxes remain a strength. From the Alberta Competitiveness Council’s 2010 report (PDF, 14 MB):

[Taxes and fiscal policy] represents the area of best performance for Alberta, with moderately low tax burdens for both corporations and individuals and a strong government financial position.

Of all the measures that report looks at, Alberta performs the best (unsurprisingly) in taxes and fiscal policy.

What about being a low-cost environment? From the same report:

Within Canada, business costs in Alberta (Edmonton) are lower than Ontario (Toronto), but higher than in each of the other provinces compared. This result is due to Alberta’s strong economy of recent years, which led to a much higher increase in business costs – especially labour, electricity, and facility costs – than seen in other provinces.

I haven’t yet found a good comparison of business costs with regions elsewhere in the world, so let me know if you come across something. I suspect the picture is not as rosy as it once was.

How about our labour force? All across Canada the population is aging, and that (along with our very low fertility rate) is going to lead to labour shortages. Here’s a graph from Alberta’s Occupational Demand & Supply Outlook, 2009-2019 (PDF), that shows this trend for our province:

There are many consequences as a result of this trend, not the least of which is Alberta’s challenge to attract and retain labour. Our taxes will likely also be impacted – an older population means higher costs for health care, and a slow growing labour force means a slow growing tax base.

Let’s look at the Canadian dollar (compared to the US dollar).

The strength of the Canadian dollar has an impact on foreign investment, among other things. As you can see, the dollar has been quite strong in recent years (aside from the dip in late 2008/early 2009), which may not be a good thing for Alberta.

So if being low-cost, having a surplus of labour, and being a relative currency ‘bargain’ are no longer part of the Alberta Advantage, what does that mean?

This diagram comes from the Institute for Competitiveness & Prosperity, based on a presentation that Professor Daniel Trefler of the University of Toronto gave here in Alberta on October 15, 2009. The diagram was originally used to illustrate the shift that China and India have yet to make.

On the same slide that listed the four points above, Tammy included this diagram. That’s the shift we need to make here in Alberta – from being a strong low-cost competitor, to being a strong innovation-based competitor.

How are we going to do that? By making strategic choices. Here’s (more or less) what Tammy showed next:

Tammy went on to talk about the industries that are important for us to focus on here in Edmonton, and a similar exercise would apply for Alberta. I’m not sure if what I have written above is exactly what she was trying to get across, but that’s how I interpreted it.

What do you think about shifting the Alberta Advantage?

8 thoughts on “Shifting the Alberta Advantage

  1. Have you ever bought cutlery, pots, firearms or appliances that are made in Switzerland? The quality of these items is absolutely outstanding, and if you go to visit the factories, they end up being family-owned businesses located in small towns. Why can’t Alberta have that sort of Value-added capcity? I think that value-added comes from quality, and quality is rooted in craftsmanship and pride. When you flip many of these Swiss products over, what does it say? “Swiss Made”. I would argue that this little logo is responsible for all the value-added industries in Switzerland. When a product is exported with that Swiss Made logo on it, the end user immediately associates its Swissness with quality, and hence the value added inherent in the product. Maybe if Alberta adopted a similar certification process as the “Swiss Made” logo on Swiss products, we would be spurred to add more value to products made here, because “Alberta Pride” is at stake. Nobody wants to be exporting half-assed goods from this province. Instead of trying to build a competitive advantage in terms of “cheap labour”, we can build one on “People who actually take pride in what they produce”, also known as Craftsmanship.

  2. I’m very curious to know what Tammy advocated as the industries Edmonton should focus on, and whether they are different from what Alberta as a whole should focus on.

  3. There is always talk about lower taxes, but how about user fees, how about higher insurance costs, how about fees where other jurisdictions don’t have them? The low tax angle is a small part of the considerations for starting or growing a business. I really see a lack of initiative in this government. All the years of surplus oil money has made it lazy and unimaginative. There are some gems in the Alberta government that are being stifled by the “stay the course” ideology that seems pervasive in every department. Most of those people will leave for greener pastures because if you are a creative, ambitious person the Alberta government probably isn’t the place for you. Case in point, Alberta gets a failing grade – http://www.techvibes.com/blog/entrepreneurs-vs-red-tape-official-report-cards-identifies-canadas-best-and-worst-provinces-for-entrepreneurs-2011-01-12

  4. One small labor advantage that I think Alberta has is large amount of tech people. While there might be a small need to update the education of these people to be industry capable they are willing to work, produce very good results and work for a rate far cheaper than you find out in Silicon Valley, Vancouver, Seattle or any other tech hub.

    What we are lacking though is the support to get ideas and businesses off the ground running so that they can begin to hire our talent (that we routinely allow to escape out of province, forcing a brain drain) and produce content that can bring in revenue. I know that there is some of this waiting in the wings, but we have to stop standing idley by in the province and waiting for industry to do the heavy lifting and hope that they then remain in-province and willing to create communities and cultures. We need to foster this growth ASAP while we still have the opportunity.

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