About the Economy of Nova Scotia

When measuring economic performance, we often hear statistics about employment, productivity, and growth of our Gross Domestic Product (GDP). This brief background document is essentially a Nova Scotia Economics 101 look at those indicators and a few others to gauge how Nova Scotia has been doing and where we could be headed. Spoiler alert: we need to create new wealth, to attract and retain more people and investment, and generally to find ways to build a new economy.

What makes up Nova Scotia’s economy?

We are a mixed economy made up of just about any goods or service activity our climate and laws will allow. Although our population is under 1 million people and we are the second smallest province in land mass, we have much diversity in terms of how we earn our livings. Simply dividing the province into urban and rural distorts the great variety of occupations pursued throughout Nova Scotia. We have farming in urban centres and hi-tech Internet companies on rural routes. Different sectors and regions are in transition away from older to newer forms of economic activity. Of course, the most precise economic units are individuals and their households. We all know that whether the statistics tell us times are tough or good, some people are experiencing the opposite. Nonetheless, despite their generalities, province-wide measurements provide are strong indicators of our economic performance.

Wealth Creation & Growth

The Nova Scotia Commission on Building our New Economy is focusing on the need to create new wealth in Nova Scotia. To live the lives we want to live, to be communities where people of all ages and origins choose to live, work, and play, and to have quality services and amenities accessible to all, we need the ongoing creation of wealth. We take it as a given that Nova Scotians are not interested in just their personal well-being, so when we speak of wealth creation we do so in our cultural context of caring, sharing, and community. Personal financial wealth is easily measured, but on the collective scale that we call economy, the closest indicators of wealth creation are those that measure growth.

What is growth and why is it important? Growth really means gain. Real Gross Domestic Product (GDP) measurement tells us how much income we generate from our goods and service production, after allowing for cost inflation. In turn, these gains can increase our standard of living. GDP is certainly not the only measure of our well-being; other indicators consider how evenly gains are shared in the forms of better incomes for all, better services such as education and health care, and inclusion in the social and economic life of our communities.

It is also crucial to understand the sustainability of our economic

activities (their long-term social, cultural, environmental, and economic impacts) and our place in the world.

In times of global connectedness and competitiveness, of increased awareness of the preciousness of natural resources and nature itself, and in times of visible population and infrastructure decline in many of our communities, just doing things the way we always have won’t keep us where we want to be; it means we will have less than we do now…and right now we already have the second lowest per capita income generation in Canada. This is why wealth creation, thoughtful growth, is a must for Nova Scotia.

How do we create wealth in Nova Scotia?

Wealth creation that will show up as growth in GDP as well as in higher standards of living and income can only come from two sources:

1. Labour (work), capital (money, buildings, equipment, knowledge), and raw materials (resources);

2. How much and how well these elements are used.

This second factor, what proportions of available labour, capital, and materials are actually in production and how effective the production processes, technologies, and management are at generating valuable output from a given set of inputs, is often called ‘productivity’. When we are told we need to be more productive to get ahead, we might interpret that as an accusation of laziness. While more effort may be part of creating new wealth in Nova Scotia, we have a strong work ethic now; what we’re really measuring is how effective we are being with our work. Working harder at unprofitable work won’t result in greater productivity. The real productivity need is for better ways of doing things, innovation and use of new technologies, finding new opportunities for niche markets, including new production of value-added goods for export. Increasing productivity by these means will result in growth, meaning more jobs and better incomes, and in the attraction of new investment for more growth.

While wealth has been created in Nova Scotia by many means, we have historically looked to key primary sectors for our livelihoods. Many of us still do, some in innovative ways such as new product development from traditional crops or by finding new global markets. Others are appealing to local consumers with local products. Our economy is also centred on public and private service activities, especially in the Metro Halifax area. Depletions of resources or discovery of new resources, as well as changes in market demand for certain products, create fluctuations in the sources of our wealth.

