B. C.’ s economy faces hard truths
Lagging productivity must get back on track, while income inequality is a roadblock on path to successful society
The Sun’s 2035 series provides a valuable opportunity for British Columbians to have a dialogue about the future prosperity and social and environmental sustainability of this province. Building a foundation for prosperity in B. C. requires an understanding of the “hard truths” defining our challenges and our choices. Two such hard truths are the dire need to improve British Columbia’s low productivity performance and the growing income inequality in our society.
Hard truth No. 1: Increasing productivity — creating more value with any given level of employment, investment, materials and energy — is the only sustainable way to improve our standard of living and that of our children and grandchildren. Unfortunately, it is no secret the productivity performance in B. C. and Canada over the past 30 years has been very poor. Thirty years ago, Canada’s level of productivity was the fifth highest in the world; by 2009 it had fallen to 15th. Thirty years ago, B. C.’ s level of productivity was above the national average; now it is below the national average. Slipping as a province within a country which is also slipping internationally does not bode well for B. C.’ s prosperity.
Hard truth No. 2: The distribution of income in B. C. has become steadily more unequal over the past 30 years. This inequality tends to undermine the sense of shared prosperity necessary in a successful society.
There are multiple causes behind these two hard truths, and a full consideration of them is beyond the scope of this short column. But there is one very important factor that is common to both. That factor is what economists call “human capital” — the knowledge, skills and competencies of the workforce. In an increasingly knowledge- intensive economy, this is increasingly the critical factor that determines whether a society is economically and socially prosperous.
If this is the primary source of a society’s wealth, and if people’s incomes are going to increasingly reflect their personal human capital, we need to ensure that capital is distributed as fairly and as comprehensively as possible. If we, as a society, do not do an adequate job in equipping a broad cross- section of our population — not just a relatively narrow slice of the so- called “best and brightest’ — with the right kinds, quality and quantities of human capital, then economic and social prosperity will increasingly be beyond our grasp. Our poor productivity performance and the growing inequality in the distribution of income suggest we have been missing the mark in this regard.
You might expect, given my position as president of one of B. C.’ s largest publicly funded post- secondary institutions, this is all just a prelude to an argument for significant increases in funding for education. Indeed, it is essential that we invest adequately in education. Important as the level of public investment in education is, however, what we do with that public investment is just as important. There are hard questions we must grapple with if we are going to make any headway against these hard truths.
Are we sure the significant investment in post- secondary education creates as much human capital as it could? The oft- repeated mantra about the higher average incomes earned by post- secondary education graduates is a “proof” that would not pass scrutiny in any undergraduate social science course. A disproportionate number of university graduates come from families with above- average incomes and those who did well in high school – they already had a head start in the lifetime income sweepstakes. To demonstrate that we are building human capital, rather than merely filtering it, we need to look at the real value added as a result of time spent in post- secondary education.
Are we adequately focusing our resources to ensure quality post- secondary education is broadly accessible to everyone who will benefit from it? If not, what kinds of trade- offs are we prepared to make to do so?
Are we investing in the right proportions across the post- secondary spectrum? For example, are we investing enough in the STEM ( science, technology, engineering and mathematics) disciplines? Can we teach innovation and entrepreneurial skills? How can we provide more work- integrated learning, which is more likely to lead to better employment opportunities and prosperity for our students and graduates? Do we have the balance between “applied” and “academic” education right? Does the very distinction between applied knowledge and academic knowledge betray an outmoded view of education, one more appropriate to an industrial economy than to a knowledge- intensive one?
I do not claim to have the definitive answers to these questions. But I am convinced that, unless we as a society are prepared to grapple with these and other hard questions in a meaningful way, we have little hope of making any substantial progress on the hard truths of B. C.’ s dismal productivity performance and its increasingly unequal distribution of income.