How to make Manitoba a “have province”

Maclean’s magazine caused quite a stir on Jan. 12 by publishing an article called Manitoba can’t get any respect, describing Manitoba as the odd man out among the four western provinces, the runt of the litter.

I could take a few shots at Maclean’s itself, starting with how “Canada’s only national weekly current affairs magazine” is closer in spirit to People Magazine than to The Economist. I would rather be practical, however, and come up with some suggestions on how Manitoba can go from being a “have-not” province to Canada’s most-improved province by the end of the decade.

I started this weekend by looking for the differences between the “haves” and “have nots”.

Unfortunately, Canada has only 10 provinces, which didn’t give me a very robust sample to work with. The United States, however, has 50 states plus the District of Columbia, with wide variations in quality of life and living standards between states.

That, plus ample amounts of data available for free from the U.S. Census web site, gave me something I could work with.

With the data available, I set out to figure out what a state has to do to boost its median household income — the level of income reached by at least one-half of all households. I also paid attention to what divides “the have-mores” and “the have-leasts” — the 10 states with the highest and lowest median household incomes respectively — from the middle 31 states. (I’m referring to D.C. as a “state” for the purposes of this blog post just to keep things simple.)

The “have-mores”, in alphabetical order, include Alaska, California, Connecticut, Hawaii, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey and Virginia. The “have-leasts”, also in alphabetical order, are Alabama, Arkansas, Kentucky, Louisiana, Mississippi, New Mexico, Oklahoma, South Carolina, Tennessee and West Virginia.

(I freely acknowledge that some states have huge disparities in wealth, such as those between New Jersey’s affluent New York City suburbs and poverty-stricken Camden, rated on WorstCity.com as one of the world’s worst cities; or that a Hawaiian household’s dollar doesn’t go as far as it would on the mainland due to the high cost of shipping almost everything islanders need half-way across the Pacific. Still, the “have-mores” and “have-leasts” are a pretty good reflection of what many Americans would consider the most and least desirable states to move to.)

Here’s what I learned:

1. Education is a government’s single most important portfolio. Unless 87 percent or more of the population aged 25 years and over has a high school education, and at least 29 percent have a university degree, the odds of getting into the “have-mores” club aren’t all that great. Manitoba, where only about 80 percent of 25-64 year olds have finished high school and only 19 percent have a university degree, falls well short of these minimum requirements. To its credit, the provincial government has made reducing Manitoba’s abysmal high school dropout rate a priority over the past 10 years, and has been kept on course by the backing of the business community and the advocacy of radio host Richard Cloutier.

How important is education to everyone’s well-being? In the U.S., just increasing the percentage of adults with a high school diploma by merely one percentage point:

    Increases the percentage of adults aged 25+ with a university degree by 0.66 percent. (That doesn’t sound like much, until you realize that the same increase in Manitoba would mean an additional 3,900 Manitobans aged 25-64 with university degrees.)
    Reduces the percentage of households in the “less than $25,000” income bracket by 0.84 percent. (Again, that doesn’t sound like much, until you realize that it would be the rough equivalent of lifting 3,800 Manitoba households out of the lowest income bracket.)
    Increases the median household income by an average of $1,054 U.S.
    Reduces the percentage of individuals living below the poverty line by 0.68 percent. (This would be roughly the equivalent of lifting 7,800 Manitobans above the poverty line.)
    Reduces the unemployment rate, on average, by 0.14 percent. (The equivalent of putting an extra 850 Manitobans to work.)
    Reduces the violent crime rate, on average, by 23.4 offences per 100,000 residents. (In Manitoba, this would mean 269 fewer violent crimes per year.)

2. Giving mothers and seniors the option to keep on working is good for the economy. The “have-more” states tended to have a larger percentage of the population active in the workforce. What does this mean for governments and employers? It means that they should make it easier for women to be full participants in the workforce, particularly by making it easier to juggle the competing demands of the workplace and parenthood; and that they should not penalize those who want to keep on working after age 65.

Since a higher percentage of the entire population being in the workforce is good for the economy, it might also be wise for governments not to encourage any new “baby booms” to replace retiring Baby Boomers, as this would mean a smaller percentage of the population being in the workforce. Instead, governments should encourage high school students to pursue post-secondary studies, high school dropouts to return to school, and skilled immigrants to choose Manitoba.

