News Releases and Op-Eds
Finlayson: The New Canadian Pecking Order (Troy Media)
Canada’s economic pecking order is changing, at a pace that raises questions about the country’s economic future as well as the sustainability of current federal-provincial fiscal arrangements. The picture is summarized in the accompanying table. It shows where the six most affluent provinces rank on three common economic metrics: output or real gross domestic product (GDP) per person; average weekly earnings for people holding payroll jobs; and labour productivity in the business sector. Note that the data for the four bottom ranked provinces – Manitoba, Nova Scotia, New Brunswick, and PEI – are not reported in the table.
Scanning the table, a few things stand out.
First, Alberta leads the pack by a wide margin on both per capita GDP and average weekly earnings; it also narrowly tops the charts on productivity. This will not come as a surprise to most Canadian economy-watchers or policy-makers.
Second, Saskatchewan’s second place ranking on the first two measures is striking and underscores the superior economic performance and the growing economic clout of the Western provinces.
Third, Newfoundland and Labrador, having enjoyed an impressive climb up the Canadian economic ladder in the past decade, now finds itself among the three richest provinces based on the measures reported in the table.
Finally, the three biggest provinces – Ontario, Quebec and B.C. – which are home to more than three-quarters of the country’s population, are best described as middling jurisdictions in economic terms. Quebec is a chronic under-achiever, while B.C. has been challenged by the loss of high-paying manufacturing and processing jobs coupled with two decades of notably lackluster productivity growth. But it is Ontario’s situation that causes perhaps the greatest concern. That Ontario has been eclipsed by the former “have-not” provinces of Saskatchewan and Newfoundland and Labrador says much about the nation’s changing economy. And the signs suggest that Ontario’s historic descent into “have-not” status is not a short-term development.
What explains the provinces’ shifting economic fortunes? A one-word answer would be “resources,” and more specifically “energy.” Alberta, Saskatchewan and Newfoundland and Labrador produce and export virtually all of Canada’s oil, and hydrocarbons as a whole loom large within their industrial structures. Saskatchewan and to a lesser extent Alberta also benefit from an abundance of non-energy natural resources that help to underpin their prosperity.
Population flows confirm the variations in economic vibrancy across the provinces. Last year saw Saskatchewan notch a 1.8 per cent gain in population, supported by the arrival of 10,000 international immigrants. Alberta now attracts as many permanent immigrants as British Columbia. Alberta and Saskatchewan are also the only two provinces experiencing positive net interprovincial migration. And they boast the country’s lowest unemployment rates.
Finally, it is instructive to compare where the provinces stand in terms of fiscal strength. Here the differences are also stark. Alberta and Saskatchewan enjoy by far the smallest net government debt burdens, measured relative to GDP, among the ten provinces. B.C. has the third lowest net debt/GDP ratio (18 per cent). At 25 percent of GDP, government debt is somewhat higher in Newfoundland Labrador but it is now less than half of the level recorded in 2004. Ontario (40 per cent of GDP) and Quebec (50 per cent) are struggling with the country’s heaviest public debt burdens. Growing disparities in fiscal health among the provinces are likely to compound the impact of variations in economic performance and to heighten pressures on the existing regime of federal-provincial transfers.
As posted on TroyMedia.com