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THUNDER BAY, ON, May 5, 2015/ Troy Media/ – Ontario’s location, at the heart of the North American continent on the Great Lakes/St. Lawrence waterway adjacent to the huge population of the U.S. northeast, is highly strategic.
It’s economy is critically dependent on this location because it affords access to the huge markets of the U.S. neighbours with whom it competes. How does Ontario stack up its American and Canadian neighbours – namely, Minnesota, Wisconsin, Michigan, Ohio, Pennsylvania and New York, and Manitoba and Quebec?
These provinces and states together account for 88 million people and produce approximately US$4.5 trillion annually in GDP. With 13.6 million people, Ontario is a major economic force. It has the second largest population after New York State, which has 19.7 million people.
Economic performance among the worst
Ontario has only the fourth largest economy, after New York, Pennsylvania and Ohio. As a result, Ontario’s per capita GDP is lower than one might expect, edging out Michigan, Manitoba and Quebec but behind New York, Minnesota, Pennsylvania, Wisconsin and Ohio.
When it comes to real per-capita GDP growth, Ontario and Michigan, not surprisingly, have been the worst performers. Both are highly dependent on automobile manufacturing and this sector was hit hard during the last decade.
Between 2000 and 2013, real per-capita GDP grew the most in Manitoba and New York State at 19 per cent each. Next came Pennsylvania, Minnesota and Quebec at 12, 11 and 10 per cent respectively. At the bottom was Ohio, Ontario and Michigan at 7, 5 and -3.0 per cent respectively.
Ontario’s relatively poor performance on the per-capita income side is reflected in worker productivity. Output per employee on these nine jurisdictions was highest in New York, followed by Minnesota, Pennsylvania, Ohio and Wisconsin. Ontario came in sixth, ahead of Manitoba, Quebec and Michigan. When it comes to its adjacent U.S. neighbours, Ontario’s productivity performance is superior only to Michigan.
The paradox is that, despite poor per capita income and productivity growth relative to these adjacent jurisdictions, Ontario does relatively well when it comes to job creation. Indeed, Ontario, Manitoba and Quebec all saw much greater employment growth than the U.S. states in this comparison group.
Between 2000 and 2013, Quebec saw the highest employment growth at 19 per cent, followed by Ontario at 17 per cent and then Manitoba at 13 per cent. Meanwhile, Minnesota was next at only 6 per cent followed by New York State at 5 per cent, Pennsylvania at 4 per cent and Wisconsin at 2 per cent. Ohio and Michigan actually saw their total employment shrink at rates of 5 and 14 per cent respectively over this period.
This paradox is largely the result of two key factors: the differential impact of the 2009 recession (the U.S. was hit harder), and the commodity and resource boom that affected the Canadian economy during this period. While Ontario manufacturing suffered from the decline in the U.S. market, it was somewhat insulated by opportunities in the booming western resource sector.
Despite the faster rates of employment growth in Canada, at 6.4 per cent Ontario still managed the third highest average unemployment rate of these nine jurisdictions over the period 2000 to 2013. Michigan came in the highest at 7.4 per cent and Manitoba the lowest at 4.2 per cent.
Per capita output growth 2nd lowest
In the highly integrated and competitive North American economy, Ontario has delivered a mixed performance. Despite having the second largest population of its immediate neighbours, Ontario has only the fourth largest economy and sixth highest per-capita output. Moreover, its per capita output growth was the second lowest of this comparison, only ahead of Michigan.
Despite its strategic location and access to some key U.S. markets, Ontario has turned in a mediocre performance over the last decade. Even where it has performed well – in the case of job creation – it has come at the cost of lower productivity, putting it at a disadvantage in the longer term.
Ontario needs to up its economic performance if it wants to remain a key player in the North American economy.
Troy Media columnist Livio Di Matteo is Professor of Economics at Lakehead University.
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