NORTHERN ECONOMIST 2.0: 2025

Tuesday, 24 June 2025

Is Thunder Bay in Decline?

Last night’s Thunder Bay city council meeting was another eventful evening with discussions of tax ratios, highway trucking routes and the ultimate location for the city’s tiny homes endeavour given the demise of the Kam River location. However, the most interesting aspect of last night’s debates was the exchange between a councillor and the city manager in which the question was asked if Thunder Bay was in decline? Thunder Bay has come a long way in terms of its internal debates as a few decades ago asking such a question would have been met with a bristly closing of ranks among the city’s political leaders with boosterish assertions that all was well in Thunder Bay despite short term challenges. Times have apparently changed reflecting a maturation of economic discourse in the city though one does get the impression that in some regards it is too little too late given a more vigorous growth agenda should have been in place decades ago.

Nevertheless, the question was asked and answered by the city manager. While the exact response cannot be replicated from memory, in essence it was that no, Thunder Bay was not in decline. However, its economy and population were growing more slowly than provincial and national rates and that Thunder Bay needed to do more to boost growth and hence Thunder Bay had to undertake measures to boost economic growth. This was tied to the discussion of lowering the tax ratios on commercial, large industrial, and multi-residential properties, effectively increasing the proportion of taxes paid by remaining property classes – namely single detached residences which incidentally have gone from footing half the bill to over 70 percent of the bill over the last few decades. Ostensibly this move would serve to attract businesses to Thunder Bay and boost growth and lower the tax burden on existing ratepayers. Re-balancing the tax ratios is a long standing issue in Thunder Bay and rooted in provincially driven policies.

There is of course some confusion as to what exactly this would cost the average homeowner in Thunder Bay. According to one report in the local media: “A home assessed at $100,000 would see a tax increase of $66.58. The median residential single-family detached home in the city, with an assessment value of $219,000, would see a $145.80 increase on its tax bill.” Another media report stated that “For a house assessed at $219,000, the median home value in Thunder Bay, that shift would mean an extra $7.83 on the tax bill, according to Kathleen Cannon, director of revenue.” Needless to say, taxes paid are going up though the amount of the increase is not being clearly communicated. Most people would indeed be leery of a tax shift that promises lower taxes in the future given that the tax levy in Thunder Bay has been going up for decades even if the rate of increase has declined over time.

How much money are we talking about here in terms of additional tax shifting onto residential homeowners from commercial, industrial and multi-residential assessments? Well, according to the 2021 Census, there were 26,790 single-detached homes in Thunder Bay and 2,040 semi-detached homes. If we go with the median estimate of $145.80 as the increase in the tax bill, then this would entail a shift of $4.2 million dollars out of a $240 million tax levy onto residential ratepayers. On the other hand, if it is $7.83, then this would entail a shift of $225,739. Given the amount of debate that this has been taking up, one suspects that it must be the former rather than the latter. One would think that if you are going to reduce the total business/industrial tax bill, the $4.2 million dollar amount would be of more significant impact on job creation and growth than a few hundred thousand dollars.

However, the purpose of such a move to boost growth brings us back to the question of whether Thunder Bay is in decline, thereby justifying potential growth enhancing measures. And, by decline one of course must assume that it applies to economic decline rather than social or moral decline. Definitions are of course important and decline can be defined as “a gradual and continuous loss of strength, numbers, quality, or value.” Thus, an economic decline should exhibit a reduction in key economic variables such as GDP growth, population or employment.

Figure 1 takes real GDP data largely from Statistics Canada and supplemented where necessary by Conference Board numbers and provides the annual rate of real GDP growth for Thunder Bay, Canada and Ontario for the period 2010 to 2024. There are years where Thunder Bay has exceeded national or provincial growth rates in real GDP ands years when it has fallen below. Overall, since 2010, Thunder Bay has experienced faster real GDP growth than Canada 40 percent of the time and Ontario 50 percent of the time. However, since 2019, Thunder Bay has never grown faster than either Canada or Ontario. As a result, over the 2010 to 2024 period, Thunder Bay’s average annual real GDP growth was 1.8 percent compared to Canada’s 2 percent or Ontario’s 2.1 percent. Thunder Bay’s economic output is growing but it is growing at a slower rate than Canada or Ontario.

Figure 2 presents the population increase from 2001 to 2024 based on Statistics Canada data again for Canada, Ontario and the Thunder Bay CMA. Between 2001 and 2024, Thunder Bay’s CMA grew from 121,986 to 133,0676 for an addition of just over 11,000 people representing a percent increase of 9.1 percent. While this is indeed growth, during the same period, Canada added nearly 10 million people for an increase of 33 percent while Ontario added nearly 5 million people for an increase of 42 percent. Again, Thunder Bay’s population is growing but not as quickly as either the country or the province.

Finally, Figure 3 looks at employment but like population, given the differences in size, total employment is best analyzed not in terms of absolute numbers but as an index. In 2006, Thunder Bay had 59,800 employed while Canada was at 16.4 million and Ontario at 6.5 million. To look at growth comparatively, 2006 is set equal to 100 for each jurisdiction. By 2024, Thunder Bay had added just over 5,000 more jobs putting the index from 100 to 108.7 – an almost nine percent increase in employment. By way of comparison, employment in Canada rose 27 percent over the same period while Ontario rose slightly under 27 percent. As the trend lines illustrate, employment rose in Thunder Bay – albeit with more fluctuations – but also at a lower rate.

So, is Thunder Bay in decline? Strictly speaking, it is not. Thunder Bay is growing but it is growing more slowly than the rest of the province and the rest of the country in terms of output, population and employment. It is growing in absolute terms but getting smaller in relative terms when it comes to population, employment and output. If Thunder Bay had grown at the same rate as the rest of the province over the last two decades in terms of population and employment, it would have a CMA population of over 170,000 people and employment at nearly 76,000 jobs. It is not decline but relative decline. It is not as big a problem as absolute decline but a problem nonetheless.

