Toronto is Canada’s biggest city and a major world economic centre. Its competitive advantages include being a hub for banking and finance, being an intermodal transport node for road, rail, air and marine transport, having a highly educated population and being a large market in its own right with nearly three million people making it the fifth-largest North American city by population.

In 2020, with a GDP of $431 billion, Greater Toronto dominated Canada’s economy accounting for 21 per cent of Canada’s GDP. Indeed, the presence of Toronto makes Canada one of the G7’s most centralized economies based on the proportion of economic activity held in one major city. Yet, Toronto’s large role in Canada’s economy pales in comparison to its role within Ontario.

Toronto dwarfs its surrounding province leading to the question: has Ontario become too Toronto-centric? And if so, why does that even matter?

When making economic and population comparisons involving Toronto it’s important to make the distinction between the City of Toronto and Greater Toronto or the Toronto Census Metropolitan Area (CMA). Within Ontario, based on the 2021 Census, the City of Toronto accounts for 21 per cent of Ontario’s population but once the GTA is considered (adding the municipalities of Mississauga, Brampton, Markham, Vaughan, Pickering and Ajax, Oakville, Richmond Hill, Burlington, Oshawa, Whitby, Milton and Clarington), Greater Toronto accounts for nearly 50 per cent of Ontario’s population. If one broadens the concept of “Toronto” to the Golden Horseshoe stretching from Oshawa to Niagara Falls, then the provincial population share of this region is well over 50 per cent.

So, the question is not really whether Ontario has become more Toronto centric over time, but perhaps rather has it become too GTA centric?

The first chart below plots a population ranking of Ontario’s largest municipalities in 2021. If one looks at the top 10 municipalities, Toronto and GTA municipalities make up six of the top ten. This was not always the case as the second chart illustrates. If one goes back to 1921, at just over half a million people, Toronto was still head and shoulders above the next largest city—Ottawa. However, what is interesting is that if one looks at the top ten, none are municipalities currently in the GTA. Indeed, places like Mississauga, Milton and Markham were pastoral hamlets with the top spots in the distribution going to cities like London, Brantford, Kitchener and surprisingly—Thunder Bay—which in 1921 was the sixth-largest city in Ontario.

The third chart pulls all of this together by comparing Ontario population shares in 1921 and 2021 of Toronto and its CMA cities. In 1921 and 2021, the city of Toronto alone accounts for almost similar shares of Ontario’s population at 18 and 21 per cent respectively. What’s different is the share of Toronto plus the CMA (the Greater Toronto Area) which in 1921 accounted for 21 per cent of Ontario’s population and in 2021, 46 per cent. It is not so much that the province has become more Toronto-centric but more Toronto-region-centric. A century ago, Ontario’s cities and regions outside the GTA were more important both economically and in terms of their population shares.

Is this evolution good or bad? Well, like answers to all economic questions, it depends. On the one hand, having a large dense urban agglomeration provides a concentration of economic opportunity and resources which can be the building blocks of a dynamic economy. Unfortunately, unlike the northeast United States, which boasts a large number of such urban concentrations operating under separate municipal and regional jurisdictions, Ontario’s world size urban agglomeration is unique within the province dominating the province to such an extent that while not a mega city by world standards, it nevertheless acts like one.

As more and more of Ontario’s population and economic activity has become concentrated in one monolithic region subject to uniform government regulation and one size fits all municipal policies, one wonders if that has hampered economic innovation and generated slower economic growth over the last two decades. This may sound far-fetched given that the GTA ostensibly has a large number of municipalities. However, in reality under Canada’s constitution, municipalities are creatures of the provinces and their activities are tightly and uniformly regulated whether revenue sources, public health, urban planning, housing policy or environmental regulation.

It is often the case that bigger is not always better, and internationally, per-capita GDP often grows faster outside large cities. Large cities do add total employment and population at a faster rate than smaller ones, but these gains appear to outpace their GDP growth resulting in slower per capita GDP growth. Indeed, if one examines the limited available data for Ontario CMAs as illustrated in the fourth chart below, real per-capita GDP growth in the Toronto CMA was outpaced by five other smaller Ontario CMAs with Toronto barely keeping up with Thunder Bay, Hamilton and Belleville.

The Ford government is aware of its economic challenges, as its recent Long-Term Report on the Economy 2024-46 notes that the economy can be expected to slow as a result of population aging, slower labour force growth and lagging productivity. With much of the province’s economy concentrated in the GTA—and given recent immigration rapidly expanding its labour force and the youngest age profile of the province’s regions—it suggests that lagging productivity is a potential problem here.

Oddly enough, when it comes to productivity, little attention is paid by Ontario’s government to the institutions shaping economic growth which in the case of the GTA include its municipal structure and provincial oversight. Having the provincial government and its bureaucratic functions enmeshed within its largest city may engender a lack of economic awareness that Toronto’s size and dominance may be operating at cross purposes with productivity.

Ontario’s policy challenge is quite clear: How can it unshackle the economic potential of municipalities in the GTA by creating interurban competition while better coordinating regional infrastructure needs such as roads and transit?