Capacity to address the demographic tsunami

Not long after my column on the Economy Lab went live, I got an email asking me to explain the sentence “this region has far less capacity to address it than the rest of Canada.”

As you can imagine, it is hard to get everything said in a 500-600 word column so I will explain my thinking on the issue of capacity here.

There are a number of reasons why we have less capacity to address demographic challenges compared to places like Ontario, Saskatchewan, Alberta and BC.  And for the purposes of this blog, I will mostly focus on the Maritimes as Newfoundland & Labrador are an outlier.  That province has the most acute demographic issues but it has far greater fiscal capacity to address them than the Maritimes.

First, the Maritimes do not have a history of attracting significant numbers of immigrants.    The ability to attract, retain and integrate large numbers of immigrants is a real competitive advantage for places like Toronto, Montreal, Vancouver and increasingly places like Calgary and Winnipeg.  In the Maritimes, we attract a few Korean immigrants and I start getting emails warning about the need to “protect the delicate cultural fabric” of our society.

The ‘delicate cultural fabric’ is finished.  Without lots of new immigrants – across the region, we will not be able to survive.

I am in Toronto for a few days and I just got a coffee at Starbucks.  While waiting in line I looked around and there must have been 20 or more different nationalities in there – it looked like the lobby of the United Nations or the Tower of Babel. But it works.  The Toronto CMA has added something like 1.4 million immigrants since the early 1990s – it must be one of the largest unforced mass migrations into an urban area in history and crime isn’t that bad, people are nice and friendly, – it works.

Second, the Maritimes do not have the fiscal capacity of many other provinces.  In Saskatchewan and Alberta, for example, if they need to raise more money to pay for health care for the growing elderly population – they can raise taxes.  Alberta doesn’t even have a sales tax.  The Maritimes have among the highest tax rates for individuals in the country (NB has a little more wiggle room than PE or NS).    It will be hard to raise more revenue without a significant economic boom which brings me to the third point.

One of the reasons why the Maritimes are in this demographic position has been the moribund economy – for decades.   It is going to be hard to attract people, industries, investment – all the things we need for a healthy economy because the situation can end up in a vicious cycle where demography restrains investment which stifles in-migration which stifles more investment.

The Halifax shipyard project is big news.  There may be more onshore and offshore oil and gas as well as mining opportunities.  We need to find more ways to improve the economy and that will foster a broader environment for immigration attraction and retention and entrepreneurship.

In the end, the Maritimes are a part of Canada and if the provinces become virtual retirement homes – the money to pay for this vision will come from somewhere – transfers, taxes, squeezed services, consolidation, who knows.