The Long Saga of Arrested Development in Northern Ontario

 

Ontario has suffered from slowing economic growth over the course of the late 20^th and early 21st century but nowhere in the province has the problem been as severe as in northern Ontario.  From 1990 to 2005, total employment in Ontario grew 23 percent and real per capita GDP grew by 17 percent.  However, even omitting the pandemic year, going from 2005 to 2019, Ontario’s total employment grew only 15 percent while real per capita GDP grew by 8 percent.  There is a similar trend of slowing employment growth after 2005 on a regional basis but some regions - especially the north - have fared worse than others.

 

The most alarming picture comes from a glance at the overall employment growth picture from 1990 to 2019 (we need to omit 2020 because it is the pandemic year and makes things look even worse). As the accompanying figure shows, from 1990 to 2019, total employment in Ontario grew by 42 percent.  The fastest growing regions were Kitchener-Waterloo-Barrie, Toronto/GTA and Ottawa.  This triangle region has indeed become the new core of the Ontario economy with the rest of the province increasingly being relegated to more peripheral status with the peripheral nature worsening the farther out from this core.  In Ontario, being out of sight of Toronto in the end also means being out of mind.    Indeed, the most distant regions from this core – Stratford-Bruce, Windsor-Sarnia and the North have done the worse.  But it is only the North that has seen long-term employment decline over the course of thirty years with the Northeast shrinking by 1 percent and the Northwest by 7 percent.

 

 

 

 

Of course, the first response of most members of northern Ontario’s mover and shaker elite will be to rear up on their hind legs, shake a finger at government and bemoan their failure to promote northern economic development and argue we need a new program to address northern needs.  The fact is, it is not that there has been insufficient attention by government.  Indeed, the most significant growth industry of the last thirty years has been in government funded studies, reports and programs designed to kick start the northern Ontario economy and help engineer a new golden age of growth.   Here is a quick list of major initiatives at both the federal and provincial level that show the last 50 years has seen a plethora of plans, programs and policies.  Here they are:

 

Federal

 

1969-1987 Department of Regional Economic Expansion (DREE)

1987 to Present FEDNOR (1987 – present)

2018 to Present Prosperity and Growth Strategy for Northern Ontario

 

Provincial

 

1966 Regional Development Councils established (NWORDC & NORDC).

1970s Design for Development: Designation of “Primate Growth Centers.”

1970 Creation of Northern Affairs Branch within Department of Mines

1977 Ministry of Northern Affairs Created

1977-85 Royal Commission on the Northern Environment

1985: Ministry of Northern Development & Mines established

1985: Advisory Committee on Resource Dependent Communities: Rosehart Report

July 1986 Northern Ontario Relocation Program (1,600 public servants to North).

1987 Northern Ontario Heritage Fund

1999 Regional Development Teams

2002 Smart Growth Panels

2004 Northern Prosperity Plan

2005 Northern Development Councils & GO North Investor Program

2008 Northwestern Ontario Report: Rosehart as Facilitator

2010 Far North Act

2011: Northern Ontario Growth Plan – a “25-year plan” to strengthen Northern Economy

2011 to Present: Highway Four-Laning/Ring of Fire promotion/Northern Policy Institute

 

It is not that there have not been enough government attempts to save the north, it is that they have all been ultimately unsuccessful or at best a short-term holding action because they have not addressed the fundamental core economic problem of the region.  The three major engines of northern Ontario economic development are natural resources, transportation and indeed government.  During northern Ontario’s development, economic growth was most robust during eras where all three engines came together to provide the impetus for economic growth and employment creation. 

 

The most robust periods of economic growth and development occurred during the eras from 1867 to 1913 and 1946 to 1969.  Both of these eras coincided with good global economic conditions which fostered a demand for resource products and led to private capital investment flowing to production facilities and transportation networks.  Both of these eras also saw a large spending and policy role for government particularly in infrastructure which facilitated resource development.  However, the institutional environment of a region dependent on external decision making both in terms of public and private sector decisions  resulted in an inability of the region to retain maximum benefits from resource development. The fundamental problem is one of arrested economic development rooted in the long-term inability of the economy to diversify beyond the industries that powered its original takeoff because of the inability to substantially retain the economic linkages generated by those industries. 

