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Matthew Mendelsohn and Mike Moffatt
February 2015
Economic Challenges and Opportunities for Southwest
Ontario and the GTA
Overview
1
This presentation will look at:
1. Global megatrends
2. Economic outlook
3. Economic Risks and Opportunities for Peel
4. A Sectoral Model of Economic Opportunity in Peel
5. Recommendations
Main Messages for Today
2
1. Great deal of volatility in short-to-medium term outlook
2. Demographic and cultural shifts changing the nature of
work
3. New landscape emerging for Canadian exporters
4. Return to the status quo ante (pre-2008) unlikely
5. Significant competitive advantages for Peel to exploit
with the right infrastructure
6. Policy responses required by three levels of
government
Context
3
4
5
6
7
8
Change in income in last 30 years by province
9
The global context
Interconnected
trends at the global
level shape
Ontario’s prospects
10
Global Megatrends Most Relevant to Peel Region
•Globalization
•Automation
•Digitization
•Rise and Fall of Oil
•Demographics
•Resource stress and climate change
•Inequality and precariousness
11
Global, Canadian and
Provincial Outlook
12
Global Theme for 2015 - Volatility
13
Global Theme for 2015 – Uneven Labour Markets
Source: The
Guardian
14
GDP Growth Consensus Forecasts
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
BC Alberta Ontario Quebec Canada US US Export Growth
US Import Growth
2015
2016
15
Ontario – US Economic Link
0
0.2
0.4
0.6
0.8
1
1.2
1.4
BC AB SK MB ON QC NB NS PE NL
Sensitivity to 1% Change in Real US Growth (% of Real GDP)
16
Risk Factor – Oil Prices
0
20
40
60
80
100
120
WTI Spot Price (USD)
17
Risk Factor – Oil Prices
Effects of Lower Oil Prices
Lower Canadian GDP Increased Purchasing
Power
Lower Canadian Dollar Higher US Economic
Growth
Lower Interest Rates
(and further lower
dollar)
Higher Ontario GDP
18
Economic Risks and
Opportunities for Peel
19
Major Shifts Occurring in Peel Region and Canada
1. Aging population
2. Who has full-time jobs?
3. Young Canadians and entrepreneurship
4. Changing of Canadian trade patterns
20
Aging Populations
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%
Calgary
Brampton
Ottawa
Vancouver
Montreal
Mississauga
London
Hamilton
Caledon
% of Population Growth, 2006-2011, From Individuals 65+
21
But… Older Workers Retaining Full-Time Employment
0
10
20
30
40
50
60
70
80
90
Full-Time Employment Rates for Women in GTA
15 to 24 years
25 to 54 years
55 to 64 years
65 years and over
22
But… Older Workers Retaining Full-Time Employment
0
10
20
30
40
50
60
70
80
90
Full Time Employment Rates for Men in GTA
15 to 24 years
25 to 54 years
55 to 64 years
65 years and over
23
Why Are The Young Absent From the Labour Force?
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Educational Attainment - Ontarians Aged 25-44
1990
2014
24
Why Are The Young Absent From the Labour Force?
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
1990
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
2011
20
12
2013
20
14
Percentage of Ontarians, Ages 25-44, With a Diploma or a Degree
25
GTA Following Trends Seen in Canada and in Other
Developed Countries
1. Full time employment rates for under 24 continue to fall
with youth staying in school longer.
2. Increases in percentage of women in the workforce
tailing off.
3. Full-time employment for men not recovered from
recession
4. Workers staying on past age of 65
26
No Advantage in Young Workers (2011 Census)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Percentage of the Population Between Ages 15-29 (2011 Census)
27
Basic Skills of Young Workers
0
10
20
30
40
50
60
70
16-34 Year Olds Scoring 'Below Proficiency'
Numeracy
Literacy
Tech Solving
28
Future Workforce of Peel
1. Mississauga and Brampton have similar sized cohort of
15-29 year olds to other Canadian cities.
