The School of Public Policy Report - "Value Added" is a Term that is "Better off Dead"

CALGARY, March 11, 2015 /CNW/ - Politicians across Canada often tout the need to have more "Value added" industries in Canada.  They say our economy improves when we turn our raw goods into finished goods, because that creates more and better jobs.

According to a report released today by The School of Public Policy and author Trevor Tombe, that understanding is entirely and often dangerously wrong.

The report examines the meaning of the phrase "value added" and argues that it should be struck from Canada's political lexicon. The reality is that almost everything Canadians are being told about which activities add value, and which ones do not, is backwards. Manufacturing is seen as the ultimate source of value added. For example, the leader of the federal Opposition, the NDP's Thomas Mulcair, has insisted that "exporting unrefined heavy oil creates no value-added jobs" and likens exporting raw logs to "a practice typical of undeveloped nations." It is not just the NDP, since similar statements are made across the political spectrum.

Fortunately, such views can be put to the test. Today's report shows that they are not just inaccurate, they are the opposite of reality. Tombe states "Canada's raw resource extraction industries actually provide the highest value-added, often by a significant margin. Oil and gas extraction, for example, creates $1.36 million in value per job per year, 15 times higher than the national average for all sectors and more than triple the value added per job per year in the petroleum products refining sector."

Is there a better way to think about what value added means? Yes - industries that generate the most income are industries with high value added. To say a sector like oil and gas extraction creates no value-added jobs is to say it creates no income, which is plainly false. Income, is value. 

The paper can be downloaded at http://www.policyschool.ucalgary.ca/?q=research

SOURCE The School of Public Policy - University of Calgary

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