3. Business and unions can be allies for prosperity. Manitoba has a long history of tense business/union relations dating back to the 1919 General Strike. Yet U.S. data tends to suggest that the “have more” states have higher levels of union coverage (generally starting from 15 percent of the workforce and up), and the “have least” states have the lowest levels of union coverage (generally 10 percent or lower). With every one-point increase in the union coverage rate being associated with a $776 increase in the median household income, there’s no point knocking something that seems to put more money in consumers’ pockets.

4. Research and Development can become to Manitoba what natural resources are to Alberta and Saskatchewan. Research and development — the creation of new goods and technologies — is an incredibly effective wealth booster. In the U.S., every dollar spent on R & D in a state’s universities produces, on average, $59 of economic growth. To take advantage of this opportunity, Manitoba youngsters should be exposed to science and technology from an early age, and the government should continue to work with the universities to establish them as first-rate research facilities.

5. Don’t pay peanuts unless you want monkeys. The better off a state was in my analysis, the higher its state and local government employees were paid. Some might see this as reflecting the fact that a wealthier state can afford to pay its employees better wages than a poor state can. Others might see this as a case of getting what you pay for, with wealthier states having first-rate managers in their governments, and poorer states being under inferior management because the smart people all moved away. I suspect that it’s a bit of both — opportunity attracts talent, and talent leads to opportunities.

6. Don’t be afraid to go into debt for the right reasons. Governments of wealthier states have lower debt loads than poorer ones, right? Wrong! The “have more” states tended to spend more money per resident on debt interest, starting from $179 per citizen and up. The “have least” states tended to spend the least on debt interest, mostly below $100 per citizen.

To put it another way, which states would you be more likely to consider living in if you were to move to the U.S.? Higher debt states, such as Connecticut, Illinois, Massachusetts and New Hampshire? Or lower debt states, such as Alabama, Arkansas, Georgia, Nebraska, Tennessee, Texas and Wyoming?

You get what you pay for — and debt-averse jurisdictions don’t get much.

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About theviewfromseven
A lone wolf and a bit of a contrarian who sometimes has something to share.

9 Responses to How to make Manitoba a “have province”

  1. Mike Waddell says:

    This would appear to be some tremendous research on your part.

    Is median household income one of the criteria for determining a “have or a have not” province in Canada? Where can one find a comprehensive set of guidelines to know where the thresholds are for the equalization payment formulas?

    This research reminds me a bit of the two books by Jim Collins…Good to Great and Built to Last. G2G was written in response to the questions that arose from B2L readers who said that it was good to know what a good company was like but wanted to know how they got there.

    You have posed some solid ideas and I think in many ways number 3 would be particularly relevant to Manitoba. It has always been a challenge for me to reconcile the fact that the labour movement in Manitoba would appear to spend an inordinate amount of energy on political activity in relation to the growth of the union coverage in Manitoba. Unions would be wise to engage with people on all sides of the political spectrum to ensure that they are able to have individuals in government at all times for effective long term dialogue that would not be interrupted by the periodic changes in government.

    An area where your concept of business and labour being allies for prosperity would be effective is in the area of payroll taxes. Business and labour should both be leading the charge to see this punitive tax reduced or removed in Manitoba.

    There are businesses in Manitoba who relocate, who cap their growth, and who hive off areas of business to avoid expanding their payroll past the triggering levels.

    I will need to process this over the next few days but you have definitely given me food for thought.

  2. Fantastic! This is one of the best blog posts I’ve read anywhere for a long time.

    It’s an issue we should be discussing a whole lot more in Manitoba, as the “how to become a have” question you pose needs to be answered before we can really envision where we want to be in 20 years and make a plan for how we’re going to get there.

    I think you’ve provided a lot to think about — and a much better contribution to the debate than the simplistic argument that broad tax cuts combined with privatization represents our one and only policy option and the universal prescription for economic success.

  3. Reader says:

    Your R & D comments are fair from the standpoint that we should value that sector more.

    But on the “how,” you reflect a common Canadian bias toward the assumption that “research” is something that only happens through public programs at public universities.

    Much of the United States’ success at pumping out jobs in and jobs from R & D comes from their research institutions’ willingness to work with the private sector, and from U.S. law which allows federal and state funded research institutions to spin off new discoveries into commercial ventures far more quickly and cleanly than we do.

    Not to mention the fact that US tax and financial rules are far better at encouraging venture capital investment of the sort that attracts private money to later-stage R & D, which makes it possible to turn that research into job-creating long term commercial projects.

