Investing in the future
By Toronto Star
Everyone knows that Ontarians with a university degree tend to make a lot more money that those with only a high school diploma — twice as much, in fact, according to census figures.
Imagine how wealthy we would be as a society if we had a magical potion that could instantly infuse the 1.7 million Ontarians who quit after high school with the knowledge that a university education provides.
Personal income in the province would be roughly 13 per cent higher — meaning Ontarians would have an extra $50 billion to spend on nicer vacations, better health care or to invest in an even brighter future.
But there is no magic tonic to get us from here to there.
We could still do it, however, if we were prepared to make a huge investment of time and money in raising the educational achievements of Ontarians. That, in turn, would require us to reduce our current consumption for a period of time.
In a nutshell, that is the central message in the latest report of the Ontario Task Force on Competitiveness, Productivity and Economic Progress. Task force chairman Roger Martin, who is also Dean of the University of Toronto’s Rotman School of Management, says the research shows that “stakeholders in Ontario’s prosperity — individuals, businesses and governments — are under-investing for tomorrow in favour of consuming today.”
By doing so, he says, we are limiting our growth, both now and for the future. To climb back to the position we held as recently as 1977 as one of the richest jurisdictions in North America, we must change course.
To underscore that point, the report compares investments in education, business machinery, equipment and software, and spending on public infrastructure in Ontario and the state of Massachusetts, which enjoyed comparable levels of prosperity in the mid-1970s.
Since then, Massachusetts has devoted three times as much per capita to education as Ontario. Its businesses have spent considerably more on productivity-enhancing machinery, equipment and software per worker. And in the decade from 1993 to 2003, government investment in the state increased by 49 per cent, compared with a decline of 18 per cent in this province.
With its heavy emphasis on investment, the task force says Massachusetts “has become the richest jurisdiction of meaningful size on the planet,” with a per capita gross domestic product 46 per cent higher than Ontario’s. At $19,100 per person, that gap highlights just how big the payoff can be from policies that encourage investment.
But in Canada and Ontario, the task force says our tax policies actually discourage investment; our brand of fiscal federalism encourages spending on consumption; and we don’t do nearly enough to release the great potential of our young people through higher education.
Because our policies are not smart, we are not getting the kinds of investments that would enable all Ontarians, and all Canadians, to become wealthier by working smarter.
In the coming federal election, what we need is not a debate about how much to lower taxes, but a debate about the changes needed to give us smarter taxes. Federal parties should almost hold a competition on how much money they would devote to investment in infrastructure.
They should also debate alternatives to a federal transfer system that robs wealthy provinces of the wherewithal to undertake productive investments to promote consumption spending in the poorer regions.
