This is an addendum to one of my posts last week regarding comments made by Navdeep Bains, Minister of Innovation, Science and Economic Development - he hopes that that Trudeau's new budgetary measures will attract "top-notch workers, scientists and scholars from the U.S."
Lets look at the competition he and Canada faces in trying to attract U.S. workers. USA Today published an article this past weekend on "Tech Job Migration" (the link is at bottom of Blog. The salient points from this article are...
Many Tech startups and even existing "Big Players" are relocating to cities like Phoenix, Tucson, Houston and Denver for reasons of lower operating costs and an increased ability to attract new talent based on the lower costs for housing and lower costs of living.
Lets take a look at the attraction for a potential tech employee and what they will choose Phoenix for example over Ottawa.
Taxes & Cost of Living
An individual in Phoenix making $80K will have a tax rate, before deductions of 17.9%. The save individual in Ottawa will have a personal tax rate of 31.5% (nearly double). In Phoenix the worker will be able to purchase a 2,000 sq/ft home, within a 30 minute commute, for approximately $250K. The same home within a hour commute of Ottawa will cost approximately $650K. The employee in Phoenix will only require a downpayment of $12.5K with 100% of the mortgage interest being deductible. The Canadian will need $65K downpayment to obtain a reasonable mortgages rate without CMHC Insurance. Taxes on the Phoenix house will be $1,900/yr whereas the property taxes on the Ottawa home would be $6,000/yr. Utilities, gas and other costs of living are approximately 17% higher in Ottawa than in Phoenix (https://www.expatistan.com). HST tax in Ottawa 13% in Phoenix 8.6% (only on goods, services not taxed). Health Care, the Ottawa employee will receive "Free" Healthcare, the company will, in all likelihood, have a Benefits package for the employee. As of January 2016 U.S. employers are required to provide adequate health insurance coverage options for employees. At a minimum the Phoenix company will provide the employee with 70 percent/30 percent. Out of pocket premium expense (fully deductible) for the employee would range from $1,118 for single or individual employee coverage; $2,824 for employee-plus-one coverage and $4,236 for family coverage.
Will all the above taken into consideration the Phoenix employee will have approximately $38,000 more for discretionary spending per year than the Ottawa employee!
Get ready for the stampede Minister Navdeep Bains!!!!!
Bombardier is in the news again so I’m jumping in with both feet. The federal government says it will provide $372.5 million in interest-free loans to Bombardier. This is short of the $1-billion that they have been asking for however, over the years, Bombardier has received roughly $1 billion in federal support. Last year, Bombardier received a $1-billion US investment from the Quebec government in exchange for a 49.5-per-cent stake. In August 2016 Bombardier handed out pink slips to aerospace employees in Montreal as part of its efforts to trim 7,000 workers over two years.
According to their most recent 5 year summary revenues have declined from a high of $20B in 2014 to $16B in 2016, approximately the same amount as in 2012. In the same time their EBIT has declined from $666M to -$58M with the biggest loss in 2015 of -$4.8B.
In addition to the Federal loans the media was also in an uproar as to Bombardier ‘s plans to offer hefty bonuses to six members of its senior executive team in the amount of $32 million in bonuses. In response to the backlash, the company made a concession late Sunday evening and announced the new plan will be to delay — but not reduce — the payouts to executives, as long as the company hits certain performance targets. 'I can understand why people were so angry,' CEO says in recommending deferment plan.
While the company has yet to repay all the money its borrowed from the federal government in the past its founder Joseph-Armand Bombardier’s descendants have collected approximately $150 million in dividend payments from Bombardier over the last decade as a result of the company’s dual class share structure.
Since half of the bonuses are now delayed to 2020 how many more times do you think they will go to the Provincial and Federal governments for additional funding.
Now I have run both Public and Private companies. When we, like many others, struggled to compete and increase sales there where no government monies made available to us. We had to go to the banks and if they didn’t like what they saw then we, as directors and owners of these companies had to make personal guarantees for the loans. We also had to have a good business plan and a detailed use-of-funds that would be monitored monthly by the banks “Special Loans” department. One slip up and all monies could be called in. In my experience in the high-tech sector I saw many companies go under resulting in thousands of lost jobs. The only interest the governments had was to make sure their taxes were paid before any monies where distributed to others, including employees.