Monday, 23 June 2025

Employment Growth in Provincial Norths: Comparing BC and Ontario

Economic development in the northern regions of Canada’s provinces is not only an Ontario issue. Except for perhaps some of the Atlantic provinces (am thinking PEI here), Canada’s provinces all have northern regions which are more rural and remote, and which have often lagged southern regions and metropolises in economic growth and development. Ontario and British Columbia are the focus of this comparison.

Ontario’s north divided into the Northeast and Northwest portions of the province total approximately 800,000 people in population or about 5 percent of the provincial population spread over about 90 percent of the province’s landmass. British Columbia’s north consists of three regions (with their associated major centres in brackets): the North Coast (Prince Rupert), Nechako (Burn’s Lake) and the Northeast (Fort St. John) (though some might consider part of the Cariboo region centred on Prince George as also part of the north). These three regions total about 170,000 in population accounting for about 3 percent of British Columbia’s population spread over about half of its land mass.

Northern BC and Northern Ontario have a lot in common economically given that they have major port cities (Prince Rupert and Thunder Bay), are natural resource intensive with a focus on mining and forestry, are remote from the rest of the province in terms of transport links and accessibility and have in general lagged in economic development from the more developed southern regions. A unique difference on the resource side is the presence of aluminum smelting and liquified natural gas exporting in BC’s north which do not have equivalents in Ontario's north.

A key indicator of economic activity is of course employment growth, and the accompanying figure looks at the growth in total employment in these northern regions for the period 2011 to 2024 using data from Statistics Canada. To start, British Columbia’s employment growth has been more robust than Ontario over this period growing at nearly 31 percent versus Ontario’s 23 percent. When it comes to northern regions, however, Ontario’s north has outperformed BC’s north in employment growth. Total employment in the North Coast and Nechako regions has grown by 4 percent while the BC northeast has declined by 5 percent. Meanwhile, Ontario’s Northeast and Northwest have seen their total employment grow by 6 and 5 percent respectively.

While several reasons could be advanced as to why Ontario’s north has done somewhat better in terms of recent employment growth, a key factor is likely location. Northern Ontario is positioned as a transport corridor for Canada and is a conduit for a lot more trade and commerce going from east to west. Cargo and traffic bound for BC’s north is more targeted and generally going there for either a specific regional need or to exit via Prince Rupert. There is a key difference across the two norths in terms of energy. Northern BC has infrastructure projects underway related to natural gas production and liquified natural exporting underway and these will hopefully generate an uptick in employment growth in the years to come.

However, for the time being, Ontario’s north has the larger critical mass in terms of both total employment and population with larger urban areas than northern British Columbia and has seen the more robust employment growth. Ontario’s north is quite unique when examined nationally as its population tends to dwarf the total populations of most the other provincial norths. Northern Quebec, for example, is an area about the size of Alberta but with barely 50,000 people. Northern Alberta (north of Edmonton) has about 375,000 people, northern Manitoba about 100,000 people and northern Saskatchewan about 40,000 people. Ontario’s north contains a total population pretty much equivalent to all the other provincial norths plus the three territories. It is a more significant region than most of us give it credit.

Wednesday, 11 June 2025

The Misery of Youth

As the economy slows and unemployment rises, the discussion has inevitably turned to the plight of youth in Canada who are facing the worst youth unemployment rates in decades. As one report has stated: “Apart from the pandemic, Canadian graduates between the ages of 15 and 24 are facing the highest unemployment rate this country has seen since the mid-1990s, according to first quarter data from Statistics Canada.” Not only are recent graduates faring poorly but even summer employment is at a premium and some of the blame has been placed on the recent admission of record levels of low-skilled migrant workers. When combined with persistently high prices including the cost of housing and economic uncertainty the current situation particularly with Generation Z is being seen as anxiety inducing and the worst ever.

Figure 1 plots the monthly youth unemployment rate obtained from Statistics Canada covering the period January 1976 to April 2025. Current youth have experienced the highest youth unemployment rate ever in the recent past – that of the pandemic – but the COVID-19 Recession was not a standard recession in that much of the downturn was policy induced because of shutdowns and lock downs which is some countries lasted longer than others. Youth unemployment in Canada peaked at 30 percent during the pandemic and was the highest ever during the 1976 to 2025 period. However, what is notable is that even including the pandemic in drawing a linear time trend (which would serve to pull the line upwards), there is a noticeable downward trend in youth unemployment rates over this entire period.

As for the claim that the current youth unemployment rate of 14 percent is the worst since the recessions of the 1990s, it was higher during the Great Recession of 2008-09 – at over 15 percent – and even higher during the recessions of the early 1990s and early 1980s. Indeed, if one is looking for anxiety causing economic events for Canadian youth, the period from 1970 to 1995 saw recession over 1973-75, stagflation during the mid and late 1970s, a recession in 1981-82, a major stock market crash in 1988 and another recession in 1991-92 followed by the federal fiscal crisis.

It cannot be denied that Generation Z youth and younger Millennials are having a particularly tough time now given that they were born in the first decade of the 21^st century and have gone through the 2008-09 Great Recession, the pandemic, a major bout of inflation and now the uncertainty regarding the economy because of the trade and tariff war. However, what one terms as the worst ever seems to have become somewhat subjective and generally refers to whatever is the memory span of the afflicted generation or cohort. And the matter is not helped by what is often the short-term focus of media analysis in terms of time spans that consider a couple of decades ancient history. It often helps to put things in a longer historical perspective which of course is limited by the availability of the data. It also helps to try and measure economic distress more quantitatively and with as broad a measure as possible.