 

Successful development and diversification via linkage retention requires retaining a greater share of the income through local entrepreneurs and government institutional policies to allow for local decision making in the development of the natural resource export base – the region’s comparative advantage.  Aside from wages to labour during the labour-intensive phases of development, the vast majority of the income flows from northern development went to external owners of investment capital in the railway, mining and transportation sectors who also made the investment decisions.  Absence of such flows reduces the opportunities that exercise and promote local entrepreneurial talent and development.  It is not that were no successful local entrepreneurs in forestry, mining and transportation.  It is just that there were not that many and they did not persist.

 

The failure of persistence of local entrepreneurial magnates was partly a function of being able to make more money elsewhere and partly the result of government policy at the federal and provincial level.  Government institutional decisions regarding taxation and natural resource policy were external as they were made at Queen’s Park or Ottawa.  Moreover, during the first 50 years of northern development, the private income flows out of the region were complemented by the resource rents going to Queen's Park from forestry and mining - that on average provided about 20 percent of provincial government revenues.  In northern Ontario’s case, it was bereft of its own institutional capacity for promoting linkage retention by being part of Ontario rather than a separate province such as Saskatchewan or New Brunswick. Government decisions were made more to promote provincial or national development strategies rather than the long-term economic success of the region.   In the end, the north was useful in driving economic opportunities for Ontario and Canada but ultimately expendable.

 

All those plans and programs?  They were not designed to actually really do anything that mattered.  They were short term political bones thrown to placate the locals and secure elections by providing evidence that government did indeed care.  And, in the short run they did create a few temporary jobs and allow some people to make money before moving on, while all the while professing how much they loved the north.  The long run implications are now evident.  Arrested regional economic development.

Moving Beyond the Pandemic in Ontario

 

With each passing day, the new COVID-19 case count has been diminishing in Ontario.  Today’s tally was 114 and there were zero deaths.  Indeed, the number of daily deaths has been in the single digits since July 1^st.  For Thunder Bay District, the last while has  seen a zero daily case count more often than not  There are only two active cases in the District and the hospital has no COVID cases.  And vaccination rates continue to grow with 69 percent of all people in Ontario having received at least one dose and 47 percent being fully vaccinated with two doses.  For the time being, the pandemic is practically over, and the province is slowly reopening its economy with the third stage set to begin this Friday.

 

 

 

Moving forward, the challenge is many-fold.  First, the damage done to the economy is significant.  Ontario had the most protracted lock down in Canada and indeed in much of the developed world.  There are many businesses that after such a protracted lock down will not reopen.  The implications for business formation and investment is serious.  Moreover, the reopening is proceeding at such a slow pace that it may indeed be too late for many businesses.  Employment is rebounding but we are still not where we were before the pandemic.  In 2019, total employment in Ontario stood at 7.377 million employed persons.  In 2020 it fell to an annualized 7.022 million. As of June 2021, the most recent numbers suggest that at 7.273 million, we are still not there yet.

 

And, try getting anything done.  Employment and labour force participation have both shrunk.  The labour shortage which has been underway due to the aging of the population has been made worse with the shutdown and withdrawal of labour not to mention the reduced immigration of the last year.  Indeed, if Thunder Bay is any indicator, trying to get anything done in terms of household repairs and services is very difficult. Everyone is booked and prices have gone up.  Thunder Bay was always a difficult place to get things done without a bevy of personal connections often acquired in high school and the problems seem to have become worse in the wake of the pandemic. 

 

Yet the recovery continues, but much depends on what happens next with the pandemic.  The summer is a golden time and for the post-pandemic recovery to continue beyond September vaccination rates must continue to rise.  With new variants percolating around the world and travel resuming, getting total double vaccination rates above 80 percent is crucial.  September and the return to more indoor activity will be an important test as to whether or not we really have got things under control.

 

While it is important to relax restrictions as normalcy returns there is one restriction that should be maintained for the remainder of the summer and into the fall and it should be a very simple one – if you are in an indoor public space, you must wear a mask.  It is true other provinces are already moving away from this but in my opinion this is premature.  I think you can probably open everything up for indoor activity – gyms, theaters, dining etc… with fairly generous capacity constraints but the one thing that should be maintained is a face mask particularly this fall. Even in a restaurant, except at your table with your designated dining partner or party, there needs to be a face mask on the way in and as soon as you leave your table with servers always masked.  It’s a simple rule and one with the greatest benefits in preventing a resurgence until the vaccination rates are much higher.  

 

Whether we are up to this final task or plan to throw this modest caution to the winds remains to be seen.

