Northern Economist 2.0

Tuesday, 28 November 2017

Is Income Inequality Responsible for Thunder Bay's Deteriorating Social Fabric?

Thunder Bay has seen a number of deteriorating social indicators over the last few years which include rising homicide rates, tragic deaths of indigenous people and increasing use of foodbanks.  In looking at the causes of what appear to be increased poverty and violence, one might consider that these trends are the result of rising income inequality.  Income inequality in both Canada and the United States has been rising over the last few decades and researchers have been drawing links between health status and economic inequality as well as the role of inequality in fostering environments conducive to crime and violence.

We had a talk last week at Lakehead University from Martin Daly whose book Killing the Competition makes the case that most homicides are the result of competition between males over goods that are distributed inequitably.  In other words, economic inequality drives the homicide rate and all things given one would expect more unequal societies to have higher crime and homicide rates.  Of course, this raises the question as to what income inequality has been like in Thunder Bay over the last few years and whether it too has trended up.

Needless to say, information on income inequality at a CMA level is not easy to obtain or construct.  However, there is tax filer data available from Statistics Canada obtained from Revenue Canada and it is possible to obtain annual data on median total tax filer incomes for the top 1 percent as well as the bottom 50 percent and construct a ratio. One can construct a simple dispersion or inequality measure by taking the ratio of the median income of the top 1 percent to the median income of the bottom 50 percent on the tax filer total income distribution.  If this ratio goes up over time, it implies increasing income inequality while if it goes down it implies decreasing inequality.

The figure below plots this measure of income inequality for the period 1982 to 2015 for Thunder Bay as well as Greater Sudbury and Ontario.  The results are intriguing.  In 1982, the median total income of the top 1 percent of tax filers in Thunder Bay was 11.9 times that of the median for the bottom 50 percent - $78,200 versus $6,600.  By 2015, the ratio was 12.34 - $236,900 versus $19,200. While income inequality in Thunder Bay has gone up somewhat over time, much of the increase was actually between 1982 and 2001 when the ratio rose from 11.9 to 14.2 and has actually moderated since.

Given that homicide rates in Thunder Bay trended downwards from the early 1980s to 2007 and surged since 2007, there does not seem to be much correlation here.  Moreover, Figure 1 also plots the same inequality measure for Greater Sudbury as well as Ontario as a whole.  Since the late 1990s, Greater Sudbury has actually been more unequal with respect to this inequality measure than Thunder Bay and yet its homicide rate is now lower.  As well, both Thunder Bay and Sudbury have a much more equal distribution of tax filer income than Ontario as a whole which saw its ratio rise from 15.3 in 1982 to peak at 24.9 in 2006 before declining to 22.2 in 2015.

So whatever is disturbing the social fabric of Thunder Bay, income inequality does not appear to be the obvious culprit. 

Thursday, 23 November 2017

Homicide Rate Up Again in Thunder Bay

Statistics Canada released its 2016 homicide statistics yesterday and for Canada as a whole, the total number of homicides actually declined slightly with the national homicide rate falling by 1 percent to 1.68 per 100,000 of population.  Of course, when Canada's urban areas are examined, there is quite a bit of fluctuation around this national average.  For Canada's CMAs, the homicide rate in 2016 ranged from a high of 6.64 per 100,000 of population in Thunder Bay to a low of 0 in three cities: Trois Rivieres, Kingston and Greater Sudbury (See Figure 1)

If you look at the percentage increase in the homicide rate, the rankings change somewhat.  The largest percent increases in the homicide rate were in Ottawa, Gatineau and Thunder Bay.  Fifteen CMAs saw an increases in their homicide rate, two saw no change (Brantford actually had zero murders in 2015 and 2016) while the remaining 17 CMAs saw declines in their homicide rates. (See Figure 2).

Thunder Bay is up again after a decline in the homicide rate in 2015.  If you need a refresher on long-term trends in Thunder Bay's homicide rate, here it is down below.  Thunder Bay's homicide rate trended downwards from 1981 to about 2008 and then began to trend up.  For a local media take on this story, see here.


Wednesday, 22 November 2017

Bigger Deficits in 2016

Statistics Canada has released its 2016 Consolidated Government Finance Statistics and the combined deficit of all three levels combined – federal, provincial-territorial and local – was $18.1 billion in 2016 which was up from $12.9 in 2015.  According to Statistics Canada, the increase in the combined deficit was attributable to expenses rising faster than revenue.  Government spending in Canada in 2016 was up by 2.6% while revenues were up by 1.0 percent.  The accompany chart from Statistics Canada summarizes the picture nicely.

The federal government saw an especially pronounced deterioration.  The net operating balance deficit for the federal government was $10.0 billion in 2016, compared with a $2.1 billion surplus the previous year. Total federal expenses grew 4.2%, due to an increase in social benefits (old age and family allowances) and grants to provinces and territories expenses, while revenue actually was down 0.1%. A big component of that revenue drop incidentally was from income tax revenue – despite the increase in personal income rates on higher earners that kicked in.  For a longer term take on federal finances, you might want to check another post of mine here.

As for the provinces, net operating balances in deficit were reported in 9 of 13 jurisdictions with Alberta (-$9.9 billion), Manitoba and Ontario (each -$1.7 billion) having the largest deficits in 2016.  While still in deficit, Ontario's net operating balance improved the most, due to higher revenues from corporate income taxes and taxes on goods and services – but then Ontario’s economy in 2016 did see an improvement.  As for the largest surpluses – meet the new poster children for fiscal responsibility in Canada in 2016:  British Columbia (+$4.9 billion) and Quebec (+$4.4 billion).

