Industrial Matters ... Matter!

In prior posts I've laid out the facts that Canada's Innovation Economy has been struggling for some time. We are now starting to see the compounding effects of neglecting our Nation's economic engines in favor of less productive initiatives, over-taxation, over-regulation and lack of national and regional re-industrialization strategies. We're losing our competitiveness. Here's some more evidence...

Real wage growth has stagnated and averages less than 1% growth per annum

Weak productivity growth (output per hour worked) is inextricably linked to worker pay. Average productivity growth of 1% per annum since 1994

Productivity underperformance versus the U.S. has increased relative unit labor costs in Canada by about 5%

Foreign Direct Investment in Canada decreases $6.2 Billion in Q1/24

Canadian's continue to move capital out of Canada

FDI from the U.S. into Canada has flatlined in favor of Mexico.

(NAFTA (1994 to 2019) in billion U.S. dollars)

Here's a note from Better Dwelling (Feb. 21/24).

"Canada Has Never Seen Such A Large Foreign Investor Sell Off 

Canada is typically seen as a safe haven for investors but some of that sheen has begun to tarnish. Foreign investors sold a net of $48.7 billion worth of Canadian equities in 2023. That number doesn’t just sound astronomical, it would have been unimaginable in 2019. It’s the largest annual outflow on record ever for Canada.  

“Over the past three decades, a “normal” year would see net buying of about $12 billion—an inflow of about $1 billion a month, not the net outflow of $4 billion per month seen in 2023,” says Porter, emphasizing how unusual this trend is. "

Still not convinced? Here's some more trivia for you. I went on to the Statistics Canada website and downloaded the information below. I clipped the chart because it was way too big. You'll see the employment statistics by industry in Canada from February 1976 to June 2024. The highlighted area is the Manufacturing Industry employment category. In 1976 there were 1.836 million people employed in the sector (19% of the total work force). In June 2024 there were 1.819 million employed. Basically the same number 48 years later! WOW! As of last month only 8% of our national workforce worked in manufacturing. So where were all the new jobs created? Well, take a look at the Services category. The gain here basically accounts for almost all of the net new jobs created in Canada since 1976!

Now some pundits will tell you that the "Services Sector" contributes the most to GDP in Canada. They'll also tell you that the wages are higher. But, like most things in life...the answer is "it depends" on how you categorize and interpret the data. Below is a breakdown of the distribution of Canadian GDP and a chart from Statistics Canada on average hourly wages. You'll see that if you group everything that is considered a service into one category the answer is clear..."Services" contributes the most to GDP. But if you break down the category into each distinct contributor the conclusion changes. And if you look deeper into wages you'll see that the Goods-Producing Sector generates higher wages than the Services-Producing Sector does.

All of this adds up to INDUSTRIAL MATTERS .... MATTER! And they matter to all of us.

Our collective prosperity depends on it. But what to do? The answer is to use our strengths to re-industrialize our nation. I'm not talking about going back to the years of "drawing water and hueing wood." I'm not talking about making ten-cent t-shirts. I'm talking about high-value industrialization; technologies of the day and of future that we can scale and export. In BC I'm talking about things like sustainable aviation fuel, green hydrogen, renewable energy, high purity mineral processing, engineered wood products, green concrete, bio-sciences, ag-tech, etc., etc., etc.

Let's start by creating a new national mindset. One built on entrepreneurialism. Lets become the "High Value Entrepreneurial Nation on the World." We can do it. We have great, innovative people and institutions here. We're already on our way but we need to boost our efforts.

Next let's rapidly create new policies and taxation structures to reward innovation, risk taking and investment in industries of the future that lever our strategic geographic and natural advantages and our history as a progressive, peace seeking, safe nation.

Let's invest in creating the conditions that will enable the private sector to build out the ecosystems and creative economic clusters rooted in collaboration that will drive high-value, employment dense industries. One of the most important elements here is putting in place the factors that will enable new business to scale. Marrying scientists, designers, engineers, venture capitalists etc. with local manufacturers will create high-value added supply chains that are sustainable. This will encourage capital to flow into industry enabling business to grow. Scalability is critical. Without the option of scalability we lose in the long term. We need to keep these businesses in Canada and encourage them not to sell out to international large caps or private equity that repatriate our hard earned intellectual property to their own shores for their own benefits.

Support from technical training institutions is critical. People with hands-on technical skills are needed to bring innovation to life. Supporting these institutions is key. More public and private engagement here is a must.

We need progressive and flexible land use and development policies that enable us to deliver the industrial spaces of the future. A one size fits all approach won't work in the future in my opinion.

And there are so many more things we can and should do. We are at the nexus of another significant turning in the history of the world, another industrial evolution. We either seize the day or we get left behind.

Look for more Industrial Matters coming your way in the near future.

ben