Ontario's Economic Performance Falls Behind U.S. Neighbors in Great Lakes Region
By global measures, Ontario stands as a prosperous province, offering living standards and opportunities that many worldwide envy. However, a closer look within its own economic region paints a starkly different picture. According to a recent study, Ontario is emerging as an economic laggard compared to its U.S. neighbors in the Great Lakes area, with data revealing a concerning and widening prosperity gap.
Alarming GDP Disparities Highlight Ontario's Struggles
In 2024, the latest year for which data is available, Ontario's per-person GDP was recorded at C$74,143. This figure is lower than that of all eight U.S. states in the Great Lakes region, including Michigan, New York, Pennsylvania, and Illinois. The gap is substantial: Michigan, the lowest-ranking U.S. state in the region, had a per-person GDP of C$79,697, meaning Michiganders enjoyed living standards 7.5% higher than Ontarians.
New York, the regional leader, nearly doubled Ontario's living standards with a per-person GDP of C$134,470. On average, the Great Lakes region's per-person GDP was 34.5% higher than Ontario's, translating to more than C$20,000 per person. This disparity underscores Ontario's competitive challenges in attracting investment and talent.
A Growing Prosperity Gap Over Two Decades
The prosperity gap between Ontario and its U.S. neighbors is not static; it is rapidly increasing. Between 2001 and 2024, after adjusting for inflation, per-person GDP grew by only 12.7% in Ontario, compared to 22.5% across the Great Lakes region as a whole. This trend predates recent trade tensions, indicating deeper structural issues within Ontario's economy.
This widening gap should raise alarm bells for Ontarians. As these states compete directly with Ontario for manufacturing and other sectors, the province's sluggish economic performance has led to anemic job creation, slow wage growth, and increased pressure on government finances due to weaker revenue growth.
Policy Shortcomings and the Ford Government's Response
In March, the Ford government launched the "Protect Ontario" advertising campaign, promoting a plan to build a more competitive, resilient, and self-reliant economy. However, critics argue that the government's policies have not addressed key economic hurdles. For instance, the recent budget left relatively high personal income tax rates unchanged, making rates less competitive compared to neighboring states.
Additionally, the government has broken its promise to reduce the headline business tax rate to spur investment and job creation. Regulatory barriers continue to hinder job-creating projects and new homebuilding, while provincial finances deteriorate due to increased spending and borrowing.
Calls for a Rethink of Economic Strategy
Ontario has the potential to be a dynamic and affluent global powerhouse, but its economic engine continues to sputter rather than accelerate. Experts urge the Ford government to reconsider its economic approach, learning from more successful jurisdictions that have significantly improved living standards for their citizens. Without strategic changes, Ontario risks falling further behind in a competitive regional landscape.
Jake Fuss, director of fiscal studies at the Fraser Institute, authored the study, highlighting the urgent need for policy reforms to bridge the prosperity gap and foster sustainable economic growth in Ontario.