Figure 2 puts together several variables that can be considered as having an impact on the welfare or misery of people in general and youth in particular – alongside the youth unemployment rate are plotted the central bank rate and the CPI All Items monthly inflation rate (seasonally adjusted). It turns out that along with youth unemployment being higher in the late 1970s and early 1980s relative to the present, so were inflation rates and the bank rate. The bank rate meant that mortgage rates for first time home buyers coming onto the market were extremely high and while one can argue that housing prices were extremely low even relative to the incomes earned at the time the fact remains that frequent recessions and job losses combined with rising food prices created challenges for the youth of that era also.

Trying to put the misery of youth today in some kind of historical context requires a more multi-dimensional measure that tries to combine another of factors over time - enter the misery index. The misery index, an economic indicator first created by economist Arthur Okun during the 1970s, was designed to measure economic misery. The 1970s were marked by what is known as stagflation and were characterized by high inflation and unemployment, following the oil price shock and its quite significant macroeconomic impact on everyone including youth. The misery index added the rate of inflation to the unemployment rate, with higher totals indicating more economic distress for the public. While not a perfect measure of economic welfare, the misery index can be useful in gauging the current mood of economic angst and misery. Using monthly data from Statistics Canada, the next chart plots monthly for the period 1976 to early 2025, what can be termed a Youth Tri-Misery Index -the sum of the central bank rate, CPI All Items Inflation Rate and the youth aged 15 to 24 unemployment rate.

As Figure 3 illustrates, youth misery has been on the rise since even before the pandemic. It had been on a persistent downward trend since the early 1990s with the reversal starting somewhere around 2016-17. Misery shot up during the pandemic and after the post-pandemic drop has resumed an upward trend with the present impetus being rising youth unemployment even as the bank rate and inflation have come down. However, the peak period for misery over the entire 1976 to 2025 period based on the measure provided in Figure 3 is not the present but the early 1980s.

A 20-year-old coming onto the labour market in 1981 would have been born in 1961 – ostensibly a member of what is considered the blessed baby boom generation. And yet, 1961 represents the tail end of the baby boom and the tail end of a boom has its own unique dynamics. It is much like arriving at a wedding after 11 pm. The main meal has been served and program of events completed but you can still have a few drinks and perhaps partake of a light midnight buffet dinner. The 20-year-old coming onto the Canadian labour market in 1981 had already seen a recession and stagflation as a teen, experienced a recession in the early 1980s, may have bought a house at double digit interest rates in the early 80s, saw a boom in the mid 1980s, a stock market crash in 1988, and a major recession in the early 1990s (during which many lost the house they had bought in the early 1980s). And if they worked for the public sector in the 1990s experienced either federal and provincial restraint brought about by the federal fiscal crisis. It was not exactly a picnic - I know, I was there - but escaped relatively unscathed though marked with a perpetual risk averse caution.

My point is not that the youth of the past had it harder than those of the present. I really do not know how a current twenty-year-old feels when faced with economic challenges given the experiences and, background and preparation they have had to date. However, youth at any point in history face challenges and the key should be to address the problems they face at a point in time rather than engage in inter generational comparisons of how hard done by someone is or how the past had it better. Much of the current attention especially within the framework of social media seems designed to inflame feelings between cohorts and generations rather than devise and implement solutions to pressing problems like rising youth unemployment or the cost and affordability of housing.

For example, there seems to be a perception that people can be easily divided into generational cohorts, and this division is then used to stereotype the experience of each generation. For example, it is true that older Canadians on average have experienced a windfall in wealth due to the rise in prices since 2010. However, not every older Canadian has a house in Toronto or Vancouver that represents a multi-million-dollar nest egg. Even the much-maligned baby boomers have had a more diverse set of economic experiences than one might expect and not all are effortlessly gliding from one shopping and travel experience to another funded by their bounteous home equity. Growing up is a tough experience and we need to help those having a tough time, but we should start by being a bit more grown up in the analysis and conversations that we have.

Tuesday, 10 June 2025

Measuring the Cost of Labour Shortages in Ontario's North

Notwithstanding the effects of the current trade war and the creeping up of the unemployment rate, labour shortages have been a persistent economic theme since the pandemic in Canada as well as northern Ontario. A recent Conference Board report has argued that the main challenge for the labour market in Northern Ontario is a shortage of labour with the region experiencing some of the highest job vacancy rates in the country. This situation has been brought about by an increase in the demand for skilled trades and labour because of resource and construction projects in the region combined with an aging population and continued out-migration.

Measuring the labour shortage and its impact in the north is an interesting exercise given that traditionally the region has seen itself as chronically depressed and lacking opportunity. Statistics Canada has labour market data which provides statistics by economic region including data for job vacancies and Figure 1 plots quarterly job vacancies for both Northeastern and Northwestern Ontario. While vacancies are down since the peak of the pandemic, it remains that there has been an upward trend overall since 2015 and as of the fourth quarter of 2024, there were approximately 9,000 job vacancies in the Northeast and just under 5,000 in the Northwest.

Of course, having a lot of vacancies is in some respects good news because it is correlated with low unemployment rates and unemployment rates in northern Ontario have declined since 2015 as vacancy rates have grown. Figure 2 plots unemployment rates for both northern regions and the downward trend is noticeable. The inverse relationship between job openings or vacancies and the unemployment rate is known as a Beveridge curve – as job openings increase, the unemployment rate drops. Figures 3 and 4 plot these relationships for both the Northeast and the Northwest along with a linear trend. Based on these linear trends, the current number of job openings in the Northeast and Northwest are associated with unemployment rates of about 6 and 4 percent respectively and in fact the monthly unemployment rate in the fourth quarter of 2024 averaged 5.8 percent in the Northeast and 4.7 percent in the Northwest.

