Canadian Provincial Standards of Living: Newfoundland and Saskatchewan Are Up, Ontario Is Down, But Alberta Remains Tops

Alberta has enjoyed the highest standard of living of any province in every year since the early 1980s, and there are no challengers in sight. The Alberta economy has grown at a faster pace than the Canadian economy almost every year since 1990, and this strong performance is expected to continue over the medium term. As noted above, though, Alberta has also experienced stronger population gains than other provinces, dampening the pace of growth in real GDP/capita.

Economic growth in Alberta has outpaced the national average by a wide margin in recent years largely, but not entirely, due to strong energy prices. Alberta has also offered an "open-for-business" low-tax environment. The high demand for Alberta's energy resources has required and attracted a strong inflow of additional workers. The fact that the pace of growth in central Canada, especially Ontario, has been so weak has made it easier for Alberta to maintain the lead.

Investment and production in the energy sector and this business-friendly investment climate should continue to provide Alberta with a stronger pace of economic growth during 2008–13 than seen in any other province. Global Insight forecasts the Alberta economy will expand 16% over the next five years (3.3% annually), compared with 13% for Canada over-all. However, with the province's population projected to grow at almost double the pace of Canada's (9% versus 5%), Alberta's real GDP per capita will grow slightly less than the national average (7% versus 8%).

Although the strong population growth will pull the province's real GDP/capita growth below the Canadian average, its real GDP/capita level will remain well above any other province's through 2013. Alberta's standard of living was 41% above the Canadian average in 1998. It fell to 35% above by 2003, is 36% above in 2008, and projected to be 35% above in 2013.

Ontario Moves Downward—and Stays There

For every year since the early 1980s, Ontario has had the second-highest standard of living of any Canadian province. In the mid-1980s, Ontario's standard of living was about 15% above the Canadian average. In fact, when Alberta experienced a dip in growth during 1986 and 1987, Ontario briefly tied it for first place. The Ontario standard of living, which was 9% above the Canadian average in 2002, will dip to only 4% above this year.

The Ontario economy has been running below the Canadian average since the SARS epidemic and electricity blackout days of 2003. Since then, the appreciating Canadian dollar, weak U.S. economy, and high energy prices have kept the province's pace of growth below the national average. Relatively high business taxes and industry-specific problems in the auto and forestry sectors have also contributed to a relatively weak performance. Adjustment to the high Canadian dollar is not yet entirely behind the Ontario economy, and the U.S.-based auto firms remain in adjustment. As a result, Ontario's standard of living is forecast to continue falling relative to the Canadian average, from 104% in 2008 to 101% by 2013. That is, Ontario’s consistent performance over the past three decades as a “have province,” which has been in steady decline for a decade, will have virtually evaporated several years from now.

Saskatchewan Will Move into Second Place Next Year

Recently revised data have shown Saskatchewan's real GDP/capita to be considerably higher than other provinces' levels. Saskatchewan's real GDP/capita moved ahead of British Columbia's in the late 1990s, moving the province into third place. While holding this spot since 2000, Saskatchewan's real GDP/capita dipped below the Canadian average, leaving only Alberta and Ontario above the national average. Global Insight forecasts that Saskatchewan's energy resources, uranium, and potash, along with decent agricultural crops, will spur strong growth this year, moving its real GDP/capita slightly above the Canadian average.

Global Insight forecasts Saskatchewan moving ahead of Ontario to capture second place in 2010, and remaining there through 2013. The rate of growth of the Saskatchewan economy over the next five years should be about the same as that of the Canadian economy over-all. However, its population growth will be only about half the pace of other provinces, yielding stronger growth in real GDP per capita.

Newfoundland & Labrador Moves from "Have Not" to "Have" Status in a Decade

Real GDP/capita here was the lowest of any province from at least the early 1980s until 2000. In 1998, it was similar to its place of the previous five years, at only 71% of the Canadian average. In 2000, Newfoundland & Labrador was able to climb out of the cellar, surpassing Prince Edward Island. By 2003, its real GDP/capita had moved up to 91% of the Canadian average, surpassed only by Alberta, Ontario, Saskatchewan, and British Columbia. In 2007, continued energy investment and production, coupled with strength in mining, moved Newfoundland & Labrador past British Columbia. And this year, Newfoundland & Labrador 's real GDP/capita moved up to 97% of the Canadian average and into fourth place.

Global Insight forecasts that investment in Newfoundland & Labrador 's energy sector will cool, but continued energy production and mining over the next five years will yield a decent pace of growth (7% cumulative), but weaker than the Canadian average (13%). However, this modest economic growth will be produced with a continually shrinking population. As a result, Newfoundland & Labrador's real GDP/capita will move from 97% of the national average today to 100% in 2013. This pace will leave British Columbia (at 95%) in the dust, moving the province into a close struggle for second place, within a whisker of Ontario (101%) and Saskatchewan at 103%).