    So, to achieve the results you want, we’d need a massive change in thinking, not just in how we value our research, but also in what we do with it and related policies.

  4. Fat Arse says:

    I am speechless. Probably your best post ever. As soon as my jaw manages to extricate itself from the floor I, hopefully, will have a salient/constructive comment to offer, until then, all I can say is… fantastic analysis!

  5. Reader says:

    Look, it’s an interesting comment, but I’m also a little baffled as to why everyone thinks this is some sort of revolutionary analysis.

    For one thing, it compares US states, but that doesn’t allow us to jump to conclusions about Canadian provinces without in turn applying those same comparisons in the same mix. You argue that “higher wage economies are better” based on the comparison in the US states – without accounting for the possibility that their wages are at an optimum level, but that ours might be above that optimum level. And wages might be higher for a variety of reasons: a state with high-end jobs in life sciences or advanced research is wise to pay more because they can generate a higher return with more profitable products; would a province which relies on, say, primary agriculture, subsidized Hydro and middle-level manufacturing be as wise to do the same?

    How can you say “debt is good” in more advanced US state economies and then apply that to Canada without, in turn, comparing it to our own levels of debt? What if their higher-state debts are significantly lower than ours? Or their ability to carry debt is better? Or their assets are stronger to compensate? What if their debt has been more effective because it’s been applied to better things – like strategic infrastructure – instead of wasted carelessly like ours often is? What if their ability to borrow is aided by federal funds from gas taxes, which reduce the need for debt for basic road maintenance?

    What you’ve got is an interesting point for further discussion, where the likes of Topiary sees this post as a sort of nobel-earning proof that everything he always believed is true after all. Let’s not get carried away.

  6. SD says:

    “Don’t pay peanuts unless you want monkeys.”
    Manitoba pays public servants 50% more than they would earn in the private sector
    http://www.fcpp.org/publication.php/3004

    “Deadweight won’t deliver no matter how much you pay?”

  7. cherenkov says:

    There is some interesting analysis here for sure, but keep in mind: VF7 hasn’t posted the details of his statistical analysis (t-values, etc) so we can’t tell which of the coefficients are actually statistically significant.

    Also: Newfoundland is now a “have” province, but also has the lowest median income in Canada. Something to think about. Source: http://www40.statcan.gc.ca/l01/cst01/famil108a-eng.htm

  8. theviewfromseven says:

    Thanks to everyone for taking the time to respond to this post and for the kind words. I was really amazed by the response it got.

    In response to some of the points above:

    – There are two ways in which a province can become a “have province”. One is to cease to be a recipient of equalization payments, even though this doesn’t guarantee prosperity (e.g., Newfoundland). The other way is to get enough growth happening so that Manitobans can get over an inferiority complex stemming from seeing other Manitobans leave for better opportunities in Ontario, Alberta and B.C.

    – I would agree that payroll taxes are not conducive to job creation and should be reduced or eliminated.

    – A lot of R & D does indeed take place away from universities. Universities are vital, however, in creating an environment favourable for private-sector R & D.

    – I’m not in favour of taking on debt until Kingdom Come, but nor am I in favour of going to the opposite extreme of the Manitoba of the ’40s and ’50s that avoided debt to the point of putting off much-needed infrastructure projects and improvements to the education system.

    – All of the relationships discussed above are statistically significant: Pearson correlations of .383 or stronger, all significant at the 0.01 level, Rsq values ranging from 0.1269 to 0.6433. (In the course of locating these numbers, I noticed a glitch that resulted in my making small corrections to the numbers under item #1)

    Thanks again to everyone for taking the time to write. I appreciate it.

  9. unclebob says:

    Good post for discussion
    I have seen a number of rating programs for state development and a number of years ago had the opportunity to make some comparisons with Canada. We did poorly

    I applied some of the same tests to communities and found a more direct and accurate comparison.

    I am interested however in your assumption of the direct co-relation between education and income. I am not sure that you can make that assumption.

    a) labour is more mobile today than in the past
    b) governments that value education may also value progress and business making more enlightened policies in each
    c)in the US, governments do less to directly drive the enrollment of schools compared to Canada. Families and individual values do make a difference

    My sense is that individual and family values have a significant role to play. This is an important distinction as shifting those values is a much more powerful catalyst of change than ramming extra bodies through the doors of an institution particularly when the institution has some incentive to spit them out the other end with a piece of parchment.

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