NORTHERN ECONOMIST 2.0: 2019

Sunday, 15 December 2019

Making Decisions at Thunder Bay City Council

Thunder Bay City Council does have a tough job when it comes to making decisions that affect the public welfare that have to balance diverse interests and needs as well as financial and economic criteria. At the same time, they sometimes do not do themselves any favours. Two cases in point come to mind - the soccer bubble on Golf Links Road and Dease Pool.

First, the decision to finally allow a private developer to go ahead with a project to build a soccer bubble on Golf Links Road. According to the news story, the project - which was proposed in spring of 2019 - was intended to open for winter 2020 but zoning restrictions halted the progress. Essentially, the area of the building site was zoned "Prestige Business Park" which meant that a recreational facility could only be built as an auxiliary feature to a "prestige" item like a hotel. This hurdle was finally overcome apparently by allowing the project to proceed with a promise to build the hotel later. No doubt, the City of Thunder Bay probably also has a planning definition of what a prestige hotel should be like and will intervene when it sees fit.

Why this could not have been done sooner is a good question. There is a shortage of space for soccer in the city and having a private developer step up is a good idea. Indeed, why should the City spend scarce resources on a publicly funded indoor turf facility at all if the private sector could provide the services thereby freeing up resources for things the private sector would likely not fund - like a swimming pool in a socio-economically challenged neighborhood? One wonders if the decision to stall the private developer was in part in the hopes they would go away so that there would be less competition for the City run turf facility - once it was finally built. If that is the case, they should move faster - taking years to decide and build the facility while not allowing for an alternate facility is a disservice to those who want their children to play soccer - and are willing to pay the fees for it. The need for the space is all the more urgent given the collapse of the Sports Dome in 2016.

Regarding the decision to close Dease Pool and "repurpose" the space, I have already opined at some length on the issues here in a previous blog post. The final decision is apparently going to be made tomorrow night and the outlook is grim for the people who want a new pool rather than any of the suggested alternative uses given the recommendation is for demolition. Moreover, there is some division in the local community itself given that the survey respondents happy with the alternatives proposed by the City (44%) is greater than those who are unhappy (38%). At the same time, one suspects that those happy with the alternatives are divided four ways while those who are unhappy all want to see a new pool but that nuance will likely escape the decision makers.

In the end, a decision will be made and the appropriate imperial decree made that public comment has been received and considered and had no effect on Council’s Decision as the proposed accepted redevelopment is consistent with all relevant planning legislation and represents good planning.

Thunder Bay City Council has spoken, the case is closed.

Tuesday, 3 December 2019

Should Lakehead University Go Private?

Universities in Ontario are in a transition period as the provincial government brings in a new performance based funding formula that ties a substantial portion of the government grant revenue to a set of ten indicators. The new Strategic Mandate Agreement – known as SMA3 - includes performance indicators such as “Research Funding”, “Graduation Rates” and oddly enough “Graduate Employment Earnings”. How a university is expected to acquire information on the latter is a bit of a puzzle to me.

While the previous formula also had a set of performance based indicators, they were more numerous. It remains that a reduction in the number of indicators while increasing the proportion of revenue tied to those indicators makes the prospects of future short-term revenue volatility a greater possibility. The public may be willing to accept a 5 or 10 or 20 percent revenue fluctuation in its local university and the subsequent disruption to programs and enrollment, that it would not tolerate if a similar model were applied to say hospitals or physician services or the provincial drug plan. In these latter examples, people could die in the wake of disruption from sudden funding changes, whereas in the case of universities it would be unlikely.

Lakehead will of course also be impacted by these changes to the funding formula and one wonders if in the long-run, Lakehead – not to mention other universities – should give serious consideration to ending their dependence on provincial government funding entirely and go completely private. The immediate reaction to this is to cringe given that provincial grants in Ontario still account for anywhere from 30 to 50 percent of university revenues and their elimination would probably necessitate as much as a doubling of tuition fees. Lakehead University is for example closer to 50 percent for its revenue share from grants, while University of Toronto is closer to 30 percent.

However, freeing oneself from the clutches of the provincial government might come with some benefits. Provincial governments in general have been encroaching on university autonomy for the last 50 years. In Ontario, if one goes back to the 1960s and 1970s, provincial grant revenues for some universities accounted for well over 50 percent of their revenue. Even more interesting is that despite accounting for the lion’s share of their funding, the provincial government generally left them alone to run their own affairs. Over time, as the provincial government has reduced its relative contribution, it has also gradually become more intrusive by setting performance targets, establishing lengthy bureaucratic quality assurance reviews and tying more and more funding to short term goals linked to provincial economic development and employment visions.

