Lagging productivity hurting Ontario workers, report says
Quebec, Ontario ranked at the bottom Gain would add to household incomes
The Toronto Star
By Thulasi Srikanthan
Ontario continues to lag several of its U.S. counterparts when it comes to productivity, says an annual report released today by the Task Force on Competitiveness, Productivity and Economic Progress.
“We got a little too much consumption and not enough investment,” said James Milway, executive director of the Institute for Competitiveness and Prosperity, the group carrying out the research for the task force.
Though the task force notes Ontario is doing well internationally, it says the province’s potential is not being fully met.
The benefits could be tremendous, the task force notes.
Improving the province’s productivity and consequently eliminating the prosperity gap would mean an extra $8,400 in personal disposable income for an average Ontario household and $26 billion more in governmental revenues from Ontario, the task force reported.
Currently, Ontario’s GDP per capita, key in measuring the prosperity gap, ranks the province 15th out of a group of 16 North American counterparts, a group that contains the biggest North American states and provinces.
In 2005, Ontario’s GDP per capita measured $6,100 below the median, compared with $6,000 in 2004.
“We haven’t been making the investments for future prosperity if you look at what we have been doing,” he said.
“The average individual is not investing as much in post-secondary education as our counterparts in the U.S., our businesses aren’t investing as much in machinery, equipment, (research and development) and in hiring well-educated managers.”
However, the task force notes that Ontario is doing well outside of North America, outperforming many countries with similar or greater population.
But Milway maintained a lot of improvement remained to be made in Ontario.
“I think at every level, every part of society, we have got the balance wrong,” said Milway, referring to consumption for today’s prosperity and investment for future prosperity.
“We shouldn’t be complacent. We are doing fine but we know we can do better,” he said.
“It’s almost kind of philosophical: do we Ontarians mind that we are not living up to our potential?”
Compounding the gap is the large number of people who work part-time because they cannot find full-time employment.
“The reason they are not able to find full-time work is that our economy is not operating at full potential.”
To close the gap, the group recommendations include elimination of the capital tax, reducing the corporate income tax rate, increased investment in post-secondary education and in machinery, equipment and software.
“It can be a virtuous circle or a vicious circle,” he said.
“If we are creating enough prosperity, we can continue to invest in future prosperity, but if we start to slip too much, we won’t have adequate resources and we will be forced to make painful choices between consuming and investing.
“We would rather be in a place where we can have our cake and eat it, too.”
A lower GDP per capita, the task force states, means “lower wages, fewer full-time jobs and less government spending to support social spending and prosperity investments.”
Ontario wasn’t always lagging by so much.
In the late 1980s, the task force reported that Ontario was within $600 of the group median.
But when recession hit in the early 1990s, conditions started to decline.
