Alberta Productivity Growth is Low

I pointed out in this post that that Alberta's GDP growth of late was mainly due to population growth, not productivity growth (GDP growth of 3.9% in 2013 versus population growth of around 3.2%). That's still better than Ontario's. That amount of rapid population growth makes it hard to integrate everyone into high productivity jobs. Plus Alberta has been a big user of low wage TFWs, which is pretty much the best way to lower your per person productivity.

Here's a National Post article that basically says the same thing:

"Alberta’s oil sector may have been a “job machine” over the past decade, but it came in “dead last” in labour productivity growth compared to other North American oil-producing jurisdictions, according to a report.

During the 2001-2012 period, Alberta ranked last with respect to its average growth rate in real per worker GDP and second last in real per capita GDP, said Fraser Institute analysts in a report published Thursday.

The two indicators show that much of the province’s economic growth is coming from expanding inputs like labour “rather than improving the productivity (and thus income) of individual workers,” the Vancouver-based think tank said."

If even Alberta has low productivity growth, Canada's as a whole is in trouble.

New York Times Article "The Downward Ramp" and Ontario

There's a good New York Times article called "The Downward Ramp" about a study about negative happenings in the US employment market, especially for college graduates. The whole article is good, but I was interested in these two particular paragraphs:

"This possibility has been explored from various angles by Robert Gordon, an economist at Northwestern; Lawrence Summers, the former secretary of the Treasury, now at Harvard; and Erik Brynjolfsson and Andrew McAfee at M.I.T. who wrote “The Second Machine Age.”

Gordon’s prognosis is perhaps the bleakest: “The future of American economic growth is dismal, and policy solutions are elusive.”"

One of the themes of this blog has been that Ontario's GDP growth per person (related to productivity growth) has been dismal since the Mike Harris years and that a lot of Ontario's economic growth has just been from an increasing population.

Considering that if the US is struggling with the same problems, that's not good news for Ontario. First Ontario still depends a lot on US economic strength for its economy. Second, if anything Ontario is probably doing worse with regards to productivity growth than the US, as government policies during the Liberal era have focused on increasing the contribution of the provincial government to the overall economy and our manufacturing portion of the economy (often a source of productivity gains) has basically collapsed (partly due to high electricity prices engineered by the Ontario government although most is due to factors the government can't control like 9/11 and global outsourcing). Hiring more teachers per pupil is obviously bad for productivity and there's not a lot of evidence that more teachers per pupil has improved student performance considering the most recent PISA results (actually judging by PISA results it appears to make them worse).

I particularly like the quote “The future of American economic growth is dismal, and policy solutions are elusive.” To me that describes what has been happening in Ontario. Economic growth has been dismal and the Liberal government has been flailing around trying to deal with this reality and has tried everything from "green energy" to funding MaRS, which are ultimately peddled by modern day snake oil salesmen (i.e. Richard Florida) trying to get some money out of a fading economic power desperate for a magic bullet.

The safer assumption is that these policies will not work and Ontario's GDP growth per capita will be weak. Compounding the problem will be people voting with their feet to move to the greener economic pastures of Alberta, driving down economic growth from population growth. Taking the advice of Public Enemy, don't believe the Ontario finance department's hype of Ontario's growth over 2.5% in the next couple of years.

Bad Greater Toronto Productivity

The Globe has an article about a study about Greater Toronto's productivity lately. Some people seem surprised it is poor, I'm certainly not:

"The economy of the Greater Toronto Area is lagging those of its North American peers, a new reports says.

Declining productivity – a measure of economic output per person – is holding back the region that accounts for 20 per cent of the country’s economy, says the study by Toronto Region Board of Trade and the Institute For Competitiveness and Prosperity."

"The report appears to contradict Toronto Mayor Rob Ford, who, while campaigning for re-election, has claimed the city is booming. He has pointed to the dozens of cranes, and maintains the tourism sector is busy and unemployment is low.

But the former business school dean who co-authored the report said Toronto’s productivity fell 6 per cent between 2000 and 2010, at the same time that Vancouver, Calgary and a handful of large cities posted gains. Montreal’s productivity declined slightly."

"The report finds that while wages have risen slightly, economic prosperity has fallen – a fact Mr. Martin said came as a shock. “We’re considerably poorer than we would be, as an economy,” he said. “We have fewer tax dollars of revenue and fewer dollars in the pockets of Torontonians compared to … Seattle, Chicago, Boston.”

Mr. Martin said although the report drew on data collected in 2010 or 2012, it remains accurate. He said nothing has taken place since then that would halt Toronto’s decline."

I'm surprised people are surprised. Toronto's economy has been based around real estate for what seems like forever and certainly that's not going to be good for productivity gains. Ontario's overall economy has been weak and manufacturing has also been weak where productivity gains often come from.

One has to wonder what happens to Toronto's economy if building of new condos significantly slows. In some ways Toronto the last fifteen has been basically a Ponzi scheme where more population is added and somehow the economy expands overall, but GDP growth per capita is stagnant if not negative.