Rural British Columbia faces economic transformation challenges

In January we published our State of the North economic report, an annual exercise that makes this journalist turned public-sector CEO’s palms sweat because I’m never quite sure what the political fallout might be.

This year was particularly so as the report, which is independently researched by our partners at MNP, included new data and forecasts on the changing nature of the rural economy.

The report could be summed up by saying the next industrial revolution that’s forecast as coming soon to a rural community near you is well underway and has been for many years.

At the top of the report, the short-term forecast for the region is flat – that’s because the steep downturn in the forestry sector and middling development in other areas is offsetting the explosive contributions the energy sector will make to our region in the years ahead.

In fact, it was startling to see how critical LNG Canada, Coastal GasLink and Site C are to our near-term regional economic health.

More interesting yet is how employment in B.C.’s natural resource sectors has changed over the past 20 years, and what the demographic forecast for the north looks like in the next 20.

The data shows that employment attributable to natural resources in B.C. has been on a steady decline since 1997, and today the high-tech sector employs slightly more people in B.C. than all the natural resource sectors combined.

That said, our natural resource industries still contribute significantly more to provincial GDP than the high-tech sector does.

It’s worth pointing out that these sectors are just statistical identifiers and are not mutually exclusive: there are many high-tech jobs in B.C. that support natural resource industries, and vice versa.

Now, combine that data with what we know anecdotally is going on in B.C. and you can identify some interesting trends:

1) The data indicates that urban areas such as Metro Vancouver are diversifying faster and becoming responsible for an increasing share of provincial employment.

2) Natural resource industries in B.C. are among the most technologically advanced sectors we have. The decline in their employment numbers is because these industries have been adopting new technologies, such as automation, to remain competitive.

This means that mines, mills and gas plants typically employ fewer people than they once did as labour-intensive jobs disappear, but they now need to find more skilled employees for tech-enabled jobs.

This is a good-news story in that it demonstrates how innovative heavy industry in B.C. has been over the past two decades.

The challenge lies in how our rural communities position themselves to adapt to this new reality.

Regional centres such as Prince George, Kamloops, Nanaimo and others likely stand to do well in the decades ahead thanks to population sizes, sector diversity, housing adequacy, amenities and services such as health care and education.

But smaller communities may find it challenging to maintain population, services and quality of life for residents without a vision and plan to adapt to the future. The report’s data shows rural areas increasingly account for a smaller share of B.C.’s residents. Their population will age significantly in the next 20 years, and much of their housing is inadequate or old.

As well, more than a few of our communities continue to operate centred on a large industrial tax base, which makes diversification difficult in a down commodity market as those places struggle to maintain service delivery.

And maintaining those communities is costly, given northern climates and the 20th-century vision with which they were laid out, characterized by extensive infrastructure and low-density neighbourhoods.

Although these trends need to be addressed, it should be pointed out there’s no scapegoat here – the challenge in rural areas I’m describing is common to rural areas across Canada, the U.S. and Europe.

In their 2018 paper Jobs for the Heartland: Place-Based Policies in 21st Century America, Benjamin Austin, Edward Glaeser and Lawrence Summers describe a similar trend in the U.S. eastern heartland as “economic dislocation caused by deindustrialization.” They note that the mobility of labour and capital between high-wage and low-wage areas in 20th-century America has fallen considerably, and that the country is evolving into “durable islands of wealth and poverty.”

So, what’s the solution?

In short, we need to look at ways to retain our retirees, attract the next-generation workforce and support the development of that workforce through education and training that’s adaptive to knowledge-based and tech-enabled jobs.

Certainly, we need jobs for these people, which is why I continue to support the natural resource industries. I see them as the cornerstone for long-term development and diversification in the north, and it’s clear that future jobs in those industries will be knowledge based.

But we also need to consider more seriously place-based policies we could implement in rural areas, policies common in Europe and the U.S., that catalyze job creation, sustain rural communities and improve the well-being of people who call this part of the province home. •

Joel McKay (joel@northern development.bc.ca) is the chief executive officer of Northern Development Initiative Trust, a non-profit organization that stimulates economic growth throughout northern B.C. He is also a Jack Webster Award-winning journalist and a former Business in Vancouver editor.