Ontario lagging behind neighbours on key economic measures

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Appeared in the Windsor Star, June 20, 2021
Ontario lagging behind neighbours on key economic measures

As Ontario continues to recover from COVID-19, it’s important to maintain proper perspective. Compared to most places around the world, Ontario is prosperous, with an abundance of opportunity and economic freedom. Ontarians should never lose sight of this reality or take it for granted. However, if we narrow our geographic focus, we see that the province is an economic laggard compared to many of its peers.

For example, our recent study published by the Fraser Institute found that every U.S. state bordering the Great Lakes is more prosperous than Ontario. Indeed, per-person GDP—a good indicator of living standards and prosperity—is significantly higher in each Great Lakes state. And the average per-person GDP for the entire economic region (which also includes Quebec) is 27.1 per cent higher than in Ontario.

Crucially, this large prosperity gap is growing. Between 2000 and 2019, average inflation adjusted per-person GDP growth in Ontario was the second-lowest in the region at 0.7 per cent per compared to neighbouring New York (the region’s top performer on this measure) at 1.5 per cent annually—approximately double Ontario’s rate.

For the economic region as a whole, the inflation-adjusted per-person economic growth rate was 1.0 per cent during this period—again, compared to 0.7 per cent in Ontario. This might not sound like such a big difference until you consider the effect of economic growth compounds over time, so seemingly small differences in growth rates can cause prosperity gaps to grow quickly.

Consider this. After adjusting for inflation, in 2000 the region’s per-person GDP was $12,033 higher than in Ontario. Thanks to slower growth in Ontario, that gap had grown to $17,809 in 2019. Again, the prosperity gap between the rest of the region and Ontario, which was already substantial in 2000, has grown significantly.

It’s also important to recognize that within Ontario itself, there’s substantial variation between economic regions. Between 2008 and 2018, 91 per cent of all net jobs in the province were created in either the Greater Toronto Area or Ottawa. While the province’s overall economic performance has been weak, economic life has generally been even harder for Ontarians who live outside of the province’s two largest cities.

Finally, Ontario’s comparatively low GDP and weak overall economic growth compared to its neighbours are not just a matter of academic concern. Robust economic growth helps create good jobs and generally pushes wages higher. Although there’s no single perfect measure of economic performance, per-person GDP, which is calculated by dividing a jurisdiction’s overall GDP by its population, is widely considered the broadest single indicator of economic success.

Ontario is a wonderful place to live, and by global standards, remains an economic success. But this fact should not make us complacent. The data shown here clearly demonstrate that within the prosperous Great Lakes region Ontario is an economic laggard. As the province emerges from the pandemic, changing this trend and catching up with our neighbours and trading partners should be a top priority for the Ford government and policymakers at Queen’s Park.