However, these job vacancies do come at an economic cost – in particular regional output foregone. A quick back of the envelope calculation can be done using an estimate of output or GDP per worker. This can be calculated for Greater Sudbury and Thunder Bay using GDP data from Statistics Canada extrapolated to 2024 with growth rates from the most recent Major City Insights done by the Conference Board of Canada. When combined with the regional employment data from Statistics Canada, one can get an estimate of GDP per employee. In this case, for 2024, GDP per employee in both cities was approximately $130,000. Using this number and assuming each job vacancy results in foregone output of $130,000 is a heroic assumption as it assumes every job in the region produces $130,000 worth of GDP. Nonetheless, in the absence of anything else, here goes.

In 2024, the average quarterly number of job vacancies comes out to 8,713 for Northeastern Ontario and 5,148 for the Northwest. Multiplying the number of vacancies by the GDP produced per employee results in a foregone GDP output of approximately $1.1 billion in Northeastern Ontario and about 0.7 billion in the Northwest for a total of $1.8 billion dollars. That is a large number, but it needs to be considered relative to the output of the region. Again, a current GDP estimate for Northern Ontario is not readily available but using employment numbers for the region and the per employee GDP estimate already available I get an estimate of about $50 billion for current nominal GDP. In other words, the output foregone represents nearly 4 percent of the current GDP in Ontario’s north.

This is of course only a crude estimate but think of this. Simply being able to fill the job vacancies currently available represents about 4 percent of northern Ontario’s GDP. Even if this number is an overestimate, it is something to think about given the amount of energy that is usually expended thinking about how to boost growth in the region. Simply filling the jobs that currently need people would in of itself boost economic output and activity.

Thursday, 5 June 2025

Province Building, Ontario's North, James Bay and the Ring of Fire

Several interesting threads have come together over the past week that warrant a short historical overview of economic development in Ontario’s north. First, there was the passage of Bill 5 which gives the Ontario government the powers to establish special economic zones to speed up mining and other development projects and which has been denounced by environmental and Indigenous groups in the province. While this bill could be applied to a variety of sectors including housing one suspects the goal is to speed up development in the critical mineral rich Ring of Fire area which has been on the cusp of development for decades but, has yet to really go anywhere.

Second, there was this week’s First Minister’s Meeting in Saskatoon which saw a rather amicable gathering in which the premiers presented wish lists of nation building infrastructure projects. Here, Premier Ford stated that his priority was mining in the Ring of Fire and along with infrastructure to access and develop the project. Premier Ford’s full list was of course rather ambitious and included “Ring of Fire critical mineral deposits in northern Ontario, both large-scale nuclear energy generation and small modular reactors, GO passenger train service and a new James Bay deep-sea port.”

The emphasis on the Ring of Fire and a port on James Bay is probably the most ambitious northern Ontario oriented development strategy of recent years. In the 19^th century there was a northern Ontario policy of land settlement, railroad building and a manufacturing condition (domestic processing of resources) which guided Ontario’s northern economic development until the 1930s (Di Matteo, 2022; Zaslow 1971). As well, Bill 5 in many respects represents a repudiation of the Far North Act (2011) which set aside from development about 20 percent of Ontario’s landmass in its north. However, the emphasis on special economic zones, mineral development and rail access with a port on James Bay are old themes in Ontario’s northern development strategies.

The provincial government has generally resisted the creation of special economic zones especially in northern Ontario. In the wake of the forest sector crisis nearly two decades ago, the Common Voice Initiative published a report titled “Enhancing the Economy of Northwestern Ontario” which among other things advocated Investment Incentive Zones which in many respects was more transformational than what the province is currently proposing. As the report stated (p.17): “The Province should designate Northwestern Ontario as a Special Economic Development Zone. The rates for Provincial sales, personal income and corporate taxes for the Northwest should be set 20 percent lower than those for the province to reflect income differences Northwestern Ontario and Southern Ontario…” Bill 5 is more about suspending various government acts and regulations at ministerial discretion to fast-track development rather than a coherent approach to economic incentives within special economic zones.

As for mineral development, Ontario has long recognized the vast richness and wealth of the Canadian shield underlying Ontario’s north and particularly the James Bay region. In the 19^th century, Benidickson (1980: 62) notes that “descriptions of Ontario's northland including the James Bay region contributed to the gradual emergence of an increasingly favourable impression of the area's resource which was in marked contrast to previous assessments. For example, in commenting on a railway intended to reach James Bay, the Dominion Illustrated regarded the construction proposal as "the latest instance of the changed valuation which recent developments have put upon a region once deemed practically worthless.'” The result was several initiatives to build a railway to James Bay and a deep-water port on James Bay as a conduit not only for agricultural products (which was a bit optimistic given the land and climate of northern Ontario) but also minerals and forest products. The Toronto business community in the late 19^th and early 20^th centuries even saw a James Bay port as a third outlet to Europe that would expand the city’s agricultural hinterland (Nelles, 1975, p/.19).

Again, quoting Benidickson (1980: 63) “For nearly three decades, beginning with the Lake Superior and James Bay Railway proposal of 1882, private railway promoters planned and advocated a series of northern rail lines to reach Ontario tidewater at James Bay. Although these proposals differed with regard to the location of the southern terminus, overland routing, and port selection, they were generally similar in intent. An Ontario railway to James Bay would contribute to the development of the territory through which it passed, and, having reached northern waters, would confirm the province’s still theoretical status as a maritime power.” A number of private railway projects followed but they were unsuccessful and it was not until the Ontario government itself took the bull by the horns and built the Temiskaming and Northern Ontario Railway starting in 1902 that an effort was made to access this region and also assert provincial sovereignty over the region. Ontario had an ownership dispute with the Manitoba and federal governments over its north that was not fully resolved until 1912. However, plans for a deep-water port on James Bay never came to fruition though they periodically surfaced with the concept emerging and retreating in the 1940s, late 1950s and 1970s.

