Why demographics will make it hard to slay Ontario's deficit

A place to (not) grow: Ontari-ari-ari-old

The reality is Ontario’s creaking workforce is likely to upset everyone’s plans, no matter which party wins the election


The other day federal Finance Minister Joe Oliver waded into the fray of the Ontario election to offer a warning to the province’s next premier—You know, whoever that might be, totally not taking sides. While cheering Quebec’s recent austerity budget, Oliver fretted that Canada’s economy could never reach its full potential while weighed down by Ontario and its multi-billion-dollar deficits. “These are inescapable mathematical calculations,” he said of the need for Ontario to balance its books. “It’s about arithmetic.”

In any campaign, and Ontario’s was a particularly ripe example, two plus two rarely adds up to four. But for all the thousands of kilometres the leaders travelled, for all the babies kissed, promises made and millions of pixels burned out by instant online analysis, it’s remarkable how little attention went to the only mathematical reality that matters as Ontario tries to get back on its feet. Its workers are getting old, fast, and that simple fact is the demographic hand grenade that threatens to blow an even bigger hole than already exists into Ontario’s economy.

The reality is Ontario’s creaking workforce is likely to upset everyone’s plans, no matter which party wins. That’s because underlying the various party platforms was a common assumption: that Ontario’s economic growth will kick into higher gear over the next few years, providing a boost to the provincial budget and doing much of the heavy lifting needed to haul Ontario out of its fiscal hole. The impetus for the growth might vary (Tory cuts, Liberal corporate welfare and taxes on the rich, NDP corporate taxes), but once past the nitty-gritty each party was in the same finger-crossing territory: our plan will boost the economy, and that growth will bring Ontario’s $11.3-billion deficit under control.

Partway through the campaign, Doug Porter, chief economist at BMO Nesbitt Burns, published a report entitled “Destiny dictated by demography” (PDF) that should have given all parties pause. In it, he sketched some of the ways Canada’s aging population will hit the economy over the next five to 15 years. Top of the list: “Average growth rates will be slower; get used to it.” For Ontario in particular, he estimated, that means an annualized rate of real GDP growth of just 1.7 per cent for 10 years. Yet the Liberal’s last budget before the election forecast growth of 2.5 per cent for each of the next two years, rising to 2.6 per cent by 2017—growth rates not out of step with what the other parties might expect.

To see how Ontario’s demographics could undermine the economy, consider the following. In the early 2000s, Ontario was a notch behind Alberta in terms of the pace of growth of its adult, working-age population. Today the two provinces aren’t even close. Ontarians are shuffling into retirement age far faster than new workers are coming along to replace them. Sure, the aging workforce is a nationwide phenomenon. But in Alberta, where the number of people turning 65 last year rose slightly more than five per cent, the working-age adult population also grew five times faster than in Ontario.

Ontario's greying workforce

Ontario’s labour force participation rate is already deteriorating as a result. While it’s often said that a lower participation rate is a sign of workers giving up and leaving the job market, the real driver is demographics.  As this chart shows the participation rate for most Ontario regions is below the national average, which is saying a lot when you consider the size of the province’s population.

Labour force participation ontario

And where once Ontario could rely on immigrants to fill that gap, those days are over. A decade ago more than half of all immigrants to Canada made Ontario their destination. As of 2012 that figure had plunged to just 38.4 per cent. For them, the opportunities lie in the West, not Ontario.

immigrants to Canada who moved to Ontario

The province’s stagnating workforce is going to work against the next and future governments in myriad ways. Older workers will demand more health and social services. That’s simply going to drive up costs at a time when nine per cent of all Ontario’s revenues are already allocated to interest charges on the province’s $280-billion debt. (Memo to new premier: pray interest rates don’t rise.) The flip side is fewer workers will be available to bring home paycheques, pay taxes, buy homes, cars, clothes and go to restaurants. Rising expenses and lower tax revenues: it’s the exact opposite scenario of what Ontario needs to repair its balance sheet—and yet that’s the demographic destiny faced by Ontario’s next premier. The arithmetic is inescapable.




A place to (not) grow: Ontari-ari-ari-old

  1. Another Ontario-is-bad article, I see.

    • Another politicians-feed-us-fairytales article.

    • Ontario has its problems. It also contains around 40% of Canada’s population. Expect to hear a lot more about Ontario’s problems than you would about, say PEI’s.

      • This kind of thing isn’t a simple population matter. It’s a deliberate effort to drive down Ontario. And boost the west.

        Flaherty did it, Harper does it….so does our new FinMin Joe Oliver. Lots of columnists jump on the bandwagon….and the end result?


        Except that economies go up and down all the time, and there are always problems….but lots of good new things are going on as well.

        Since Ontario IS vital to Canada, you’d think people would seek a little more balance.

        We are not all standing on street corners rattling cups and we are not all going to the tarsands for a temporary job.

        • You may be right, perhaps our economy will go up and down, but the fact of the matter is that we are spending more than we take in. ON is vital to Canada, but like the former industrial heart land of the US (the rust belt states now) economic results of yesterday or even today does not indicate future economic results. Tell me how it makes sense that class room sizes are getting bigger, teacher’s salaries are increasing and yet there are thousands of teachers out there without a job. Hospital beds close, employee benefits increase and there are loads of doctors, nurses, pharmacists and other support staff needing a job. Does this make sense and do you think that we can continue on this path, regardless of past failed government policies from all political parties? I’m not attacking any political party because I have voted for all 3 in the past and not all policies have failed, but the times they are a changing and just like Chretian had to do in the 90’s to balance our budget to avoid downgrading of our debt and higher servicing costs, so will future ON governments.

          • The number of teachers is dependent on the number of students.

            Fewer kids per classroom means higher cost.

            Yes, we have a debt….always have….since day one. So does Canada, so does the US.

            But it makes no sense to get your panties in a bunch about it when we also have income.

            Ontario accounts for 40% of Canada’s GDP….we aren’t remotely broke.

            Health workers are rarely without a job. It’s a guaranteed life-job.

            Well if we can’t ‘continue on this path’, what path do you THINK we should be on?

            We aren’t doing anything any different than any place else…province, state, prefecture…and we’re actually doing better than most.

        • There was never any conspiracy or concerted effort to drive down Ontario. That is merely the voice of your own internal demons having their way with your thoughts again.

          • LOL riiiiight.

  2. Maybe Ontario will be a place to grow old, comfortably.

    The Ring-of-fire Mining potentials, in Northern Ontari-ari-ari-new is considered by many, and I use the term loosely, to be the next economic Alberta/Oil Patch of Canada, except without the huge landscape devastation, and I hope, this time, with NO “Foreign” Invetsment companies allowed !
    We’ll mine it, and “they” can buy it.

    Being so, this will definitely be an economic boon, that should last for quite some time for Ontario, and may very well drag Ontario out of it’s present financial woes. -but hey, Ontarians can only hope that this pans out.