Canada's Growing Population: Urban Perspective

 Statistics Canada has released its population estimates for sub-provincial areas as of July 1, 2023 and they show rapid growth in population in Canada as well as all of its Census Metropolitan Areas (CMAs).  As noted by statistics Canada: "On July 1, 2023, the combined population of Canada's 41 census metropolitan areas (CMAs) reached 29,814,146 people. The population growth experienced in CMAs (+3.5%) from July 1, 2022, to July 1, 2023, outpaced that of Canada as a whole (+2.9%). In comparison, census agglomerations (CAs) saw a population growth rate of 2.0%, while areas outside CMAs and CAs grew at a combined rate of 1.1%. These differences are a sign that Canada continues to get more urbanized, as the proportion of Canadians living in a CMA reached almost three in four (74.4%) on July 1, 2023. However, it should be noted that the population growth rate for areas outside CMAs and CAs was at its highest in over 20 years and that 2022/2023 was the third consecutive year in which these regions grew faster than 1.0%."

Naturally, those of us in Northern Ontario have been wondering how much our population has grown and the results show that Thunder Bay and Sudbury have also experienced growth.  In 2023, Greater Sudbury reached an estimated population of  185,230 - up from 180,271 the year previous for an increase of 2.8 percent. Indeed, Sudbury is pretty close to meetings its projected population of 188,510 by 20151 several decades ahead of schedule.  Meanwhile, Thunder Bay - which has been marked by a debate over missing tens of thousands of people in its population tallies - is also up and its CMA appears to have topped 130,000 for the first time coming in at 130,752 for an increase of 1.4 percent over the year previous.  Half of Thunder Bay's population growth since 2001 appears to have occurred in just one year which is remarkable.  Thunder Bay's population has been growing and the estimates do show a much larger number than the official 2021 Census tally but the estimates have always been larger than the census tally.  In 2021 for example, the census tally for the Thunder Bay CMA was 123,258 while the July 1st population estimate by Statistics Canada was 128,040.

As much as Thunder Bay has grown over the last year - adding nearly 2,000 people in one year according to the estimates - its population growth rate for 2022 to 2023 was nevertheless still the lowest of all Canadian CMAs as illustrated in the accompanying figure.  The estimates suggest that the official census headcount based on individuals filling out the census does  underestimate actual population but one is looking at something in the range of about 5,000 people - maybe 10,000 if one wants to be generous about it.  That is still a substantial difference this is due to transient elements of the population less likely to fill out census documents including students as well as Indigenous peoples.  However, it is likely not the tens of thousands that some have argued in the past. One estimate that there are 15 percent more people than the official census count would put our population at over 140,000. 

 

So, Thunder Bay is growing and that is good.  But, it is not growing as much as we think in terms of population and indeed relative to everyone else, it seems to have the slowest growth rate.

Canada and Ireland: The Great Divergence

 

Having returned from a great visit to Ireland, I have been reflecting on the Irish economy and economic miracle that have seen Ireland become a country with one of the highest per capita incomes in the world as measured by per capita GDP.  With its membership in the EU and access to the European market, it has pursued an economic strategy which is largely rooted in attracting large foreign multinational firms which has not only boosted activity in finance, research, and digital services but also in manufacturing.  Information technology and pharmaceuticals have been particularly important sectors. While much is made of the Irish corporate tax advantage, there is also a highly educated population which provides Ireland with human capital strength.

 

Ireland is a much smaller country than Canada with a population of only 5 million, but it has some interesting similarities.  It is a bilingual country – Irish and English – and it has seen substantial immigration in recent years to the point where nearly 20 percent of its population is foreign-born.  This of course represents a remarkable reversal from Ireland’s past as a source of migrants. And with rapid economic growth and substantial immigration, like Canada, it has not been building enough homes and housing prices and rents have grown substantially creating some tension.

