Transportation: a weak link in NB's economic development?

Yves Bourgeois, Ph.D.

Director, Urban and community studies institute, UNB

Assistant professor, economics, UNBSJ

1. What is regional economic development ?

2. Transportation and RED1. …as an economic sector

2. …as enabling infrastructure

3. Questions

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1. What is regional development ?

1. THEORYIntellectual discipline studying how varying spatial configurations produce regionally differentiated outcomes (GDP/income, jobs/unemployment)

2. PRAXISBelief that by changing these spatial configurations (labour, capital, formal/informal institutions) regions can proactively enhance growth or mitigate negatives (unemployment, poverty etc)

In economics, we can focus on questions of production (growth, factor endowments, +) or distribution (equity, unemployment, poverty, +)

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Growing the economic pie or better sharing it ?

Regional economic development (RED) is an intersection between economics (production is grounded), planning (decisions/history matter) and geography (all activity is inherently spatial)

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EconomicsIndustr org

Public financeTradeSpatial

PlanningRegional

CommunityTransportation

RED GeographyEconomic

PhysicalPolitical

1.1 RED sample of debates

1. Convergence vs divergence World flat (Friedman) or spiky (Florida) ? ex. Geppert et al (2005) convergence

between EU countries but divergence within

2. Local buzz vs global pipelines Locally clustered firms > globally

connected?

3. Why growth concentrating despite ICT Some cities do better job @ attracting talent

Amenities (Flordia, Glaeser) Some …better “institutions” (Scott, Storper) Some have better infrastructure

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1.2 Sources of economic growth

1. Labour More workers increase output (GDP)…

Natural increases (incentives, subsidized daycare) Immigration (laws, int’l gateways, accredit.) ** Integration (skills match, transpo, daycare)

…but do not increase general standard of living ($/cap)

2. Capital Equipping worker with machine increases output/hr

productivity gain = growth of GDP and $/capita Transpo costs moving capital inputs competitive Financial capital mediated by space / transpo (VC)

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3. Technological change Better mousetraps/tractors/computers

productivity (GDP/hr), GDP + per capita income Proximity to labs (R&D) and especially customers,

suppliers, competitors and consultants

4. Trade relative differences in factor productivity impels

regions to specialize, increasing output/hr, and offering the opportunity to trade surpluses…provided transpo costs > gains from D.o.L.

In sum, transportation is the keyhole through which we move people, goods, services and ideas.

In some case, production factors are substituted… Fishworkers instead of robots in electronics Robots instead of tradespeople in plastics

...with varying impacts on employment and productivity In other cases transpo costs (time as well as accounting

costs) and our competitiveness is undermined. 6

2. Transportation and RED1. Transpo and distribution outcomes Spatial mismatch

Are jobs accessible to low-income workers? Ex. increased disposable income disparities if

commuting costs to job sites are higher Unemployment / Underemployment among

low income, immigrants, women Sprawl

Are road users footing true cost of building and maintaining hwy/street infrastructure?

If taxpayers subsidize (social > private costs) too high pollution for all, residential segregation etc

Mass, shared transit to improve access

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2. Transpo and production outcomes Transportation as an economic driver

Moncton as the “Hub City,” SJ “becoming” Transpo Hub according to TG 2.0 strategy

Rotterdam port, Amsterdam airport, Denver Transportation as enabling infrastructure

Moving resources, both physical (natural, parts/equipment, semi-/finished manufactured goods) and people (labour, financiers, service providers)

Moving them according to economic activitystreets, bike lanes, sidewalks for commuters,streets for bankers, airports for VCs

Moving them competitivelyairport for time-sensitive KIBS, mfg, perishabletrains/ports for long haul, bulkhighways and streets for

Moving ideas (embedded knowledge) Intermodality and economies of scope 8

9Air flight patterns,

Aaron Koblin, Google Labs, Published by BusinessWeek

2.1 Transportation as an economic driver

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National Occupational Classification for Statistics (NOC-S) 1991 1996 2001 2006 2011

