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A Province Suffocated by Socialism

Appeared in the National Post, 21 September 2004
Authors:
Release Date: September 21, 2004
The economic chasm between neighbouring provinces Alberta and Saskatchewan continues to grow: favourably for those in Wild Rose Country and disastrously for those remaining in the Land of Living Skies.

Alberta has chosen to pursue a more market-oriented economy, characterized by smaller government and lower tax rates.

The other province, Saskatchewan, has chosen a more socialist-leaning model characterized by larger government, higher tax rates, social ownership of capital (Crown Corporations) and heavier regulations.

The results for Albertans have been spectacular: higher incomes, more jobs, greater opportunities and a bright future. The results for Saskatchewanians, on the other hand, are dismal: The province continues to lose its young people and entrepreneurs to other provinces, chiefly Alberta; incomes are stagnating; and job creation is near non-existent. For Saskatchewan to turn the corner, it must undo 60 years of socialism and move aggressively towards a market-based economy.

The gap in prosperity between the two provinces is well documented but worth highlighting. Albertans enjoy average per capita disposable income of $26,170, some 32.3% higher than Saskatchewan’s $19,784. Average employment growth over the last five years in Alberta has been 2.6%, significantly higher than Saskatchewan’s miserable 0.5%.

At first glance it’s surprising that Saskatchewan maintains a relatively low average unemployment rate: 5.7% versus Alberta’s 5.1% over the last five years. This should be good news except that the low rate is more a function of the fact that people of working age are leaving Saskatchewan than it is because of job creation.

Saskatchewan’s out-migration rate, according to the 2001 Census, was the second worst in all of Canada -- 2.7%, behind only Newfoundland. Put more directly, more citizens chose to leave Saskatchewan than any other province except Newfoundland after adjusting for the size of the population.

Nearly 25,000 Saskatchewanians left the province for better pastures between 1996 and 2001, most opting to locate directly west of Saskatchewan in Alberta. In fact, over the last 25 years, roughly 114,000 residents of Saskatchewan have left the province.

The poor job creation record coupled with the ongoing out-migration of citizens has led to Saskatchewan maintaining the second worst dependency ratio in the country. That is, Saskatchewan has the second lowest ratio of taxpayers to the general population. Specifically, taxpayers represent 46.8% of the population in Saskatchewan, compared with 52.4% in Alberta.

Unless Saskatchewan is able to stem the tide of its citizens leaving or attract more Canadians to live in the province, its dependency ratio will only worsen, resulting in an ever-increasing burden for those workers remaining.

Apologists for Saskatchewan have blamed the province’s poor performance on everything from disappointing crop performance, to a lack of natural resources, to poor geographic location. All of the above are nothing short of bad excuses: Saskatchewan is endowed with a plethora of natural resources including oil and gas, potash and uranium. Furthermore, the province’s economy has performed poorly in periods with good crops and poor crops alike.

The single most important explanation for Saskatchewan’s poor performance is government policy. By punishing entrepreneurship and business development through the most burdensome business tax regime in North America coupled with an overly prescriptive and rigid set of labour markets, the province has effectively placed a "Closed for Business" sign on its doors.

Changing course will require difficult decisions as government spending is pruned, programs reformed, taxes trimmed and regulations overhauled. The payoff, however, would be a strong and independent province that would position itself for a prosperous future wherein bright, energetic students would no longer be forced to leave the province.


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