At the same time as grant funding has been reduced, the provincial government has also regulated and circumscribed the ability of universities to raise tuition because of the political fall-out. So, universities in Ontario – like many in the country – have come to have less autonomy from the provincial government while at the same time having their funding growth restricted. The government is calling more and more shots while providing less and less funding value. For its 30 to 50 percent funding share, it basically wants universities to operate as arms of the provincial training, education and economic development ministries. Moreover, its mandated goals end up affecting 100 percent of university operations and performance while only providing at best half the general grant revenue.

It is unlikely that any Ontario university would want to push the envelope and drastically change its funding. It would require a degree of innovation and risk taking that universities as currently structured and configured in their operations would be quite averse to. Indeed, the lack of experience in operating as a private and more profit oriented institution is a significant obstacle. Still, one wonders how much more autonomy universities in Ontario are willing to cede to the provincial government. Are there any rams among the sheep?

Saturday, 30 November 2019

Doug Ford's National Health Strategy

Ontario Premier Doug Ford is hosting Canada’s provincial premiers and territorial leaders at a dinner tomorrow tonight in advance of the First Minister Meeting in Toronto on Monday. Apparently, Premier Ford is expected to ask the premiers to get behind a call for an increase in the federal Canada Health Transfer escalator to 5.2 percent from the current 3 percent which took effect in 2017 under the Trudeau administration - after being announced nearly five years earlier by the Harper government. This was a reduction in the growth rate of federal health transfers in the wake of the 2004 Health Accord Escalator which saw annual increases of 6 percent.

Now, asking the federal government for more transfers at meetings of provincial premiers is a practice with a long tradition and one might expect the federal government to make some bland soothing diplomatic statements but generally ignore the premiers. Indeed, provincial premiers traditionally pine for the good old days of 50/50 health cost sharing with the federal government in the early days of Medicare. This eroded after 1977 when Established Program Financing turned into a block grant and then the Canada Health and Social Transfer after 1996. However, I think this time Doug Ford’s request is actually a reasonable one given recent trends in federal finances, federal health transfer funding and provincial-territorial government health spending.

First, according to the federal Parliamentary Budget Officer, federal finances are generally sustainable but that of the provinces are not given growing and aging populations and their growing demands on the health care system. Indeed, federal policy to grow Canada’s population via larger immigration rates is a factor behind growing demand for health services along with aging populations and the onset of new demands given changes in illness patterns and new technologies. Immigrants to Canada are on average generally younger than Canadians, but it turns out that some of the highest growth rates in health spending recently have been for younger cohorts. And as for federal finances, it is true they are running large deficits but given the lack of interest in taming their deficits, why not spend it on something more useful like health care?

Second, the provinces have made big strides in making their health care systems more sustainable and been bending the cost curve but a decade of this is beginning to strain their health systems. Between 2009-10 and 2019-20, it turns out that after adjusting for population growth and inflation, real per capita provincial-territorial government health spending has been growing at 0.9 percent annually. Indeed, a glance at Figure 1 below shows how since 2009-10, real per capita provincial-territorial health spending has essentially flattened out. Indeed, the situation is worse in Ontario than the rest of Canada. Along with the effects of the 2008-09 Recession on provincial finances, there was also the announcement of the coming end of the 6 percent health transfer escalator which has spurred the provinces to get their health spending under control.

The average annual growth rate of real per capita federal health transfers since 2009-10 has been 2.1 percent while provincial-territorial health spending has grown at 0.9 percent. In other words, health spending is growing slower than federal real per capita health transfer increases. As a result, the federal transfer share of provincial-territorial government health spending has actually grown from 20 percent to 23 percent. This is not because the federal government has become more generous but because after population growth and inflation, the provinces are increasing their spending slower than the increases in transfers. The provinces have become more responsible when it comes to managing their health spending but after nearly a decade of much slower growth they need some help.

There are only so many efficiencies that one can obtain within the health care system without at some point needing to actually get more real resources. The recent efforts to once again health care reform delivery in Ontario via the Ontario Health Teams is a step to further bend the cost curve but it will come to naught without the federal government also coming to the table with assistance. Trying to do more with less eventually will create a situation where less is indeed less. In trying to solve his problems, Doug Ford will also be helping the other provinces solve theirs.

Saturday, 23 November 2019

The Four Ages of Health Spending and Ontario’s Differential and Growing Gap

The last post documented the “Four Ages’ of Ontario provincial government health spending. The first age, in the wake of the creation of the Medicare system stretches from 1975 to 1989 and saw average annual growth of 3 percent. The second age from 1990 to 1997, encompassing the 1991 recession and the 1995 federal fiscal crisis and transfer cut witnessed a decline in real per capita provincial government health spending with an average growth rate of -0.7 percent annually. From 1998 to 2010 – there was a recovery in the average annual growth rate of provincial government health spending to 3 percent, fueled by a recovering economy, the fiscal dividend of low interest rates, and increases in federal transfer funding. Finally, with the actions taken to meet the expiry of the Health Accord in 2017 and the economic slowdown after the Great Recession in 2008-09, the growth rate plummets again eking out an increase averaging 0.5 percent annually from 2010 to 2019.

