Northern Economist 2.0

Monday, 1 April 2019

Regional Economic Divides a Challenge for Ontario Budget 2019

The Financial Accountability Office of Ontario recently issued a report called Incomes in Ontario: Growth, Distribution and Mobility which summarizes recent trends in personal income in Ontario in the areas of income growth and distribution.  Among the findings were that Ontario’s median income growth was the slowest among the provinces between 2000 and 2016, that there has been an increase in income inequality in the province, and that relative and  inter-generational income mobility has declined – that is over time, it has become more difficult for lower income Ontarians to move up the income distribution and that children of higher income parents are more likely to become high income earners themselves.

As the report states: “It has become more difficult for Ontarians to “get ahead” – that is, move up the income distribution. In this report, upward income mobility is defined as the share of working-age Ontarians who move up at least one income quintile over a five-year period. This share declined from 41 per cent in the early 1980s to 32 per cent more recently. The decline was most pronounced for lower-income Ontarians.”  Moreover, what is also of interest is that while Ontario’s productivity has grown, incomes have not kept pace suggesting that Ontario’s economic growth has not translated directly into increased personal incomes.

Much of this report focused on Ontario wide trends but one of the most interesting pieces of information is Figure B.1 in the appendices - a map titled Median household income across census divisions in Ontario.  In this map, median household income from the 2016 Census is plotted by major census division in Ontario in four categories – Less than $65,000, $65,000 to $69,999, $70,000 to $74,999 and finally more than $75,000.  The map taken from the report is shown below and illustrates Ontario’s great regional economic divides.


Ontario’s highest household income regions stand out as mainly two islands on the map – the area surrounding downtown Toronto – that is the GTA and central Ontario – and the Ottawa region.  Downtown Toronto itself has substantially lower household incomes than the surrounding GTA and GTA belt area. The east and the southwest have swathes of lower income areas and then there is the North.

Ontario’s North is generally characterized by lower median household incomes.  The pocket of the north with the highest household incomes is the Sudbury region – the rest falls into the two lowest categories – that is, median household incomes of below $70,000.  Indeed, the 2018 BMA Municipal Study provides some substantial detail on household incomes in Ontario.   In 2018 they ranged from $127,780 in the GTA to $82,613 in Eastern Ontario – difference of 35 percent.  They were second lowest in northern Ontario municipalities at $84,288 – a 34 percent difference.

Compare the average household income in the Toronto bedroom communities of Oakville at $179,132 or Pickering at $124,559 to the northern Ontario five major cities – North Bay ($82,320), Greater Sudbury ($97,604), Sault Ste. Marie ($82,955), Timmins ($96,423) and Thunder Bay ($87,350).  While these five major northern cities do not have the lowest incomes of major Ontario municipalities, they are generally ranked as low-mid income centers.  Indeed, of the six Ontario regions summarized in the BMA study, the north is the only region without any municipalities ranked as “high” household income cities. 

On April 11, Ontario will release its budget – the Ford government’s first.  While this budget would be well advised to deal with pressing issues in the public finances such as providing a timetable for balancing the budget, as well as meeting the demand for public services in health and education, it also needs to address regional development issues and in particular its north.  The northern Ontario economy’s poor economic performance has resulted in the north becoming a region with some of the lowest household incomes in the province mainly because it does not have as many employment opportunities as the rest of the province.  Unemployed or underemployed household members mean a lower household income – its that simple.

What should Ontario do to help stimulate the northern Ontario economy?  Well, the north’s comparative advantage is its resource base – the land, water, trees and mineral resources of the region.  Yet, the last two decades have seen the province restrict the ability of the region to responsibly use its resource base to help create economic opportunity.  Jobs in Northern Ontario’s resource sector create the income and employment growth that will foster further deepening of the economy by expanding population, increasing market size and offering new opportunities for local businesses to serve this market.

So, what should the provincial government do on April 11th specifically to help the North?  Briefly:

1.     Repeal the Far North Act which has sequestered 225,000 square km of the region’s 806,000 square km area land base from development – nearly 30 percent.
2.     Foster skills, human capital acquisition and entrepreneurship training for Indigenous youth as they are the North’s fastest growing demographic.
3.     Free up crown land to facilitate new cottage/camp development in the north in areas one to two hour drives away from major communities in order to boost tourism.
4.     Improve the consultation process with First Nations so resource development can proceed more smoothly and quickly.
5.     Continued infrastructure development via spending on regional highways adjacent to major centres to improve transport connectivity.
6.     Work with northern Ontario universities and colleges to attract more international students given that many students are helping address labour shortages in the service sector in the short-term and in the long-term are often likely to remain where educated, thus boosting long-term migration rates into the north.