Once among Canada’s economic leaders, Ontario has fallen behind the rest of Canada in terms of per capita income according to a new study by the Fraser Institute.
The report, released on Thursday, reveals that after boasting incomes five per cent higher than the rest of the country before 2000, 23 years later, Ontario’s per capita GDP is now 3.2 per cent lower than the other provinces.
Researchers found that living standards in Ontario are falling behind the rest of Canada.
“It’s well known that Canada’s economy has been stagnant nationally for a long time, and there’s been very little growth, and that was talked about a lot in recent election campaigns,” Ben Eisen, a senior fellow at the Fraser Institute and co-author of the study told True North in an interview.
“But the truth is that stagnation has been even more pronounced when you take a regional view and look at Ontario,” he said. “It’s been longer lasting, and as a result, the overall performance over the century so far has been worse in Ontario than in Canada.”
According to the study, real per-capita GDP growth in Ontario averaged just 0.55 per cent annually from 2000 to 2023, compared to 0.91 per cent in the rest of Canada.
After adjusting for inflation using the 2023 loonie as a standard, the study found that in 2000 GDP per capita in Ontario was $63,146, 4.9 per cent higher than the rest of Canada. But by 2023, Ontario’s GDP per capita was $71,659, 3.2 per cent lower than the national average.
“Canada is mired in a growth and productivity crisis. Ontario’s growth crisis is longer and deeper than what has occurred in the rest of Canada taken as a whole,” the study said.
If Ontario maintained the economic growth trajectory it had from 1981-2000, Ontario’s GDP per capita would have reached $93,957, making it $22,298 or 31.1 per cent higher than it is today. If it had matched the rest of Canada’s post-2000 growth, it would have been $77,725, $6,066 or 8.5 per cent higher than today.
Eisen told True North, Ontario’s declining growth in business investment has been an “important part of the problem” of economic stagnation and has been for “a long time.”
Between 1981 and 2000, Ontario’s per-worker business investment grew 4.5 per cent annually, significantly outpacing the 1.8 per cent growth in the rest of the country. Since 2000, annual business investment growth was 0.71 per cent, nearly matching the rest of Canada’s low 0.67 per cent rate.
Eisen said the problem predates Ontario Premier Doug Ford’s Progressive Conservative government.
“When Ford first ran for Premier, their slogan was ‘Open for Business.’ The idea was that they were going to turn around this long-standing problem that Ontario has had, weak business investment growth,” Eisen said. “Unfortunately, that hasn’t yet been accomplished.”
He said Ford needs to revisit several of his initial campaign promises, including providing “meaningful tax relief” to make Ontario more competitive with the other provinces and U.S. jurisdictions.
Ford did not respond to True North’s requests for comment.
“Ontarian individuals pay some of the highest income taxes in North America or in Canada, the United States, I should say, and business taxes haven’t been reduced, as several governments in a row have promised to do,” Eisen said.
He said Ontario, like other provinces, need to increase economic freedom to promote economic growth and investment to ensure its high standards of living are maintained for years to come.
He noted that Ontario has scored relatively low compared to other North American jurisdictions in terms of economic freedom as per the Fraser Institutes an annual study.
“Ontario continues to perform very poorly on that index, one of the least economically free jurisdictions in Canada or the United States. And that’s because of a high tax burden, a high regulatory burden, and a number of public finances that aren’t sound,” he said. So, addressing those and trying to promote economic freedom, the evidence is overwhelming that if we do those things, that’s going to translate into GDP growth in the long run.”
He said “getting a grip” on the province’s finances after back to back deficits would improve the situation.
He said he worries how easy it is to be complacent given the high standard of living Ontarian’s enjoy by global standards despite economic bad news “piling up” year over year.
“If it doesn’t stop, we’re going to keep sliding away, and we’re going to lose our status as one of the richest places in the world to live,” Eisen said. “And I hope that reports like this will help drive home the fact that we are in danger of losing our status as a frontier economy, and one of the, one of the most prosperous jurisdictions in the world.”