Three mid-sized Ontario cities face varied economic fates

Windsor and London are not recovering from the decline in manufacturing as well as Kitchener-Waterloo

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THUNDER BAY, ON Jun 12, 2015/ Troy Media/ – In looking at the recent tumultuous economic change in Ontario, it is useful to compare the southwestern Ontario cities of Windsor, London and Kitchener-Waterloo. Despite geographic proximity, there are differences in how economic change has affected these cities.

Southwestern Ontario was particularly hard hit by the manufacturing decline a decade ago. Between 2002 and 2013, total regional employment was virtually stagnant, going from 767,000 jobs to only 772,000 jobs. Manufacturing employment in the southwest over this period dropped from 173,000 jobs to 121,000 – a 30 per cent decline. Particularly hard hit was Windsor-Sarnia, which saw manufacturing employment drop from 84,000 to 54,000 – a 36 per cent decline. Nearby London and Kitchener-Waterloo saw relatively smaller manufacturing employment drops of 24 and 17 per cent.

All 3 Ontario cities hit hard, but . . .

What is remarkable is how much ontario citieshas thrived relative to the other two cities. While all three saw manufacturing sector declines, Kitchener-Waterloo seems to have adjusted the best to economic change.

Since 2001, employment in Kitchener-Waterloo grew 29 per cent but only 8 per cent in London and 7 per cent in Windsor. While the unemployment rate in Kitchener-Waterloo soared to almost 10 per cent in 2009 at the recession’s height, it dropped to 5.6 per cent by this year.

The unemployment rate reached 10 per cent in London and 14 per cent in Windsor in 2009, but by this year only declined to 7 and 10 per cent respectively. Reflecting this differential economic performance, the population of Kitchener-Waterloo grew 24 per cent between 2001 and 2015 while London and Windsor grew 17 and 10 per cent respectively.

Of the three communities, Kitchener-Waterloo appears to have done the best job translating its university sector human capital advantages into economic performance. Manufacturing in Kitchener-Waterloo is transitioning to advanced manufacturing activity rooted in high tech enterprises quite separate from the old industrial base.

In addition, the future is further brightened by the construction of a light-rail transit system, which can be expected to provide an additional boost to employment and income.

Windsor and London, on the other hand, have shed their old heavy industrial sector jobs but have not attracted as many new opportunities. London and area lost the 100-year-old Kellogg’s food cereal plant and Caterpillar. Nearby, the Heinz plant in Leamington was shuttered.

A lower Canadian dollar is of little help to generating employment in factories that have disappeared.

While London has also traditionally had a rather robust financial services sector for a city its size, that sector has not made up for the losses in manufacturing. As for Windsor, it was the most dependent on the auto sector and the U.S. market and as a result it suffered the most during the economic downturn. Windsor has much further to climb to restore its economic fortunes.

Kitchener-Waterloo most nimble of 3 Ontario cities

London and Windsor were more reliant on traditional and older energy intensive manufacturing that originated during Canada’s era of tariff protection. Their industrial sector has been harder hit by the U.S. downturn as well as Ontario’s high electricity prices. Advanced manufacturing in Kitchener-Waterloo, with the high-tech spinoffs from the University of Waterloo, has been more nimble and less sensitive to either the exchange rate or soaring electricity prices.

The final difference between these three cities may very well be locational in terms of their proximity to the Greater Toronto Area and its dense market of nearly six million people. The GTA is Ontario’s job engine. It is no coincidence that Ontario cities in the GTA’s shadow, such as Guelph, Kitchener-Waterloo and Barrie, are doing better than more distant cities like Windsor and London.

Being close to the GTA has brought spillover benefits from firms and families relocating in the search for cheaper property as well as opportunities for businesses closer to the opportunities of the GTA.

Future prosperity for Windsor and London may indeed require more effort to access economic opportunities from servicing the GTA with business and construction services.

Troy Media columnist Livio Di Matteo is Professor of Economics at Lakehead University.

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