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By MARC HUDON
hudon.marc@dailygleaner.com

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OTTAWA - Lower corporate and personal income tax rates would create more investment, more jobs, reduce unemployment and increase worker productivity to help make New Brunswick more competitive, says the director of fiscal studies at the Fraser Institute.

However, Neil Veldhuis said the province's performance outlined in the think-tank's labour market report released Thursday is "concerning across the board."

The report, which measures areas such as job creation, unemployment and productivity, pegs New Brunswick seventh in Canada and 43rd among 60 jurisdictions in North America for its labour market performance.

New Brunswick fared poorly across all economic indicators, including 33rd in employment growth, 58th for its unemployment rate of 9.2 per cent and second last in productivity.

Veldhuis said the Liberal government must do more to create the "right type of environment" to encourage business investment.

He said a flat tax - which was proposed by Finance Minister Victor Boudreau in his recent discussion paper on taxation - would put more money in New Brunswickers' pockets and encourage them to work harder and take more risks.

New Brunswick's prohibitive personal income tax rates include some of the highest marginal rates on middle- and higher-income earners in Canada and North America, said Veldhuis.

"That's one of the largest barriers in terms of having the right incentives to work harder, to increase productivity and take risks," he said.

Meanwhile, data also shows that about 22 per cent of New Brunswickers work in the public sector, placing it near the bottom of the rankings. Alberta has the smallest proportion of government employees in Canada at 15.5 per cent.

Veldhuis said trimming the civil service would free up more money for tax cuts and create more business opportunities.

"Productivity in the public sector is much lower than productivity in the private sector," he said.

Veldhuis also said organized labour is still too prominent in New Brunswick, with about 29 per cent of workers belonging to a union.

The think-tank's fourth installment of its labour report ranks Alberta, Nevada and Utah as the top three performing jurisdictions in North America.

However, Veldhuis said the New Brunswick government is mulling ideas that could improve its ranking.

"The discussion paper on taxation is a very positive step," he said.

"New Brunswick would become a beacon for investment. The labour market performance would increase dramatically as a result of those tax cuts."