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Workers build homes in a suburb of Fort McMurray, Alta., in this photo from 2010. The Wood Buffalo census agglomeration, which includes Fort McMurray, generates only 2.2 per cent of its total income from government sources. (Kevin Van Paassen/The Globe and Mail)
Workers build homes in a suburb of Fort McMurray, Alta., in this photo from 2010. The Wood Buffalo census agglomeration, which includes Fort McMurray, generates only 2.2 per cent of its total income from government sources. (Kevin Van Paassen/The Globe and Mail)

The ‘have’ and ‘have-not’ divide hits Canada’s cities Add to ...

Most of the time we think of ‘have’ and ‘have-not’ as a definition for provinces. ‘Have-not’ provinces are those that cannot provide public services and fund public infrastructure out of the taxes, royalties and fees generated in the province and require equalization payments from Ottawa to make up the difference. ‘Have’ provinces contribute more than their share.

A look at provincial income and taxation data reveals another have and have-not divide at the community level.

Elliot Lake, a picturesque community in Northern Ontario, has the distinction of being the most reliant on government transfer income of any census metropolitan area (CMA) or census agglomeration area (CA). In 2010, according to Statistics Canada data, more than one third of total income in the Elliot Lake CA came from government sources, such as the Canada Pension Plan, Old Age Security, Employment Insurance, etc.

At the other end of the scale is the Wood Buffalo CA (Fort McMurray) in Alberta, the epicentre of oil sands development, which generates only 2.2 per cent of its total income from government sources.

To put it another way, for every dollar of employment income in Elliot Lake there is 72 cents worth of government transfer income. In Wood Buffalo, by contrast, there is only 2 cents of government transfer income for every dollar of employment income.

Not surprisingly, the communities that are most reliant on government transfer income are also generating much less tax revenue for governments. In 2010, the average income taxes paid per taxfiler in Elliot Lake ($3,309) was 51 per cent less than the Canadian average, while Wood Buffalo generated more than double the national average ($20,856 per taxfiler). Don’t forget this only includes income taxes – it doesn’t include the billions of dollars in royalty income and corporate taxes coming out of Wood Buffalo.

Combining the two attributes – reliance on government transfer income and income tax contribution – we can estimate which communities are ‘have’ (i.e. contributing more and taking out less) versus those that are ‘have-not’. However, this analysis does not factor in other considerations, such as the cost of public services.

Elliot Lake is an exaggerated example because it developed a strategy in the 1990s to position itself as a retirement community. However, there are many other towns and cities across Canada that are highly dependent on government transfer income.

Most of these communities are in Quebec and Atlantic Canada but a number are in the west, including the B.C. towns of Parksville, Port Alberni and Powell River.

On the other end of the scale, along with Wood Buffalo are communities such as Grande Prairie and Canmore in Alberta and Estevan and Lloydminster in Saskatchewan, which generate fewer than ten cents of total income from government sources for every dollar of employment income. In Atlantic Canada, St. John’s in and Halifax are the only two communities that require less than average government transfer income and contribute above average levels of income taxes. In Ontario, the strongest economies by this measure are Ottawa, Toronto, Oshawa and Guelph.

Some of the have and have-not divide can be attributed to larger urban versus small urban or rural areas. However, increasingly the divide is related to emerging natural resource-based economies such as oil and gas versus declining natural resource-based economies such as forestry and fishing. Lloydminster and Estevan in Saskatchewan are among the strongest economies while Thetford Mines, Que., and Bay Roberts, Nfld., are among the weakest.

Along with Elliot Lake, emerging ‘retirement’ communities across Canada are also among the weakest as measured by the high level of government transfer income and the relatively low level of taxes generated. The Tillsonburg CA southeast of London, Ont., has an median age of 46.9 and requires 83 per cent more worth of government transfer income compared to the national average and contributes 30 per cent less than the national average worth of income taxes. There are a growing number of Ontario communities that fit this profile.

In Wood Buffalo, 92 per cent of all tax filers claimed employment income in 2010 compared to only 47 per cent in Elliott Lake. On the flipside, 40 per cent of Elliot Lake tax filers claimed Old Age Security payments and 50 per cent claimed Canada Pension Plan payments compared to only 2 per cent and 4 per cent respectively in Wood Buffalo.

There is some indication the gap between have and have-not communities across Canada is widening. The 94 CMA and CA regions that are more reliant on government transfer income witnessed a 23 per cent non-weighted average increase in the ratio of government transfer income to employment income between 2001 and 2010. The 37 CMA and CA regions that rely on less than the national average level of government transfer income witnessed only a 5 per cent non-weighted average gain since 2001.

You can view a table showing how each of Canada’s CMAs and CAs compare on these two metrics by clicking here.

David Campbell is an economic development consultant and columnist based in Moncton. He also authors a daily blog on economic issues in Atlantic Canada which can be found at www.davidwcampbell.com.

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