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Jeffrey Simpson

Alberta, the rest of Canada feels your pain Add to ...

Alberta’s pain is Canada’s too. The whole country loses when a downdraft hits the province’s economy, principally its fossil fuel sector.

Migration to the province has slowed or halted. Remittances have shrivelled from workers who migrated away from their families in Atlantic Canada, Ontario and Quebec. Contracts dried up in Central Canada for material needed in the energy and construction industries.

The Conference Board predicts oil and gas producers will register a pre-tax loss of $2-billion in 2015, which means less money for Ottawa from corporate taxes, and for Alberta from royalties and other assessments.

The Alberta downturn is quite staggering. The government has gone from surplus to a $6.1-billion deficit, with three more years of deficits to come. The “rainy day” fund to cushion provincial finances against economic slowdowns is gone. The unemployment rate jumped 2.2 points in a year. Each week brings news of new layoffs from cancelled, delayed or trimmed fossil-fuel projects.

About 63,500 jobs were lost in Alberta in the first eight months of 2015, a third of them in oil and gas and about half in construction.

The ripple effect is terrible for affected families and the companies on which they relied. Government stimulus spending can’t fill the private-sector gap. It can only soften the blow a little.

But the effects are nationwide, because for years Alberta acted as a sponge. It soaked up labour from every province, some more than others, and provided those who found employment there better wages at more productive jobs than they had before. The net gain for Canada was impressive.

A study for the Centre for the Study of Living Standards in Ottawa tries to quantify the gains. It found that from 1987 to 2014, Alberta gained 433,851 people from new interprovincial migration, while British Columbia gained 331,083.

Ebbs and flows naturally occurred during that period, but since 1996, Alberta has been the major destination. The flow of people was closely related to the price of oil.

The cumulative net economic impact of migration through the 1987-2014 period, according to the centre’s estimates, added almost $146-billion to Canada’s gross domestic product. This gain occurred because people migrated to better-paying jobs, often tied to higher-productivity activities, in a country with chronic productivity challenges.

This estimate, of course, undervalues the impact of migration. Among the thousands of workers who migrated from Atlantic Canada were many who worked part of the year in Alberta’s energy industries, went home for part of the year, but sent money back to their families throughout the year.

These remittances don’t show up in statistics, but they helped families throughout Atlantic Canada who otherwise would have had to rely on income from piecemeal work and employment insurance.

The Alberta downdraft will dry up employment, slow down migration and reduce remittances. For Atlantic Canadian provinces already defined by slow-growth, low-productivity, high-unemployment economies, the effects will be widespread and painful.

Alberta’s arrivals were different demographically than British Columbia’s, as shown in a recent monograph by the B.C. Business Council. During the past decade, the most prominent age cohort of migrants to B.C. was 45 to 64 years old, whereas Alberta attracted 18 to 44 year olds.

The B.C. paper, however, points to the national impact of Alberta’s woes. It says: “An Alberta that is no longer able to absorb large numbers of Canadians looking for better opportunities is likely to have adverse consequences for the entire national economy and labour market.”

New climate-change requirements and higher corporate taxes from the provincial government, coupled with prospects for a prolonged period of very low oil and natural gas prices, suggest the Alberta downdraft will continue to be severe and will spread over many years.

It might be thought outside the province that Alberta’s downdraft are that province’s alone. As migration patterns and productivity studies show, those woes reverberate across the entire country.

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