Ontario versus the West: No contest

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Appeared in the Globe and Mail

When Ontario Finance Minister Charles Sousa announced a budget update and a revised, lower forecast for provincial economic growth, it was yet another piece of evidence that Ontario’s economy is sluggish. But Ontario’s problems run deeper than just one fiscal update from one finance minister.

Ontario, and Quebec for that matter, are both flashing red light economic warnings, mimicking the historic and well–known economic malaise in Atlantic Canada on a variety of telling statistics.

For example, consider private sector investment (excluding residential construction but capturing non-residential structures, machinery and equipment), which is the precursor to growth in employment and incomes.

Alberta, with a much smaller population, has consistently attracted more private sector investment since its private sector numbers first topped Ontario in 2004. More recently, Alberta garnered $83.5 billion in investment last year. Ontario was second ($42.1 billion) and Quebec third ($26.8 billion). Note the disparity—those two provinces combined see less investment than Alberta. Meanwhile, British Columbia ($23.3 billion), Saskatchewan ($14.6 billion), Newfoundland and Labrador ($8.2 billion) were next. The Maritime provinces and Manitoba together attracted $11.5 billion.

Given that private sector investment in Ontario and Quebec is weak, no one should be surprised that job growth, unemployment, incomes and migration statistics in Central Canada also pale when compared to the robust West.

Not every bit of data can be listed here but consider some examples, starting with household per capita income. Back in 2003, Ontario had the second-highest income in the country ($37,018) behind Alberta ($40,744). Since then, and adjusting for inflation, Alberta has leapfrogged ahead, landing at $52,207 in per capita income by 2012. Yet Ontario ($40,838) is now in fourth place behind Alberta, Saskatchewan ($42,249) and British Columbia ($41,239).

Or consider another indicator: tax filings. Alberta and Saskatchewan have the lowest proportion of people filing at incomes under $30,000 (42.2 and 47.4 per cent respectively), with Ontario’s proportion at 50.1 per cent.

And where’s the much-talked about “middle class?” Using the $30,000 to $99,999 tax filing data as a proxy, Alberta (45.5 per cent) and Saskatchewan (45.2 per cent) again have the advantage over Ontario, with its proportion of middle-class tax filers at 42.9 per cent.

As for high-income tax filers, Alberta is in a league of its own. Fully 12.2 per cent of Alberta tax filers report incomes of $100,000 and above—almost double the national average of 6.6 per cent. The percentage is 7.4 per cent in Saskatchewan and 7 per cent in Ontario.

Unsurprisingly, migration patterns follow the money. Examine young adults between the ages of 25 and 34 (profiled in my recent study). Between 2003 to 2012, Alberta gained 60,855 young “career class” adults, on a net basis, from other parts of the country. British Columbia gained 10,643 while Saskatchewan stayed about even—an improvement over past decades when it lost young people. Now look at central Canada: Quebec lost 24,355 young adults while 27,452 people between the ages of 25and 34 left Ontario on a net basis.

Sort through the statistics and the surprise is how consistently Ontario and Quebec now mimic the weak economic opportunities in the Maritimes instead of the bright economic opportunities available in the West.

There’s no great mystery as to why. Provinces with substantial private sector investment—something the  West has attracted with pro-entrepreneur policies and by simply saying “yes” to resource extraction in specific—end up with enhanced employment opportunities, higher incomes and better prospects to enjoy a middle-class lifestyle.

In contrast, from ever-higher hydro rates and increasing taxes in Ontario, to moratoriums on various forms of resource extraction in Quebec, Nova Scotia and New Brunswick, central and eastern Canadian governments are routinely squelching opportunity. That’s why if one seeks opportunity—the money, jobs, and employment security—it is increasingly found in Western Canada, most notably in Alberta and Saskatchewan.

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