New Brunswick needs stronger private sector to prosper
New Brunswick’s economy, like any economy, is composed of two sectors. The first is government—including municipal, regional, provincial and federal—and the second is the private sector. Government funds itself by drawing resources from the private sector. Given this relationship, the state of the private sector should concern all New Brunswickers, even those preferring much larger government.
It’s no secret that Atlantic Canadians have suffered from a prosperity gap compared with the rest of Canada. In the decade leading up to the pandemic (2010 to 2019), income in the Atlantic provinces (as measured by per-person GDP) was just 86 per cent of the rest of the country. In simple terms, this means we have lower living standards than the rest of the country and improving the private sector is key to closing this gap.
While the Higgs government has prioritized private-sector investment and controlling the growth in government spending, recent research shows the state of New Brunswick’s private sector remains a cause for concern. In fact, across measures of business investment, new business creation and venture capital investment, the province underperforms most of the rest of Canada.
Private-sector investment, for example, remains crucial for the province’s prosperity because it finances the new factories, machinery and equipment, and research and development that ultimately make workers more productive and improve living standards. Unfortunately, relative to the rest of the country, private-sector businesses are not investing in New Brunswick. Consider that in 2019 (the latest year of non-pandemic-influenced data), private-sector investment per worker in New Brunswick was just $13,800—higher than the other Maritime provinces but third-lowest in the country and 35 per cent below the national average.
Other measures tell a similar story. The province ranked ninth (of 10 provinces) in small business startups, a key measure of entrepreneurship. And eighth in venture capital per person, a measure of private-sector investment in startups and early-stage businesses. Improving the conditions for new business creation and investment is a key component of a healthier private sector.
One bright spot for New Brunswick is the share of private sector versus government workers. On this measure of private-sector employment, New Brunswick ranks fifth, with 64.0 per cent of all workers employed in the private (versus government) sector. While this outranks the other three Atlantic provinces, it remains below the national average of 64.7 per cent.
One consequence of the relatively weak state of the private sector is that New Brunswick has one of the largest government sectors in Canada. While the province did control spending during the pandemic, government spending (including federal, provincial and local government) represented 57.4 per cent of the provincial economy in 2019, third-highest in Canada. Simply put, government dominates the New Brunswick economy.
Most New Brunswickers want the province to become more prosperous, more independent, with higher incomes and improved living standards. To achieve this, it’s crucial to have a strong private sector creating wealth in contrast to the government sector, which redistributes it.