 

However, despite these similar aspects including housing issues between Canada and Ireland, there is one key difference.  Ireland’s per capita GDP has soared well past Canada’s.  Indeed, as the accompanying figure illustrates, the cross-over year marking the start of this divergence was 1998 and even with the setback of the 2008-09 financial crisis, Ireland recovered and has powered its way to a real per capita GDP that is nearly twice that of Canada’s now.  Since 1998, real per capita GDP in Ireland has grown 173 percent whereas in Canada it only increased by 30 percent.  And unemployment rates remain quite low even with robust immigration and population growth.

 

 

 

It is true that Ireland’s performance has been truly exceptional and probably represents an outlier rather than the norm. And it is not only doing better than Canada but a lot of other places. Still, given that Canada has many similarities with Ireland in terms of immigration levels and population diversity, high human capital, and access to a large foreign market (the US), why we seem to have similar problems (such as infrastructure and housing deficits) but not the rapid economic growth that went with it is indeed an important and perplexing question.  With our own highly educated population, why have we not been able to leverage growth and attract investment? What is holding Canada back given the many obvious advantages we seem to possess?

Finding Canada's Most "Entrepreneurial" Province

 While employment in Canada is up since the pandemic what is disturbing is the shift towards public sector employment combined with a trend away from self-employment over the longer term.  As has been noted, since January 2014, public sector employment in Canada has expanded from 3.5 to 4.4 million workers—a 27 percent increase—private sector employment grew from 11.6 to 13.4 million—a 15 percent increase—and self-employment shrank by approximately half a percent.  From January 2020 to the present, public-sector employment has expanded nearly 17 percent going from 3.8 to 4.4 million. Private sector employment grew from 12.6 to 13.4 million, an increase of 6 percent. Self-employment fell from 2.8 to 2.6 million—a drop of 7 percent.  Self-employment has been in decline for some time but the pace picked up with the pandemic.

Of course, a regionally diverse economy like Canada has provincial differences across all kinds of economic and fiscal indicators and self-employment is no exception.  While all provinces have seen a long-term decline in their self-employment share of employment, there are some interesting provincial differences.  Figure 1 uses Statistics Canada data on employment by class of worker to plot monthly self-employment shares of employment from 1976 to the present. Up until the late 1990s, the self-employment share was actually rising in all the provinces with the exception of Saskatchewan and Prince Edward Island.  The declines there are likely a reflection of farm consolidation in the agricultural sector as family farms are businesses and both these provinces have large agricultural sectors.

 

However, starting in the late 1990s, self-employment declines also commenced in the other provinces and the decline has picked up steam since the pandemic.  Self-employment peaked in Canada at just over 17 percent in the late 1990s and then declined to just under 15 percent by 2019 and has now reached approximately 13 percent.  Self-employment as an employment share actually spiked upwards during the early months of the pandemic as layoffs hit other sectors but then begins to decline rapidly.  One suspects the length of the pandemic with its restrictions was a contributing factor to many small businesses winding up their activity.

The decline of self-employment is disturbing because small business are in many respects a backbone for entrepreneurship and innovation.  New ideas are often translated into reality via the creation of a small businesses and while businesses are always being created or destroyed, if on net more small businesses are being wound up than created, then the long-term result is a smaller field for the development of entrepreneurial skills.   Small businesses provide opportunities for financial independence outside of traditional large employers and many small businesses being locally owned and based are also active in communities providing support for an assortment of charities and community activities.  And while self-employment as the owner of a small business may only account for 13 percent of total employment, these businesses in turn further employ a lot of private sector workers.

If one accepts the self-employment share of employment as a metric for entrepreneurship in Canada, then a provincial ranking does provide one measure of where entrepreneurship is most important.  Figures 2 to 4 provide a provincial ranking at three points in time and when combined they illustrate two types of trends.  First, there is an overall decline in self-employment particularly after 2000 and second, there is a shift across provinces. 

