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

Arena served Summerland for 26 years

Warm winters meant short ice seasons in early 1950s

Environment Canada cancels storm alert for Princeton

Rain and some thunderstorms still expected overnight

Severe thunderstorm watch in effect for Okanagan, Shuswap

Environment Canada is forecasting strong wind gusts, large hail and heavy downpours in parts of the Interior

Parts of the KVR through Princeton will open to motorized vehicles Monday

Parts of the KVR trail through Princeton will open for motorized vehicles… Continue reading

WorkSafe BC conducted 70 inspections in the Okanagan amid B.C.’s reopening plan

WorkSafe BC has conducted 100 inspections at restaurants across the province since May 19

QUIZ: Test your knowledge of the world of summer sports

In a typical year, there are plenty of summer sporting events and tournaments held across Canada

‘We’re sick of it’: Anger over police killings shatters U.S.

Tens of thousands marched to protest the death of George Floyd

District offers safety tips after cougar spotted near Lake Country school

The animal was seen on a walking trail near Peter Greer Elementary Saturday morning

Surrey mayor’s party under fire for ‘sickening’ tweet accusing northern B.C. RCMP of murder

Mayor Doug McCallum says tweet, Facebook post ‘sent out by unauthorized person’

Father’s Day Walk Run for prostate cancer will be virtual event this year throughout B.C.

The annual fundraiser for Prostate Cancer Foundation BC has brought in $2.5 million since 1999

Similkameen winery co-owned by Dr. Bonnie Henry

B.C.’s provincial health officer is part of the original ownership group of Clos du Soleil in Keremeos

Shuswap man reported missing by RCMP has been found unharmed

Salmon Arm resident apologizes for having caused anyone concern

Emergency crews rush youth to hospital after quadding accident in West Kelowna

West Kelowna Fire Rescue’s new off-road vehicle was used in the rescue

Dr. Bonnie Henry announces official ban on overnight kids’ camps this summer

New ban comes after talking with other provincial health officials across the country, Henry says

Most Read