Prosperity gap worsens in Ontario: think tank
Globe and Mail
By Heather Scoffield
Each Ontario family is missing out on about $8,300 a year in disposable income because of the province’s poor productivity, a think tank concludes in a report to be released today.
That amount is the “prosperity gap” between Ontario and the median of 16 comparable North American jurisdictions analyzed in the annual report by Ontario’s Task Force on Competitiveness, Productivity and Economic Progress, led by Roger Martin, dean of the University of Toronto’s Rotman School of Management.
Ontario’s prosperity ranks 15th out of the 16 jurisdictions, down a notch from last year, mainly because the other jurisdictions—Quebec and 14 U.S. states—were more active in boosting their productivity.
“Higher productivity is the key to closing our prosperity gap,” Mr. Martin writes in his report. He said he “has found nothing about the economy that precludes us from achieving at least median status in our peer group.”
There are three key reasons for Ontario’s substandard performance, he adds: Ontarians underinvest in themselves and their skills and education; companies underinvest in machinery, equipment and software; and government spending is too skewed toward present-day consumption, by focusing on health and social services.
The report says that if Canada’s productivity gap is to narrow, companies need to spend more on equipment and training, and individuals invest more in education.
Governments need to change course by spending more on higher education and less on health care and social services. They should also shift taxation to encourage productivity, and reduce taxes paid by the poor. Plus, they should work together to change the federal-provincial equalization formula, because it perpetuates regional disparities, the report says.
“We need to make important tradeoffs between consuming today and investing for future prosperity,” the report concludes.
A new report from Toronto-Dominion Bank reaches some of the same conclusions, especially when it comes to the private sector taking action on training. But firms would also be well-advised to pay more attention to investment opportunities offshore, and outsource more of their services, that report says.
Canadian companies have embraced the notion that outsourcing low-productivity areas of their production lines can boost profit, the TD paper says, but now they should do the same for services.
Canada is a net supplier of global services, but the jobs are low skilled and will soon be priced out of the international market because of high wages and the high Canadian dollar, the paper says.