 

A Pandemic of Poorly Prepped Puppies

 

One of the many interesting features of the COVID-19 pandemic has been the increase in people seeking the solace of pets of all types.  Adoptions and sales of dogs for example have soared in Canada and indeed in other countries.  The buying frenzy is reminiscent of other frenzies at different points in the pandemic ranging from toilet paper to outdoor space heaters to bicycles and exercise equipment.  In the United States, pet industry sales grew by nearly 7  percent in 2020 and associated food, treats and supplies grew 10 percent.  However, buying a living thing is not quite the same as an inanimate object and any subsequent buyer’s remorse a more serious issue.  Indeed, around the world, animal shelters are apparently starting to see an upsurge in older puppies with “behavioural issues.”

 

An increase in the supply of canines across a wide spectrum of owners who might not normally have acquired one means that there are a lot of first time dog buyers who think the natural and proper relationship between a person and a dog is somewhere between that of a Disney cartoon and your best friend from high school.  Indeed, the tendency to treat dogs and pets as members of the family has grown and just as many parents are indulgent with their children, so too are many dog owners.  The result is a pandemic of poorly trained and undisciplined dogs who essentially own their owners rather than vice versa.  Indeed, there are so many dogs that one is surprised that government have not decided to tax their ownership as a way of paying down post pandemic debt.

 

The pandemic has aggravated what is a canine behavioural problem sometime in the making.  It has come to a head during the pandemic and nowhere more so than during the last few weeks whether sitting on my deck or going for a walk.  The standard young couple today is no longer two people and a couple of kids but two people and at least one or more dogs and sometimes a cat or two for good measure.  And when they walk their family members, the dogs are not always well behaved on their leash.  Indeed, we have now come across several who are not on their leash or even if on a leash dart right out at you and begin to paw you supposedly because they want to be your friend.  Of course, if I behaved in a similar way towards the pedestrians I came across on my local walking trail, I imagine I would soon be a featured on the local newscast in a most unflattering manner and soon after would have to spend some time in forcible confinement.

 

The fact is that many dogs are not being properly trained and they are becoming a hazard to other pet owners as well as people who do not own pets.  Today, an off-leash dog barked and chased after us in a nearby park while its owner was off ruminating thoughtfully in the distance.  Later in the day, while driving, we saw another off-leash dog scamper across the street pursued by an arm flailing owner entreating it to please come back.  Yesterday, a person with two rather large German shepherds paused to check their phone as we walked by and barely prevented one of the dogs from successfully lunging as I walked by.  And the coup de grace, several weeks ago a rather large and ill-tempered dog actually got off its leash and attacked another two small dogs out for a walk with their owner. 

 

It is probably only a matter of time before more serious incidents start to emerge in greater numbers as playful puppies turn into more hellish hounds.  Needless to say, while your friendly neighbourhood spider man might say, with great power comes great responsibility I would add that great responsibility also comes with dog ownership.  

 

 

Thunder Bay Budget 2022: Once Again the Drama Begins

The City of Thunder Bay has launched its Budget 2022 consultation process with a town hall meeting that occurred on Tuesday of this week.  The online meeting hosted by the elected chair of the finance committee as well as the treasurer and city manager, provided an overview of city finances as well as the opportunity to ask submitted questions.  Of course, this ensured that nothing would be said about the ongoing leaky pipe saga which continues unabated in city neighborhoods or indeed anything else deemed too awkward. Not surprisingly, given the federal and provincial abundance that has been showered on municipalities everywhere, the financial impacts of COVID-19 in 2020 were borne well and even generated a surplus of about $4 million.   The presentation also made the usual plea for funding infrastructure deficits which apparently is estimated at $20 million every year.  It is a deficit which no matter how much is spent just seems to get bigger.

The presentation on the city's finances was actually useful in that it tried to present a discussion of how the basic budgets fitted together in terms of tax and rate supported expenditures as well as the capital budgets and provided a breakdown of where the money went.  The City Manager did go on to say that the budget was complex and the plethora of multi-colored slides did certainly convey an impression of complexity.  However, municipal budgets are actually not that complex - they are only presented in such a manner because it is to the advantage of administrators who may want to manage the amount of scrutiny. 

The CD Howe Institute has already noted that municipal budgeting in Canada is a bit of a travesty with opaque and late budgets that impede understanding and accountability.  Moreover, the format of budgets differs from the public sector accounting standards used in year-end financial statements making budgeting very  confusing, even for elected councilors. The fact is the budget is really quite simple.  Money comes in and money goes out.  In general, more money comes in than goes out which is why there is an operating surplus that is then placed into reserves.  