Canada Transport and equipment operators [H6-H7] 3.9% 3.9% 3.8% 3.7% 3.7%

New Brunswick Transport and equipment operators [H6-H7] 4.6% 4.6% 4.8% 4.5% 4.3%Campbellton-Miramichi, New Brunswick [1310] Transport and equipment operators [H6-H7] 5.1% 5.4% 5.5% 4.3% 4.9%

Moncton-Richibucto, New Brunswick [1320] Transport and equipment operators [H6-H7] 4.4% 4.3% 4.6% 4.6% 4.0%

Saint John-St. Stephen, New Brunswick [1330] Transport and equipment operators [H6-H7] 3.8% 3.7% 4.1% 4.0% 3.9%

Fredericton-Oromocto, New Brunswick [1340] Transport and equipment operators [H6-H7] 4.1% 4.1% 4.6% 3.1% 3.8%Edmundston-Woodstock, New Brunswick [1350] Transport and equipment operators [H6-H7] 6.9% 6.5% 5.3% 7.7% 5.9%

Employment in Transportation industries has decline slightly over past 20 years across Canada

Transportation-related jobs have been more concentrated in NB than average, particularly in resource-dependent regions, but have also been declining faster

Shift-share analysis, NB economic regions, 2006-2011

NB Cam-Mir

Mon-Ric

SJ-SS Fre-Oro

Woo-Edm

StatCan LFS and SEPHΔ empl NS IM RS

Δ empl NS IM RS

Δ empl NS IM RS

Δ empl NS IM RS

Δ empl NS IM RS

Δ empl NS IM RS

Total employed, all industries 1.7 369.4 0.0 -17.4 -6.6 71.2 0.0 -10.3 0.1101.9 0.0 1.1 0.1 86.6 0.0 0.4 0.067.3 0.0 -1.4 -0.1 42.5 0.0 -7.2

Agriculture -1 6.4 -1.3 -0.3 0 0.5 -0.1 0.1 0.0 0.9 -0.2 0.1 0.1 1.6 -0.3 0.3    -0.3 2.4 -0.4 -0.3

Forestry, fishing, mining, quarrying, oil and gas 0.7 10.1 0.2 0.6 -0.1 4.3 -0.2 -0.1 -0.3 2.1 -0.1 -0.5 1.1 1.6 -0.1 1.6 -0.3 1.2 0.0 -0.3 0.0 0.9 0.0 0.0

Utilities 1.1 3.4 0.9 0.6 -0.1 0.7 0.1 -0.2    1.1 0.9 0.1 0.9 0.1 1.3 0.1 -0.1   

Construction 7.4 21.8 6.3 3.6 1.3 3.8 0.5 0.6 0.5 5.9 0.7 1.9 0.5 5.6 0.7 1.5 0.2 3.9 0.5 -0.1 0.0 2.6 0.3 -0.5

Manufacturing -4.5 38.4 -6.5 1.5 -1.7 7.1 -1.5 -0.6 0.1 9.3 -1.9 2.2 0.0 9.8 -2.0 1.4 -0.1 3.6 -0.7 0.2 -0.4 8.6 -1.8 -1.7

Trade -2.6 59.5 -5.7 -3.8 -0.6 11.1 -0.4 -0.8 -0.1 19.3 -0.6 -1.8 0.0 13.3 -0.4 0.3 0.0 9.7 -0.3 -0.5 -0.1 6.0 -0.2 -0.8

Transportation and warehousing -2.3 20.9 -3.4 -3.5 -0.2 2.4 0.0 -0.3 -0.1 7.6 0.0 -1.0 -0.1 4.5 0.0 -0.6 -0.1 2.8 0.0 -0.4 -0.3 3.5 0.0 -1.2

Transportation and warehousing   17.0 -0.3 -2.8                   

Truck transportation   6.6 0.6 -1.5                   

General freight trucking   3.9 -0.3 -0.2                   

Specialized freight trucking   2.7 -0.5 0.1                   

Support activities for road transportation   1.7 -0.2 0.0                   

Couriers   0.7 0.0 0.1                   

Warehousing and storage   1.4 0.0 -0.6                   

Finance, insurance, real estate and leasing 1.2 16.8 0.3 0.4 -0.8 2.8 0.0 -0.9 0.1 5.8 0.0 0.3 0.2 3.8 0.0 0.5 0.3 2.7 0.0 0.6 -0.1 1.7 0.0 -0.2

