NORTHERN ECONOMIST 2.0

Wednesday, 4 January 2023

Thunder Bay 2023 Budget Is Out: Highest Tax Levy Increase Since 2015 Proposed

The City of Thunder Bay has released its proposed 2023 budget and it looks like the biggest tax increase in recent years. The proposed budget is increasing the tax levy by 6.18 percent (just under 6 percent after tax base growth) which will raise the total tax levy by nearly 13 million dollars and bring the total tax levy to over 220 million dollars. As the accompanying figure shows, this will be the largest tax increase since at least 2015 and probably since 2006. In terms of tax levy increases for the 1991 to 2023 period, since 1991, Thunder Bay tax levy increases have ranged from a high of almost 22 percent in 1998 to a low of -1.7 percent in 1995. If enacted, this proposed levy increase will be the fifth highest since 1991. The current Mayor campaigned on keeping the tax increase low and reduce bureaucracy but this proposed budget comes apparently with an additional 50 full time equivalent employees. With inflation running at over 6 percent, the proposed budget comes pretty close to the inflation rate which is not unexpected as signals to this effect have been ongoing for months. However, one suspects the Mayor will at least make an effort at vocal displeasure at this increase given that it is the fifth highest increase since 1991, the highest increase in nearly twenty years and he was the mayor from 1997 to 2003 which means he was also in office as the Mayor during the highest levy increase in the 1991 to 2023 period. A legacy associated with some of the highest tax increases in Thunder Bay's municipal fiscal history is not something the mayor probably is interested in. The reaction of the rest of council and the public will be key. These are of course very preliminary numbers and reaction on my part and the full budget has yet to be posted on the city web site at the time of writing but will take a look at the details in coming days.

Tuesday, 3 January 2023

The Rise of the Polygon: The Evolution of Regional Concentration in Ontario

Last post, we looked at Ontario’s population and in particular its concentration in the GTA and what I termed the GTAPlus or "The Polygon" – a geographic area essentially going from Oshawa to the end of the Niagara peninsula and then to Kitchener-Waterloo and finally out to Barrie and back to Oshawa with Toronto approximately in the center. Approximately two-thirds of Ontario’s population and by extension its economy are clustered in this small area whose perimeter is about 500 km and encompasses a total area of nearly 14,000 square kilometers and a land area of about 11,000 square kilometers. On a map of Ontario, this area looks like a postage stamp and represents only about 1.3 percent of its area. Yet, well over nine million people out of Ontario’s 14 million people live here and it accounts for approximately 600 billion in GDP – nearly 70 percent of Ontario’s economy.

In many respects, this core area has always been the heart of Ontario’s economy but less so in the past in terms of its population, urban, and economic dominance. There was a time when Ontario had somewhat more dispersed and balanced urban and economic development but the economic development of the last century has increasingly concentrated economic activity in The Polygon. In order to provide some perspective on the evolution of Ontario’s population over time, we start with Figure 1 which plots the population of Ontario’s largest municipalities today ranked according to their 2021 population. These differ from CMA populations – for example, while Hamilton is the third largest CMA in Ontario, its municipal boundaries and population make it the fifth largest municipality in Ontario after Toronto, Ottawa, Mississauga and Brampton. Population size today versus 1921obscures the size of these cities 100 years ago so Figure 2 also plots the 1921 populations on their own.

Needless to say, the rankings have shifted somewhat over time. London, Ontario was Ontario’s third largest municipality in 1921 while Hamilton was fourth, Windsor fifth and Thunder Bay (then the two Lakehead municipalities of Fort William and Port Arthur) would have been Ontario’s sixth largest city. Ontario’s third and fourth largest cities today – Mississauga and Brampton were essentially small towns in 1921. Indeed, much of the GTA outside of the City of Toronto today in 1921 was at the bottom of the municipal population rankings. Indeed, when one considers these 30 largest municipalities (though Pickering and Ajax have been combined) – 23 of them can be considered members of the Polygon. These municipalities alone account for nearly 9 million people in Ontario today, representing nearly two thirds of Ontario’s population. However, in 1921, they totaled about 700,000 out of Ontario 2.9 million for approximately 25 percent of Ontario’s population.

