Can't see the prosperity? You're soaking in it

While Newfoundland and Labrador is definitely wealthier than it once was, perceptions continue to clash with expectations, John Gushue writes.

Being a have province has turned out to be a double-edged sword

I had an interesting conversation with a young woman at a business in downtown St. John's recently. The conversation was about whether things were booming or — given the provincial government's finances — in a bust.

She definitely tilted toward the latter. "I'm not seeing any prosperity around here," she said.

Um, really? I made a vague but imprecise comment about the state of things downtown, but I could have been far more detailed. If I had the nerve, and the time, I would have said to the employee, "Take a good look around you. Where do you think your customers are coming from?"

More to the point, look up and down the downtown areas. Boutiques and shops are catering to parcel-toting customers, luxury sedans and trendy SmartCars are parked next to each other, construction continues on major new buildings, and the place feels as vital as any time as I can remember.

What a different scene from, say, 20 or so years ago, when the downtown St. John's of the early '90s was so quiet that tumbleweeds would not have seemed out of place.

That's the thing about prosperity: few of us would admit to feeling rich since the oil started flowing at Hibernia, but few of us are actually untouched by the overall change in fortunes.

Plenty of problems, many of them new

I'm not saying there are not problems, and that there is not a squeeze, and that some people are not feeling the hurt. Far from it. I've written here a few times about the crunch we have in housing, in particular the dire need we have to push affordable housing to the fore.

St. John's has received many of the benefits that have come with Newfoundland and Labrador's oil-fuelled prosperity, as well as new problems. (CBC )

Our most vulnerable people are feeling the swing in the cost of the living the most. This, unfortunately, is one of the all-too-predictable outcomes of a boom economy. Indeed, I remember reading research papers from the 80s and early 90s that laid out these scenarios. (Another, incidentally, involved the infrastructure in the justice system to deal with anticipated crime ... but that's fodder for another column.]

There definitely seems to be a perception that we're not enjoying the fruits of prosperity, or that the reality is not as rosy as people might have expected. I see it frequently in social media, comments left on stories on our site, and definitely in everyday conversation.

The reality of the boom is definitely double-sided, too, including in the very downtown St. John's streets I described. In February, one of my favourite little shops closed its doors, with Britannia Teas proprietor Kelly Jones saying that soaring rents and overhead were just too much for her small business to continue a retail operation. [She's running Britannia now through pop-up events and online sales.]

Other employers I know continually complain about the difficulty they have finding and then keeping staff, particularly in the service sector. The number of employed people — another key indicator of prosperity — has been steadily climbing through the years, and as of Friday's estimate stands at just over 234,000. Employers, basically, are competing among a pool that is much smaller than it was before.

In announcing the layoffs in March, the government claimed that that very vibrancy in the private sector would be strong enough to mop up a lot the job losses it was announcing.

"In fact," Finance Minister Jerome Kennedy said during his budget speech, "we believe our economy is so strong right now that it can absorb much of the impact of what we are doing this year."

Yet, speaking with reporters beforehand, Kennedy admitted that many of the people who were about to get a pink slip would have a difficult time finding work in their career.

Another dichotomy: a boom economy with depressed pockets.

Indeed, that's what's confounding so many people. How is it that we have a still-healthy industry, with oil prices significantly higher than they were a decade ago, and yet have to go through such a painful round of cutbacks? There are many reasons, and critics will emphasize their favourites, but we had several straight years of heavily escalating spending coupled with a recent turn that includes less revenue from not only oil but other sources, not to mention the winding down of the Atlantic Accord payout.

Consider this. Ten years ago, the government's budget was based on overall revenues of $4.02 billion. (That .02 would have been more significant then.) This year's budget is based on overall revenues of $6.39 billion, and that's down from last year by about $200 million.

"Where did all the money go?" is a question I've heard on airwaves and read on social media. I'm sure some conspiracy theorists think something nefarious happened to a mountain of cash, but the truth is mundane. The money went on higher salaries for more employees handling more services, as well as such necessary but dull things like asphalt, schools and other public works.

To have and have not

Meanwhile, there seems to be a misunderstanding of what being a "have" province means. We always equated the phrase "have not" with being poor, and for good reason, but it really has to do with equalization and who gets it.

A misnomer — and one that drove me crazy — is that equalization means having the rich provinces directly sending money to the poor provinces. How many times did I suffer a jibe, no matter how well meant, from an Ontarian making a joke at my expense.

Equalization works like this: all taxpayers pay into this 100 per cent federal system, which in turns distributes the money to the provinces that qualify to receive it. The formula is complicated, but it's based on a province's fiscal capacity, or their ability to generate revenue. Thanks to a cascade of money from the offshore oil industry — royalties, super-royalties, corporate income taxes, and more — Newfoundland and Labrador has not qualified to receive equalization since November 2008. That's the "have not" part, behind us. By definition, we became have.

The $1.5-billion that Nova Scotia will collect from the equalization in the coming year would sure be handy over at Confederation Building, wouldn't it? It would cover the budget deficit three times over, and probably make moot some of the spending cuts the Tories have had to make.

But losing that equalization cash goes with the territory, as does the volatility that comes from basing much of your financial position on commodities (we're a mining province, too, don't forget) that are traded in the marketplace, sometimes with dramatic swings in value.

A pot of our own

More to the point, we've switched the equalization revenues with a pot of money of our own. We're not dependent on another government, with its own purse strings. That's significant.

But how significant? It was supposed to be huge, epic, epoch-making, if you'll recall, and perhaps this taps into the current dissatisfaction that so many people are feeling in the wake of the March 26 budget and its broad-based spending cuts.

In the months before we went off equalization, Tom Marshall, the finance minister at the time, said adjusting to a "have" reality would not just mean having a new fiscal arrangement, but "a revolution between the ears." Premier Danny Williams even mused about having a public holiday to mark the historic turn.

In other words, our expectations went up, probably far higher than was necessary — or healthy. Now, we're adjusting to a cool-down, a more realistic phase where we recognize we cannot get everything we want, and realizing that "have" does not automatically mean "have it all."

Reality check time

But being realistic also means taking a fact-based look at what's around us, and the evidence of prosperity is rather undeniable.

Consider this. The personal disposal income per person in this province was $6,710 per person in 1981. Ten years later, through the double-digit years of inflation in the 80s, it had more than doubled to $13,075.

Ten years after that, and through a rough period that included the cod moratorium and tough budgets galore, the figure had climbed to $17,462.

Things really started cooking in the years that followed. By 2010, the last year for which figures are available, personal disposal income was pegged at $27,402 for each man, woman and child.

Granted, our cost of living has been climbing (I stew on that when I'm at the grocery store and looking for things to make, well, stew), and I know that some rural areas are really hurting, but the overall amount of money kicking around the province is considerable.

I stew on that point when I'm at a place like Costco, and I see families, many of them young, fill their carts with non-essential items. The restaurants downtown seem to be thriving; a few weeks ago, an impromptu urge one weekend to get a meal resulted in a scramble to find a place that could give us a table.

As for that young woman working downtown, and others who can't see the prosperity in their midst, I guess I would say this: trust me. You do not want to go back to periods in our past, when it was practically impossible for a young adult to get any kind of job, when entire graduating classes of fields like medicine took jobs outside the province, and, yes, when equalization payments from Ottawa were the rope pulling the place along.

We need to recognize that an increase in overall wealth does not mean that we're all wealthy.