Task Force releases Second Annual Report

Released November 25th, 2003

Ontario has a 10 percent prosperity gap against the leading US states because individuals, businesses, and governments invest less than our counterparts in these states. To close the gap Ontario needs to reverse the widening pattern of under investment that limits our potential for productivity gains.

This is the key conclusion from the Ontario Task Force on Competitiveness, Productivity and Economic Progress. The work of this government-appointed group of industry and academic leaders, chaired by Roger Martin, Dean of the Rotman School of Management, is to stimulate business, governments, and educational institutions to increase the pace of innovation and competitiveness to raise Ontarians’ economic and social well being.

In its Second Annual Report, Investing for prosperity, the Task Force shows that Ontario’s prosperity ranking improved to 13th place among a peer group of 16 North American jurisdictions consisting of the 14 most populous US states and Ontario and Quebec. “Ontario moved up one rank - from 14th in last year’s report - mainly because we avoided the 2001 recession that the US endured,” said Martin. The Task Force continues to urge Ontarians to aspire to close the prosperity gap with the peer group - which will ensure our standard of living continues to rise.

Latest results from 2001 show that per capita economic output in Ontario trails the peer group median by $4,118 or 10 percent. The Task Force calculates that this prosperity gap translates to about $6,640 per household in after-tax disposable income. For many home buyers, this added income could cover their mortgage costs; similarly, many tenants could cover their rental costs or consider buying a house. Tax revenues from Ontario to all government would increase by $17 billion - a significant contribution to health care and other costs - without raising tax rates.

Productivity continues to be the source of the prosperity gap. The Task Force’s research shows that Ontarians are not creating as much value as we can from the province’s endowment of human, physical, and natural resources. “It’s becoming clearer to the Task Force why our productivity and prosperity trail the peer group,” said Martin. “It’s because we under invest.” He was referring to findings that:

  • Ontario businesses invest about 10 percent less in machinery, equipment, and software, which are critical drivers of productivity and innovation
  • Spending on education in Ontarians is much lower than in peer group states, especially in higher education; and young people’s aspirations to achieve university degrees are also lower
  • Federal, provincial, and municipal governments in Ontario have shifted their spending more towards areas that consume current prosperity, such as health care and social services, and away from investment in education and infrastructure
  • We under invest in processes to integrate immigrants into our economy even though their qualifications and skills give us an advantage over our peer group
  • Through governance and fiscal structures, we are under investing in our cities where the prosperity gap with the peer group is highest
  • Ontario needs to break out of today’s under investment trap to ensure we are investing for tomorrow’s prosperity.

The Task Force recommends that Ontario and Canada explore opportunities for tax reform to address the high tax burden, especially on capital investment, that is dampening our motivations to invest. It also recommends that Ontarians raise their educational aspirations, especially since each level of education a student achieves translates into higher income and prosperity. Other recommendations include strengthening processes for integrating immigrants into our economy and finding ways to overcome market and governance structures that are impediments to rising prosperity.

The ongoing challenge is to eliminate the 10 percent prosperity gap with peer states by eliminating Ontario’s investment shortfall. The Task Force is continuing its research into ways to achieve break-out investment, looking at the levels of competitive intensity required so our clusters of traded industries can compete globally, the impact of the urban/rural prosperity gap and ways to raise productivity in our cities, and the greatest opportunities for tax reform.

The Task Force research work over the coming year will identify further initiatives to raise prosperity and living standards across the province. As well, it will continue to engage business leaders, academics, regional development agencies and the public in a consultation process.

The complete report can be downloaded directly from:
http://www.competeprosper.ca/task/ar2003.pdf

For more information contact James Milway, Executive Director of the Institute for Competitiveness and Prosperity at 416.920.1921 ext. 222.

About the Task Force
The creation of the Task Force on Competitiveness, Productivity and Economic Progress was announced in Ontario’s April 2001 Speech from the Throne. Roger L. Martin, Dean of the Joseph L. Rotman School of Management at the University of Toronto, is the Chairman. The mandate of the Task Force is to measure and monitor Ontario’s competitiveness, productivity, and economic progress compared to other provinces and US states, and to report to the public on a regular basis. Members of the Task Force were announced on October 17, 2001. See www.CompeteProsper.ca for further information.

The aspiration of the Task Force is to have a significant influence in increasing Ontario’s competitiveness, productivity and capacity for innovation. This, they believe, will help ensure continued success in the creation of good jobs, increased prosperity and a high quality of life for all Ontarians. The Task Force intends to seek breakthrough findings from their research and to propose significant innovations in public policy in order to stimulate businesses, governments and educational institutions to take action.

About the Institute for Competitiveness and Prosperity
The Institute is an independent not-for-profit organization established in 2001 to serve as the research arm of Ontario’s Task Force on Competitiveness, Productivity, and Economic Progress. The Institute and the Task Force are supported through the Ministry of Economic Development and Trade.