Once again, the Ontario government is embarking on a northern Ontario development strategy that has been nearly 150 years in making. Projects such as deep-water seaport on James Bay have been proposed and resurfaced a number of times with their success limited by first the scale and cost as well as conceptually what the shipping purpose of the port would be. This time, the impetus is coming from the Trumpian challenge to both Canada’s economy and its sovereignty. In the 19^th century, Ontario was competing against the federal government with respect to a northern development strategy that mimicked the national policies of western development. This time may perhaps be different if the federal government is brought onside to assist with infrastructure development in the region given the new push for Arctic sovereignty. However, the key difference this time is that despite Bill 5, the Indigenous peoples in the region will be more aware of their interests and more assertive and any development will need to ensure that there are direct, tangible and substantial benefits to the Indigenous peoples in the region. As well, the ultimate determinant of any successful project to build a new port on James Bay will be economic viability - what is the demand for shipping from James Bay and what is going to be supplied?

References

Benidickson, J. (1980) “Ontario’s James Bay Vision,” Journal of Canadian Studies/Revue d'études canadiennes, Volume 15, Number 3, Fall 1980, pp. 60-73.

Di Matteo, L. (2022) Arrested Development: A Brief Economic History of Northern Ontario, 1870 to 2020, American Review of Canadian Studies, 52:2, 163-192.

Enhancing the Economy of Northwestern Ontario, December 5^th,2006.

Nelles, H.V. (1975) The Politics of Development. Forests, Mines and Hydro-electric Power in Ontario, 1849-1941.Toronto: MacMillan.

Zaslow, M. (1971) The opening of the Canadian North, 1870-1914. Toronto: McClelland and Stewart.

Wednesday, 28 May 2025

Nation Building and Northern Ontario

Yesterday’s Throne Speech emphasized that the world has shifted and is more uncertain but that it is also a time of opportunity to reforge Canada’s economic and political relationships and embark on economic nation building that could be the largest transformation of the Canadian economy since WWII. There was a commitment to major national infrastructure projects as well a movement to remove federal barriers to internal trade to enhance the Canadian economic union. However, the details of what is going to be done remain a work in progress and that suggests that there are still opportunities to put forth new ideas. If Canada is going to embark on a period of building a larger internal economy and putting in place national infrastructure projects, attention needs to be paid to the transportation links that knit the economy together - in particular, the road network.

The highway and road transport network in Canada has been key in facilitating our trade and commerce particularly with respect to the United States. Truck transportation accounts for nearly half of the Canadian exports shipped to the United States and nearly 70 percent of the goods imported from the United States. The east west dimension of Canadian internal trade should also not be underestimated when examining the role of road transport in facilitating the Canadian Economic Union. For example, it has been noted that “$528 billions of goods and services moved across provincial and territorial borders in 2022—equal to 18.8% of Canada's gross domestic product. Furthermore, one-third of Canadian businesses participated in internal trade by buying or selling goods across provincial and territorial borders in 2023.”

If there is to be more east-west internal trade within Canada as trade barriers are removed, it stands to reason that much of this commerce will flow through the Highway 11-17 corridors in northern Ontario. However, the roads here are already severely stressed by the post pandemic increases in transport trucks and associated accidents. According to the OPP, 60 percent of fatal crashes in Northwestern Ontario alone (21 fatalities) in 2024 involved transport trucks. This is not surprising given the increase in truck volume as well as the two-lane nature of much of the highway system in northern Ontario. While there are more passing lanes in place than 20 years ago, in many respects little has changed in what is a vital zone of national transit. As noted in a much earlier pontification on this topic:

“Canada is the largest developed country in the world without a system of fully grade-separated roadways that allow uninterrupted traffic flow between its major urban centres. The key roadblocks include the two-lane stretches from the Manitoba border to Sudbury and much of the route between the Alberta border and Kamloops. Most importantly, the Trans- Canada is still a two-lane stretch through the vital zone of transit through northwestern Ontario connecting the East with the West from the Manitoba border to Sudbury, leaving the nation's east-west flow of personal and commercial traffic subject to the whims of an errant moose. The slow travel times and disruptions make cutting through the United States an attractive option for east-west travellers, despite the absence of an Interstate route along the border, but U.S. border crossing formalities have also made this more difficult and time-consuming.”

If U.S. border issues were a concern two decades ago, they are even more significant now. In improving the east-west highway link through northern Ontario, there are definite challenges of cost rooted in both distance and geography but if the Europeans can tunnel through mountains to build their autobahns and autostradas, then surely, we can deal with rocks, trees and muskeg. There are two key highways – Highway 11 which can be termed the northern route and Highway 17 which can be term the southern route though both come together as 11-17 from Nipigon to Shabaqua. While a portion of the stretch between Nipigon and Thunder Bay is being four-laned, after nearly 20 years the four-lane project here is still not complete. Moreover, it remains that there is a bottleneck at Nipigon given the national highway system comes to one choke point at the Nipigon Bridge which is subject to disruptions.

What should a national project to improve the Trans-Canada through northern Ontario look like? Here is my suggestion. Highway 11 from North Bay to Nipigon should be four-laned. The 400 from Barrie to Sudbury is nearly completely four-laned. After Sudbury, constructing four lanes on highway 17 is more problematic for several reasons but Highway 17 from Sudbury through to Sault Ste. Marie to Nipigon should be subject to 2+1 upgrading – essentially a three-lane highway with a centre passing lane that alternates every two to five kilometers.

