‘Policymakers should prioritize attracting business investment as a means of raising living standards’
Wage growth in Ontario has fallen behind the rest of Canada for more than two decades due to prolonged economic stagnation, according to a new report from the Fraser Institute.
In the report, the public policy think tank notes that since 2000, workers in Ontario have experienced slower income growth compared to those in other provinces. Specifically, real per capita GDP in the province has increased by just 0.55% annually—well below the 0.91% average for the rest of the country.
"Since the turn of the century, Ontario's economy has performed worse than other provinces. The result is that Ontarians are now experiencing lower standards of living—on average—than their fellow Canadians," said Ben Eisen, Fraser Institute senior fellow and co-author of the report.
Different Canadian provinces have previously announced minimum wage increases. However, Alberta’s wages are also falling behind the rest of Canada, despite the province having the highest gross domestic product per worker, according to a previous report from the Centre for Future Work.
Ontario’s economic challenges persist even though real business investment per worker initially showed strong growth.
Specifically, in 1981, business investment per worker in 2023 dollars in Ontario stood at $6,226. This was less than half of the investment per worker in the rest of Canada which was $13,899.
From 1981 to 2000, business investment per worker in Ontario grew 4.5% annually, compared to 1.8% for the rest of the country. Since 2000, however, that figure has collapsed to just 0.71%, nearly matching the rest of Canada's low rate, according to the report.
As a result, the gap in real investment per worker between Ontario and the rest of Canada shrank dramatically. In 2000, real investment per worker was 35.8% higher in the rest of Canada than in Ontario. In 1981, this gap stood at 123.3%
However, this investment in Ontario fell to just 0.71% from 2000–2023.
“The collapse of business investment growth in Ontario is another key aspect of the provincial economy’s extended ‘broken’ state,” according to the report.
Also, in 2000, Ontario’s GDP per capita stood at $63,146 (in 2023 dollars), nearly 5% higher than the rest of Canada. By 2023, it had fallen to $71,659—3.2% lower than the national average.
The Fraser Institute estimates that if Ontario had simply kept pace with other provinces, per capita GDP would be $77,725 today, translating to an 8.5% increase in average earnings and purchasing power.
“Living standards in Ontario would be 31.1% higher today if the slowdown that began in 2000 had not taken place,” the report notes, adding that per capita GDP could have reached $93,957 if the province had maintained its growth rate from the 1980s and 1990s.
Recently, Ontario announced it is committing a total of $11 billion to support employers and workers in the face of mounting U.S. tariffs on Canadian goods.
Now, Eisen is calling on policy makers to step up.
"To reverse Ontario's economic decline relative to the rest of the country, policymakers should prioritize attracting business investment as a means of raising living standards," Eisen says.