Put another way, in 1921, nearly three quarters of Ontario’s population lived outside the Polygon whereas today it is at best one-third. The increasing concentration of economic activity and population in The Polygon – Ontario’s geographic top 1 percent so to speak – reflects the decline of resource sector (agriculture included) and manufacturing industries that had dispersed population prior to the mid 20^th century. The relative decline of cities such as Thunder Bay, Sudbury, London and Windsor – the North and Southwest regions of the province – reflects this economic shift. The growth of the Polygon cities reflects the rise of services and knowledge industries and the increasing importance of having large urban agglomerations with economies of scale and scope for associated industries and robust international connections to world cities as the source of growth.

Is this a problem? Well it depends on your perspective I suppose. The Polygon is a dynamic and growing population and economic cluster in Ontario and is essentially Ontario’s gateway to the international economy. While small and compact, it has a very diverse population given it is the end point for most of the international immigration into Ontario. By world standards, having 9 million plus people clustered on 11,000 square kilometers – over 800 persons per square kilometer – is not exactly at the top of the list. The Polygon is still quite roomy by world standards. For example, the Hong Kong SAR with an area of just over 1,000 square kilometers has about 7,000 people per square kilometer. Nevertheless, for the Polygon region to proposer, it will need continuing investment in infrastructure not least of which will be housing. It will also need investment in quality of life infrastructure such as green space and recreational facilities, not to mention transit. Still, these challenges represent opportunities for creative solutions and innovation. The most important challenge is the institutional framework given the patchwork of municipalities and jurisdictions in this area. Infrastructure development based on existing municipal boundaries is a sense fails to take into account the true scope of the Polygon as a growing and integrated region.

Some of those creative solutions will also need to address what happens to those living outside The Polygon. Here the challenges are more diverse. In the end, Ontario really consists of three regions - The Polygon, The Ottawa Nexus (Ottawa and the Kingston-Pembroke area) and then everyone else. Figure 3 outlines what this looks like in terms of distribution with the Polygon at closer to 10 million people here because Muskoka-Kawarthas are lumped into it for population purposes. The Ottawa region is the next largest outside of the Polygon but with its role as the federal capital and its own relatively compact outlying region, it will easily find its own solutions to its growth and development issues. More problematic will be those parts of Ontario outside of the Polygon and Ottawa Nexus, the Southwest from London to Windsor and upwards into the Bruce Peninsula and of course “The North” which with 90 percent of Ontario’s land area only has about 6 percent of the population. The interests of a high growth densely populated region like the Polygon will differ from these slower growth and lower population density parts of Ontario.

Needless to say, there will not be a one size fits all solution to economic growth and development in these regions but their success will ultimately all hinge on their ability to tap into opportunities offered by the Polygon and how to market the goods and service of their regions there and beyond. There is strength in numbers and it is time for cities like Windsor and London in the Southwest, Thunder Bay and Sudbury, in the North and Peterborough and Kingston in the East to forge better relationships within their regions and with each other to promote their common interests outside. These cities may have greater success by magnifying their lobbying power and political influence within Ontario by presenting a more united front when it comes to economic development issues. Easier said than done? Yes, but when it comes to the economic future, there is no say, only do.

Monday, 2 January 2023

Measuring Ontario: Introducing "The Polygon"

Happy 2023! This is the first post of the year. Northern Economist started out as a blog dealing mainly with Thunder Bay and northern Ontario economic and policy issues but over the years the posts have branched out into a wider range of topics with Ontario as a whole much of the focus. For 2023, I will be looking at Ontario issues a lot more given Ontario’s importance as an economy in its own right not only within Canada but indeed the world economy. At 14.2 million people, Ontario is the largest province in Canada making up 37 percent of its population. Within North America, if Ontario was a US state, it would be the fifth largest in terms of population coming in between New York (19.3 million) and Pennsylvania (12.8 million). If Ontario was a country, it would be the 75^th largest country in the world by population. And as for its economic size, with an estimated GDP of 956 billion dollars in 2021 ($707 billion USD), Ontario would be among one of the 25 largest economies in the world. Yet, most of Ontario’s population and economy is highly concentrated in a rather small geographic area as illustrated in Figure 1.

As part of getting to Figure 1, let me review some of the other ways of looking at Ontario's population and economy in terms of boundaries. Ontario’s population has been growing robustly and this robust growth is a factor -along with low productivity and business investment - why per capita GDP lately has not been growing as fast. Ontario’s population can be looked at a variety of different lenses – economic regions, CMAs or municipalities. Ontario used to be a very rural province but as industrialization progressed by the early 20^th century half of its population lived in urban areas. Today, over 85 percent of Ontario’s population is urban and it is increasingly being concentrated in a number of large urban areas chief of which is the GTA.