Professional, scientific and technical services 1.7 15.0 0.9 -1.3 0.3 1.7 0.2 0.0 0.3 3.8 0.6 0.3 0.1 4.1 0.6 -0.4 0.0 4.4 0.7 -1.0 0.1 0.8 0.1 -0.1

Business, building and other support services -4.3 22.5 -5.5 -4.1 -1.2 3.4 -0.2 -1.2 -0.1 7.3 -0.4 -0.7 -0.2 6.6 -0.4 -1.3 -0.2 4.1 -0.2 -0.9 -0.1 1.1 -0.1 -0.1

Educational services -1.5 28.3 -3.0 -3.0 0.1 4.9 0.0 -0.2 0.0 6.6 0.0 -0.4 -0.3 6.5 0.0 -1.9 0.2 6.7 0.0 0.7 -0.3 3.5 0.0 -1.3

Health care and social assistance 5.2 47.7 2.7 -2.7 0 12.4 1.4 -2.1 0.2 11.5 1.3 0.5 0.1 10.9 1.2 -1.1 0.2 7.6 0.9 -0.2 0.2 5.2 0.6 0.2

Information, culture and recreation 0.9 11.9 0.3 0.3 -0.3 1.7 0.0 -0.4 0.0 4.6 0.0 -0.1 0.0 3.4 0.0 -0.3 0.3 1.8 0.0 0.4 1.2 0.5 0.0 0.6Accommodation and food services -3.1 25.9 -4.4 -5.0 -1.1 5.2 0.1 -1.5 0.0 7.3 0.2 -0.8 0.0 5.9 0.1 -0.5 -0.3 5.6 0.1 -1.9 -0.1 2.1 0.0 -0.4

Other services -1.8 18.1 -2.7 -3.2 -1.5 4.3 0.1 -1.8 -0.1 4.4 0.1 -0.8 0.0 4.0 0.1 -0.2 0.0 3.7 0.1 -0.4 0.1 1.7 0.0 0.0

Public administration 4.7 22.7 3.5 1.2 -0.8 4.9 0.5 -1.6 0.4 5.4 0.6 1.3 0.3 3.8 0.4 0.3 0.4 7.0 0.7 1.4 0.0 1.7 0.2 -0.3

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Shift-share analysis is a regional economics tool to break down what explains employment growth or decline in a sector

National share: how many jobs would be created/lost if the industry followed the overall national employment trend

Industry mix: jobs owing to national industry trend Regional share: jobs owing to region’s competitive

advantages Shift-share analysis on previous slide reveals

Transportation jobs contracted in all economic regions of the province (2006-2011), and this despite jobs growing within transportation industries across Canada

The most sizeable job loss was in Greater Moncton (“Hub City”) followed by SJ

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There is considerable spread in average hourly wages between transportation subsectors (StatCan, SEPH, 2008)

Air traffic support services ($43/hr) Sea and rail ($36/hr) Urban mass transit ($33/hr) Air transportation ($32/hr)

Road transportation support ($25/hr) Trucking ($23/hr) Interurbain bus service ($23/hr) Courrier ($22/hr) Warehousing ($22/hr).

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Summary Not much evidence for emerging SJ “transportation

cluster” and “Hub City” shedding jobs even faster Silver lining = If NB is shedding jobs in transpo sector,

it is mainly in low-wage trucking and warehousing Unanswered question is whether job losses owe to

implementing more efficient technologies, which may help sustain industry,……changes in distribution networks (ex box stores, online sales, etc)… or declining regional competitive advantages

With 3.7% of Canadian workers (4.3% in NB) employed in transportation, it is important but can only do so much as an individual sector to drive growth.

Opportunities to leverage higher-paying port, rail However, the bigger task at hand is

understanding how transportation is the critical infrastructure sustaining the other 96.3% jobs

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2.2 Transportation as enabling infrastructure

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Transportation infrastructure can enable or hinder the flow of workers, goods, services and ideas

Transportation costs, whether “out-of-pocket” or opportunity (time) costs, increases total costs to businesses and undermines competitiveness

2.2.1 Moving workers

New Brunswick is inefficient at moving people. In Moncton, Fredericton and Saint John, 85-90% of

workers go to work by car, compared to Halifax (76%), Toronto (71%) and Montreal (56%).

