Toronto’s economy has been remarkably resilient in recent years – but looming challenges in Canada’s largest city will be tough to tackle in an era of slow growth and fiscal constraints.
A new paper by Toronto-Dominion Bank, to be released Thursday, explores the biggest economic risks the region faces and warns of tepid economic and employment growth over the next few years.
The stakes are high. The Toronto region – which includes the GTA and Hamilton – accounts for nearly half of the province’s GDP and 15 per cent of the country’s economic output.
While the city’s economy has outperformed U.S. peers in recent years, key drivers of that growth – booming real estate along with consumer and government spending – are expected to fade.
“Toronto’s had a good ride … but the big issue is how we sustain the momentum, given these challenges,” said Derek Burleton, the bank’s deputy chief economist and co-author of the report.
The city’s economy is rapidly shifting. Manufacturers, a key source of employment, have shed 170,000 factory jobs in the past decade, a third of which have evaporated since the recession.
And the housing boom, which accounted for a quarter of economic activity and job creation in the past decade, is now tapering off.
The report comes ahead of an April 17 forum of urban leaders, hosted by CivicAction, that will discuss the region’s future.
Here is the bank’s assessment of the key challenges the city must address: congestion, opportunities for youth, eroded cost competitiveness, infrastructure, marginalized population and the environment.
Congestion: Transportation tops the list. Gridlock in the region is legendary – and costly to both health and time, to the tune of about $6-billion in lost productivity a year. A long-term view, including plans for Metrolinx, is crucial. Road tolls or a new sales tax are the best ways to raise revenue.
Opportunities for youth: The region has lots of post-secondary grads – but high youth unemployment and underemployment, with 28,000 net job losses among young people since 2009. Schools need to work more closely with employers. Poor labour market outcomes for youth are linked with poverty, civic disengagement and higher crime rates.
Eroded cost competitiveness: The tax burden on businesses has ebbed, but a strengthening Canadian dollar and downward pressure on wages in the U.S., where several nearby states have adopted right-to-work legislation, are making it tougher for Toronto firms to compete.
Aging population: An older population will trigger higher health-care expenses just as population growth slows. Newcomers are essential to driving the economy, but a greater share is looking elsewhere. The Toronto region’s share of national immigrants has fallen to 34 per cent from 44 per cent in 2006.
Infrastructure: From water and sewer systems to roads and bridges, Toronto is in desperate need of renewal if it is to sustain residents’ quality of life. Yet municipalities don’t have much fiscal nor administrative flexibility to address the needs.
Marginalized population: The recovery from recession has left many people behind. Social assistance should be revamped – with advantages in a simplified and more generous system, while access to affordable housing should be improved.
The environment: This area has tumbled down the priority list in recent years. But the region must address expected changing weather patterns such as higher temperatures and more erratic precipitation. Landfill capacity pressures are another problem.