Figure 2 plots the ranked populations of Ontario’s CMAs. A CMA (Census Metropolitan Area) must have a total population of at least 100,000 of which 50,000 or more must live in the core. Generally a CMA is formed of one or more adjacent municipalities and CMAs and municipalities bearing the same name usually differ in size. For example, the City of Hamilton is just over 500,000 but its CMA is closer to 800,000 people. The largest CMA in Ontario is the Toronto clocking in at 6.6 million. Next comes the Ottawa CMA at just over one million, and then comes Hamilton at over 800,000 and they fall away after that in size with Belleville at about 114,000.

Figure 3 shows the population share of these CMAs and they show the Toronto CMA – the GTA – accounting for nearly half of Ontario’s population. Indeed, the GTA, Ottawa and Hamilton together account for 60 percent of Ontario’s population, the remaining CMAs account for 25 percent and the rest of Ontario represents 15 percent of the population.

Another way of looking at the distribution of Ontario’s population is via the Economic Regions used by Statistics Canada and the provincial government – which total eleven. These are broader geographic entities covering specific parts of the province and contain not only CMAs and municipalities but also all the other urban entities whether they are villages, townships, etc… as well as rural areas. Think of them as the eleven kingdoms of Ontario. Figure 4 ranks the regions by population size and again the Toronto (GTA) region at 6.9 million people is the largest followed this time by Hamilton-Niagara at 1.6 million and the Kitchener-Waterloo-Cambridge region at 1.5 million. The region centered on Ottawa comes in fourth place and the much of western Ontario followed by the north and east. At 241,000 people the Northwest is Ontario’s smallest economic region by population size. Figure 5 plots the distribution of population by region and Toronto and the adjacent regions of Hamilton-Niagara and Kitchener-Waterloo-Cambridge account for two-thirds of Ontario’s population. Eastern Ontario – consisting of Kingston-Pembroke and Ottawa together account for 13 percent. Western Ontario including Stratford-Bruce is 11 percent the remaining largely northern regions – Northeast, Northwest, Muskoka-Kawartha account for nine percent.

As total output is well correlated with total population, these rankings are also pretty good indicators of the economic size of these regions. However, these CMA and economic regions are just one way of dividing up the province geographically. Here is another. Take a map of Ontario and starting at Barrie, draw a line to Oshawa and then to the end of the Niagara peninsula just below Niagara Falls, and then continue up to Kitchener and back to Barrie. You get a rather nice looking polygon that on a map of Ontario looks a bit like a postage stamp in terms of its size. Let's look at figure 1 again to better introduce "The Polygon'.

It turns out nearly two-thirds of Ontario population and just over two-thirds of its economy is clustered in this small polygon going from Oshawa to the end of the Niagara peninsula and then to Kitchener-Waterloo and finally out to Barrie with Toronto and the GTA approximately in the center. This small postage stamp area relative to the rest of the province – See Figure 1 again - has most of Ontario’s economy and population concentrated. “The Polygon” is essentially the GTAPlus and while Toronto since confederation has always been Ontario’s largest city, its dominance of the province’s economy and population has grown to an extent that was unimaginable in the 19^th century when Ontario was a more dispersed province in terms of its economic activity and population. Much of this dominance however is rooted in the growth of a regional economy as demarcated by the Polygon. More on that in a future post.

Sunday, 4 December 2022

Northern Ontario: Economic Indicator Overview

This is a follow-up post to the post last week in the wake of an economic overview of the challenges and opportunities facing northern Ontario’s economy presented at the Regional Meetings of the Economic Developers Council of Ontario in Thunder Bay. As the year draws to a close and we enter 2023, along with the demographic indicators, it is worth presenting some of the highlights for the regional economy in terms of economic indicators. This post, a quick overview of some of the key economic trends that have been emerging in northern Ontario over the last while and they provide a framework for viewing the future.