It should be noted that the four ages of health spending marks not only Ontario, but indeed all the provincial health care systems. However, what is interesting is the differential performance of Ontario with respect to the rest of Canada. As Figure 1 illustrates, when the average annual growth rates of provincial/territorial government health spending between Ontario and the rest of the country are compared, Ontario has been growing slower – or shrinking faster -than the rest of country since 1990.

For the period 1975 to 1989, Ontario on average grew slightly faster at 3 percent annual average growth compared to 2.9 percent for the rest of Canada. However, come the cuts of the 1990s, Ontario shrank at -0.7 percent annually while the rest of the country only shrank at -0.2 percent. Meanwhile, during the recovery period from 1998 to 2010, Ontario grows at 3.1 percent but the rest of Canada at 3.3 percent. Finally, since 2011, while growth has slowed everywhere, the rest of Canada still manages to edge Ontario out with average annual growth of 0.6 percent compared to 0.5 percent for Ontario.

The long-term effect of this on real per capita provincial government spending have accumulated over the long term to generate a growing gap between Ontario’s and the rest of Canada's provincial/territorial government health spending. As Figure 2 shows, from 1975 to 1989, per capita provincial government health spending in Ontario was lower than the rest of Canada but rises to close the gap. It briefly matches the rest of the country and then after 1995 again falls below where it has since remained. Indeed, since 2010 the gap has widened appreciably. In 2010, real per capita provincial government health spending in Ontario was $4,213 compared to $4,491 in the rest of Canada - 6 percent lower. In 2019, it is forecast at $4,386 compared to $4,742 in the rest of Canada – 7.5 percent lower.

Ontario – the largest economy in Canada – on a per person basis basically spends less on its government health system than the rest of the country. While some of that might be ascribed to a greater population density and economies of scale in providing health services, given that there appear to be constant calls to addresses waiting times and shortages, it is unlikely the difference is due to superior system performance combined with greater efficiencies. Moreover, that gap has been growing over time. In other words, the wealthiest economy in the Canadian federation is providing less spending per person when it comes to public sector health care than the rest of the country. Some of the growing gap is the result of the more brutal impact of the two major recession periods on Ontario compared to the rest of the country but it is also a function of Ontario's poor fiscal management as well as its choices. More on how that difference pans put across assorted categories of health spending in the next post.

Sunday, 17 November 2019

The Four Ages of Ontario Government Health Spending

Understanding the pressures and challenges facing Ontario’s health care system and in particular - provincial government health spending – requires an overview of the numbers. The Canadian Institute for Health Information (CIHI) via its National Health Expenditure Database provides a wealth of information on health spending in Canada. The 2019 edition of the National Health Expenditure release allows us to piece together a broad picture of where health spending in Ontario has been over the last few decades.

Figure 1 on total health spending in Ontario provides a view of total and provincial government health spending over the period 1975 to 2019 (with 2018 and 2019 being estimates). They show steadily rising spending. Total health spending on health in Ontario was $4.4 billion in 1975 and has grown to an estimated $100.5 billion. Meanwhile, over the same period provincial government health spending has grown from $3.1 billion to $63.4 billion. The massive growth in health spending over time is part of the conventional wisdom that health spending is unsustainable.

However, these numbers are nominal totals and do not take into consideration population, inflation or economic growth which are all necessary to provide context for these numbers. Between 1975 and 2019, provincial government health spending in Ontario grew 20-fold while GDP grew 13-fold, population grew 1.7-fold and prices 5-fold.

Ontario’s Health System is Undergoing Structural Change Again

Ontario is embarking on yet another transformation of its provincial government health care system with its creation of Ontario Health Teams which will replace the LHINs. The LHINS (Local Health Integration Networks) were created in 2006 to create regionally integrated health delivery systems to essentially streamline services. The move to a regional approach in Ontario at the time was a bit late given that most other provinces that had gone the regional/decentralization approach had done that in the 1990s and in the early 21^st century began to move away from the approach. This continual restructuring of health care service delivery in Canada has if anything been quite disruptive and we are now about to undergo another round of it in Ontario.

The LHINs were to have jurisdiction over hospitals, community care access centres, various community health services as well as mental health and addiction. However, they were not given jurisdiction over physicians, public health, diagnostics or the provincial drug spending plans. This made the LHINs only a partial health integration network and in the end that was probably their undoing as the seamless one stop shopping system of care never really fully emerged.