While the Ontario government is planning to do this on Highway 11 north of North Bay, the entire stretch of Highway 17 from Sudbury to Nipigon should be done this way. Highway 11-17 from Nipigon to Shabaqua should be four-laned. Highway 17 from Shabaqua to the Manitoba border should be four-laned. And, if more resilience is desired given the potential bottleneck at the Nipigon bridge, thought should be given to an additional crossing over the Nipigon River between MacDiarmid and Nipigon that would consist of a 2+1 highway to Upsala. There is also the issue of Highway 11 past Shabaqua that ends in a U.S. border crossing leaving only one major highway crossing between Manitoba and Ontario that may need to also be explored. However, a bottleneck on flat land is in somewhat of a different league than one over a water crossing.

Of course, the element of cost here is paramount. Estimates of the cost per kilometer for 2016 for northern Ontario alone suggest a range between $350,000 and $550,000 per kilometre. One suspects that in the wake of the pandemic like everything else, costs have grown substantially. However, we have both a Prime Minister who wants to nation build as well as strengthen the Canadian economic union and facilitate more internal trade as well as an Ontario Premier who wants to invest in nation building projects that includes a tunnel under the 401 and a deep water port on James Bay – not exactly cheap projects. The transport infrastructure for a stronger east-west commercial union is necessary and yet has been strangely missing from both the national and provincial discourse.

Nevertheless, it is somewhat refreshing to have a government that seems ready to embark on aspects of sovereign reconstruction (after a decade of what I suppose can then be termed sovereign deconstruction). However, when to comes to sovereignty and enhancing our national economic space, words are not enough. There will need to be action and that action will require investing in transportation infrastructure that enhances Canada’s economic space as an economic union. Improved highway links through Northern Ontario are key to doing this and a start would be our northern Ontario federal and provincial MPs and MPPs recognizing this and making the case.

Tuesday, 6 May 2025

Canada's Effective Tariff Rate: 1870 to 2024

I had a recent piece in The Hub dealing with President Trump’s current tariff policies that included a chart on the average effective tariff rate on US imports from 1870 to the present. In its wake, Almos Tassonyi contacted me and asked if I was planning to do something similar for Canada. Honestly, it had not occurred to me but thanks to Almos for the suggestion and this post presents data on Canada’s effective tariff rate on imports. It is just in time for Prime Minister Carney’s trip to Washington and he might like to point out that historically, Canada has had lower effective tariff rates on imports than the United States. But then, that should not be surprising given that we have always been a small open economy with trade as an important contributor to our economy.

The accompanying chart plots both the US average effective tariff rate taken from the previous article on The Hub alongside the Canadian average effective tariff rate. The average effective tariff is the ratio of tariff revenues to the total value of all imports rather than tariff revenues to the value of dutiable goods imported. Since 1870, the average tariff rates on dutiable imports have been higher than the average effective rate. And of course, the actual rates imposed are higher in relation to effective tariff rates whether based on the value of imports or the value of dutiable goods. For example, during the National Policy Tariffs (1879-1897), the rates on manufactured imported goods ranged from 17.5 to 45 percent with some goods of course free of tariffs.

The data on tariff revenues and the value of total imports for Canada is taken from several sources: The Jorda-Schularick-Taylor Macrodata Base, Historical Statistics of Canada (H1-18), the 2024 Fiscal Reference Tables (Table 6) and FRED. Figure 1 plots the Canadian average effective tariff rate alongside the US one and both have declined over time. Over the entire 1870 to 2024 period, the average annual Canadian effective tariff on imports has been 9.9 percent compared to 12.5 percent for the United States – 21 percent lower. There have been periods when our effective rate has been below the US rate but also periods when it has been above.

From 1870 to 1914, the annual average US effective tariff rate was 27 percent while ours was 17 percent. During the WWI period (1914 to 1918), the Canadian average was 17 percent while the US fell to 10 percent. During the 1920s, the average rates of the two countries tracked quite closely but after 1930, the trade war era of the Smoot-Hawley tariffs saw the average US tariff from 1930 to 1939 at 17 percent while Canada’s was at 14 percent. The post-World War II period is marked by a steady decline in average effective tariff rates in both countries with the 1950s to the 1970s seeing generally higher rates in Canada than the United States. The average annual effective tariff rate in Canada from 1950 to 1979 was 7.5 percent while for the United States it was 6 percent. The late 1980s saw the arrival of the Canada-US Free trade Agreement and the 1990s saw NAFTA and in their wake, tariffs came down. However, since 1990 the average US effective tariff rate has been higher than Canada’s. From 1990 to 2024, the annual average Canadian effective tariff rate on total imports was 1.1 percent while for the United States it was 2 percent – nearly double the Canadian rate.

Going forward, the average US effective tariff rates are going to be higher, but it is uncertain where exactly they will land. At present, estimates have ranged from 14 percent to over 20 percent, but these are likely to be unsustainable in a world that is more globalized and interdependent that current US policy makers seem to realize. However, I would not be that surprised to see effective average tariff rates return to and stabilize at late 1970s to early 1980s levels which would bring us close to about 5 percent. That does appear to be the time period where many of the current President's economic views, such as they are, were nurtured. Time will tell.

Friday, 2 May 2025

Making Major Decisions at Thunder Bay City Council-Part II

As noted in the previous post, the last few weeks at Thunder Bay City Council have been busy with three major decisions of particular note: not approving changes to council composition, approving the Kam River Heritage Park site as the location for a temporary village of tiny homes to address homelessness and finally, not shutting down the County Park location and adding Intercity Mall as the location for a new more centralized library. These were particularly thorny issues to deal with on several fronts and my take is that the correct decision was made in two out of the three cases. In the last post, I provided my thoughts on the two decisions I think City council got right: sticking with the status quo on council composition and not putting a large new central library in the Intercity Mall. However, on the third decision – going ahead with the Kam River site for the tiny homes project- I beg to differ. However, there may yet be a silver lining to the decision made if it is truly a transitional decision and time it buys used to bring about long term social and geared to income housing.