First, Figure 1 looks at the evolution of employment in northern Ontario since 2006 and presents it alongside the similar trend for Ontario as a whole (note the dual scale). Ontario as a whole has seen its employment grow from 6.53 million jobs in 2006 to 7.37 million jobs by 2021 – an increase of 13 percent. Naturally, there have been bumps along the way – namely the 2008-09 Great Recession and of course the 2020 drop in employment as a result of the COVID-19 pandemic. However, 2021 saw a recovery from the pandemic drop and as we close out 2022, Ontario has seen employment growth continue. The north is a somewhat different story. Simply comparing the two end points of 2006 and 2021, total employment has declined about 5 percent in the Northeast and about 6 percent in the Northwest. In the wake of the forest sector crisis of the early 2000s, there has been a permanent downsizing of employment in the region – that is, while there has been recovery and there is a stability in employment over the long term, not all of the jobs shed then have been recovered. Moreover, in terms of the pandemic rebound, the northwest in 2021 rebounded better than did the Northeast as illustrated in Figure 2.

The last two decades have seen a period of unprecedented economic change in the north which has seen jobs both created and destroyed and also accompanied by a labor force and population that has been aging at a faster rate than the rest of the province. Altogether, the economy has been stable and has shown signs of growth in several sectors. Employment over the long term has been growing in agriculture, profession, scientific and technical services, education and health and social services. With respect to the two largest cities, employment has actually grown somewhat in Sudbury and Thunder Bay but has shrunk outside of these two centers for the overall slight decline in the region. Moreover, as a result of the rapid aging of the population, the labor force has shrunk faster than employment resulting in unemployment rates as low or often lower than the provincial average.

There is growth in total output in northern Ontario particularly in the major centers of Thunder Bay and Sudbury as illustrated in the two final figures. Real GDP in 2022 will finally have reached pre-pandemic levels in both cities. Post-pandemic recovery in terms of real GDP growth in 2021 was actually better in Thunder Bay relative to either Sudbury or Ontario as a whole. For 2022, the year is expected to end out seeing growth in real GDP in Thunder Bay and Sudbury that pretty much matches Ontario as a whole. The robustness of the mining sector and growing Indigenous economic development, along with opportunities in tourism, agriculture and health and education services appear to be the source of growth and are the drivers in addressing the twin challenges in 2023 of fostering both economic and population growth in the north.

Sunday, 27 November 2022

Northern Ontario: Demographic Indicator Overview

Last week, I gave an economic overview of the challenges and opportunities facing northern Ontario’s economy at the Regional Meetings of the Economic Developers Council of Ontario in Thunder Bay. I covered a lot of ground, and it is worth presenting some of the highlights for the regional economy in terms of current indicators. This post, a quick overview of some of the key demographic trends that have been emerging in northern Ontario over the last while.

Figure 1 provides Census results from 2006 to 2021 and they show that despite the perceptions, northern Ontario’s population is starting to grow once again. While the period 2006 to 2016 saw a slight decline, the 2021 Census shows that population is up in both the Northeast and Northwest of the region. Between 2016 and 2021, northern Ontario’s total population grew from 780,140 to 789,519 – an increase of 1.2 percent (See figure 2) with the Northeast growing much faster that the Northwest. On the other hand, from 2011 to 2016, the Northwest grew substantially while the Northeast actually shrank.

Two other trends worth noting. First, while the conventional wisdom is that the major urban centres in Ontario’s north are all major attractors of population within the region, it turns out that between 2016 and 2021, Thunder Bay, Sudbury and North Bay grew while Timmins and Sault Ste. Marie shrank somewhat (See Figure 3). Second, the population that self-identified as Indigenous in the Census has been growing. According to the Census (See Figure 4) the Indigenous population in the Northeast rose from about 61,000 to 67,000 (about a 10 percent increase while that in the Northwest grew from about 53,000 to 55,000 – about a four percent increase. If one adds up the two regions, in 2021 about 122,345 people in that year identified as Indigenous in the north or about 15 percent of northern Ontario’s population. About 24 percent of the Northwest’s population self-identified as Indigenous while 12 percent of those in the Northeast did so. However, it should be noted that these figures may be an under count of the Indigenous population.

The trends are positive in that the region’s population is growing but the point to consider is that it is growing slower than Ontario as a whole. While Ontario’s population was up nearly 5 percent from 2016, the North is only up about 1 percent. This means northern Ontario’s share of Ontario’s population (which peaked in the early 1950s at nearly 12 percent) will continue to decline, all other things given. While 2021 saw the region’s share at 5.6 percent, according to Ontario government population projections, that share could decline to 4 percent by 2046. It is relative rather than absolute decline in population that is the real concern given that a declining share is also associated with declining long-term representation and influence within the province and the country.