As for the OHTs which are going to replace the LHINS, according to the provincial news release, this is “an administrative step only and not a merger of the LHIN boundaries. Further, there will be no impact to patients' access to home and community care or long-term care placement as Ontarians continue to receive the care they need from the care providers they have built relationships with at the 14 LHINs. These changes are a means of streamlining the regional oversight as an interim measure as the government continues to work toward moving home and community care supports out of bureaucracy to integrate them with Ontario Health Teams.” The Ontario Health Teams will be responsible for all of a patient’s care including primary and emergency care, home and community care, palliative care, cancer care, residential long-term care and mental health and addiction services.

An OHT is a team of health care providers working together to deliver at least three types of health services – the initial call expressed a preference for a minimum of primary care, hospitals, home care and community care. The aim is to create a truly integrated health care system for Ontarians with seamless transitions. How many of these teams will ultimately emerge will depend on the population size covered. If there are about 250,000 people per health team – a not unreasonable number given the Northwest LHIN covers that amount – then there would be about 60 teams ultimately. Eventually, if all of this pans out, I suspect there will be anywhere from 50 to 70 of these teams covering the entire population of Ontario and they will report to a new centralized oversight agency – Ontario Health. Given population aging and the impact of new technologies and drugs on health care costs, part of the goal will also be to contain rising costs by eliminating duplication streamlining transactions costs and thereby slowing the rate of provincial government expenditure growth.

How is all this going to go? Will it be effective in improving services? Good questions. We have been reforming health care for two decades in Canada to deal with access, coverage and sustainability of the system and all the same issues still seem to be there – physician shortages, long waits for services, hallway medicine – and total spending has still grown though spending growth has moderated over the last few years. Will this time be different? We will have to wait and see. In the meantime, this is as good a time as any to look at the Ontario health system and its spending in more detail. Over the next few weeks, I will devote a number of blog posts to health spending in Ontario to provide some context for spending in the system as well as review where we have been over the last few decades. Visit this page for updates.

Wednesday, 6 November 2019

Ontario’s Finances: A Quick Review of the November 6th Fiscal Statement

The 2019 Ontario Fall Economic and Fiscal statement was delivered by finance minister Rod Phillips today and the basic message is that the deficit is down from the 2019 budget projection but spending on government priorities is up - notably in health and education. Compared to last spring, this is a “good news” statement and the outcome of a process of retreat that has marked the Ford Government over the last six months given the outcry from a number of directions that restored among other things, funding for autism programs and a new French language university.

Revenue growth is greater than anticipated, given Ontario’s booming economy and this has allowed for a smaller deficit as well as more spending. The deficit is now projected to be $9 billion which is down from the original budget estimate of $10.3 billion – but based on interim numbers had already come down to $9.3 billion.

Based on the interim numbers since the budget, spending is up from $163.4 billion to $164.8 billion (which incidentally includes a $1 billion reserve) billion but revenues are up $154.2 billion to $155.761 billion. Revenues are basically about $1.5 billion dollars more than anticipated while total spending including the reserve has gone up by about $1.4 billion. So, the deficit is lower than what was both in the budget and in the interim update but at $9 billion, it is still the largest deficit since 2014-15 when it stood at $11.268 billion. Moreover, it is expected to decline to $6.7 billion in 2020-21 and $5.4 billion by 2021-22. As a result, the net debt will rise though the net debt to GDP ratio will stay flat at about 40 percent. Nevertheless, the net debt but is expected to be $353.7 billion – up from $338.5 billion in 2018-19.

So, based on the 2018-19 numbers, by 2021-22, revenues will have grown by $11.7 billion – an increase of 7.6 percent - while total expenditures will grow by $9.7 billion – an increase of 6 percent. So, the plan is essentially to slow expenditure growth and wait for revenues to catch up which is a traditional approach used by Ontario governments before this one. Revenues in 2019-20 are definitely up with CIT revenue $936 million higher and PIT $525 million higher than anticipated. As well, if the government holds the line on further spending, the reserve will likely be applied to the bottom line allowing the 2019-20 deficit to come in at closer to $8 billion.

Nevertheless, despite all the cries of austerity, it would appear that its business as usual in Ontario given the “grow your way out of deficits” approach that is being used – again.

Saturday, 2 November 2019

Rising Health Spending Is Not Just About Seniors

The Canadian Institute for Health Information (CIHI) has released its 23^rd annual report on health spending in Canada - National Health Expenditure Trends, 1975 to 2019. As a member of the CIHI National Health Expenditures advisory panel, it is always great to see the wealth of data on trends in health spending across Canada. Total health spending in Canada in 2019 is expected to reach $264.4 billion which represents an increase of 3.9 percent over last year and accounts for 11.6 percent of Canada’s GDP – a figure also up slightly from last year. After a period of zero average annual growth in real per capita total health spending from 2010 to 2014, the period since 2014 has averaged about 1.4 percent a year. This, however is lower than the average annual growth rate from 1996 to 2010 which was at 3.3 percent. Health spending growth has resumed but on what currently seems like a more sustainable trajectory given that real per capita GDP growth is closer to 2 percent.

