All parties should commit to growing Nova Scotia’s economy

As was long rumoured, Nova Scotians will head to the polls on November 26. While elections usually generate the temptation for candidates to make big spending promises, voters should demand that all parties commit to a set of policies that will brighten Nova Scotia’s economic future.

While much as been made of Nova Scotia’s growth over the last several years, data show that the average person isn’t much better off. For example, according to our recent study, in 2022 (the latest year of available data) Nova Scotia had the third-lowest employment earnings among 60 Canadian provinces and U.S. states, down from fourth-lowest in 2010. In other words, while the province has grown its population, incomes on a per-person basis are low and dropping relative to peer jurisdictions.

The fact that Nova Scotia workers are among the lowest-earning in North America should be a cause for swift policy action. In reality, there’s no reason why Nova Scotians should not be among the highest earners in North America. The key to reversing this trend is for the provincial government to enact better policies to strengthen the economy and raise living standards.

So, what’s to be done? Here are three broad policies that can help drive growth in Nova Scotia.

First, on the campaign trail all parties should commit to addressing Nova Scotia’s crushing tax burden. When it comes to the main categories of taxation (personal income taxes, business taxes, sales taxes) Nova Scotians pay more than almost anybody else in North America. A high tax burden, particularly when it comes to personal and business taxes, reduces growth by reducing the incentive to work, invest and create jobs. High taxes also contribute to the cost of living.

Second, to meaningfully deal with the province’s tax problem, the size of government must be controlled. Government spending—on an inflation-adjusted per-person basis—has reached all-time highs during the Houston government’s tenure. But this is a long-standing and bipartisan problem. Government spending (at all levels including provincial and federal) represents 63.0 per cent of the provincial economy (the highest in Canada) and more than one-quarter of all employment. A large government sector is consistently associated with lower growth as it crowds out the private sector by competing for scarce resources such as labour and capital. A good starting point for Nova Scotia’s parties is to look west to New Brunswick where both the outgoing Higgs government and the incoming Holt government have committed to balanced budgets.

Third, parties should commit to reducing Nova Scotia’s regulatory burden. Businesses consistently report excessive regulation as a top concern, one that adds costs and restricts their ability to grow. One recent study reported that Nova Scotia had the fourth-highest regulatory burden in Canada, with more than 32,000 individual regulations in the province. While business groups have reported improvements in recent years, much more work remains to be done. This is particularly true when it comes to the natural resource sector, which generally provides high-paying employment but has been held back by a high and rising regulatory burden.

Crucially, when enacting pro-growth policies, government should create the conditions for growth but not attempt to directly drive growth itself. Beware of politicians promising to generate growth by increasing the size and scope of government. A smaller government, more competitive taxes, and a lower regulatory burden can create the conditions for the private sector to produce new jobs and raise incomes.

To be sure, as politicians traverse the province making various spending promises, these three policy areas may not always be at the top of their agendas. However, economic growth is highly relevant to the average voter concerned about their income and standard of living. To brighten Nova Scotia’s economic future, all parties should commit to an agenda of economic growth.