NBers have the third highest car ownership rate in Canada with HH owning 1.55 vehicles on average, compared to the Canadian average of 1.47, and following only Alberta (1.87) and Saskatchewan (1.79).

Cost of car ownership not typically factored in CoL indices. Common front for social justice argued the motor fuel tax should fall to help low-income earners afford commuting, especially from rural communities.

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New Brunswickers put on average 16,118km per vehicle compared to 15,366km for Canada (Natural Resources Canada, Canadian vehicle survey 2009).

NBers produce 9.4% more CO2 from private vehicle operation than the Canadian average (StatCan, Env Accounts & Statistics Division, 2009). Transpo = 27% GHG, 2/3 road.

40% of Moncton’s downtown surface is parking (Downtown Moncton inc)

2.8% of Greater Monctonians use public transit, compared to Canadian average of 11%, Halifax (11.9%), Toronto (22.2%) or Montreal (32.6%).

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Not paying true social costs skewing investments towards individual rides

Making shared transportation unattractive to middle income earners, limiting access to work (and play) and increasing commuting costs participation

2.2.2 Moving goods

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Top 25 exports by HS2 codes (2011) ($1000 Cdn) ($1000 Cdn)

NB Que27 - Mineral Fuels, Mineral Oils, Bituminous Substances and Mineral Waxes 10688996.80 76 - Aluminum and Articles Thereof 7172960.5303 - Fish, Crustaceans, Molluscs and Other Aquatic Invertebrates 648674.80 88 - Aircrafts and Spacecrafts 6445340.3847 - Pulp of Wood and The Like; Waste and Scrap of Paper or Paperboard 587780.52 84 - Nuclear Reactors, Boilers, Machinery and Mechanical Appliances 5696133.2348 - Paper, Paperboard and Articles Made From These Materials 558080.27 48 - Paper, Paperboard and Articles Made From These Materials 4808008.7544 - Wood and Articles of Wood (Incl. Wood Charcoal) 367314.44 27 - Mineral Fuels, Mineral Oils, Bituminous Substances and Mineral Waxes 3530309.5231 - Fertilizers 319912.27 85 - Electrical or Electronic Machinery and Equipment 2873929.4020 - Preparations of Vegetables, Fruit, Nuts or Other Parts of Plants 304569.09 26 - Ores, Slag and Ash 2447381.7316 - Meat, Fish and Seafood Preparations 171773.61 74 - Copper and Articles Thereof 2422253.5178 - Lead and Articles Thereof 169829.43 87 - Motor Vehicles, Trailers, Bicycles, Motorcycles and Other Similar Vehicles 2250096.1426 - Ores, Slag and Ash 157451.69 39 - Plastics and Articles Thereof 1793827.3372 - Iron and Steel 101170.14 72 - Iron and Steel 1684099.0607 - Edible Vegetables and Certain Roots and Tubers 67710.17 02 - Meat and Edible Meat Offal 1567309.6395 - Toys, Games, Sporting Goods and Other Goods for Amusement 66158.92 44 - Wood and Articles of Wood (Incl. Wood Charcoal) 1559449.4787 - Motor Vehicles, Trailers, Bicycles, Motorcycles and Other Similar Vehicles 64843.54 71 - Pearls, Precious Stones or Metals, Coins and Jewellery 1366686.3884 - Nuclear Reactors, Boilers, Machinery and Mechanical Appliances 61688.94 90 - Optical,  Medical , Photographic, Scientific and Technical Instrumentation 1122658.3522 - Beverages, Spirits and Vinegar 51139.65 30 - Pharmaceutical Products 933567.1328 - Inorganic Chemicals and Compounds of Precious Metals and Radioactive Elements 47688.53 47 - Pulp of Wood and The Like; Waste and Scrap of Paper or Paperboard 907254.9939 - Plastics and Articles Thereof 42560.26 40 - Rubber and Articles Thereof 888524.57

06 - Live Trees and Other Plants (Incl. Cut Flowers and Ornamental Foliage) 29535.0894 - Furniture, and Stuffed Furnishings; Lamps and Illuminated Signs; Prefabricated Buildings 873558.68

