Dealing with another kind of supply chain challenge
I’m not sure why but one of the things that triggers me is seeing telecommunications installer trucks from Ontario and Quebec driving around the streets of New Brunswick. I saw two from different companies this week in Moncton.
It makes absolutely no sense to me why the telecom firms have to hire contractors from as far away as Kingston, Ontario to drive down here stay in accommodations here and then take their employment income back to Ontario.
Maybe they are dealing with a surge in demand. Maybe there are a surplus of these contractors in Kingston. I don’t know and, quite frankly from the position of an economic development consultant, don’t really care why.
A couple of years ago I asked a contractor coming out of a house on my street why he was working down here using a vehicle with Ontario plates. He was hired, he told me, and paid well including expenses to come down here and do the work. He was from Kingston.
This is a potentially serious challenge with the emerging labour shortages in New Brunswick. If local workers can’t be found here to do work such as construction trades, personal and professional services, etc. - it might end up leading to imported services - and likely at much higher costs.
I drove by a construction site a couple of weeks ago and saw a lot of Nova Scotia license plates.
I looked at the indirect (supply chain) multipliers for the telecommunications sector and sure enough, the indirect multiplier for the telecommunications industry in New Brunswick has dropped on average by over 11% between 2010-2014 and 2015-2018. Only PEI generates less output in the telecom supply chain (per dollar of direct output) than New Brunswick. Quebec generated 32.4 cents in the supply chain for every direct dollar of output. Ontario over 40 cents. New Brunswick? 16.4 cents.
Considering New Brunswick’s telecom sector had $469 million total output in 2018, that differential in the supply chain could be huge.
The good news is that across the entire economy (all sectors combined) the indirect multiplier has remained fairly consistent in recent years.
Maybe we need a more intelligent approach to economic development. Instead of the usual trio of entrepreneur support, export development and investment attraction, maybe we need to add supply chain development (or protection) to the conversation.
A dollar is a dollar, folks. If that telecom installation work was being done by New Brunswick-based contractors, the income would stay here to be spend in the local economy and the taxes would stay to pay for public services here.
First and foremost, we need to ask industry leaders in New Brunswick if they have to go out of the province to access suppliers and, if so, would they be willing to use a local supplier if the price and quality was similar.
For me it is mostly anecdotal. Loggers coming in from Quebec because it is harder to find workers here. Construction trades brought in from adjacent provinces to meet a local demand. Telecom installation trucks driving around.
I guess you could argue this is efficient. If these workers are meeting a surge in demand, then it is better than having an oversupply of these workers who end up on EI when the surge ends.
I never liked that argument. If you end up with a surplus - maybe ship them off to Kingston for work rather than vice-versa.
The bigger picture concern is that Atlantic Canada ends up like Northern Canada - with much higher wages and prices because we didn’t buckle down and ensure there are enough workers to meet workforce demand.
As I wrote in my column last week, there are a lot of folks now working on this - in government and industry/professional/trades associations.
I am quite hopeful that with a combination of higher workforce participation and immigration that we will be able to meet workforce demand.
But contractors driving around with out-of-province license plates provides an important wake up call.