Quebec to blame for its own declining prosperity
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Lorne Gunter Feb 8, 2012 – 2:43 PM ET
Quebec’s provincial per capita GDP ($40,270 in 2010) is just 85% of the national average of $47,438. Only three provinces have proportionately smaller economies, New Brunswick ($38,940), Nova Scotia ($38,478) and PEI ($34,723). Even Newfoundland and Labrador, habitually the basket case of Confederation, now has a significantly stronger economy with per capita provincial GDP of $55,186, thanks to its recent natural resource boom.
As recently as 1995, Quebec’s per capita economic strength was over 90% of the national average. So what has happened since?
According to a new study of provincial economies across the country by l’École des Hautes Études Commerciales de Montréal (HEC), the problem is not so much Quebec declining as it is other provinces racing ahead much faster. Still, according to the study’s author, economist Martin Coiteux, if Quebec doesn’t take action to increase the productivity of its labour force and spur development of its natural resources, “it runs the risk of finding itself last among Canadian provinces with respect to income and standard of living.”
This is hardly a new warning. Eight years ago, no less a Quebec icon than former premier Lucien Bouchard called on his province – both the people and the government – to rethink the “Quebec model” of economic development. Mr Bouchard and 11 others, who became known as “Les lucides,” said it was time to “wake up” from the twin notions that the provincial government was better suited than private investors to decide future economic development and that the province’s extensive social safety net could be afforded indefinitely. They recommended free-market reforms to unleash the province’s enormous economic potential and more user-pay social programs to curb government spending and debt.
Of course, Les lucides were met by Les Solidaires, a group of union activists, left-wing intellectuals and special interests that insisted the high-tax, big-spending, centrally planned approach was working just fine.
Unfortunately, Les Solidaires have prevailed. For instance, Quebec sits on one of the continent’s largest shale gas deposits, but thanks to a reluctance on the part of provincial politicians, development is at a standstill.
This inertia – whether from too much faith in the goodness of government or too much easy cash from the federal government to pay for social schemes Quebec cannot afford on its own – is a shame. As Mr. Bouchard pointed out in his manifesto, in the 25 years prior to 2005, Quebecers had pulled level with the rest of Canada in years of education received and francophones were close to income parity with anglophones. The gap in unemployment rates between Quebec and Ontario, too, had closed from over five percentage points to under two.
It’s not too distressing that the Atlantic provinces have caught up to Quebec – or nearly so – in personal income. The four had the farthest to come, so also the most room to grow. But what should disturb Quebecers is that the gap between their province and Ontario is widening again. According to the HEC study, Ontarians enjoy an annual income advantage of nearly $10,000 over Quebecers – and this is at a time when the regulation-heavy, high-taxing McGuinty government is slowing Ontario’s growth. Simply put, even though Ontario’s growth is slipping, Quebec is failing to keep up with its neighbour.
According to the HEC study, over a 31-year period from 1978 to 2009, every region of Canada gained on income against Quebec. Why? Mr. Coiteux explained that “proportionately, fewer Quebecers work [than other Canadians]. They work fewer hours on average. And they earn an hourly pay that’s lower than that of most other Canadians.”
I have always been struck when examining Statistics Canada’s annual labour force participation data by just how few people in have-not provinces, including Quebec, have jobs. In Quebec, the percentage of working-age residents in the labour market is under 65%. In Alberta, it’s nine percentage points higher. And Alberta’s labour market is expanding, while Quebec’s is stagnating.
None of this is to say that Quebecers are lazy or unwilling to take entrepreneurial risks. On the contrary, I think the political culture in Quebec is what is standing in the way. The provincial government can rely on Ottawa shipping in $8 billion to $10 billion a year in equalization payments. Quebec receives half of all the federal top-up funds distributed to have-nots in a year. So the province’s politicians do not have to make rational economic decisions.
Because they know that Ottawa will siphon off gobs of cash from have provinces to pay for cheap day care and low tuition and seniors’ care and prescription drugs and so on, Quebec politicians have the luxury of blocking resource development in the name of the environment or of preserving Quebec’s slower-paced lifestyle.
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