Jock Finlayson, executive vice president and chief policy officer of the Business Council of BC. (Submitted)

COLUMN: B.C. must find new ways to grow economy as housing market unfurls

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC

As the province’s long-running real estate and housing boom unwinds, it is important to identify and pursue new and more sustainable sources of future economic growth.

Working to increase productivity and build more sizable B.C. companies are good places to start.

Productivity is defined as the economic value of what a business – or the economy as a whole – produces, measured per hour of work. The wages and salaries that employees receive depend in large part on the productivity levels achieved by businesses.

Many factors determine how productive a company is, including its size, management strategy, workforce skills, and the tools, technologies and equipment available to help employees do their jobs.

For British Columbia, one key to developing a highly productive economy is growing more of our businesses into companies of significant size – e.g., annual revenues of $100 million plus, and/or at least 250 employees.

A glance at the existing mix of B.C. businesses confirms two things: Small is apparently beautiful, and company growth is far from the norm.

Today, B.C. is home to approximately 500,000 businesses. Around 300,000 of these are tiny one-person operations with no paid employees. Another 111,000 are small firms with fewer than five employees. Thus, more than four-fifths of all enterprises in the province are best described as “micro” businesses, each with under five staff.

COLUMN: Think B.C.’s employer health tax doesn’t affect you? Think again

At the other end of the spectrum, just 8,200 companies have 50 or more employees, with only 1,300 of these having at least 200 people on the payroll.

Why is it important to encourage more B.C. companies to grow? There are several reasons.

Higher pay: In Canada, like other advanced economies, there is a positive relationship between business size and the compensation provided to employees. The relationship is not one-for-one, but people who work for bigger companies generally earn more than their counterparts toiling for smaller organizations.

The average weekly wage for employees of the largest B.C. companies (500 or more employees) is 25-30 per cent higher than that for employees of businesses with fewer than 100 staff. Non-wage benefits – e.g., pension contributions, extended health coverage, life insurance, etc. – also tend to be more generous at larger employers.

Increased productivity: For employees of larger businesses, higher average pay is linked to another well-documented fact: Bigger firms tend to be more productive than smaller ones, measured as the value of production per hour of work. Often, this is because larger companies invest more than smaller ones in the equipment, technologies, digital tools, and up-to-date facilities that boost productivity.

More exports: As businesses expand, they are increasingly likely to engage with outside markets and export their products and services. In Canada, the top three per cent of exporting companies account for a whopping 60 per cent of total merchandise exports.

For a small jurisdiction like B.C., exports are vital to overall prosperity. To improve export performance over time, more of our companies need to reach a size where it makes sense – or becomes necessary – for them to sell beyond the local market.

Smart public policy can assist in creating an environment that facilitates the growth of B.C. companies.

One priority is to ensure that firms have access to the right kinds of talent, not just well-qualified entry-level employees (where B.C. does quite well), but also people with substantial expertise in areas critical to business growth, like finance, market and product development, global supply chains, data management, and executive leadership.

Policy-makers should also be looking to retool the tax system to incentivize business growth and innovation. This calls for a fresh look at the tax rules affecting investments in machinery, equipment, software, digital technologies and other forms of capital that often increase productivity.

COLUMN: Are B.C. communities in boom?

In addition, the dramatic jump in income tax rates as businesses scale up should be reconsidered. In B.C., the combined federal-provincial business tax rate climbs from 11 to 27 per cent once a company reaches a net income of $500,000. It is hard to see any justification for this kind of sharp and arbitrary tax rate escalation.

Finally, government has a role in assisting small and mid-sized enterprises (SMEs) to become export-ready. Export Development Canada and the B.C. Ministry of Jobs, Trade and Technology are both active in working with SMEs that are keen to export. World Trade Centre Vancouver operates a trade accelerator program that’s targeted at growth-oriented SMEs.

Given the huge number of small businesses in B.C., enhanced support for local firms to participate in international markets should be a priority for the provincial government.

Jock Finlayson is executive vice president and chief policy officer of the Business Council of British Columbia

www.facebook.com

Just Posted

Trail RCMP step up enforcement for Winter CounterAttack

Dec. 6 is National Impaired Driving Enforcement Day

Christmas Toy Drive in Trail lights up the season

Opportunities to donate to the cause before Christmas

Spreading Silver City cheer at the Christmas kettles

Last year the Trail Salvation Army Church distributed 283 Christmas hampers

Kootenay nurses work for well-being in Guatemala community

Bien Estar is an offshoot of the annual Selkirk College nursing student trips to Guatemala

Rapping mom busts rhymes for Castlegar rec centre kid’s drop-in

Funny video with important message about importance of service

Fashion Fridays: Ethical and sustainable gifts for the season

Kim XO, helps to keep you looking good on Fashion Fridays on the Black Press Media Network

Residents in B.C. city could face 133% tax hike in ‘worst case’ lawsuit outcome: report

An average home could see a tax increase of $2,164 in one year

B.C. Transit finds 28 used fareboxes online, saves $300,000

‘Someone joked maybe we can buy used fareboxes on eBay,’ CEO says

Many of Canada’s working poor can’t afford lawyers, don’t qualify for legal aid

One lawyer says many people earn too much to qualify for legal aid, but not enough to really live on

Economy lost 71,200 jobs in November, unemployment rate climbs to 5.9%

Jobless rate is at its highest since August 2018, when it hit 6%

VIDEO: John Lennon’s iconic Rolls Royce rolls into Vancouver Island college for checkup

Royal BC Museum, Camosun College and Coachwerks Restorations come together to care for car

VIDEO: Rockslide closes part of Highway 93 in Fairmont Hot Springs

Geotechnical team called in to do an assessment after rocks fell from hoodoos

Petition calls for appeal of ex-Burns Lake mayor’s sentence for sex assault

Prosecution service says Luke Strimbold’s case is under review

Northwest B.C. wildlife shelter rescues particularly tiny bear cub

Shelter co-founder says the cub weighs less than a third of what it should at this time of year

Most Read