We've all seen the ads. The Don't-Pay-a-Cent event! We pay the GST! No interest payments until 2009! In a highly competitive retail environment, the mantra is get 'em in the store with cutthroat prices. The ads are gimmicky, annoying, and loud -- but they work.
An equally fierce competition is heating up in Manitoba and across Western Canada. But this war isn't over price-conscious shoppers. Rather, the West is fighting over young, educated workers, and Manitoba's government is armed with a seductive new campaign to attract and retain them.
Manitoba is in a tough spot. Its overall tax burden is the highest in the West. Lacking abundant oil and gas resources, Manitoba does not have the same wiggle room to lower personal income taxes to rates enjoyed by the other three western provinces. A recent survey of business leaders indicates that the single biggest challenge facing companies in Winnipeg is the lack of workers. Despite the economy doing fairly well, the province is still suffering a net out-migration of people to other provinces -- mostly Alberta.
So, Manitoba has gone on the offensive and is targeting workers with what matters most: cash. The government is offering recent graduates a tax credit of up to 60 per cent of the cost of their tuition if they stay in, or move to, Manitoba.
Thanks to its rollicking economy and soaring wages, Alberta has not had to do much to attract workers from other provinces. It's like the high-end fashion retailers that would never engage in loud, in-your-face marketing tactics. Have you ever seen a Don't-Pay-a-Cent Event at Gucci? Ever heard of Midnight Madness at Louis Vuitton? Having created a powerful image of quality and luxury, high-end retailers never have to endure the humiliation of a Boxing Day Blowout.
In the same way, high wages in Alberta give its labour market some sexy cachet and the ability to attract workers. Manitoba's labour market lacks the high wages and name-brand appeal. If Alberta is high-end designer, Manitoba is sensible footwear at reasonable prices. It's Prada versus Payless.
By targeting recent graduates with its tuition tax credit, Manitoba could be pulling off a real coup. The deal is open to graduates anywhere. The province would love nothing more than to seduce highly skilled workers with big earning (read: taxpaying) potential who have had their education subsidized by taxpayers elsewhere.
Some people have advised the province to raise the minimum wage as a way of stemming the out-migration. There are good reasons for governments to impose minimum wages, but keeping people from leaving is not one of those reasons. Any program to retain and attract more workers in the province should target well-educated, skilled and trained workers -- not ones working for minimum wage.
A tuition tax credit is a smart way for Manitoba to lure the young and educated, but it will take more than this to win the war for workers.
Average weekly wages in Alberta are the highest in the country.
Manitoba's are the third lowest. The realities of Alberta's high housing costs and growing transportation woes will be felt only after someone has accepted a job there. The sticker shock in Alberta still seems reasonable to the thousands of provincial migrants who are lured by those big pay cheques.
Manitoba's tax credit for tuition is a terrific idea, and it is great to see the province being proactive in stemming the outflow of young people. But the tax credit is akin to offering a mail-in rebate on a piece of stereo equipment that is not of great quality to begin with.
Offer a high-end product, and a mail-in rebate will be unnecessary.
To combat Alberta's higher wages, Manitoba has to improve its brand image by getting its own average wages to rise. The only practical way the province can do this is to reduce business taxes, payroll taxes, and other costs imposed on employers. If employers in Manitoba really are that desperate for workers -- as they say they are -- the cash left on their balance sheets will go to higher wages.
Get those wages up, Manitoba, and it will be easy enough attracting workers.
Todd Hirsch is chief economist at the Calgary-based Canada West Foundation. The views expressed are his own.