After several other tries at establishing a tiny homes village first on Miles Street (which is separate from another project by Alpha Court), then in Intercity, and then on Cumberland Street, the nod has now been given to the Kam River Heritage site – for now. This has been somewhat of a merry go round in terms of location selection. There is still another meeting for final ratification, however, and this location decision has been made and reversed before. However, my feeling is given the cycling across locations, City Council will stick with this final choice if only to avoid further eroding their credibility.

This has been a charged and emotional issue given the need to address the homeless problem and the presence of tent encampments under third world conditions. There are also the many concerns as what the impacts of such a village will be on adjacent residences and businesses. And to be fair, this is not just Thunder Bay’s problem, but the provincial and federal government’s problem given there are homeless encampments across the province and the country.

In the end, several reasons were advanced as to why the Kam River site should be selected including proximity to essential services, the fact the area already houses an encampment, and that it is in keeping with the City’s strategic plan. After numerous delays, there is also a sense of urgency to put the project in place to not jeopardize provincial funding though making decisions to just get the money is never sound public policy.

However, a key concern raised has been safety of the residents given the proximity to water and rail tracks with the prospect of drownings up front and center. The City Manager commented that “You can drown in six inches of water like you can drown in 12 feet of water. The depth is not really the consequential issue. It's clearly delineating it, making people understand the risks, and putting in some prevention measures." This somewhat less than sensitive response in the wake of recent history along our waterways also omits the reality that a drowning is a drowning whether in six inches or 12 feet of water and if it is a municipally run village on city land there will inevitably be additional liability issues. Safety is a big issue with this site.

As well, even with these tiny homes, encampments will still not be eliminated as the tiny home village is part of a city homelessness plan that includes three approved encampment sites. Also not addressed as a concern is the reality that this plan - unlike the other sites considered - puts the tiny village essentially out of sight and out of mind by locating it where it will not be easily seen. This will be a problem given that the project is supposed to run for only five years as “permanent” solutions are brought into play. However, if the problem disappears from public view, it will be difficult down the road to generate the attention and the resources for permanent solutions. The risk of hiding the problem is that long term solutions will go onto the back burner.

Then there is the cost. According to the media reports, Thunder Bay will spend $5.5 million to construct an 80-unit "tiny home" village, with the province contributing $2.8 million of that, and has targeted operating costs for the first year at $1.5 million. So, over the five-year span of the project, the total cost for 80 units based on these numbers will be close to 13 million dollars. Given the history of public sector capital projects at the public sector level in Thunder Bay, one can certainly expect cost overruns in the building and operation of these tiny homes. Hamilton (always my favourite example) has also erected a “temporary” village to house its growing homeless population with the cost for 40 units (80 beds) originally forecast at $2.8 million but that has ballooned to $7.9 million or about $100,000 per bed. Operating costs annually are apparently going to be $40,000 per bed.

Is this a problem? Well, in the case of Thunder Bay, think about it this way. Spending $13 million for 80 tiny units over five years works out to $162,500 per unit – or $32,500 annually. Thunder Bay is currently undergoing an apartment building spree financed by federal and provincial housing money which is increasing the supply of rental units but not necessarily increasing the stock of affordable housing because two-bedroom units in these new build apartments are going for as much as $2500 per month. At $2,500 per month, the annual rent is $30,000 per year. Essentially, for the same amount of money, the City of Thunder Bay could simply house up to 160 homeless people in new existing two bedroom apartments for the next five years in very nice lodgings. If older buildings at somewhat lower rents were put into the mix, then you could house even more homeless people.

Of course, this modest proposal of a solution is not going to happen. One suspects that current rental accommodation landlords in Thunder Bay are not terribly interested in helping solve the city’s homeless population problem in a manner that might affect the value of their investments or the building environment of their current mix of tenants. This does however lead to what I think the longer-term solution could be.

Given the private sector does not appear to be either capable or willing to provide new build affordable housing and given the amount of money that is being spent simply for tiny homes, there can be a public sector role in longer term housing solutions. There needs to be more social housing – administered by the district of Thunder Bay Social Services Administration Board (DSSAB) and funded by the City of Thunder Bay, the Provincial and the Federal governments with local groups (such as Alpha Court as well as Indigenous organizations) in partnership. The partnership approach is key and has been noted by others. Small apartment style buildings providing social housing and geared to income units need to be built in multiple locations throughout the city with city owned and other public land in the downtown cores and city being possible locations.

Again, as outlined in a much earlier blog post, a good model here is Finland which has through the building of social housing complexes that provide places to live and a fixed address for those requiring access to government services dramatically rescued its homeless population. As I have noted, “People who are homeless need to be housed and housed without questions being asked. Creating a complex or dispersed network of complexes of transitional emergency housing with very small personal units combined with social support such as a community kitchen, social workers and even a nurse practitioner and mental health workers and basic security on site would be one way of dealing with the homelessness crisis.” And once lives are stabilized in these homes, the next step is placing them in geared to income units. As far as I am concerned, tiny homes on a riverbank are at best an expensive band-aid solution. If you are going to be spending tens of millions of dollars, you need to be leveraging that money into permanent solutions, not stop gaps. True, the social housing approach is seen as more expensive, but it is more likely to solve the problem rather than dilute or obscure it. Moreover, the tiny homes approach is not exactly cheap either.

Still, these are all complicated questions, and one certainly does not envy the people who must wrestle with them. I suppose getting two out of three decisions right is not a bad score but as my old high school motto would say - Agimus Meliora – let us strive for better things. And doing better in the case of homeless encampments given that the Kam River site is likely a done deal, is to gain redemption by using the next five years to fully implement long term solutions and not hide problems along a riverbank.

