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

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

New plane for Air Search and Rescue Association

The new Cessna 182 will also be used for Angel Flight services

Fernie Chamber of Commerce signs lease for downtown coworking space

By: Brad Parsell, Executive Director Fernie Chamber of Commerce The Fernie Chamber… Continue reading

Province looking at steps to dissolve Jumbo resort municipality

Disincorporating municipality will likely require a legislative change, according to the province

Elkford curlers dominate East Kootenay Playdowns

The East Kootenay High School Curling Playdowns took place in Fernie last weekend

Almost 20,000 parking tickets issued by Interior Health at hospitals in 2019

In 2018, pay parking in Interior Health hospitals totalled $5.3 million of their $2.2-billion budget

WHO says China virus not global health emergency

The decision came after Chinese authorities moved to lock down three cities on Thursday

VIDEO: ‘Porn’ answer was a wrong one for Surrey family on ‘Feud’ game show

Surrey’s Rams competed on the TV show Wednesday night

Abandoned boats left to freeze on Okanagan Lake cause chaos

Over the last week weather conditions have caused three separate incidents

B.C. teacher witnesses coronavirus terror in Shanghai: ‘Everyone is on edge’

Face masks and hand sanitizer ‘sell out’ as 9 SARS-like illness cases confirmed in the city

B.C.-based firefighting plane crashes in Australia, killing three

Three people are confirmed dead in the crash in New South Wales

Living near major roads linked to higher risk of dementia, Parkinson’s: UBC study

Green space could mitigate some of the risks, researchers found

B.C. privacy commissioner suggests media civility for Prince Harry and Meghan

Lawyers for the Duke and Duchess of Sussex reportedly sent a letter to British press threatening legal action

Victoria’s plastic-bag ban ended by Supreme Court of Canada

City’s leave to appeal lower court’s decision denied

One person in Vancouver being monitored for coronavirus, feds say

Federal Health Minister Patty Hajdu said five or six people are being monitored in Canada

Most Read