Ford government should act to improve Ontario’s improving economy
There has been some good economic news lately in Ontario. The economy is growing, unemployment is down, and average weekly wages are up. All of this is welcome news. It’s important, however, to understand that Ontario has felt more than its share of economic pain in recent years and that many Ontarians are still struggling.
Let’s first recall just how serious Ontario’s economic problems were only a few years back.
From 2007-2016, private-sector employment growth in Ontario averaged just 0.6 per cent annually, the third lowest rate in Canada, beating only New Brunswick and Nova Scotia. If you look at changes in median household income, the story looks even worse. On this metric, Ontario had the worst performance in Canada during this period. Indicator after indicator tells the same story of economic weakness in Ontario in the years prior to the current economic uptick.
Crucially, all this pain was not spread out evenly across the province—it was particularly acute outside of Toronto and Ottawa, in southwestern Ontario, eastern Ontario (excluding Ottawa) and northern Ontario. Indeed, Ontario’s economic woes were so severe that one Fraser Institute analysis characterized the period from 2007 to 2016 as a “lost decade” for Ontario’s economy.
For Ontarians who endured spells of unemployment or experienced weak wage growth over the course of a decade, the recent improvement in Ontario’s economy and labour market is more than welcome, but again, many still feel the effects of recent years. Given this historical context, the province needs a prolonged robust period of economic growth to help Ontarians make up for lost time.
Of course, many factors outside the government’s control will influence whether a lengthy economic growth period will occur. There are signs of a recession in the United States (which would of course hurt Ontario) and the possibility of additional new restrictions on global trade remains worrying.
Thankfully, there are many other factors within the Ford government’s control that can influence Ontario’s economic health. For instance, the provincial economy has suffered in recent years due to the province’s lack of tax competitiveness. Addressing this problem would help attract investment and encourage Ontario’s economy to grow. Following Alberta’s lead and meaningfully reducing the Corporate Income Tax is just one example of how Ontario can improve its tax policies to encourage growth.
Furthermore, the Ford government could finally address the province’s longstanding spending problem. Spending growth since the early years of the millennium is a primary cause of the current deficits and rapid debt accumulation. Meaningful action to reform and reduce government spending would help reassure credit agencies about the province’s fiscal health and help prevent increases in borrowing costs (i.e. interest payments on government debt).
Ontario’s economy is doing better, and that’s good news. But it’s no reason for complacency. Ontario’s policy environment could and should be made more friendly to investment and more conducive to growth. By introducing policy reforms to help achieve this goal, the Ford government can help boost Ontario’s chances of a badly-needed lengthy period of strong economic growth.