Warning: ini_set(): A session is active. You cannot change the session module's ini settings at this time in /home/customer/www/thenavigatormagazine.com/public_html/wp-content/plugins/subscriptiondna/dna.php on line 50
Navigator Magazine | Productivity and Incomes

Productivity and Incomes

Atlantic Canada’s capture fishing industry has had a serious productivity problem for a long time.

I wrote a column about that fact a little over a year ago. This month, I will discuss the significance of the problem in determining incomes of people in the industry and the challenges it will present for the industry of the future.

First, I should remind readers that productivity is measured as a ratio:

CCFI-Graphic

It is a measure of how much of something we get out compared to what we put in. Essentially, it is a way to measure effectiveness and efficiency in using inputs to produce outputs. As I said in the previous column, the standard of living we enjoy is mainly determined by our productivity — individually, provincially and nationally — something that will be further illustrated below.

The problem in our industry is that we have not used our inputs of people, fish resources, fishing vessels, processing facilities, or even energy very productively. Quite simply, we don’t get enough out for what we put in. And that has a direct effect on the incomes earned by people in the industry.

Before I explain that further, I will note that some people in the industry earn really good incomes, largely because they have access to substantial quantities of high-priced species, such as lobster, crab, shrimp, or scallops or even larger quantities of some lower-priced species. On the other hand, people who have access to only small quantities of fish to catch or who work seasonally in processing plants typically have relatively low incomes from employment and depend heavily on Employment Insurance to make up their total annual income.

Revenue per employee is a measure of productivity that gives a broad indication of the funds available to provide incomes to employees.

In 2015, fish landings in Newfoundland and Labrador had a total value of $738 million — the highest ever. The harvesting sector provided employment to 9,334 people, so the average catch value per person employed was $79,066. That was a significant improvement over 2014, when the catch value was $661 million and there were 9,453 harvesters, for an average catch value per person of $69,925.

In contrast, the province’s aquaculture sector produced output value of $161 million during 2015 with 439 employees, an average of $366,743 per person.

Newfoundland and Labrador’s seafood export value during 2015 was somewhat in excess of $1.2 billion. Deducting the value of fish landings and aquaculture production leaves $301 million as the value added in the processing sector. That value was produced by 7,721 people, for an average of $38,985 per person.

For comparison, it may be worth looking at similar statistics for Iceland. In 2013, that country’s catch value amounted to C$1.211 billion and the harvest employed approximately 3,600 people, for an average catch value per person of $336,389, almost all from catches of relatively low-priced groundfish and pelagic species.

Overall output value that year amounted to C$2.275 billion, indicating that value added in the processing sector was C$1.064 billion. The processing sector employed about 5,000 people, so the value added per person was approximately C$212,790. These numbers were probably even higher in 2015, because of increases in prices for fish products between 2013 and 2015.

According to Statistics Canada, the value added per hour worked by employees in seafood production across Canada was approximately $45 in 2012. For the Canadian food production industry as a whole (including seafood), the average was more like $85.

In each of the illustrations above, the output value per employee must cover very real costs besides providing income for the employees. Nevertheless, it’s pretty clear which sectors are likely to provide higher incomes to their employees.

For what it is worth, Facebook’s revenue per employee was US$1.35 million in 2015, Google’s was over US$1.2 million, Apple’s US$1.05 million, and Microsoft’s US$680,000. Is it any wonder people who work for these companies earn very high incomes and enjoy the lifestyles that go with them?

Over the past few years, participants in N.L.’s industry have benefited because rising market prices and favourable currency exchange rates have increased output value in local currency and the number of people employed has been on a gradual decline, providing somewhat better incomes, especially in the harvesting sector, to those who remain.

However, these fortunate developments are increasingly under threat, because catches of crab and shrimp, measured in tonnes, have been decreasing, due to warming water temperatures. These same temperatures are more beneficial for rebuilding groundfish stocks, but it will take some time before the lower-priced species can provide revenues anywhere comparable to those provided by shellfish.

Furthermore, there are a lot more harvesters and vessels with licences to fish groundfish than have licences to fish shellfish. That means income generated from groundfish catches will be divided among more people, reducing the income available to anyone.

In other words, the productivity problem in Newfoundland and Labrador is likely to get worse. Because future catches are likely to be made up of more lower-priced species, catch quantities will have to be much higher to provide the same income. But that could present a problem.

In 2012 — the most recent year for which I could find data — Newfoundland and Labrador had 7,301 licensed fishing vessels. Of those, 4,008 had licences to fish groundfish. Not all of those licences were for NAFO zone 2J3KL, where the northern cod stock has been under moratorium for 24 years, but a large number were.

When that stock is reopened for fishing, if the inshore allowance is at the historical level of 115,000 metric tonnes and the number of vessels licensed to fish it is 3,500, the average catch per vessel will be 72,437 pounds. At the top 2015 Grade A price of $0.75 per pound for HOG, or $0.62 per pound round, that catch would provide an average of $45,092 in revenue per vessel, to cover vessel ownership and operating costs and be divided among the crew members — considerably less than the incomes people in the harvesting sector enjoyed in 2015 or even 2014. Very likely, incomes will be less than most people will need or want. Certainly, they will be less than most people have become accustomed to.

Based on the overall pattern the numbers above present, it is easy to see why the seafood sector in both Newfoundland and Labrador and Canada as a whole now has difficulty attracting employees. Income opportunities are better in other sectors, so people are being attracted elsewhere. And that is likely to continue to be the case in Newfoundland and Labrador, when the industry makes the transition from shellfish to groundfish.

As the baby boom generation continues to move into retirement, the labour supply can be expected to shrink further.

Depending on how you look at it, that is either a problem or an opportunity.

The industry has needed to improve productivity for a long time. The transition to groundfish may be what it takes for that to happen, out of necessity. Productivity can be improved, for example, by extending the operating season, getting more value out of our raw materials, and using more technology to replace the people retiring from the industry. We already know how these things can be done. A lot of the technology needed is already available, having been developed in other countries that have continued to catch and process groundfish while we have largely been out of the game.

Our industry needs to change, if it is to have a good future.

There is no shortage of opportunities to sell fish and seafood products to markets around the world. But, for the industry to be competitive internationally, viable economically, and attract the employees it needs to operate, it will have to make substantial improvements in productivity.

Simply put, we will have to find ways to produce more value with fewer people. It won’t be easy but it will be necessary. As the saying goes, a smooth sea never made a skillful sailor.

author-avatar

Managing Director of the Canadian Centre for Fisheries Innovation — Newfoundland

No Replies to "Productivity and Incomes"

    Leave a reply

    Your email address will not be published.

    *