Alberta Trades Jobs Work Careers Edmonton Calgary

Statistics Canada recently released its labour-market figures for February and the numbers sure seemed like good news for Ontario.

The country’s largest province generated 46,000 new jobs, outperforming its provincial siblings by a country kilometre and far exceeding the expectations of leading economists. In fact, the net job-creation figure for the entire country was 43,000, due to losses elsewhere.

The data should have put a big smile on the face of Ontario Premier Dalton McGuinty, who is just settling into a second term following last autumn’s provincial election. But they didn’t, and for good reason.

There is a hole in the heart of the Ontario economy and it is bleeding in the worst way. The province lost some 20,000 manufacturing jobs in February and the latest losses are on top of 106,000 positions that disappeared in the sector over the past year.

Manufacturing has historically defined Ontario. It was the cornerstone of the provincial economy just as fish, wheat, oil and lumber shaped the economies of other parts of the country. In recent years, though, manufacturing has been, and you can choose your word here, shrinking, eroding or disappearing at an alarming rate due to competition from low-cost China and India, rising commodity prices and the strength of the Canadian dollar.

Unfortunately, the premier and his cabinet haven’t a clue what to do about it. They have tried the usual political gimmicks - programs that offer manufacturers free money for the right type of behaviour - without much success.

In April 2004, the province unveiled the $500-million Ontario Automotive Investment Strategy. It offered grants to vehicle assemblers and parts manufacturers that invested in skills training, innovation and research, improved infrastructure and energy efficiency. The McGuinty government claims this initiative led to $7 billion in new investment even as one manufacturer after another has closed its doors and jobs have vanished.

More recently, the government has put up $1.1 billion over five years for the Next Generation Jobs Fund, which will go to companies that reduce pollution, save energy and make transportation more efficient.

Ontario would like Ottawa to come to its rescue with funds to bail out failing companies or to subsidize troubled sectors of the economy.

The federal government has wisely refrained, but has instead offered some good and much-needed advice.

Federal Finance Minister Jim Flaherty, an Ontarian himself, has chastised the provincial government for “a lack of innovation, lack of foresight and a lack of leadership.”

Flaherty is galled at McGuinty’s unwillingness to participate in a federal plan to stimulate business investment by making Canada a low-tax jurisdiction.

Ottawa has announced a number of cuts to the corporate tax rate that will reduce it from 19.5 per cent to 15 per cent by 2012. Flaherty has urged the provinces to cut their rates to 10 per cent by the same date in order to give Canada a combined rate of 25 per cent and a competitive edge over other advanced countries.

Alberta has already met the federal target and the B.C. government has announced plans to lower its rate to 10 per cent. But Ontario is sitting at 14 per cent and has shown no inclination to adjust it downward.

“If you’re going to make a new business investment in Canada, and you’re concerned about taxes, the last place you will want to go is the province of Ontario,” Flaherty recently told the Halifax Chamber of Commerce.

McGuinty, sorely miffed, sent a three-page latter to Flaherty chastising him for an “extraordinary attack,” calling it “a betrayal of the federal government’s responsibility to champion the Canadian economy.”

But some people think the federal finance minister has a point. Don Drummond, chief economist at the Toronto-Dominion Bank, told an interviewer that Ontario’s business taxes “stick out like a sore thumb” when compared to other provinces and added: “There are definitely elements of Ontario’s tax regime that are going to have to change.”

There is another cloud forming on Ontario’s horizon - the U.S. presidential race - which has the potential to cause some real havoc in the province’s manufacturing sector. The two contenders for the Democratic nomination, Barack Obama and Hillary Clinton, are both promising that, if re-elected, they will renegotiate parts of the North American Free Trade Agreement.

They are responding to voters in northern states who have seen great swaths of their manufacturing base disappear and blame the flood of imports from countries like Canada. Fortunately this country will have an ace in its back pocket - the Alberta oilsands - in any negotiation over NAFTA.

Canada can promise to keep shipping oil and gas south provided the U.S. border remains open to manufactured goods from Ontario.

In effect, Alberta’s oil wealth, which is deeply resented by many in Ontario, could prove to be the province’s salvation.

(D’Arcy Jenish can be reached at jenish@businessedge.ca)