Ontario’s economy has a long way to go

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Appeared in the Ottawa Sun, July, 26, 2017

Judging solely from recent press releases and rhetoric emanating from Queen’s Park, one might conclude it’s a golden age for Ontario’s economy.

Here’s one of many recent examples. In support of its decision to drastically increase the minimum wage, Labour Minister Kevin Flynn implied Ontario’s economy is in great shape, and a key problem the province faces is how to share the riches. “The prosperity we’re seeing in the Ontario economy now has to be shared by everybody… the world has changed,” he said.

This kind of triumphalist rhetoric about the province’s prosperity is difficult to square with reality for the great many Ontarians still feeling the consequences of the prolonged period of exceedingly weak economic growth from which the province is now just beginning to recover.

Just how tough a stretch has it been?

From 2003 to 2014, inflation-adjusted economic growth per person in Ontario averaged 0.3 per cent annually—that’s about a third the national average. What about job creation? From 2004-2014, annual private-sector job growth in Ontario averaged 0.6 per cent—approximately half the rate of job-creation in the rest Canada.

As a result, average incomes in Ontario fell relative to the rest of the country. In fact, in 2012, average disposable household income in Ontario fell below the national average for the first time. Meanwhile, residential electricity prices have increased faster in Ontario than anywhere else in the country.

Given these facts, it would be a mistake to imagine that the recent uptick in provincial economic growth means the province’s growth problems are solved and all that remains to be determined is how best to share the wealth. Instead, provincial policy should focus squarely on creating conditions for continued economic growth to help make up for lost ground.

This reality becomes especially clear when you look at the Ontario economy from a regional perspective and recognize the wide variance in economic conditions within this large province.

Indeed, one recent analysis shows that in big regions of the province (southwestern Ontario, eastern Ontario, northern Ontario), employment as of the end of 2015 was lower than in 2008. In other words, many parts of the province have still not recovered all of the jobs lost during the 2008/09 recession.

Given the anemic job-creation of the past decade and the severity of the pain in many parts of the province, the Wynne government’s foremost economic goals should include creating conditions conducive to business investment and job-creation that can help put market-driven upward pressure on wages.

Instead, policies such as mandating a 32 per cent increase to the minimum wage, which will make it harder rather than easier for businesses to expand and create jobs, have the potential to do significant damage. Recovering from such a long period of economic pain takes time, and while the recent uptick in growth is welcome, it will take years of similarly robust growth for Ontario to retake its historical place as one of Canada’s strongest economies.

This outcome, unfortunately, will become far less likely if the Wynne government insists on enacting new laws that make it even harder for businesses to invest and create jobs in an effort to ensure that recent (and long overdue) economic gains are shared in ways it deems appropriate from its perch in Queen’s Park.

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