The most entertaining part of the evening was the City Manager's response to a question as to why Thunder Bay's municipal staffing levels seemed to be so much higher than other municipalities with comparable populations which of course leads to the real elephant in the room, the number of employees on the provincial sunshine list.  The answer provided was that the comparisons provided - municipalities like Kingston, Cambridge, Guelph, Waterloo and Whitby - were not really appropriate because they were lower tier municipalities.  Thunder Bay was a single tier municipality and responsible for delivering police, fire and paramedic services whereas these other lower tier municipalities only had to do fire. Indeed, the dancing around required to answer this question and other questions suggests that the current City Manager may have a promising future as a chief medical officer of health at either the federal or provincial level.

Now, Ontario does have two broad  types of municipalities: upper-tier and local with the latter divided into lower tier and single tier municipalities.  County and regional municipalities are considered upper tier.  A single tier municipality is a lower tier municipality that is not part of an upper tier.  A lower tier municipality is a municipality that is part of an upper tier - the City of Waterloo for example is lower tier because it has both a local municipal authority and is part of a regional municipality.  On the other hand, all the northern Ontario municipalities are considered single tier - including Sudbury, which despite being considered as a regional municipality, is regional only in terms of its geographic coverage. 

So, given that we should compare apples with apples, let us compare the five major northern Ontario municipalities in terms of their sunshine lists: Thunder Bay, Timmins, Sault Ste Marie, Greater Sudbury and North Bay.  Figure 1 presents the number of municipal workers earning more than $100,000 in 2020 and not surprisingly, the numbers track pretty closely with population size with Sudbury in first place with 592 employees on the list and Thunder Bay next at 557.   North Bay comes in next with 187, then Timmin with 144 and Sault Ste Marie - which is actually bigger than North Bay or Timmins - at only 114.  

 

 

Figure 2 takes the total salary bill for its members on the provincial sunshine list and divides by the number of employees on the list to provide the average salary per municipal sunshine lister.  In this chart, North Bay comes out on top at $131,015 per municipal sunshine lister followed by the Sault at $127,787.  Then comes Thunder Bay just below the Sault at $127,319 followed by Timmins at $121,643 and then Sudbury at $120,912.   This particular ranking would probably be the most pleasing to city administrators as it places Thunder Bay in the middle of the pack.  Expect to see this slide in a future City of Thunder Bay budget presentation.

 

 

However, the real comparison should be relative to your resources available and in this regards it is always per capita comparisons that should be done if you want an estimate of per person effects.  Population is correlated with the size of your economy and resources available so what happens when we take the total salaries paid to municipal sunshine list members and divide by city population?  Figure 3 shows this and reveals that Thunder Bay spends about $640 dollars per capita on its municipal sunshine list employees, well above the next highest North Bay at $475.  Sudbury is next at $434 followed by Timmins at $419 and Sault Ste Marie at $199.  Thunder Bay spends 35 percent more than North Bay in per capita terms and 47 percent more than Sudbury - which stylizes itself as a "regional" municipality.

 

 

The truth probably is that Thunder Bay spends so much because it is behaving on the expenditure side like a regional government especially in district housing, paramedic services and public health but it has the resource base of a single tier municipality.  Needless to say, we have here an irresistible spending force which has yet to come up against an immovable budgetary object.  That immovable budgetary object is the property tax and rate paying property owner of Thunder Bay whose taxes on comparable properties across these five cities are generally higher.  Property owners in Thunder Bay are essentially helping to pay for a regional empire they probably did not ask for.

Growing Old in a World without Personal Services

 

The retail reopening in Ontario this last week prompted my wife and I to go shopping for new mattresses given our decade old ones were a little worse for wear.  We went to one of our local “big box” furniture stores in Thunder Bay.  There are only three here so as a skill testing question,  if you want to know the one we purchased at, its name translates into Italian as il mattone.  It was a pleasant experience and efficient and unlike some of the other purchases we have made over the last few months, this product did not appear to be stuck on a container ship in the Suez Canal and arrived within a few days. 