Thursday, 1 May 2025

Making Major Decisions at Thunder Bay City Council-Part I

It has been a busy few weeks at Thunder Bay City Council with three major decisions of particular note: not approving changes to council composition, approving the Kam River Heritage Park site as the location for a temporary village of tiny homes to address homelessness and finally, not approving Intercity Mall as the location for a new more centralized library and shutting down the County Park location. These were particularly thorny issues to deal with on several fronts and my take is that the correct decision was made in two out of the three cases.

First, let us start with council composition. I have already opined on the shape of councils to come and the long and short is that City Council made the right decision in sticking with the status quo. My reasoning is not that City council might not benefit from a different model but replacing a seven ward and five at large plus mayor model with the proposed four wards with two ward councillors each plus two at large and one mayor did not represent a major improvement to either representation or decision making on municipal issues. Cost savings from moving to fewer councillors was always a red herring because the few thousand dollars in savings from going to 11 members from 13 was minor and cosmetic given a combined total capital and operating budget well over half a billion dollars.

The representation issue is more serious in that the proposed model would have essentially subsumed rural interests in Neebing and McIntyre wards and local neighborhood issues would have been lost in the new wards each with a mish mash of rural, urban, industrial and commercial interests. Having two ward councillors in each of these wards seemed to be an attempt to have council composition resemble a more at-large system without having a fully at large system. A “Larson” compromise it was not because the rejected model created more problems than it solved.

A fully at large system would in many respects be the least favourable outcome given the reduction in accountability to ratepayers who would no longer have a dedicated ward councillor. That is a major problem with any fully at large system given that residential ratepayers foot 70 percent of the operating budget tax bill. The partial at-large system being proposed created a more complicated set of representation problems for ward councillors while at the same time confusing who was responsible for the ward by providing two councillors who each could behave as an at-large ward councillor if they wished to avoid more pedestrian local issues. And in terms of the desire for change and “cost savings”, informal surveys suggested an eight member council plus Mayor was desired by the public rather than what was advanced even though again the cost savings here would be relatively minor.

As noted in my previous post, the public desire rightly or wrongly favored a smaller council of eight plus a mayor and “Going down to eight councillors plus a mayor would likely save several hundred thousand dollars – again a small sum compared to a budget in the hundreds of millions – but enough to increase resources available to perhaps attract better candidates. This does not necessarily mean raising salaries for councillors but could even involve providing funds so that they can hire some independent research support so they can better inform themselves on issues.” This option but as an eight-ward and not all at large model plus a mayor would have been my preferred option. However, this model was never on the table and after the time spent of this process, council composition is off the table for many years to come.

Second, the nixing of the Intercity library location. The current CEO of the Thunder Bay Public Library is rather energetic and persistent as this was the second attempt to foster change and bring about a central library at Intercity Mall. However, as can be the case with leaders who believe they see things that others do not, you cannot take people where they do not want to go. Moreover, closing a neighborhood library (County Park which is indeed in a neighborhood shopping mall) to provide a more centralized location in the Intercity shopping area where no one really lives – is not necessarily a service enhancement. While it may on the surface appear to be a more accessible and convenient location, for families with kids, heading to the library becomes more of a destination event rather than part of a routine. Moreover, the focus on having a large, centralized facility is at odds with the dispersed nature of Thunder Bay. It might work but it is an expensive experiment and the cost of the project – even with contributions from the mall owners – were substantial and not likely to be fully recouped on the operating side from closing the County Park branch.

But there is more. The informal sentiment in Thunder Bay – and not mine - is that books are very 20^th century and that indeed you might want to look at having fewer libraries rather than more. I see that sentiment as a more North American affectation given that if you go to Europe, bookstores and libraries with hard copy books still proliferate (try visiting Dublin). It is possible that in years to come, books will indeed enjoy a renaissance as the inevitable reaction against e-books and technology and a desire for retro sets in. If future libraries with books and electronic media that function as information and communication centers (rather than community hubs) eventually have a renaissance, the case can oddly enough be made that Thunder Bay is “under libraried”. That is, Thunder Bay could probably use a system with more small and dispersed libraries but not necessarily a system that concentrates resources at a few locations.

For example, the Hamilton, Ontario CMA with a population of about 785,000 people in 2021, has a City of Hamilton library system consisting of one central library in its downtown, 22 branch libraries of varying sizes, and a book mobile. However, the CMA also includes Grimsby (one library) and Burlington (seven libraries) Put another way, 32 library locations for a population of nearly 800,000 people. The Thunder Bay CMA with a population in 2021 of 123,000 has four libraries. Based on the population and total number of municipal public libraries in the Hamilton CMA of 785,000 to 32, Thunder Bay’s 123,000 CMA population should have 5 municipal public libraries rather than 4.

At first glance this seems to support the case for a library at the Intercity area given that there are already four branches in existence. However, I would argue that there is a better case for six smaller libraries - none of which would be in Intercity. Thunder Bay’s current library system is rooted in a population distribution that comes from its history as two cities. So, there are two large central libraries and two smaller neighborhood libraries. The downtown Brodie and Waverly locations in a sense are too large given that over 75 years population has moved away from the core areas.

What might work better is six libraries each about the size of a County Park or Mary JL Black. So, what this might suggest is a downsizing and refurbishment of the two downtown branches – Brodie and Waverly – in terms of their collections with each having a collection about the size of a MJLB/County Park. Furthermore, one would house the archives/reference section and the other library admin and storage (which is not far from current reality). Two new smaller branches would be put in place – one somewhere in the Northwood area or perhaps Parkdale and the other in the Current River area. Essentially a system with smaller branch libraries providing more neighborhood access. Can this work? Maybe? Will it happen? Not likely. Capital costs are capital costs whether for small, dispersed facilities or larger centralized ones. One cannot discern any appetite for major new capital library projects in Thunder Bay given the focus is on recreation facilities.

Next post - Conclusion.