Why Canada Will Not Let Bombardier, Inc. Fail
Bombardier is competing in a market, aircraft, with the likes of Boeing and Airbus both who are heavily supported via government loans. It is reported that Boeing has received over US$450 million in federal grants and tax credits since 2000, as well as more than US$64 billion in loan guarantees over the same time. Boeing has also received more state aid than any other corporation.
Bombardier employs roughly 45,000 people in Canada with over 18,000 of these in Quebec, and salaries are typically quite high. Many of these people would have great difficulty finding new jobs at the same level of compensation. Suppliers and other businesses would also fail as a result. There would be both a federal and provincial loss of tax revenue. Unemployment benefits, retraining and the potential loss of trained workers to the U.S. would also be expensive.
The federal and provincial governments learned a big lesson when Nortel collapsed.
What will the Canadian Taxpayer have to do?
Basically suck it up and live with it like we have for the past 5-10 years. Bombardier will continue to put its hand out and lean on governments for support. Executives will not only get the 2016 bonuses, well before the 2020 deadline, but will also continue to add additional bonuses and incentives year over year.
Today President Trump's signed an executive order on American energy independence reversing many Obama era environmental initiatives. Trump's executive order will roll back at least 10 major Obama environmental regulations thus providing the framework for a new Trump-era energy framework that will emphasize more production, more jobs and fewer environmental safeguards. The order makes good on Trump's promise to end what he called a "war on coal," and to bring back coal jobs.
According to the Union of Concerned Scientists the United States is often noted as the being the most significant contributor to historical emissions of global warming pollution. Most of these emissions occur when power plants burn coal or natural gas and when vehicles burn gasoline or diesel. China is rated #1, the USA #2 and Canada ranks #7 according to the 2008 study. China and the US together produce around 45% of global carbon emissions
China, the world's biggest polluter however, the country has not set a specific target for cutting emissions of the gases, mainly carbon dioxide. Recently, a cloud of industrial pollution caused by China’s factories was so large and dense it was visible to satellites.
Over the period 1948 to 2013, the average annual temperature in Canada has warmed by 1.6 ° C. New research reveals that during our cold-weather season, pollution in China is altering weather patterns in the United States and Canada.
Meanwhile in Canada the Federal and Provincial Governments are placing the responsibility, read taxes, on the heads of the average Canadian citizen. Most recently, following BC’s lead, the Alberta and Ontario governments have added a carbon tax on gasoline and virtually eliminated coal fired electric plants. As if the average Canadian can limit their use of their automobiles or turn off electrical appliances significantly enough to affect climate change. Four-fifths of Canadians will live in provinces with such taxes in 2017, and in 2018 all Canadians could be paying a carbon tax. The tax, we are told, is revenue-neutral, with proceeds used to cut corporate and personal income taxes.
In fact, Canadians breathe easier than most people in the world, ranking third in an-air quality index released by the World Health Organization.
If we look at the following list of Worse Polluting Industries most do not have a large presence in Canada.
Coupled with Trumps promises to reduce business taxes from 35% to 15% introducing carbon taxes, additional manufacturing regulations and making Canadian energy more expensive is a no-win plan against Trump’s America. Businesses will invest there not in Canada.
Todays Blog is inspired by comments made by Navdeep Bains, Minister of Innovation, Science and Economic Development - he hopes that that Trudeau's new budgetary measures will attract "top-notch workers, scientists and scholars from the U.S.
Are you kidding me? What are we doing to keep home-grown talent? It is estimated that approximately 350,000 Canadian Engineers, researchers and academics currently live and work in the US. While the majority are in California there are also large populations in Arizona, Florida and Texas.
Phoenix is currently billing itself as the "new" silicon valley and actively recruiting in California. They are boasting that there are over 4,000 jobs available with major employers such as Honeywell, Intel and other "Tier 1" employers. There pitch is built around good wages, low taxes and affordable living with good housing available in the mid $200K. Add to this a low cost of living and great weather they have a strong pitch.
Other than the "Sky is Falling" hysteria surrounding Trump what does Canada have to offer? Minimum job opportunity - over 10,000 engineering jobs have been lost in the oil patch in the last three years, minimal high-technology opportunities, 44 jobs in Waterloo ON - $50K+, low pay, high taxes, high cost of living and sky high home prices. Compare this to 301 posted jobs in Phoenix - $50K+, comparable pay, low taxes, medium cost of living and low cost housing.
Bottom line is that you can put up with a lot of "politics" if you personally enjoy a comfortable standard of living.
I am a concerned Canadian that is fed up seeing companies and people leave Canada due to the high cost of doing business and living.