THUNDER BAY – Ontario’s Gross Domestic Product (GDP) per capita ranks 5th among a peer group of 13 prosperous international regions. But among a set of 16 North American peer jurisdictions, Ontario continues to lag. That is one of the findings of the latest report from Ontario’s Task Force on Competitiveness, Productivity and Economic Progress. The report expressed concern while Ontario is still strong, there is lots of room for improvement.
Ontario needs to become more competitive. But the province continues to lag North American peers in economic performance, mainly because of lower productivity.
Economic growth is the new imperative that will lead to competitiveness and prosperity. Yet the outlook for growth over the next eight to ten years is bleak. There are available solutions. Public policies should offer incentives for businesses to innovate and invest to boost productivity and to improve labour market dynamics.
The report states that “The introduction of the Harmonized Sales Tax, reductions in corporate tax rates, and the elimination of the capital tax have made Ontario a more attractive location for business investment. The province continues to increase investment in post-secondary education, which will improve the skills and knowledge of the workforce.
But there is still much room for improvement. Businesses continue to fall behind in investments that add capacity for innovation, particularly in machinery, equipment, and software”.
Roger Martin, Dean of the Rotman School of Management and Chairman of the Task Force said, “We have so many economic advantages in Ontario – a sound banking system, a strong housing market, a robust dollar, a tradition of building great infrastructure, and a talented and diverse workforce. But the gap in GDP per capita with North American peers shows that Ontario needs to move now to push for more growth.”
While we need to address our productivity in all areas, the Report singles out the ‘dead cash’ on the balance sheets of Ontario’s companies as a unique opportunity. “That money can be used to invest in the physical and human capital we need to increase our productivity and close the prosperity gap,”continued Martin.
There are some positive factors in Ontario’s favour.
The first factor in a jurisdiction’s potential for creating prosperity is its demographics. The percentage of the population that is of working age – 15 to 64 years old – is a basis for prosperity. Having a larger proportion of the working population in this age group offers more potential for economic value to be created. Ontario’s demographic profile has been stable and has not had a significant impact on closing the prosperity gap compared with the North American peer median.
Because of its ageing population, Ontario’s demographic profile will continue to weaken. While Ontario will retain its profile advantage over both its North American peers and international peers with a smaller working age population, the potential for prosperity creation will dwindle in the coming years.
Rising youth unemployment could have serious consequences for future prosperity, as the current population of young workers forms the backbone of the labour force for years to come. But unemployed youths graduating into the recession are more likely to be discouraged than other young people and have a lower chance of finding high-paying jobs, even when the recession is over. According to a recent study by Yale University, during recessions, even youth graduating from universities are likely to accrue lower lifetime earnings than those graduating in boom times.
Ontario’s youth unemployment rate, in 2011 was double the province’s overall unemployment rate. That factor is a problem because it makes it much harder for young people to find a career and get started with their post-education career.
One of the factors facing Ontario and especially Northern Ontario are natural resource industries. The Task Force reports that overall, the size of these industries in Ontario’s overall economic mix is less than one percent of overall employment in the province.
Here is the full report:
