Wednesday, December 14, 2016

December 2011 Posts

16 Posts from December 2011

Season's Greetings from Northern Economist
Christmas and the New Year are once again upon us.   It is time for Northern Economist to once again demonstrate that economics is not really the dismal science but indeed is one of the helping professions by helping you celebrate Christmas with Economics!  One of my favorite Christmas economics web experiences is the London School of Economics Choir performing Handel’s Hallelujah Chorus.   We all know they do great economics at the LSE but they can sing too. 
For those of you who are worried about inflation and need to know the latest CPI numbers, why not take a look at the other CPI – the Christmas Price Index.  PNC Wealth Management has been pricing the cost of the gifts in the song the 12 days of Christmas for the last 28 years.  Visit their site for the 2011 edition.  For example, the price of a partridge in a pear tree was $32.52 in 1984 – today, $184.99.  The price of talent has also gone up.  In 1984, twelve drummers drumming were $834.47 but are now $2,629.90. 
If you are practically minded and want to increase the economic value of your Christmas present transactions, visit Publish or Perish-Andreas Moser’s Blog for advice like:
“The best approach would be not to give any presents at all. In a free economy, people will buy what they need and want, and suppliers will produce and sell what people want. This radical approach might seem a bit heartless though…” As a result, Andreas also suggests giving money – the gift that’s always appreciated – or simply provide a wish list.  For the record, Andreas likes cigars and books.  If you are interested, I like wine and books.  Myself, I ultimately think it’s the thought that counts and if you think hard enough you can come up with something appropriate for everyone.  For example, I often think the best Christmas gifts for fresh-water macro-economist friends are Candy Keynes. 
Always remember, economic analysis is the gift that keeps on giving.  All the best for a Merry Christmas and a Happy New Year from Northern Economist.  Northern Economist will be taking a holiday break until January. See you in 2012.
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Northern Economist's List of Things to Watch for in 2012
What will the New Year bring?  Northern Economist is looking ahead for the exciting trends and developments that 2012 will bring the world economy – internationally, nationally and of course right here in the Most Serene Kingdom of Thunder Bay.

  1. In a fund-raising effort worthy of We Are the World, Silvio Berlusconi and William Shatner will team up and record an album to raise money for European debt relief.  The lead song on the album will be Lucia in the Sky with Diamonds.  They will conclude with a video duet of the famous "Au fond du temple saint" from Bizet’s The Pearl Fishers in which they both lament lost love real or imagined against a visual backdrop featuring German Chancellor Angela Merkel and the Starship Enterprise.
  2. As part of the 2012 Diamond Jubilee celebrations for Queen Elizabeth the Second, a giant wire will be strung across the two “iconic” Beacons on Thunder Bay’s waterfront park and decorated with red, white and blue bunting and giant Union Jacks.   Once the Jubilee Celebration is over, the Beacons will be converted into an exciting new tourist attraction.  Giant oversize clothes will be strung from the wire and in honor of the prominent natural Thunder Bay harbor landmark, the beacon exhibit will be rechristened The Sleeping Giant’s Clothesline.
  3. As part of its Green Energy Strategy designed to save the environment and create jobs and prosperity, the Ontario government will announce that it is embracing new airship technology and build a fleet of airships to provide transportation infrastructure to the Ring of Fire and Ontario’s far north.  However, it will be decided that the base for construction and deployment of the new technology will be at Queen’s Park in Toronto.  Despite the uproar in northern towns starved for jobs, this will not be the result of indifference to the north or a desire to generate employment in Toronto.   A consultant’s study will conclude that the Queen’s Park location is best suited to the production of high performance Lighter than Air Technology hot air inflation equipment.
  4. In a daring move, Canada’s First Nations will announce that under their inherent rights and obligations as sovereign nations, the Canadian Federal Government will be placed under third party management and will send in former Auditor-General Sheila Fraser and Parliamentary Budget Officer Kevin Page as Administrators Plenipotentiary and Extraordinary with a joint mission to audit the Federal Government’s structural deficit forecast.
  5. The European Union will create a new joint stock company – Acme International Finance Corporation and collect all of its member’s sovereign debt obligations and sell them to this new agency at a discount, which will then use them as collateral to issue bonds that will be known as Your Owes.  The Acme International Finance Corporation will then be jointly purchased by the Canadian Pension Plan and the Ontario Teacher’s Pension Plan Fund and the equity value donated to create a massive public endowment to generate income that will help finance and sustain the Canadian public health care system.
  6. The Oxford English Dictionary will add a new definition of the word “imminent” to its definitive compilation based on its use in Thunder Bay to describe the eventual announcement of a waterfront hotel.  The entry will read:

im·mi·nent  [im-uh-nunt]
adjective
1.  likely to occur at any time: eg. After a festering illness, death was imminent.
2.  overhanging: eg. The unstable mass of rock means that danger is imminent.
3.  possibly occurring in a time frame that is immediate, or perhaps within a longer time frame ranging from several days to one or more years depending on inter temporal perceptions of the fullness of time and space. Eg. The announcement of the hotel proprietor on Thunder Bay’s waterfront is still imminent.
It is going to be an exciting New Year for us all!


Thunder Bay's Threat from the North
The new report by the Conference Board of Canada titled Northern Assets: Transportation Infrastructure in Remote Communities on transportation in northern Canada provides a case study of Churchill Manitoba as a potential international gateway that may give the Port of Thunder Bay some cause for concern.  The Port of Churchill and its Bay Line rail line play a key role in what is referred to as the Government of Manitoba’s Churchill Gateway System. Churchill could increase its role as a shipping hub by diversifying the range of agricultural products it handles and by increasing its share of Nunavut-bound freight—especially for mining projects.  As well, climate change and melting sea ice is opening up the possibility of developing polar shipping lanes between Churchill, Asia, and Europe.
Churchill’s main competitor for Asian and European markets is the Canadian east-west rail-marine transport network and in particular, the Port of Thunder Bay.  Table 4 of the Conference Board report shows how Churchill is closer to many European ports than Thunder Bay.  The year-round shipping opportunities afforded by global warming apparently makes Churchill an even more attractive shipping venue.
Developing Churchill’s role as a shipping hub in Northern Canada will require substantial investment in transportation infrastructure in and around the community, consolidated effort from public and private stakeholders, and an informed analysis of such a transportation network.  A key proponent is the province of Manitoba which has a transport strategy known as Centreport with Winnipeg as a key hub.  According to the Conference Board Report:
The overarching aim of the strategy is to “advance Manitoba’s position as a sustainable transportation and distribution gateway of choice for North American mid- continent global commerce and international travel.” The development and growth of the Port of Churchill is a key element of this strategy.
While initial versions of the Centreport Strategy placed Thunder Bay on the eastern arm of the transport network, recent reformulations appear designed to bypass the Port of Thunder Bay entirely. As the accompanying map from the Conference Board report shows, the planned Manitoba International Gateway Strategy now bypasses Thunder Bay completely with the eastern arm being a land route going through Minneapolis and Chicago and then through southern Ontario.  The Canadian ports in this strategy are saltwater ports – Prince Rupert, Vancouver, Churchill with the St. Lawrence-Seaway Ports being Detroit-Windsor, Toronto, and Montreal. 

However, developing this new North American transportation pattern with Churchill as a northern shipping hub will require substantial new investment in transportation infrastructure.  Yet, there is substantial transport infrastructure already in place along the Great-Lakes St. Lawrence Seaway with Thunder Bay’s port already in place with substantial capacity. Why should the Canadian taxpayer be building new transport infrastructure when there is a cost-effective east-west infrastructure already in place that can be incorporated into the Manitoba Centreport and Gateway Strategies? Alarm bells should be ringing in Thunder Bay given that this new strategy is not just a Manitoba government lobbying strategy but now also seems to have been given the blessing of the Conference Board of Canada.  What's next?  A call for Federal government funding to build a rail link from Churchill to the Ring of Fire?


Transport Infrastructure and Ontario's North: Floating New Ideas
One of the persistent themes in Northern Ontario economic history is transportation and access.  From the days of the fur trade, to the arrival of the railroad and later on the onset of modern highways and air travel, transportation has been essential to accessing natural resources and getting them out to market.  Yet, Northern Ontario’s transport network has borne the marks of being tailored to economic resource exploitation rather than linking together people.  The network has been designed to move resources and goods out of the region rather than facilitate travel and communication within the region.  This has been a factor in the regional divisions within a vast and sparsely populated region.
A new report by the Conference Board of Canada titled Northern Assets: Transportation Infrastructure in Remote Communities highlights the challenges of northern Canadian transportation in general and particularly the new changes being wrought by climate change such as permafrost degradation.  While the report focuses on a case study of Churchill, Manitoba, many of the issues also apply to remote rural resource communities in Northern Ontario particularly with respect to the dawn of resource exploitation in the Ring of Fire.
According the report, transportation infrastructure is more expensive to build and maintain in Canada’s North and climate change is disrupting existing rail and winter-road links.  This transportation infrastructure is not only vital to northern communities but also benefits all Canadians through its contribution to national security and sovereignty.  With milder winters, the viability of winter roads is becoming particularly acute as a problem to remote rural first nations given the reliance on them for resource development projects and supplies.
The report argues that the costs and benefits of transport infrastructure in Canada’s north must be measured by different standards than the more densely populated south. In particular, the design, construction and operation of new transportation infrastructure must include measures to mitigate and adapt to the potential effects of climate change and this will require better communication and partnership between public and private sector partners. 
If rural remote First Nations in northern Ontario are to fully realize the benefits of resource development on their lands, they will require dependable transportation infrastructure.  Most interestingly, the report also discusses the potential contribution of non-conventional transportation modes such as airships in providing future transportation infrastructure. This aspect of transportation innovation is mentioned as “an intriguing possibility” in the report.  
As the report writes:
Today, airships are commonly thought of as an old, obsolete technology. However, that perception may change after the launch of Northrop Grumman’s long- endurance multi-intelligence vehicle (LEMV). Three of these vehicles will be supplied to the U.S. Army primarily for surveillance purposes. The first is on track to be delivered by the end of 2011.  These hybrid airships, which combine lighter-than-air technologies (buoyant gases) and heavier-than-air technologies (fixed-wing aircraft), are designed to carry a payload of over one tonne at nearly 10,000 metres, while staying continuously airborne for over three weeks. At this capacity, their use for Northern resupply would be negligible.  However, trade-offs can be made between range, altitude, and capacity. Cargo applications would not require the same type of endurance and would not need to fly at those high altitudes. Barry Prentice, a professor of supply chain management at the University of Manitoba, argues there are no technological barriers to building freight airships able to carry a payload of 20 tonnes or higher.  This payload is in the same range as a single tractor-trailer truck, but an airship would be faster, more fuel efficient, and able to land virtually anywhere, removing the need for expensive road construction and maintenance.  In fact, airships may be operating in the North as early as 2014. Discovery Air Innovations Inc., a subsidiary of a Yellowknife aviation company, has signed a tentative agreement with Hybrid Air Vehicles Ltd. (HAV) to procure a fleet of airships to be used in the North. HAV is the same company manufacturing the LEMVs for Northrop Grumman…There is significant potential for the widespread commercial application of airships, particularly for resource extraction industries. And, given that federal, provincial, and territorial governments are committed to supporting Northern resupply activities, there may be opportunities for public-private partnerships to help finance infrastructure capital and maintenance costs.
As a new and innovative transportation technology in Ontario’s North, airships could be useful for both passenger and cargo transportation on a year round basis and save public sector capital expenditure on permanent road and rail links.  Remote communities could have frequent and cost-effective transportation for their people and goods to urban centers that would provide the necessary market links that could generate economic viability for communities.
Manitoba seems to be taking a lead in pioneering this new technology. Today, the Isopolar Airships Inc. Company will be announcing the completion of an 80 foot single pilot airship - the MB80 - in the Engineering Building on the campus of the University of Manitoba.  The ship will be used to perform airship research under Canadian weather conditions as the next step to adapting airship technology to Canada's north. In northern transportation, the sky is the next frontier.
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University Faculty: The Rise of the Administrative Class and Student-Faculty Ratios
With rising enrollments at university campuses across the country, it is instructive to examine what the trends have been in faculty numbers.  Statistics Canada provides annual data on the number of full-time teaching staff at Canadian universities for the period 1970 to 2008 and the long-term trends are interesting.  Data is available for full-time faculty with senior administrative responsibilities and those without senior administrative duties. 
Over the period 1970 to 2008, the total number of full-time faculty at Canadian universities grew from 24,597 to 41,954 – an increase of 71 percent.   There appear to be three phases to the growth in faculty numbers  - a period of increase from 1970 to 1993 when total numbers grew by 50 percent.  A period of decline from 1993 to 1998 when numbers declined by 9 percent followed by a period of recovery from 1998 to 2008 when the total numbers of full-time faculty rose by 25 percent.  Interestingly enough, while faculty numbers have increased in recent years, enrollment has increased faster.  Over the period 1992 to 2008, total enrollment at Canadian universities grew by 26 percent while the number of total full-time faculty grew by 13 percent. 
 


The stretching of faculty human resources across more students is also accompanied by another factor- an increasing proportion of full-time faculty holding senior administrative appointments.  Between 1970 and 2008, the number of full-time faculty without senior administrative appointments grew by 63 percent while those with senior appointments grew 196 percent.  Whereas in 1970, the percent of full-time faculty with a senior administrative appointment was 6 percent, it is now over 10 percent though the proportion has declined since 2000 as the last few years actually saw faculty numbers without full-time senior administrative duties grow faster than those with. 
The modern university does appear to have become a more administratively intensive organization and the number of faculty involved in administrative activities appear to have grown faster than those in traditional line functions.  However, much of this growth appears to have occurred before the mid-1990s.  During the 1990s, the percentage decline in faculty was similar across both categories whereas since the end of the 1990s, faculty renewal has actually seen the numbers of faculty without senior administration appoints grow faster than those without.  However, one can probably expect to see a slowdown in faculty growth rates in the near future given fiscal situations in a number of provinces though enrollment is expected to continue rising.  This means the number of students per full-time faculty member will continue to rise.  Even with the robust additional hiring since 1998, the number of students per full-time faculty member from 1992 to 2008 grew from 23.8 to 26.5 - an increase of 11 percent.

The Changing Face of Public Sector Employment: The Municipal Ascension
Over the last decade, the number of public sector employees has grown.  Between September 2001 and September 2011, the total number of public sector employees has grown from 2.795 to 3.310 million – an increase of 18.4 percent.  What is interesting is the changing distribution of those employees over the last decade (See Figure 1).  In 2001, 12 percent of public sector workers were employed in the Federal Government, 12 percent were employed with Provincial-Territorial Governments, 11 percent were employed in the Post-Secondary Education sector, 26 percent were in Health and Social Services, 17 percent were in Local Government and 22 percent were employed in Local School Boards.  By 2011, the federal share had grown to 13 percent, post secondary education was up to 12 percent and local government was up to 18 percent.  The share of health and social services had stayed the same while that employed by local school boards had declined to 20 percent.


The fastest growing part of public sector employment in Canada over the last decade was the local government sector, which saw its employment rise from 467,186 to 604,937 – an increase of 29.5 percent (See Figure 2).  Close behind, was the post-secondary education sector which saw employment its employment grow from 295,915 to 382,341 – an increase of 29.2 percent though it remains one of the smallest sectors.  Health and social services grew by only 20.6 percent but at 862,981 employees remains the largest share of public sector employment. The Federal government came in fourth place with growth of 19.8 percent.  Local school boards grew by only 8.9 percent while provincial-territorial government employment grew by 5.1 percent.


Of course, health, social services, post-secondary education, local school boards and local government are all under the jurisdiction of provincial governments yet all of this employment combined only grew by 18.2 percent – quite close to the rate of growth of total public sector employment as well as federal employment.  It would appear that while there has not been an employment shift away from federal employment towards the broader provincial-local sector, within the provincial local sector there has been a large shift towards municipal government and post-secondary education.  As Figure 3 tries to illustrate, there is a rising trend in the share of local government public sector employment and that for post-secondary education.  The increase in municipal sector employment is the more important trend given its already large employment share.  The increase in municipal employment is particularly interesting as it suggests a shift towards decentralization within provinces and an increase in the importance of the municipal role. 



Thunder Bay Gasoline Prices Among Highest in the Country
What does Thunder Bay have in common with Yellowknife, Vancouver and Montreal?  Is it:
a) a cosmopolitan urban street life
b) snowy winters
c) traffic congestion
d) some of the highest gasoline prices in the country
If you answered d), you are correct.  While Canadian motorists have been complaining about high gasoline prices for some time now, when one looks at Statistics Canada gasoline price data for major urban centers in the country, drivers in Thunder Bay are paying some of the highest prices in the country along with drivers in Montreal, Vancouver and Yellowknife.  For the period January to September 2011, the average monthly price for regular unleaded gasoline at full service stations ranged from a high of $1.37 a litre in Yellowknife to a low of $1.11 in Edmonton with Thunder Bay coming in fourth at $1.33.(See Figure 1)  For unleaded gasoline at self-service stations, the average prices ranged from a high of $1.33 in Vancouver to a low of $1.09 in Edmonton with Thunder Bay coming in third at $1.31.(See Figure 2). 

FIGURE 1

FIGURE 2


Thunder Bay's prices have been among the highest in the country for some time now.  Like the rest of the country, they have been trending up dramatically since the latter part of the 1990s given the increase in the world price of oil. As Figure 3 shows, the spike in retail gasoline prices in Thunder Bay since 1999 - as in the rest of the country - matches the spike in the price of crude oil.   On the one hand, we are not alone given that motorists in Vancouver and Montreal seem to be sharing a similar fate.  On the other hand, our average monthly gasoline prices are easily 15 cents a litre more than Winnipeg which is not that far away. It is difficult to believe that such a difference is based on solely on transportation cost and distribution factors. 
I would like to see a study on the number of gasoline stations per capita in Canada's major urban markets as well as the number of gasoline retail companies to see if urban markets with fewer stations per capita and fewer companies have higher prices.  The number of companies in a market as well as the number of stations might be a good indicator of how competitive a market might be.  That would provide the necessary evidence as to whether high prices in places like Vancouver, Montreal and Thunder Bay are a result of them being less competitive markets.

FIGURE 3
 





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Government Employment Share on the Way Down
There are many indicators of economic recovery such as falling unemployment rates,  rising GDP growth or rising retail sales.  However, another sign of economic recovery is when something else is falling - the share of employment accounted for by government workers.  I've plotted below a graph of monthly government employment in Canada over the period 2001 to 2011 as a percent share of total employment.  Government employment data was obtained from Statistics Canada and is defined in this graph as federal government, provincial territorial government, health and social service, local government and local school board employment.  I have not included employment by government business enterprises. 
The accompany Figure 1 shows that from 2001 to 2008, government employment was a relatively stable share of total employment.  It was with the onset of the global financial crisis and the recession that it rose as a share of total employment and rather dramatically at that.  While private sector employment dropped dramatically because of the recession's impact, government stimulus and deficits served to continue to expand government employment so that the share of total employment in government rose.  As the economy began to recover, private sector employment began to rise again while government employment growth continued to rise until 2011.  By the end of 2010, non-government employment had still not returned to its pre-recession levels, while government employment was above its pre-recession levels. (See Figure 2)  The decline in the government share of employment over the course of 2011 can be interpreted as a sign that the economy is recovering and that private sector job creation has resumed. Indeed, government employment in 2011 actually has begun to decline while non-government or private sector employment has continued to rise and in 2011 finally surpassed its pre-recession peak.  This suggests that public sector employment indeed played its role as an economic stabilizer during the downturn. 


 




 


Northern Economist on iPolitics and Evidence Network!
Physician fee increases driving up
cost of health care: report
by Livio Di Matteo
Published on iPolitics.ca  on December 8th, 2011.

How this happened, and what we can do about it

The recent release of National Health Expenditure Trends by the Canadian Institute for Health Information (CIHI) puts total health expenditure in Canada at a whopping $192.9 billion in 2010 and $200.5 billion in 2011 — annual increases of 5.9 and four per cent respectively. This year’s release was also accompanied by a report titled Health Care Cost Drivers, which finds the period from 1998 to 2008 was one in which public health care spending grew at an average of 7.4 per cent annually — double the rate of government revenue.
Physician spending was highlighted as one of the fastest-growing public-sector health categories of recent years, with half of the growth attributable to increases in physician fee schedules.

Economists are not surprised that physicians were able to negotiate generous fee increases given the general perception of physician shortages. However, it should be noted that the period since 2003 has seen a marked increase in the number of physicians after a period of relative stability, due largely to sharply higher medical-school enrollment.
The average number of physicians per 10,000 people in Canada is now rising markedly in most provinces after the small decline of the 1990s.
Governments are often conflicted when it comes to public health care. While more physicians means more services and access for the public, it also means more public spending. With health care sustainability once again moving into the forefront of policy discussion in Canada, physicians and their role as health-system gatekeepers will be coming under scrutiny.
If we are going to spend more on physician services, we need to ensure that we can measure outcomes and assess whether we are getting better care.
Indeed the cost and effectiveness of many procedures will likely be an area of examination. As well, we can expect to see even more pressure to move away from fee for service models of physician reimbursement and towards models that pay physicians set salaries or fixed payments per enrolled patient — though there is no certainty that these will help control costs.
There is surprisingly little evidence on whether or not alternate payment systems for physicians generate large differences in health care costs and health outcomes.
One of the arguments used to restrict medical-school admissions in Canada in the early 1990s was that physicians were a primary cost driver in the health system because of their role as gatekeepers. Reduce the number of physicians and replace them with nurse-practitioner teams and it was felt cost savings would automatically ensue.
However, the 1990s saw a perception of widespread physician shortages though only a handful of provinces had declines in the per capita number of physicians (Ontario, BC, Alberta, PEI and Nova Scotia), and by 2010 these declines have turned into marked increases in most of these provinces.
Moreover, after a short pause, health-care spending still continued to mount, driven also by drugs, diagnostic technology and public-health initiatives. The recent increase in physician numbers more than makes up for the small decline of the 1990s but is being accompanied by expenditure increases.
While physician spending is an important cost driver, the drivers of public health-care spending are also a complex interaction between physician decision-making, new diagnostic and drug technologies, population growth and aging, and the cost and deployment of other health human resources used in treatment.
Indeed, a positive correlation between physician numbers and health spending is not automatic. In other words, a high per capita number of physicians is not always associated with high per capita health spending. Quebec, for example spends the lowest amount per capita on public health care spending and yet has one of the highest number of physicians per capita. Manitoba, on the other hand has the second highest per capita public health spending in the country but is one of the lowest in terms of physicians per capita.
Two lessons emerge from this. First, public health-care spending is complex and care needs to be taken that cost-control approaches to health-system sustainability use a balanced approach rather than setting simplistic goals that target only one aspect of the health care system. Although physicians are a health cost-driver, they are not alone but operate as part of a system that also drives costs.
Second, the federal government needs to coordinate information sharing and exchange amongst the provinces so that they can learn from each other on a best practice basis how to balance any increases in physician numbers and access to services with measures to keep health spending costs under control.
 Livio Di Matteo is a professor of economics at Lakehead University and an expert advisor to EvidenceNetwork.ca, a comprehensive and non-partisan online resource designed to help journalists covering health policy issues in Canada. He holds a PhD from McMaster University, an MA from the University of Western Ontario and an Honours BA from Lakehead University.


Aboriginal Population Projections
Statistics Canada has released a study projecting that by 2031, Canada’s aboriginal identity population will range from 1.7 million to 2.2 million representing anywhere from 4 to 5.3 percent of Canada’s total population.  These are of course based on the 2006 Census, which means they will be out of date quite soon.  I would suspect that revised projections using the 2011 results would probably show even larger populations for aboriginal identity Canadians by 2031.  This is because population projections for northern Ontario done based on the 2001 census that showed declining populations in the north to 2031 once revised using the 2006 census – which picked up the higher aboriginal birth rates – now show a stable northern Ontario population until 2031.  I suspect that after 2011, projections for Canada will also show even more of an increasing aboriginal population.
According to Statistics Canada, five projection scenarios were selected for analyzing the results.  They were: "Scenario 1, “No ethnic mobility and constant fertility,” combines the constant fertility assumption, the nil intra-generational ethnic mobility assumption and the assumption that the migration patterns observed in 1996, 2001 and 2006 will continue to 2031. Scenario 2, “No ethnic mobility and converging fertility,” is identical to Scenario 1 except for fertility, which is assumed to be convergent rather than constant. Scenario 3, “Constant ethnic mobility and constant fertility,” differs from Scenario 1 only in that it assumes that intra-generational ethnic mobility will continue to 2031 instead of ceasing. Scenario 4, “Constant ethnic mobility and converging fertility,” differs from Scenario 3 only in its assumption on fertility, which is convergent rather than constant. Finally, Scenario 5, “Nil net migration on reserves,” assumes constant fertility, no intra-generational ethnic mobility and nil net migration on Indian reserves."
The study shows that by 2031, Saskatchewan will have 21 to 24 percent of its population of aboriginal identity compared to about 16 percent in 2006.  Manitoba, will range from 18 to 21 percent from 16 percent in 2006.   About 34 percent of aboriginal people were living in census metropolitan areas in 2006 and this will rise to 36 to 40 percent by 2031.  In 2031, Thunder Bay, Winnipeg, Greater Sudbury, Saskatoon and Regina will have the largest proportion of aboriginal population


The percentage of population by 2031 in major census metropolitan areas is depicted in the accompanying figure for the first four scenarios.  By 2031, the study forecasts that Thunder Bay’s aboriginal population will range from 13.7 to 15.1 percent while Greater Sudbury’s will range from 8.6 to 13.2.  As I mentioned earlier in this post, there is a strong probability that these forecasts are underestimates.  This future is probably already here.



16 Posts from December 2011
Where's the Giant Heart?
A number of years ago, the local community television station in Thunder Bay ran commercials extolling Thunder Bay as the community with a "Giant Heart".  Indeed, Thunder Bay has always prided itself as a generous community with a large community spirit, and substantial pools of volunteers ready to tackle projects.  Yesterday, Statistics Canada released data on charitable donations in 2010 from Canadian tax data that caused me to briefly question this conventional community wisdom. 
According to the report, in 2010, Canadian taxfilers reported 8.3 billion dollars in charitable donations with 23.5 percent of all taxfilers claiming charitable donations on their tax return.  The median value of donations in 2010 was 260 dollars.  What is interesting is that data was also provided by Canadian CMAs and according to Statistics Canada the most generous donors were in Abbotsford-Mission, British Columbia followed by Calgary and Victoria.  As the accompanying Figure 1 shows, when ranked from highest to lowest, Thunder Bay ranks in the bottom third at number 26.  The other northern metropolis, Sudbury, fares even worse on this measure of generosity at number 28.


However, the median value of donations may not necessarily reflect generosity if the amount given is also tied to local unemployment rates and economic conditions.  As well, this is taxfiler data and only reflects what people have claimed.  Some people may not claim all of their donations.  As well, these donations do not reflect the full range of charitable activity including volunteer time.  In some communities, it may be that there is more of a spirit of activism and involvement rather than outright cash donations.
 


If the communities are ranked by the percent of taxfilers actually claiming a donation (Figure 2), the range between the highest and lowest givers is much narrower.  In this ranking, Thunder Bay does much better coming in at 13th place with 25.8 percent of taxfilers claiming a donation.  Indeed, the top position this time is held by Regina, with Guelph and Ottawa-Gatineau next, while Abbotsford-Mission is near the bottom at 29th place with only 22 percent of taxfilers claiming a donation.  While how much you give is important, the act of giving is also just as important and also a reflection of community generosity.  Communities with higher rates of taxfilers claiming donations reflects a higher degree of engagement with giving even if the median amounts might be lower than communities with lower rates of engagement.  The more interesting observation in all of this is the following: across Canadian, less than  one-quarter of taxfilers claim a donation.  It would appear that a large majority of Canadians either do not donate or if they do do not make a claim.


Thunder Bay's Urban Evolution Continues
The commencement of a new Thunder Bay Transit express service linking the City Hall south core terminal with the north core Water Street Terminal and with stops only at intercity mall and the Walmart Big-Box store complex is a sign of how city services have finally started to catch up with Thunder Bay's evolving urban reality.  Moreover, it is also a signal that after nearly forty years of amalgamation, Thunder Bay's urban structure is finally moving towards a set of well-defined cores that builds on its urban history of two cities rather than tries to suppress it.
In the early years after amalgamation or "unification", Thunder Bay struggled to find itself but in the process downplayed its urban history as the former cities of Fort William and Port Arthur.  A policy of "core-specialization" that would have allowed a unique role for each former core area and allowed the city to build around historic core areas took a long time in being devised but it is now slowly flowering.  Such an approach sees the former Fort William downtown as "government-administrative", the former Port Arthur downtown as "tourism-entertainment" and the inter-city area as "commercial".
The former Fort William core has a revitalized City Hall complex and construction is underway and being completed on a new provincial court-house complex and the District Social Services Board Office. The Port Arthur downtown has Magnus Theatre, a Casino and a redeveloped water-front park and may yet become home to a new Thunder Bay Art Gallery as well as a possible events center.  And of course, inter-city has become the city's retail core with three shopping mall complexes as well as numerous commercial infill between them. 
The new express transit service is recognition that these areas of concentration are where activity is clustering in Thunder Bay and by making them more convenient and quicker to get to will promote additional development. However, this service is currently set up only for the "Holiday Rush" and for set times of the day.  This service should be set up permanently and for longer periods of the day.  As well, given the large student populations in Thunder Bay at Confederation College and Lakehead University and the medical services at Thunder Bay Regional Hospital, there are three more links to the express network that should be put in place.  The inter-city mall express stop should have an express link to the College, University and Hospital.  This would virtually complete a high speed urban transit network for the city connecting seven major clusters of activity though high frequency will be an important component to ensuring use. Combined with existing routes as feeder routes to these express hubs will provide a much more convenient and useful service. 


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Residential Revenue Shares in Municipal Taxation: A Comparison
Detailed financial data on municipalities is filed annually with the Ministry of Municipal Affairs and Housing in standardized Financial Information Returns accessible on the web.  After examining the shift in own-source revenue burden towards residential and away from business in Thunder Bay over the period 1990 to 2010, I decided it was worthwhile examining the burden across a number of Ontario cities to see how much variation there is.  The shift in municipal property tax burdens away from business and towards residential ratepayers in Ontario began in the 1990s.  One would be interested in seeing if such a process has resulted in similar shares of own-source revenue from residential ratepayers by 2010.
I was able to calculate an estimate for own-source municipal revenue consisting of user fees and service charges, business property taxation (commercial and industrial) and residential taxation in 2010 for the five major cities in northern Ontario: Thunder Bay, Timmins, Sault Ste. Marie, Greater Sudbury and North Bay.  As well, I also made the calculation for four other southern Ontario cities: Hamilton, Oshawa, Windsor and St. Catharines.  The ratios are plotted in the accompanying figure and suggest that Thunder Bay is not alone in the shift onto residential ratepayers.
At 0.46 (or 46 percent), the share of own source municipal revenues accounted for by residential ratepayers in Thunder Bay is slightly above the share for Sudbury, the Sault and Timmins but well below that for North Bay, which sits at 54 percent.  However, Thunder Bay’s residential share is below the four southern Ontario cities in the chart, which range from a low of 47 percent for Windsor to a high of 70 percent in Oshawa.  Another way of looking at the numbers is also shown in the figure.  Here, we plot the business property tax revenue share of total own-source revenue.  At 20 percent, Thunder Bay’s is the second lowest of the five northern Ontario cities – below Greater Sudbury, the Sault and Timmins – and above North Bay’s.  However, when compared to the other four southern Ontario cities, the share of own source revenues being paid by business in Thunder Bay is greater than in Hamilton or St. Catharines, on par with Oshawa and below Windsor.


What does this mean?  On one level, it is difficult to draw any conclusions given the small size of the sample.  A proper comparison would require a much larger number of Ontario cities.  At the same time, within the set of five major northern Ontario cities, it would appear that the share of own source municipal revenues from residential ratepayers is about the same.  The share from business taxation is lowest in Thunder Bay and North Bay while it is quite a bit higher in Greater Sudbury and Timmins.  Finally, the residual share – from user fees and services charges - is highest in Thunder Bay and Sault Ste. Marie, followed by Timmins and then much lower in Greater Sudbury and North Bay.
The share of own source municipal revenues in Thunder Bay coming from business property taxation may be high relative to Hamilton or St. Catharines but it is low compared to Sudbury, the Sault or Timmins.  Thunder Bay’s revenue share from residential ratepayers is similar to other northern Ontario cities but low compared to the four southern Ontario cities being examined here.  So, if the City of Thunder Bay says that there is an “equity case” for raising the revenue share paid by residential ratepayers and reducing that of business owners, what is the comparison group?  It certainly cannot be because residential ratepayers are providing a smaller share of revenues than business – we know that is not the case.
If the City of Thunder Bay wants to pursue a policy of “equity” when it comes to municipal taxation by reducing the property tax burden on business, then one possible set of comparators could be other cities.  So, are we using southern Ontario cities as the model?  North Bay?   Does the City of Thunder Bay know what the basis of their “equity” case is? Or perhaps, what the City of Thunder Bay should be arguing is that they want to lower business property tax burdens even further in an effort to attract firms and jobs but that is a separate argument.  In any event, based on these revenue shares, business property tax burdens are certainly not uncompetitive with respect to Greater Sudbury, the Sault or Timmins, our nearest major urban competitors.


Employment Statistics: A Quick Northern Comparison
The latest Labour Force Survey from Statistics Canada came out today and it shows that employment edged down in November nationally by about 19,000 jobs and that the unemployment rate nationally has risen by 0.1 percentage points to 7.4 percent.  In Ontario, the unemployment rate is currently 7.9 percent, down from 8.1 percent in October.  It is worth noting that unemployment rates in Ontario have been trending down over the two years.  In northern Ontario, the unemployment rate for Sudbury has also been trending down while that for Thunder Bay appears to be in a stable oscillating pattern going neither up or down by very much within the 6-7 percent unemployment range.  While Thunder Bay had a much lower unemployment rate than either Sudbury or Ontario over the last two years, that distinction has finally gone to Sudbury.