Much of the concern about rising health spending has focused on the effects of population aging. Health spending does rise with age as Figure 1 below shows rather dramatically. Aside from those aged less than 1-year, per capita provincial/territorial government health spending is well below $5,000 until the 60-64 age group when it starts to rise above that threshold reaching over $30,000 for those aged over 90 years. Yet, despite this surge after age 60, what is also interesting is that when the drivers of rising health spending are broken down, in 2019, aging per se only contributes 0.8 percentage points out of the 3.8 percent growth in public sector health spending – about 21 percent – with general inflation, population growth and other factors (eg. Technology and utilization) accounting for the rest. It does lead one to wonder whether this is because today’s seniors are generally quite healthy compared to the past or perhaps whether there are unmet needs.

What is also interesting and seldom noted is that while provincial and territorial government per capita health spending is highest among seniors, over the last two decades, the rates of growth in per capita spending have not been for seniors. Indeed, between 2000 and 2017, the highest average annual growth rates have been for children and youth aged 5 to 19, followed by children under age 1-year and adults aged 35-39 as shown in Figure 2.

Indeed, per capita spending for adults between the ages of 35 and 64 has been growing at a faster rate than those aged 65 to 89. While, it is true that much lower per capita amounts are being spent on those below age 65, spending for this demographic has been growing much faster. Again, this leads one to wonder given scarce resources whether there is an implicit transfer of resources underway away from seniors when it comes to new growth or whether younger people today have more health problems or utilize health care more than similarly aged groups in the past. Given the epidemic of obesity and mental health issues among the young, perhaps this is having an impact on health spending needs and expenditures.

If a significant cohort shift in health care needs and utilization is underway is an interesting question. I suppose fully knowing if this is a recent development or has been underway for the last 50 years requires per capita age spending data going back quite a ways - I am only aware of the CIHI data going back to the mid 1990s or so. This is an important issue. While an aging population may only be contributing 21 percent of the increase in health spending now, if younger cohorts today have deteriorating health status or more health issues than in the past, they may be poised to be a more important driver of health spending both now and in the future.

Friday, 25 October 2019

The City of Thunder Bay Has Spoken, The Case is Closed

Thunder Bay City Council and its municipal administrative apparatus seems to have embarked on its Roman imperial phase with respect to community relations with its taxpayer base. In response to those who provided input ( my input here ) on the 105 Junot Avenue South Rezoning application and following the October 21^st decision to uphold the rezoning in a 7-5 vote, the Office of the City Clerk provided a Notice of Passing decree that begins as follows:

“The Thunder Bay City Council passed By-law 94/2019 on the 21^st day of October 2019, under Section 34 of the Planning Act, R.S.O. 1990 as amended.

Public comment has been received and considered and had no effect on Council’s Decision as the application is consistent with all relevant planning legislation and represents good planning.”

I suppose all that was missing at the end of this statement was a simple “All Hail the Glory of the Emperor” to convey the full message of conquest and victory. The implied message seems to be that any resistance to the edicts of City Council is futile and has no effect. Whatever is decided is consistent, represents good planning, and the final collective decision is ultimately infallible.

The entire public drama and division over 105 Junot was amplified by The City of Thunder Bay because they encouraged the Ontario Aboriginal Housing Corporation to expand the scale of the transitional project from 20 to 58 beds to “maximize” the use of the site which one suspects probably really means greater property tax revenues for the City - assuming that the OAHC pays property taxes. A smaller scale facility more in keeping with other such projects around the province would have been more suitable given the many concerns raised by residents in the area and generated less discord.

Unfortunately, the Aboriginal Housing Corporation was caught in the middle of this unfortunate situation and making it into an emotional issue that attracted the attention of the Globe and Mail did not serve anyone’s long-term interests. What the City of Thunder Bay should have done in response to the input received was return to the original proposal of 20-beds but that would have required actually listening and accepting at least some of the arguments made by those who presented their concerns. Really, how can a facility approved on a much larger 58-bed scale in a neighborhood with the social and crime issues that were raised be “good planning?"

In the end, it is water off a duck’s back because many members of council believe they have been annointed as “progressive” thinkers who love their community. The strength of their love means that they are doing good and therefore the ends always justify the means. If that means tacitly implying that opponents to their good works are insensitive to poverty or diversity, then so be it. They constantly solicit input from constituents but listen through a set of political noise cancelling headphones so that the discordant notes from any input not coinciding with their vision of fighting social and economic injustice is politely filtered out.