 

 

 

 If one starts in 1976, the self-employment shares are highest in Saskatchewan and Prince Edward Island at 29 and 21 percent respectively.  At the bottom are Ontario, Quebec, and New Brunswick.  By 2000, Saskatchewan is still on top, but its self-employment share has diminished to 25 percent. Meanwhile, British Columbia moved into second place from fifth in 1976.  Ontario and Quebec moved up to sixth and seventh spot respectively while at the bottom are Newfoundland and New Brunswick.  However, in the 2000 ranking, with the exception of Saskatchewan and PEI, the other provinces all saw some fairly hefty increases in their self-employment shares from 1976 to 2000.  Moving to 2024, all the provinces have seen a decline in self-employment shares over the 2000 to 2024.  However, the ranking now places British Columbia, Ontario and Alberta at the top and Nova Scotia, New Brunswick, and Newfoundland at the bottom.

So, self-employment as a share of total employment in Canada has been in decline for nearly a quarter century.  However, there are variations across provinces.  The takeaway from this is not that BC, Ontario and Alberta are the most entrepreneurial provinces.  The takeaway is that since 2000, all the provinces have become less entrepreneurial as measured by self-employment shares of total employment but in this diminished state of entrepreneurship some remain somewhat more entrepreneurial than others.

 

Municipal Spending in Ontario: A Long-Term Overview

 This originally appeared on the Fraser Institute Blog. 

Municipal dollars in Ontario—where did the money go?

— April 24, 2024

   

Municipal budget season in Ontario recently ended and the evidence reveals some fairly substantial tax increases around the province. For example, Waterloo Region approved a property tax increase of 6.9 per cent while Toronto passed an increase of 9.5 per cent. Hamilton ultimately saw an increase of 5.8 per cent after fears of a double-digit tax increase were unveiled in the fall while Kingston saw one of the lower increases coming in at 3.5 per cent. For the most part, these increases exceed the current consumer price index (CPI) inflation rate of approximately 3 per cent and rather anemic GDP growth performances.

Given these tax increases have exceeded both inflation and income growth, it’s more than a matter of curiosity to understand what drives the increases. Municipal governments in Ontario provide numerous services to ratepayers, and their budgetary actions can have a major economic impact on households and individuals. An overview of municipal expenditures at the provincewide level using data from the provincial Municipal Financial Information Return illustrates not only how much total expenditures and household taxes have grown but the categories driving the expenditure over time.

The first chart below plots total municipal expenditures along with average property taxes per household from 2000 to 2022. Since 2000, municipal operating expenditures have more than doubled going from $21.3 billion to $53.4 billion. It should be noted that total municipal operating spending has grown by 151 per cent while population has grown 61 per cent and the number of households by 134 per cent. Meanwhile, property taxes used to fund that spending have also grown from an average of $3,580 per household to $5,471 per household. Importantly, municipal operating expenditures do not include capital spending and much of that spending has been funded by debt. From 2000 to 2022, municipal net debt grew from $3.8 billion to $25.5 billion—nearly a six-fold increase in debt.

Over this period, the municipal workforce in Ontario grew from 216,367 to 234,235—an increase of 8.3 per cent over roughly 20 years. Much of the additional municipal spending is going into higher wages and salaries per employee rather than simply more employment. Indeed, any examination of the public-sector salary disclosure data for Ontario finds that the number reported earning more than $100,000 grew from 586 in 2000 to 61,021 in 2022 while the average salary for those over $100,000 rose from $118,333 to $127,294—an increase of eight per cent. While the average salary of those earning more than $100,000 has increased modestly, the growing number of municipal workers earning those high salaries has been the big expenditure driver. Put another way, in 2000 approximately one-third of one per cent of municipal employees on Ontario earned $100,000 or more whereas in 2022, that percentage had grown to 26 per cent.