Friday, 17 November 2017

Why Are Northern Ontarians So Happy?

I recently came across a Statistics Canada Report from 2015 on life satisfaction across Census Metropolitan areas and economic regions that presented ranked scores based on the responses to the Canadian Community Health Survey and General Social Survey. The responses are over the period 2009 to 2013 and the key question was:

“Using a scale of 0 to 10, where 0 means “very dissatisfied” and 10 means “Very satisfied”, how do you feel about your life as a whole right now?”

There were nearly 340,000 respondents to the survey and the results for the CMAs had samples of at least 1,800 to 2,000 respondents.  Average life satisfaction from 2009 to 2013 across Canada’s 33 CMAs (as shown in Chart 1 below taken from the report) ranged from a low of about 7.8 in Vancouver, Toronto and Windsor to a high of 8.2 in St. John’s, Trois-Rivieres and Saguenay.  More interesting is that both Sudbury and Thunder Bay are in the top ten in terms of life satisfaction.  Moreover, the proportion of individuals reporting a 9 or 10 – the highest rankings – is highest in Sudbury and Thunder Bay and lowest in Toronto and Vancouver (As shown in Chart 2).  Even when the results are adjusted for individual-level socio-economic characteristics such as income, life satisfaction remains higher in smaller communities like Thunder Bay or Sudbury. 


I guess it bears repeating that economic success and achievement and life in the big city may not be all it is cracked up to be.  Given the surge in rents and housing prices in places like Toronto as of late, and the increased congestion and traffic, one would expect these life satisfaction rankings results would persist if a survey was done today.  Even with slower economic growth in northern Ontario, it remains that for many people there is an advantage to living in communities where there is a more intimate and human scale of life. 

At the same time, given the higher rate of aging populations in smaller communities and the u-shaped relationship between life satisfaction and age the report notes, it may simply be demographics - an older population seems to be a happier one.  While young people are striving and competing and making their way in the world, older people have pretty much come to accept where they are at and are comfortable in their own skins. Having a larger proportion of older people in a community may be the key to tranquility and happiness on a community level.

Nevertheless, northern Ontario can use all the good news it can get.  Residents of northern Ontario have apparently decided to embrace Albert Einstein’s observation that: “A calm and modest life brings more happiness than the pursuit of success.”

Thursday, 9 November 2017

Thunder Bay Construction Intentions Drop, Sudbury Up

Statistics Canada's latest building permit numbers show an increase nationally in September with a monthly increase of 3.8 percent.  Yearly (September 2016 to September 2017), the total value of permits in Canada was up 12.43 percent.  As noted by Statistics Canada: "Canadian municipalities issued $7.9 billion worth of building permits in September, up 3.8% from the previous month. A 1.7% decrease in the residential sector was more than offset by a 13.9% increase in the non-residential sector. A high-value institutional building permit issued in Alberta was behind much of the increase."  Ontario posted a decrease mainly due to lower construction intentions for apartments which probably does not bode well for the future of renters in the province.

With respect to the specifics across cities, the accompanying figure presents the percent change from September 2016 to September 2017 ranked from highest to lowest for Canadian CMAs.   For all CMAs, the increase was 14.5 percent.  At the top we have Halifax, St. John's and Brantford at 196.9, 154.5 and 145.2 percent growth respectively.  At the bottom - well, Thunder Bay is last at -62.9 percent, just behind Hamilton at -43.7 percent and Kingston at -40 percent.  Sudbury actually manages to shine at an increase of 123.3 percent - just behind Brantford putting it in fourth place.  Of the 14 CMAs showing a decrease, seven were in Ontario - including Toronto which saw a year over year decrease of 13 percent.

Friday, 3 November 2017

Left Behind

The good news continues for the Canadian economy as the latest job numbers from Statistics Canada show a net increase in employment of 35,000 jobs in October. Indeed, one has to wonder why the Bank of Canada does not go out and raise interest rates a bit more given that should the economy slowdown it would give them some scope to lower rates to counteract the slowdown.  At the moment we have large deficits at the federal level and low interest rates - really, how much more direct stimulus does the Canadian economy need at this point?  What do we do if the economy goes into recession?

For Ontario, however, the picture is more mixed as employment there was virtually unchanged.  Indeed, over half of the net employment growth in Canada came from Quebec and most of the remainder from Alberta.  Ontario’s employment story got another interesting assessment from a Fraser Institute Report showing that almost all the recent employment growth in Ontario has been concentrated in the Toronto and Ottawa areas.  Many of the CMAs outside of these two regions experienced employment declines.  The figure below taken from the Fraser Institute report shows that quite a few Ontario CMAs - including all of those from northern Ontario saw employment drops.

Needless to say, when it comes to employment Ontario very much seems to have become a two-track economy with the North, East and Southwest portions of the economy not doing as well as the Toronto-Ottawa core.  A notable exception is Windsor which has managed to create employment since 2008 despite the manufacturing downturn.  Some of the cities that have been doing well - Guelph, Oshawa and Kitchener-Waterloo-Cambridge are all part of that area within direct and short range of the GTA.  

Yet, the October numbers suggest Ontario as a whole has slowed down in terms of job creation even in the Toronto-Ottawa core.  This does not bode well for the effects of the minimum wage increase coming in January.  If an employment slump continues, it also introduces a new dynamic into the provincial election coming in June.  If the feeling of being left behind gains momentum even in previously economically  buoyant areas such as the GTA then the prospects for political change will rise.