Want to break B.C.’s boom-and-bust cycle? Focus on people, tech leader argues

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High-paying jobs in growing, profitable industries are the key to stable government revenue and a less volatile economy, says BC Tech boss Jill Tipping

Every business likes to say that people are its greatest asset. For Jill Tipping, president and CEO of the BC Tech Association, that maxim applies to our whole province.

You can read all about it in A New Economic Narrative for BC: BC’s Fiscal Future, which follows on the heels of a similarly named study published this past summer.

The new report builds on its predecessor by working a different angle. “Last summer, we were just looking at the facts of the economy, and in this one we dug a little bit deeper to look at the sources of government revenues,” Tipping says. “But both of the reports are coming from the same perspective, which is: there’s a conversation that we have in B.C. about the economy that’s a bit out of date.”

By focusing on the revenue question, BC Tech hopes to take that conversation somewhere new. “What is our economy currently, and where are we actually getting sustainable government revenues from today?” Tipping asks. “Does it tell us anything about how to build a stronger, more sustainable future? How do we move beyond boom and bust?”

READ MORE: The B.C. economy has fundamentally changed. Are we ready for tomorrow?

The latest report flags an aging population, an overheated housing market and falling resources revenues as threats to B.C.’s fiscal future. “We’ve got enough inherent risk,” Tipping says. “Resources royalties are subject to fluctuation. Housing—there’s some downsides to depending on that for your economic growth and your government revenues. So when you look at it in comparison, trying to make the tech and other sectors as big and successful as they can be, that doesn’t feel like the riskiest thing we could do.”

That argument hinges on the fact that services now represent 75 percent of provincial gross domestic product and 80 percent of jobs. BC Tech projects that the local tech industry will create 150,000 new jobs by 2029—double what the government has estimated.

“What was really interesting to us was to reflect how much of the economy today is services, how much of the economy today is tech sector and how much of the job growth in the next 10 years is coming from these newer sectors,” Tipping says.

“And then to draw that angle back to government revenues and realize that individuals—human beings, people—and the income taxes and the consumption taxes and the property taxes that they pay, that’s actually our largest and most sustainable source of revenue.”

As the report notes, taxation was by far the biggest single money spinner for the B.C. government in the 2020-21 fiscal year, accounting for 55 percent of total revenue. At 32.5 percent, personal income taxes were the largest contributor to provincial tax revenue, far outstripping sales tax (22.5 percent) and corporate income tax (14.1 percent).

Given that reality, the reports calls for the creation of more high-paying jobs in tech and other growing sectors. “If we do that, not only will it be a good outcome for the individuals concerned, but it also results in a great economy with less boom and bust and more stability for government revenues,” Tipping says.

Getting beyond boom and bust

But like any other sector, technology is subject to downturns. Perhaps the most infamous example is the dotcom bubble of the late 1990s, which saw internet stocks lose more than US$1.7 trillion in value during the crash that followed.

“Tech definitely has had its share of booms and busts,” Tipping admits. “But the tech economy of 2022 is quite different than where we were at the turn of the millennium, because technology has infiltrated every industry sector now,” she adds. “So I think there’s less of a tendency to boom and bust than there might have been, you know, [20] years ago in tech. Today, it’s really the modern basis of the economy.”

Tipping also distinguishes between high-margin services businesses, which offer “the possibility of creativity and growth and paying people well,” and their less profitable counterparts in other industries. “There are differences in profiles across the sectors that are often explained by economic cyclical factors but can also be explained by [asking], are we talking about effectively a low-margin business, or are we talking about a high-margin business?”

Then there’s the question of which industries will keep expanding. “Everyone who’s looking at trends for the future is saying that it will only mean growth in technology adoption,” Tipping says. “So when you’re looking at a sector that has high profit margins, pays its people well, expects to employ more people and expects to grow globally, that’s a great place to be for B.C.”

The new BC Tech report also makes a case for boosting services exports, especially in knowledge-based industries centred on intellectual property. “IP is probably just another way of saying value-add,” Tipping says. “Every time we can add more value to the product before we sell it, we’ve given ourselves a much stronger economic bargaining position in the world. We’re also keeping more of the profits for ourselves and more of the value in B.C.”

Talent trumps taxes

All of this raises policy questions for government—for example, whether to lower taxes on IP developed here, as some local businesses have proposed. “There’s definitely tax implications and policy implications that need to be looked at soberly and seriously,” Tipping says. “I would say, though, that the No. 1 topic of conversation in tech, and actually in many other service sectors, is about access to labour.”

READ MORE: AbCellera founder Carl Hansen calls for lower taxes on innovation

For BC Tech, solving that problem means rapid skilling, reskilling of workers who want to move to new sectors and a bigger role for micro-credentials, Tipping explains. “We like the idea of changing the past, established pattern of education and looking at new ways to bring people on with relevant experience and give them credit for their credentials,” she says.

“So that’s where our focus is all the time, on talent, talent supply and skilling. Although we do talk about taxation, it’s further down the list of things we worry about—far lower than access to talent.”

READ MORE: 2021 Education Guide: Micro-credentials are catching on at B.C. universities and colleges

Tipping also suggests looking at the income tax situation in other technology hubs. “If high personal tax rates meant that you couldn’t have a successful tech sector, then nobody would ever have heard of Silicon Valley in California,” she says, arguing that the same goes for living costs. “People say, Well, how can B.C. be successful? We’ve got such a high cost of living. I’m like, have you looked? The most successful tech sectors around the world, they’re all in absolutely fantastic places to live where the cost of living is high.”