Workers at Silfab manufacture solar panels at a facility in Mississauga, Ont.Kevin Van Paassen/The Globe and Mail
Ontario has done a lot of things right to become more competitive in the past decade, but so far those efforts aren't translating into greater prosperity, a new report says.
In fact, Ontario has slipped further behind major American states and is now losing ground against many other provinces in per-capita gross domestic product, according to the 10th annual report of Ontario's Task Force on Competitiveness, Productivity and Economic Progress.
"We have great strengths as a province and yet we seem not to be able to achieve our full prosperity potential," according to the 64-page report, which is being released Tuesday.
"In many ways, our economy is standing still while other jurisdictions stay ahead of us or gain on us."
The task force does, however, applaud recent efforts by Ontario to increase financing for postsecondary education, lower corporate tax rates and expand foreign trade.
Ontario ranked 15th out of 16 large states and provinces in 2010, with per-capita GDP of $46,500. That compares with New York, the leader, at $71,200.
The median was $54,200, or $7,700 higher than Ontario's level. The divergence from the median was $6,300 in 2002. The report uses per-capita GDP as the "summary measure" of prosperity.
At the same time, the prosperity gap has widened between Ontario and three provinces that have benefitted most from higher commodity prices – Alberta, Saskatchewan and Newfoundland.
"This is partly because our manufacturing industry has been severely hurt by the dollar and the current global downturn," according to the report.
The main source of the prosperity gap between Ontario and its peers is lagging productivity, according to the report.
To close that gap, Ontario's productivity would have to grow at an annual rate of 2.1 per cent year over the next decade. Productivity has grown at a rate of 0.2 per cent per year in Ontario since 2001.
Part of the reason that Ontarians are less productive is that they work shorter hours than workers in comparable American states. The average Ontarian worked 1,670 hours in 2010, compared with the median among peer U.S. jurisdictions of 1,830 hours. That adds up to a difference of more than four weeks per year.
Ontarians, however, work longer than their peers outside North America.
"While we lead most other regions around the world in competitiveness and prosperity, we do so largely by working more, not by being more innovative and productive, or working smarter," said task force chairman Roger Martin, dean of the University of Toronto's Rotman School of Management.
Also contributing to the gap are poor functioning of industry clusters, fewer workers living in urban areas, and under-investment by businesses in machinery, equipment and software, the report found.
The task force recommends several policies to help narrow the lingering gap, including continued investments in education, lower tax rates for low-income earners, wage insurance for older unemployed workers, a carbon tax and possible elimination of corporate taxes.
Ontario's business leaders understand the need for innovation, but "still need to turn these positive attitudes into action," most notably by investing more in R&D and new technology, Mr. Martin said.