Our churning sources of wealth by sector are directly reflected in two other snapshots of our economy:

1. Skills misalignment with available jobs;

2. Regional disparities of income and employment levels.

The awarding of the Federal government shipbuilding contract to the Irving Shipyard in Halifax will have a positive effect on several categories of economic measurement in Nova Scotia. Its impact will be felt throughout the province in many ways, including employment at the principal facilities and wherever supply chain opportunities are seized; but also, in the skills and infrastructure investment that accompanies a stronger revenue (taxes) position. The extent to which the benefits

ripple around the province in sustainable ways will be determined by our entrepreneurial creativity.

The shipbuilding boost can float a lot of boats; but Nova Scotia will need to scale up productivity (getting more output from our inputs), produce more goods, and find new global customers (along with supporting our own suppliers of goods & services) in a range of sectors and new ventures to find the gains we need …to create new wealth.

Nova Scotian Demographics and Economy

The regional and sector shifts in where our wealth is created, caused primarily by local and external supply and demand factors, also affect where people choose to live (or leave) and result in changing community profiles. Other trends such as fewer births later in life and labour mobility, contribute to an evolving portrait of who we are becoming. The three most obvious demographic trends to consider in our conversation on economy are:

1. Nova Scotia’s population size is declining;2. Our average age is increasing;3. More people are choosing to live in the middle of Nova Scotia, especially the Halifax area,

than elsewhere.

Nova Scotia’s population in 2011 was 945,457. That total was up 0.1% over the previous year and is consistent with about 10 years of slow growth. A number of trends combine to predict a lower population in Nova Scotia over the coming decades. These include a long-term decline in birth rates and a long-term increase in death rates (linked to the increase in proportion of our population over 64). These two statistics can be loosely connected to and affected by changes in our economy; but two other factors are more definitely linked: a net loss of people through inter-provincial migration and a slight gain via international immigration. A strong economy will prevent net losses from out-migration from the province (although rural regions may still experience population loss to urban areas) and increase the attraction of immigrants.

What are the economic concerns about an aging and lower population? Aside from the need for viable numbers of consumers purchasing and sources of public revenue, the principle concern is our shrinking labour pool. Our labour pool is the total population from which our workforce, those in active paid employment and those seeking employment, is drawn. The range of 18 – 64 is often used to represent the prime employment ages (which is not to say that those outside that range are not employable or entrepreneurs). To realize the promise of increased economic activity in Nova Scotia, especially relating to the shipbuilding industry, but also in other growth sectors, we will require both the availability and skill-match of a willing workforce. The chart below presents the forecasted change in age range proportions for the Province over the coming decades.

How can we strengthen the capacity of our workforce? It would seem that calling for an increase in birth rates or decrease in mortality rates is outside the purview of the Nova Scotia Commission on Building Our New Economy, so let’s look at some of the other scenarios. The workforce can only be expanded by finding more suitable labour from the labour pool. The prospects of suitable, that is willing and appropriately skilled, labour being available for employment can be increased by:

Retaining more Nova Scotian workers; Attracting and retaining workers from elsewhere, including other parts of Canada

and the world; Extending the employment lifespan of workforce participants; Skilling the labour pool to best fit employment opportunities;

Increasing labour participation rates of marginalized people.

For the purposes of this background glimpse at the economy of Nova Scotia, we’ve looked primarily at Province-wide conditions. While it is common to speak of an urban-rural divide in Nova Scotia, that distorts the heterogeneity of rural communities and even, to a lesser extent, the variances within urban centres. Just as there is great variation the livelihoods of rural and small town dwellers, so too there are region to region differences in population demographics. Rural is not synonymous with decline; several communities outside of Halifax had population gains in the period measure by the last Federal Census. Nonetheless, employment growth and rates in Halifax are greater than the rest of Nova Scotia. Correspondingly, workforce data for other regions, with definite community by community exceptions across particular occupations, are in decline.

The diversity and complexity of our current economy, which is subject to an array of short and long-term variables affecting wealth creation, productivity, and workforce preparedness, should inform the need for nuanced and place-based strategies for Nova Scotia. There is no silver bullet or one-size-fits-all solution. Nor will the status quo of a service-dominated and raw-resource dependent economy deliver a thriving future for our communities. What we’re hearing so far is that we need a new spirit of entrepreneurial, innovative, and sustainable development to bring greater prosperity to all parts of Nova Scotia. We need to recognize that good business is an essential part of building good community. We need to work together, as one, to build our new economy.