Those in Thunder Bay who uncritically champion all social injustice issues with unquestioned fervour and feel they have the ear of City Council and its municipal-corporate apparatus should be cautious. In the end, any dispensed progressive works are to be accepted on The City’s terms because they know what is best for you. Take the example of Dease Pool as a case in point. Here, a long-standing community pool in what is considered a disadvantaged neighborhood was closed because it was old and needed substantial and expensive renovations. There is continuing opposition to the closure but The City forges ahead.

The proposed new draft plan (available here) will essentially replace the pool area with a tennis court and a community garden. Given that swimming pools accommodate a greater and more diverse number of users than a single tennis court, it seems like an oddly elitist rather than progressive use for the site. However, consciences will be soothed with a multi-user community garden – which also atones for the environmental sin of an asphalt surface on the tennis court. If all this redevelopment was designed to somehow deal with the rising costs of an old and aging pool, those of us with a more fiscally conservative bent could be understanding. However, this will still cost a lot of money and in the end not fully serve the needs of the area.

As for the money that will be spent, it does not seem to matter because a “progressive” council that wants to do great things will simply raise the tax rates on its residents - who by the way are now responsible for the lion’s share of property tax revenue given the declining industrial and commercial base. Be prepared this year for an initial budget proposal that stakes out a high increase in the tax levy. This will be blamed on the provincial government who, being conservative rather than progressive, are the source of all fiscal evil. After a cleansing public ritual of debate and input of appropriate length, The City will then retreat to an increase of between 3 and 4 percent thereby demonstrating that it is both fiscally responsible and generous in matters of expenditure.

We should not complain too much. We elected them.

Wednesday, 23 October 2019

The Federal Election Results: Northern Ontario

The people have spoken, and Canada has a minority Liberal government. In my home community of Thunder Bay, there will be double representation on the government side as both ridings went Liberal. This however was not the result of strategic voting or a calculated decision by the local electorate to go with what they saw as the winning side but the outcome of ingrained behaviour. Thunder Bay always votes Liberal at both federal and provincial levels except on occasion when it goes NDP because the voters feel the Liberals ought to be punished. However, their NDP support is a temporary dalliance and they ultimately return to their original faith.

If Monday’s election had yielded a Conservative minority or majority, then Thunder Bay would have been on the outs and of course complaining incessantly about the lack of government attention. Yet, loyalty to one party by a smaller and more remote community does not always ensure you will get what you want if your team is in power. If your support is always assumed to be there, than that can also work against you when it comes to getting your issues on the table.

Electing a variety of representatives over the years based on calculation rather than political faith or loyalty is another approach to collective voter wisdom and diversity in outcomes over time is one way of ensuring your support is not taken for granted. While Thunder Bay generally always votes the same way, nearby Kenora is much more flexible and over the years has voted in representatives at the provincial and local level affiliated with all three of the major parties. This time, they switched from Liberal to Conservative at the federal level.

While parts of northern Ontario seem to be closed shops when it comes to voting patterns, the region as a whole, has actually elected a diverse portfolio of representatives with the balance what one might term centre-right rather than centre-left - if you assume the Liberals are more centrist than the other two parties. Given that the Liberals and NDP generally term themselves as “Progressive” the region as a whole is probably more centre-left. One can only imagine what the “Progressives” would now term themselves if the federal Conservatives had not rebranded and retained their “Progressive Conservative” label.

In terms of results for the 10 ridings, they are:

Kenora: Conservative

Thunder Bay-Rainy River: Liberal

Thunder Bay-Superior North: Liberal

Timmin-James Bay: NDP

Algoma-Manitoulin-Kapuskasing: NDP

Sault Ste. Marie: Liberal

Nickel Belt: Liberal

Sudbury: Liberal

Nipissing-Timiskaming: Liberal

Parry Sound-Muskoka: Conservative

On a map, electoral northern Ontario is a bit of an oreo sandwich made up of two conservative graham wafer borders -Kenora and Parry Sound-Muskoka - and a rather large dollop of Liberal cream accented with some additional NDP filling. Obviously, northern Ontario voters as a whole like their electoral food spiced with diversity even if smaller regions within prefer more monotonous diets. However, if one takes a pan-northern view, the north is greater than the sum of its local parts when it comes electoral wisdom and has made sure it has its bases covered.

On a final note, a special congratulations to Eric Melillo who pulled ahead of incumbent Bob Nault to win the Kenora riding. Eric is a graduate of the Economics program at Lakehead University and I am thrilled to see him do well. Eric was a hardworking and keen student in Economics and a very pleasant young man and I wish him all the best.