Where does the money go? The second chart shows the composition of municipal operating expenditures in 2022—the four largest expenditure items were transportation (22 per cent), social and family services (18 per cent), protection to persons and property (17 per cent) and environment (15 per cent). These four items together accounted for more than 70 per cent of municipal operating expenditures. What’s more interesting is the growth rates of all these categories since 2000 especially when compared to the growth rate of economic indicators.

Municipal operating expenditures since 2000 have grown the most in the categories of health and emergency services (335 per cent) followed by planning and development (215 per cent), then transportation and “Other” categories at 207 and 208 per cent respectively. Of the 11 expenditure categories, nine have grown faster than either nominal provincial GDP, real GDP, population or inflation (see third chart below). General government and social and family services have grown the least at 45 and 79 per cent respectively. While the relative restraint with respect to general government is welcome, the slower growth of social and family services given the social problems afflicting many Ontario cities seems a curious choice of priorities.

So, pulling everything together, here’s the story that emerges. Municipal operating expenditures in Ontario over the period 2000 to 2022 have grown 2.5 times faster than general inflation and double that of population. They have also grown a bit faster than the province’s output.

The increase in spending is driven by spending on wages and salaries but not in the manner one might think. Average salaries in the municipal sector for those making more than $100,000 annually since 2000 have grown by only 8 per cent but the number of individuals making those salaries has grown in the thousands of per cent. Within the broader public sector, in 2000 municipal employees accounted for 6 per cent of individuals on the salary disclosure list whereas by 2022 they accounted for 23 per cent.

In Ontario, municipal tax dollars have gone not so much into an expansion of services but into paying substantially more for roughly the same total number of people providing those services. And the areas of greatest spending increase have been in health and emergency services and planning and development. While the former can be explained by the pandemic and the opioid crisis, one must wonder where the value for money is with respect to planning and development given shortages of affordable housing and homelessness that have been allowed to develop across Ontario’s municipalities over the long term.

What New “Affordable” Housing Looks Like in Thunder Bay

 As the federal government ramps up the billions to address the housing crisis in Canada including $6 billion to construct housing infrastructure. $1.5 billion to protect existing apartment buildings and a $15 billion apartment loan program, one would expect to see progress on the affordable housing front.  In the end, the issue is not really a shortage of housing to either buy or rent but affordable housing.  A glance at assorted real estate site in any city shows a large number of listings either for sale or for rent.  However, when one looks at the price, it is the cost of renting or buying that stands out, not a dearth of listings.

An illustration can be made for Thunder Bay which is seeing a large number of new rental building under construction.  A glance at Rent Panda reveals that some recent building projects are renting for some pretty hefty prices.  Take for example the two north side rentals in Thunder Bay shown below  – 80 Junot which is essentially adjacent to the Picton Street area and across from an EMS station – and 312 Crossbow – which is in a prime north side neighbourhood.  Location aside, both of these new build rental units are two bedrooms and two baths and rent for $2450 and $2400 a month respectively – utilities not included.  Two people earning minimum wage together could expect to earn at best close to $60,000 a year.  The rent alone will take up nearly half of their gross income, never mind the utilities.

Perhaps, south side rents are less?  Well the accompanying slide shows that a new build two bedroom one bath on Mary Street near Neebing Avenue is going for $2,300 a month though it includes water as a utility but likely not hydro.  I guess we could argue that these are all new builds and maybe we should settle for something older.  Well, a three bedroom one bath house on East Christina Street on the south side is renting for $2400 a month.  

The point here is that there is housing available for rent and some of it is new and quite nice but at $2300 and upwards a month and often excluding utilities, it is not affordable housing given the average incomes in Thunder Bay.  Median household income in Thunder Bay is just shy of $80,000 a year which means that half of households earn less than this.  At these rental prices, these below median income households will see close to half of their household income go to rent and utilities.  This is not affordable housing.  This is not geared to income or social housing.  This is where the shortage lies not only in Thunder Bay but across the country.