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FUSS: Prosperity gap growing wider between Ontario and regional neighbours
By global standards, Ontario is a prosperous place. However, within its own economic region, Ontario is an economic laggard.
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In March, the Ford government launched an advertising campaign called “Protect Ontario” about its plan to build a “more competitive, resilient, and self-reliant economy.” While the government flaunts its economic strategy, which promises more of the same from a policy standpoint, Ontarians should understand just how poorly the provincial economy has performed recently.
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By global standards, Ontario is a prosperous place. Ontarians enjoy living standards and access to opportunities that are the envy of much of the world. However, within its own economic region, Ontario is an economic laggard. In fact, the data are eye-opening.
FUSS: Prosperity gap growing wider between Ontario and regional neighbours Back to video
According to our new study, in 2024 (the latest year of available data) living standards (as measured by per-person GDP) in Ontario were lower than in all eight of its U.S. neighbours in the Great Lakes region, including Michigan, New York, Pennsylvania and Illinois.
And the gap is substantial. Ontario’s per-person GDP (C$74,143) was lower than in Michigan, the lowest-ranking U.S. state (C$79,697). In other words, despite not faring well relative to their compatriots in other U.S. states in the Great Lakes region, Michiganders enjoyed living standards that were 7.5 per cent higher than Ontarians.
The regional leader (New York, C$134,470) almost doubled living standards in Ontario. And the average per-person GDP in the Great Lakes region was 34.5 per cent (or more than C$20,000 on average) higher than in Ontario.
And this prosperity gap is rapidly increasing. Between 2001 and 2024, per-person GDP increased by 12.7% in Ontario compared to 22.5% in the region as a whole (after adjusting for inflation). And you can’t blame the Trump administration’s tariffs because the prosperity gap grew substantially in the last two decades before the tariff war began.
This should raise alarm bells for Ontarians. These states compete with the province for investment and talent, and many of them have large manufacturing sectors similar to Ontario. A strong economy is vital to job creation and wage growth for Ontarian workers. But the province’s sluggish economy has led to anemic job creation, slow wage growth and increased pressure on government finances due to revenue growth that is weaker than it would be with more robust economic growth.
Unfortunately, in its recent budget the Ford government again left its relatively high personal income tax rates untouched, which means rates are more competitive in neighbouring states. It also has broken its promise to reduce the headline business tax rate to spur investment and job creation. Regulatory barriers still hinder job-creating projects and new homebuilding. And provincial finances continue to deteriorate as the government tries to spend and borrow itself out of a gigantic hole. Based on the new “Protect Ontario” ad campaign, the Ford government is doubling down on the status quo and hoping for the best.
Ontario should be a dynamic and affluent global powerhouse. But the province’s economic engine continues to sputter rather than accelerate. The Ford government should rethink its economic approach and learn from more successful jurisdictions that have helped substantially improve living standards for their citizens.
Jake Fuss is director of fiscal studies at the Fraser Institute.
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