Sunday, 20 October 2019

Which Federal Party Can Open the Door to Thunder Bay's Employment Growth?

With the federal election into its home stretch and the vote scheduled for tomorrow, voters in Thunder Bay have to decide who to vote for. Needless to say, it has been a disappointing election given that the major parties – as well as the smaller ones – have presented grandiose expenditure visions that are for the most part fiscally unsustainable. Moreover, much of the campaign has been not on policy but on opportunistic promises with major efforts expended on digging up dirt on opponents, mixing it with a little self-righteous water and then spattering it about in the hope that it sticks somewhere.

When it comes to making a ballot-box decision, the prevailing sentiment on the street seems to be that it is hard to choose from a set of equally unpalatable national parties. So, the next best approach might be: let us look locally and make the decision, based not on what might be best for the country, but what might be best for Thunder Bay. Here too, the answer is really quite muddy as ultimately what is best for Thunder Bay is making sure that at least one of the ridings is with whoever ends up as the governing party. However, even that is a difficult game to play given that we are probably looking at a minority government situation. And such strategic behaviour is made even more difficult by Thunder Bay's historical genetic aversion to any federal choice but Liberal - except when they seek to punish the Liberals by voting New Democrat. Thunder Bay has not elected a federal conservative since the 1930s but then oddly wonders why conservative governments do not grant its wishes.

In terms of what is best for Thunder Bay, needless to say a government that promotes economic growth and diversification is always a safe bet but that can often only be judged years after the fact. The current north side incumbent who is also a member of the present governing party certainly points to the last four years as a period of economic growth for Thunder Bay and northwestern Ontario in part due to the “millions of dollars coming into our area” which she no doubt ascribes to her government and her role as a Minister of the Crown.

Quantitatively assessing growth in Thunder Bay and the region is never easy but a glance at employment numbers is one way of providing an evidence-based attempt on how much growth there has been. Between 2014 and 2018, total employment in Thunder Bay has indeed grown by 3.6 percent – from 61,500 to 63,700 jobs – which is actually not bad given that Ontario over the same period increased by 5.3 percent. However, when employment is examined in a longer-term framework using the period from 2001 to 2018 – see Figure 1 – it is still within the traditional employment range of the last two decades. We basically bounce up and down between 60,000 and 65,000 jobs and never seem to break out of that corridor in any sustained fashion. Between 2001 and 2018, Thunder Bay’s employment grew 3.4 percent while Ontario grew 22 percent.

What is also interesting as shown in Figure 2 is when employment growth by occupational category over the period 2014 to 2018 is examined. The most employment growth since 2014 has been in occupations related to arts and culture (26.7%), health (22.2%), natural and applied sciences (17.6%), manufacturing (13.3%) and law, social and government services (12%). However, sales and services, business and finance, and construction have all seen declines. As for the manufacturing resurgence, given the 550 jobs slated to disappear at Bombardier, manufacturing is poised to continue the decline that has been underway since 2001.

So, has Thunder Bay’s employment grown over the last four years? Yes, but there are important qualifications given the dynamic nature and unique features of any local economy. Here in Thunder Bay jobs are both created and destroyed but in almost perfect balance over time so as to keep total employment locked within a narrow corridor. This corridor has remained the same for decades and Thunder Bay remains in an overall total employment stasis despite the efforts of two growth plans - one provincial and the most recent federal. This is unlike Ontario as a whole where jobs are both created and destroyed but on net over the last 20 years many more jobs have been created than have been destroyed. In choosing who to vote more tomorrow, voters need to think long and hard on which party they believe can actually open the door to getting us outside our historical corridor of employment stasis.

Friday, 11 October 2019

Why Understanding Crime Numbers Is Important for Public Policy

The meetings currently underway in Thunder Bay for police service boards and chiefs is focusing on challenges facing the north and in particular those dealing with guns, drugs and gangs. In particular, the lack of funding for addressing what is perceived to be escalating crime is a major grievance given that the federal government has transferred money to the Ontario government to fight gangs, drugs and gun related activity but to date the province has apparently only chosen to assist Toronto and Ottawa. Jeff McGuire, executive director of the Ontario Association of Chiefs of Police, is in Thunder Bay for the meetings and stated: “I think the government had the right intentions, there were serious guns and gangs issues going on at that moment in Toronto and GTA area. Members of OACP were quick to point out it’s not just a GTA challenge.”

What is interesting when looking at this issue is taking a look at the violent crime statistics. Figure 1 plots total violent crimes from 1998 to 2018 for Thunder Bay, Toronto and Ottawa. If a provincial government politician handing out money to fight growing violent crime is deciding on where need was most urgent based on Figure 1, they would automatically judge that need was greatest in Toronto. Toronto not only has the most violent crime incidents of the three cities but also what seems visually to be a rapidly escalating problem since 2015 - which by the way was preceded by a long decline. Indeed, after a period of decline, all three cities have seen an increase in total violent crime largely related to increased gang and drug activity, but Toronto has the most violent crimes, followed by Ottawa and then Thunder Bay.