2. Start-ups founded by youth – no big demographic
advantage for the region.
3. Canada lacking in ability to create and maintain mid-
sized firms (BDC report)
4. Canada middle of pack when it comes to youth levels of
baseline skills.
29
Canadian Trade Flows – Top 12 Export Destinations
0% 50% 100% 150% 200% 250%
United States
Japan
France
South Korea
Belgium
Mexico
Netherlands
United Kingdom
Italy
China
India
Hong Kong
Nominal $ Growth in Canadian Goods Exports to 12 Largest Export Markets, 2005-2014
30
Top 12 Manufactured Goods Export Destinations
0% 20% 40% 60% 80% 100% 120% 140%
Japan
United States
United Kingdom
Germany
Australia
France
South Korea
Norway
Hong Kong
Italy (incl. Vatican City State)
Netherlands
Mexico
China
Nominal $ Growth in Canadian Manufacturing Exports (2005-2014)
31
Top 12 Food Manufacturing Export Destinations
0% 200% 400% 600% 800% 1000% 1200% 1400%
Japan
Taiwan
Australia
United Kingdom
Korea, South
Mexico
United States
Hong Kong
China
Russia
Vietnam
Chile
Nominal $ Growth in Canadian Food Manufacturing Exports (2005-2014)
Sectoral Model of Potential
Economic Growth
Opportunities
32
33
Which sectors display high growth potential?
Key criteria:
• Current sector footprint (employment, output etc.)
• Sectors in which we have competitive advantages.
• Market opportunity, either regional or global
• Consistent with sustainable economic growth and
environmental risks
Additional considerations:
• labour cost, geography
34
Competitive advantages
•Highly educated workforce
•Competitive tax environment and strong Foreign Direct
Investment
•Diverse immigrant communities and networks
•Arable land, natural resources, freshwater
•Safe, attractive communities and public services
•Globally competitive clusters and firms
•Dynamic global city region
•Rule of law, regulatory standards – the “Canada Brand”
•Healthy consumer market
35
Some potential sustainable growth sectors
• Financial Services, including asset management
• Advanced Manufacturing
• Biomedical and Life Sciences, including pharma
• Agri-food
• Aerospace and Robotics
• Information and Communications Technology
• Creative Industries
• Logistics Management
• Environmental Technologies/cleantech
36
Recommendations
Peel as Export Hub
37
Growth in goods exports coming from India and China
and other developing markets – less so US. Peel well
positioned to access these markets given current
transportation infrastructure.
Deep cultural ties to growing markets, important for
establishing trade relationships.
Airport as a comparative advantage – take care with
transportation infrastructure
Focus on Strategic Sustainable Infrastructure
38
Growing consensus on importance of infrastructure investments
for economic growth
Adequate infrastructure increases productivity by reducing
business costs.
Infrastructure investment has spinoff benefits (e.g., innovation,
growth in private sector expertise)
Infrastructure renewal must combine hard and soft
Not just more, but respond to emerging trends:
Economic trends (broadband, internet of things)
Transportation approaches (transit, new technologies)
Demographic needs (urbanization, aging population)
Environmental pressures (climate change, resource stress)
Other Recommendations
39
Continue to encourage better data collection.
Don’t count on a return of manufacturing as it was pre-
2008
Focus on broadband
Diversity of population is a huge benefit
Skilled labour shortages and needs of business must
be considered, including shortcomings inherent to post-
secondary education system and the skills being
acquired
Beware of growing number of precarious workers
without employer-based benefits
Consider a focus on community wealth building
Do not sacrifice your competitive advantages in sectors
likely to produce high growth in the future
Five possible pieces of a federal economic agenda
40
1. Repair our relationship with NAFTA partners.
2. Reduce red tape for Canadian exporters.
3. Address gridlock in GTA and streamline border-
crossings.
4. Ensure all companies can access high-speed
broadband, so as not to fall behind US competitors.
5. Expand regional airports and increase transportation
links to Pearson.
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