Is It Time for a Massive National Infrastructure Program?
The post-war economic boom gave way to a period of economic stagnation in western economies starting in the 1970s that resulted in a decline in long-term economic growth rates that was only partially reversed given the boom of the late 1990s.  According to the neoclassical growth model, economic growth in the long-run is a function of the deepening of the capital to labour ratio.  As a result, investment spending or capital formation is important and the share of your national output dedicated to capital formation is an important indicator of investment spending in the economy.
I was able to put together from three separate data sources a series for Canada on the ratio of investment to output.  For the period 1870 to 1926, there is the national accounts data put together by Mac Urquhart at Queen’s which provides GNP estimates for Canada as well as an estimate of gross fixed capital formation.  For the period 1926 to 1960 there is Historical Statistics of Canada, which provides GNP and an estimate of gross fixed capital formation.  Finally, for the period 1961 to 2010, I was able to get annual series from Statistics Canada for GDP and gross fixed capital formation.  Note that the estimate of gross fixed capital formation is for both business and government. 
As the measure of investment activity I calculated the ratio of gross fixed capital formation to output (GNP/GDP) for Canada for the period 1870 to 2010.   The share of GDP going to capital formation is but one estimate of investment activity but it seems like a reasonable one to use.  Investment spending is the most volatile component of national output and certainly more variable than national output so fluctuations in the ratio should reflect fluctuations in investment rather than GDP changing faster than investment.  The mean growth rate of nominal GDP from 1870 to 2010 was 6.4 percent and the standard deviation 7.8, whereas the mean for gross fixed capital formation was 0.9 percent and the standard deviation 11.0.
The accompanying figure plots the investment-output ratio and it shows the most spectacular investment boom in Canadian history was the period from 1896 to 1912 when the investment-output ratio rises from 0.115 to reach a peak of 0.341.  This was of course the wheat boom/western settlement period that saw massive capital infrastructure put in place for the western wheat economy.  The ratio collapses during the First World War and recovers during the 1920s but modestly before collapsing during the Great Depression to the low of 0.096 in 1934.  There is a slight recovery but then the ratio drops during the Second World War to the lowest it has ever been at 0.0814.  The period 1944 to 1957 sees a steadily rising investment-output ratio –the post-war boom era but since the 1950s the ratio while fluctuating has never since dropped to the depths of the 1930s or the late nineteenth century.  No doubt, interventionist government economic policy did much to stabilize fluctuations in the investment-output ratio in the period since World War II.


However, the investment-output ratio has not reached the height achieved during the post-war boom – the post-war peak of 0.259 achieved in 1957.  Indeed, the long-term trend since 1957 seems to be a declining investment output ratio despite the period of increase since the mid-1990s.  Is the long-term slide in economic growth and productivity since the 1970s also rooted in the  decline in gross fixed capital formation’s share of GDP? Given that much of our aging national infrastructure was built during the boom of the 1950s and early 60s, it stands to reason that a major renewal program launched now would boost investment-output ratios substantially and fuel more robust long-term economic growth.  Canada's fiscal position is quite strong relative to many other countries and could engage in the deficit financing that would boost investment in infrastructure and capital spending. I think a key component of such a national infrastructure program could be a national highway project. Canada is the largest developed country in the world without a system of fully grade-separated roadways that allow uninterrupted traffic flow between its major urban centres.  Such a project would provide both short-term and long-term stimulus to the economy via the short term construction impact and the long-term effects of transportation costs and travel times.


Ontario’s Battered Manufacturing Sector
The release of the Ontario fall fiscal and economic statement is usually accompanied by a lot of economic data on the recent performance of the Ontario economy which when combined with past reports allows one to get an interesting picture of economic change in the province.  I took the employment data provided by economic region both for total employment as well as for manufacturing to see just how bad the manufacturing sector’s losses have been and particularly how they varied across Ontario.
For Ontario as a whole, total employment between 1999 and 2011 rose from 5.688 million jobs to 6.610 million.  However, manufacturing employment dropped from 1.049 million to 781 thousand jobs – a loss of 268,000 jobs.  As a share of total employment, manufacturing in Ontario went from 18.4 to 11.8 percent - a remarkable change.  Moreover, no part of the province was untouched by this drop.  As Figure 1 shows, every single economic region of the province saw a drop in its manufacturing employment.  In percentage terms, the largest drop was in Northwestern Ontario where 53.8 percent of the manufacturing jobs were lost.  The smallest declines were in London and Kingston-Pembroke which both saw a decline of 15.4 percent. 
Manufacturing now makes up a much smaller share of Ontario’s employment (Figure 2).  The biggest declines in the employment share of manufacturing seem to have occurred in Ontario’s north.  In 1999, manufacturing employed 16.8 percent of employees in Muskoka-Kawartha, 9.6 percent in the Northeast and 11.6 percent in the northwest.  In 2011, those figures are 8, 7.5 and 6 percent respectively.  The share of employment in manufacturing has effectively been halved in the Muskoka-Kawartha region and in the Northwest – where manufacturing’s share of employment was already below the Ontario average. 






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