Posted by: Richard | February 15, 2010

Diversifying Alberta’s Economy

A recent Globe and Mail article entitled “Can Alberta Redesign Their Own Economy” by ATB Senior Economist Todd Hirsch asked a very important question: How can we eliminate the boom and bust cycle of the Alberta economy?  Alberta is a province that has been blessed with tremendous natural resources and needs all hands on deck when commodity prices are high.  Unfortunately this means that there are few secondary industries for workers to turn to when the commodity prices drop.

Hirsch makes a key point that government probably can’t help solve this problem.  They have tried in the past, however the results have been less than inspiring.  The market demand for labour means that secondary businesses either have it very good in commodity downturns or cannot find workers during a commodity upturn.  No amount of government incentive can change this fundamental fact.

Hirsch believes the key is to encourage entrepreneurship in the province.  This makes sense, however ignores that many, if not most, of the recent entrepreneurs have commodity focused small businesses.  These entrepreneurs are not diversifying the economy, they are merely changing the employment structure.

In my view, there is a different solution for Alberta, and that is to get more people to move here.   Why do we need more people?  Without more people we cannot maintain a diversified economy.  Other industries and businesses need to know that their talent will not be hoovered up in each economic upswing.  To do this, we need to have a bigger economy with more people.

As an anecdote, I know many people who were employed in completely non-related industries to energy in the late 1990’s and early 2000’s.  These were rare people working for organizations that had no sales in Alberta and were completely exporting their knowledge and products.  Alberta was a great place to be in the 1990’s, as companies were able to find talented people that were paid competitively.  With the boom in oil and gas, these companies have now found it very hard to compete for labour.  As the boom started, energy related companies could offer 15% – 25% raises for the same role.  Our company has routinely recruited from industry stalwarts such as: banks, insurance companies and global software companies to name a few.

It has gotten so bad that I cannot think of anybody not employed in a job that isn’t related to the energy industry right now.  These jobs have been transferred out of Calgary to places such as Toronto, America and overseas.  While the boom has made Alberta richer, it has also made our future riskier.  We are only an energy economy, and while that is a great place to be in a boom, it is devastating in a bust.

It’s great to say “we need people!”, but what are we doing about it?  In my view, only a little bit.  Alberta competes in the global race for talent on high wages and ease of purchasing a home.  We are doing OK, but Calgary is a bit like St. Louis or Denver.  A nice place to live, but not a premier destination to go and work, such as San Francisco, New York City, Toronto or Vancouver.

I think for Alberta to move from a good place to live and make a buck into a place that routinely recruits the best people in the world we need to look at what makes a great city, and steal some of their ideas.  Specifically I think we need diversity.  Alberta has some of this, with a wide range of nationalities and a very tolerant culture.  But diversity doesn’t just mean languages and nationalities, it also means having people doing different jobs, having different backgrounds, education, values and goals.  Looking at Calgary, I actually think that despite the different nationalities in the city, we are a city with a homogeneous background.  Calgary is full of people who work in the energy industry with similar training either through technical colleges, business schools or engineering programs in Western Canada.

I think diversity manifests itself with an artistic community, local shops, great independent restaurants, entrepreneurs and big community events (like Montreal does in summer).  If we could add these characteristics to what Alberta already has, I think we can become a leading global city full of engaged people with a fantastic overall quality of life.  This will bring more and more people to Alberta, thereby strengthening our economy and making us one of the select winners in the war for talent.

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