 

The delivery people came while I was out foraging for food, and my wife took the delivery.  The delivery people were polite, quick and efficient and took out the old mattress and box spring for disposal.  We were told in advance we had to place them into the prepared bags provided.  The large heavy-duty plastic sheeting provided was reminiscent of the crime programs where a serial killer planning a nefarious murder lays out the material on the floor in order to dispose of the body, but I digress.  In any event the delivery went smoothly, and I actually arrived as the delivery people were leaving.  Upon entry, I found the new mattress and box spring were still wrapped, and we were required to unwrap everything – providing us with a new supply of heavy-duty plastic sheeting for any future crimes – and then put everything in place.  Which we did.

 

My point? My wife was surprised the delivery people did not unwrap and place the new mattress and boxspring when asked  – as was I. The reason?  As she was home alone, she expected the delivery people to do so.  There is a delivery fee after all and the instructions we had on a sheet dated March 2021 that were provided with the bill of sale even stated:

 

“Mattress & Boxspring will be unwrapped and placed in frames or on bedroom sets.”

 

Moreover, after checking, something similar is also stated on the company’s web site.  And yet, the delivery people stated that due to COVID-19 precautions they did not do set up of mattresses as part of their delivery.  The salesperson at the time of sale did not mention this was not done.  You can say we did not ask but really why would you?

 

My wife and I are still able bodied and given that we had to wrap the old stuff up for removal, we were quite capable of unwrapping and placing the new.  That is not the point of course. My wife was on her own at the time and could have used the help. As for COVID-19 precautions as the excuse, the delivery people apparently arrived without masks on and inquired if my wife would like them to wear masks before entering. It was nice of them to ask but so much for not setting up the mattress because of pandemic precautions.  They were obviously quite willing to work without masks if you allowed it.

 

In the end, if policy has changed on delivery and removal, salespeople need to state it at point of sale.  Of course, one understands reasons why not mentioning it might be an optimal business strategy.  After all, once mentioned we likely would have checked out a few more stores to see if they did full service when delivering.  Everyone wants a sale.  And during COVID one suspects a lot of companies like delivering with minimal effort because it saves money during a tough time. They will probably continue doing this because it saves money. This type of behaviour does reduce sympathy for all the businesses who have been clamouring for assistance, complaining that the pandemic has hurt business.

 

However, this is also not the real point. The problem here is the following.  If my wife had been a little 80 year old widow, they probably would have done the same thing – drop off the mattresses and leave her to her own devices.  Which brings me to the real point of this story.  There is an aging population and not everyone has a lot of young able-bodied friends or children living nearby to help out on a lot of personal services.  Even if you do, it would help to be told in advance you need to do something like setting up furniture on your own especially when a reasonable search of company documents says they are going to do it.  And even for the non-aging population, there are a lot more people on their own these days. The single largest household type in Canada now  is a single person rather than a more traditional two partner household.

 

I find the general lack of accountability a lot of businesses practice once they have made their sale pretty deplorable.  The long-term implications are pretty stark.  We are often told about how we need to have more home care and aging at home strategies and remain longer in homes by paying for services.  However, it turns out that there actually is not a lot of commitment to personal services in Canada and the few that there are tend to be quite pricey whether it is assistance with personal care, home maintenance, lawn care, snow removal and now by our experience, the delivery and installation of large heavy bulky furniture.   The problem will likely get worse.  Personal service is labour intensive and the pandemic seems to have made growing labour shortages worse given the substantial disincentives to work provided by easy government cash.

 

Of course many will counter that this is just the rant of a privileged boomer with multi-million dollar real estate  assets who just wants more.  However, I have always found demographic stereotyping of this nature rather odd because my demographic timing at the very tail end of the baby boom always seemed to give me more in common with the bust generations of the latter 60s and early 70s than the duck-tailed front end of the baby boom.  Whether it was job opportunities or housing or access to programs and services for the kids, it always felt like getting to a wedding reception at about 11pm. Sure there was dancing and a buffet but the substantial main course had been served a while ago.  

 

And as for the real estate, well I like a lot of other people do not live in Toronto or Vancouver.  If I liquidate my real estate, the assets are enough for a ten percent down payment on something equivalent in one of those cities.  And, good luck generating income to pay for services from any assets in retirement given the low interest rate policies being pursued which have essentially created a landholding aristocracy in major urban centers.  But there is always a silver lining.  Given the rather lack lustre defined contribution pension my university has,  I suppose upon retirement,  I may have a future providing personal services as an old family retainer to some suburban aristocrat in the GTA in return for room and board and a little cash for books.