94 - Furniture, and Stuffed Furnishings; Lamps and Illuminated Signs; Prefabricated Buildings 23907.19 28 - Inorganic Chemicals and Compounds of Precious Metals and Radioactive Elements 795438.1492 - Musical Instruments 22611.12 73 - Articles of Iron or Steel 788020.8568 - Articles of Stone, Plaster, Cement, Asbestos, Mica or Similar Materials 22444.69 12 - Oil Seeds, Oleaginous Fruits, Industrial or Medicinal Plants, Straw and Fodder 617806.7623 - Residues and Waste from the Food Industries, and Prepared Animal Fodder 21923.69 18 - Cocoa and Cocoa Preparations 535381.4485 - Electrical or Electronic Machinery and Equipment 20133.91 95 - Toys, Games, Sporting Goods and Other Goods for Amusement 500874.2173 - Articles of Iron or Steel 16943.45 38 - Miscellaneous Chemical Products 490137.25Sub-total 14634842.20 Sub-total 54071007.42Others 182542.34 Others 9529084.24Total (All Products) 14817384.54 Total (All Products) 63600091.66

Exports of NB’s top 25 exports, top 12 are resources or mfg goods with minimal transform In Que, 5 of top 9 are high VA (ex. aerospace, electronics, optics, biopharm)

On trucks and trains “You can’t unload a train at a grocery store” -- NB

trucking company owner protesting proposed carbon tax Perhaps, but do we need trucks for long haul, and

what about intermodality to optimize ?

Trucks have lower terminal costs (loading), more flexibility in scheduling and routes

Trains are more efficient for large tonnage, using less fuel (scale, friction, deceleration, idling) and fewer workers

Trains also cost less in non-market costs accidents, spills, congestion

Optimal shipping strategy? Varies by industry, by company, even “on day of the week”

Intermodality Difficult to ascertain substitutability of modes 19

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Example of cost differentials between truck and rail

Rail more efficient if large tonnage, even over shorter distances, although

http://www.columbiarivercrossing.org/FileLibrary/Memorandums/FeasibilityofDivertingTruckFreighttoRail.pdf

We often assume exports are limited to tangible goods, but increasingly services

Ex. Professional, scientific and technical services, including engineering in Fredericton

Financial services, such as VC for IT (1hr rule) Some NB IT companies have exit strategies when they ready to scale up to NA/global or need $1M+ VC

Other polycentric regions (ex. Northern Egland) have been able to develop external VC networks, but depend on cheap, well-connected air travel

…serious impediments in NB $ YYZ-LAX < $ YYZ-YFC > 1hr Limited connectivity

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2.2.3 Moving services

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Global trendsGlobal Business Strategy and Innovation: A Canadian Logistics Perspective Highlights and Key Findings leverage global value chains. continental logistics strategies long-term initiatives with dedicated facilities, personnel,

processes and technologies. Investment in DCs in Canada has increased by

106 percent over the past five years (mainly in Ontario, Alberta, Quebec and British Columbia).

Small and medium-sized firms are investing in DCs to better respond to customer mandates and to integrate further into global value chains.

to invest in logistics network strategies — such as capability to electronically collaborate with networks of key suppliers and customers — and supply chain modelling applications.

Bourgeois (2013) Many NB transpo firms aware but unable to capture IT and logistics expertise

Ten questions/topics for exploration

1. How are transportation companies become logistic co. ?

2. How are changing trade patterns and technologies altering distribution activities across key NB sectors ?

3. Measuring impact of transportation costs on NB industries’ competitiveness

4. Mode substitutability and intermodality in NB

5. Not knowing what you don’t know. Light rail vs highway expansion difficult to debate because outside NB policy realm.

6. Feasibility of pooling infrastructure (regional airport) or services (local airport specialization)

7. Impact of transportation on workforce integration.

8. Assessing impact of structural, regulatory changes (EI reforms, land use planning) and energy prices on employment and commuting patterns

9. Energy projects (shale gas, oil pipeline) impact on road building, maintenance, safety

10. Full social accounting on current transportation investments and usage (links with air quality, obesity) transit SROI

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