However, making the decision only based on total volume misses the point that crime is not only about total scale but also intensity relative to the size of local populations. Toronto and the GTA does indeed have the most violent crime, but it also accounts for almost half of Ontario’s population. What is also relevant is crime per person or per capita which adjusts for total population size.

Figure 2 plots the number of violent crimes per 100,000 population and here the difference is startling. While all three cities have seen an increase in violent crimes per capita over the last three years, Thunder Bay’s rate is practically double that of either Ottawa or Toronto. Its policing numbers and resources per capita are definitely not double those of either city. Some help is obviously needed.

The provincial government does need to address the local policing situation though as has been noted, more money alone will not solve the problem. We need to understand why it is that after years of decline, violent crime in all three cities is now trending upwards. As was noted by Jeff McGuire, there are other issues to be addressed including mental health, poverty and firearm access. Nevertheless, a good start would be understanding the distinction between totals and per capita amounts and making it part of any decision making process that allocates new resources.

Wednesday, 9 October 2019

International Relations & Trade Discussion Missing in Current Federal Election Campaign

Monday's Federal Leader's debate made nary a mention of international trade, our current dispute with China or even what is going on with the USMCA ratification in the United States. With exports accounting for about 30% of our GDP, it is astounding that such an important issue is being ignored. It is therefore worth re-posting the piece I had published early this week on the Fraser Institute Blog.

Canada needs more major trading partners beyond China and the U.S.

First Appeared in Fraser Blog , October 7^th, 2019

On the campaign trail, there’s little talk about Canadian trade policy and the repercussions of our current poor political relationship with China. The need to continue diversifying our trade is the elephant in the room this federal election.

In what seems to be explicit retaliation over the Meng Wanzhou Affair, China has detained Canadian citizens—putting a chill on business travel there—and essentially halted our exports of meat and canola. Any memories of Norman Bethune appear to have faded as China reveals its view of us as a small, inconsequential and puny power that should do as told. As a result, an important trade strategy—to diversify our trade away from dependence on what has also become a more capricious United States—lies in tatters.

The U.S. takes nearly 75 per cent of our exports, and despite recent bumps, has been by international trade standards a dream trade partner. It’s a large, rich, populous market literally on our doorstep where we share a close political and social culture, common language and history. It’s a market economy like ours with a strong rule of law. Subsequently, Canadians have not had to work very hard when it comes to exports given that the access to such a profitable market has historically been easy. A one stop export market for 75 per cent of your exports has become the gold standard of Canadian trade policy.

But Canadian business has been seduced by the prospects of China’s growing economy and the vision of a rich market of 1.4 billion people as a sort of future U.S.-like trade relationship. China has rapidly industrialized and is developing a large, dense and wealthy market. At first, it even seemed to be moving towards a more liberal market order in its economy.

Yet despite early promise, it would appear China is only playing lip service to liberal economic values and seems set on explicitly using trade relationships as part of its diplomatic and political arsenal, given that it views government policy and trade relationships as one dominion. Its recent behaviour raises an important question: Do we really want to ever be in a situation where 75 per cent of our exports are dependent on China’s market? Do we really want to give the Chinese government a quasi-monopoly over both our trade and political affairs?

It really would be the road to serfdom.

Despite the large dollar value of our trade relationship with China, it currently still only represents five per cent of our exports. Trade is about free exchange and mutually beneficial gains. If China wants our trade goods, we should certainly sell them as part of a free and open bargaining process. However, if it wants to use its economic relationships as a tool to get its way when dealing with countries on other issues, then we must protect ourselves. We are a small open economy dependent on trade and we must diversify our trade. Our recent efforts in negotiating agreements with the EU and the Trans-Pacific are only a start. We need many countries to compete for our business, but to do so we also need to show interest and compete for theirs. Part of this also involves reducing our own protectionism (agricultural supply management would be a good place to start).

If the Asia-Pacific is the future of trade, then look for opportunities in other wealthy Asian countries. Japan, India, Thailand, Vietnam, Taiwan, Singapore, Malaysia, Indonesia and the Philippines are all important economies that can serve as markets for Canadian products.

Moreover, instead of waiting for government-led initiatives, Canadian businesses should start the process themselves. Rather than placing all your eggs in a one-shot market-access strategy in the hopes that China can one day replicate our success in the U.S., shift your markets to other partners. Make sure there are a lot of them so no one country can ever hold our economy hostage. This should become the new gold standard for Canadian trade policy.

NORTHERN ECONOMIST 2.0