Matthew Mendelsohn and Mike Moffatt

February 2015

Economic Challenges and Opportunities for Southwest

Ontario and the GTA

Overview

1

This presentation will look at:

1. Global megatrends

2. Economic outlook

3. Economic Risks and Opportunities for Peel

4. A Sectoral Model of Economic Opportunity in Peel

5. Recommendations

Main Messages for Today

2

1. Great deal of volatility in short-to-medium term outlook

2. Demographic and cultural shifts changing the nature of

work

3. New landscape emerging for Canadian exporters

4. Return to the status quo ante (pre-2008) unlikely

5. Significant competitive advantages for Peel to exploit

with the right infrastructure

6. Policy responses required by three levels of

government

Context

3

4

5

6

7

8

Change in income in last 30 years by province

9

The global context

Interconnected

trends at the global

level shape

Ontario’s prospects

10

Global Megatrends Most Relevant to Peel Region

•Globalization

•Automation

•Digitization

•Rise and Fall of Oil

•Demographics

•Resource stress and climate change

•Inequality and precariousness

11

Global, Canadian and

Provincial Outlook

12

Global Theme for 2015 - Volatility

13

Global Theme for 2015 – Uneven Labour Markets

Source: The

Guardian

14

GDP Growth Consensus Forecasts

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

BC Alberta Ontario Quebec Canada US US Export Growth

US Import Growth

2015

2016

15

Ontario – US Economic Link

0

0.2

0.4

0.6

0.8

1

1.2

1.4

BC AB SK MB ON QC NB NS PE NL

Sensitivity to 1% Change in Real US Growth (% of Real GDP)

16

Risk Factor – Oil Prices

0

20

40

60

80

100

120

WTI Spot Price (USD)

17

Risk Factor – Oil Prices

Effects of Lower Oil Prices

Lower Canadian GDP Increased Purchasing

Power

Lower Canadian Dollar Higher US Economic

Growth

Lower Interest Rates

(and further lower

dollar)

Higher Ontario GDP

18

Economic Risks and

Opportunities for Peel

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Major Shifts Occurring in Peel Region and Canada

1. Aging population

2. Who has full-time jobs?

3. Young Canadians and entrepreneurship

4. Changing of Canadian trade patterns

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Aging Populations

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

Calgary

Brampton

Ottawa

Vancouver

Montreal

Mississauga

London

Hamilton

Caledon

% of Population Growth, 2006-2011, From Individuals 65+

21

But… Older Workers Retaining Full-Time Employment

0

10

20

30

40

50

60

70

80

90

Full-Time Employment Rates for Women in GTA

15 to 24 years

25 to 54 years

55 to 64 years

65 years and over

22

But… Older Workers Retaining Full-Time Employment

0

10

20

30

40

50

60

70

80

90

Full Time Employment Rates for Men in GTA

15 to 24 years

25 to 54 years

55 to 64 years

65 years and over

23

Why Are The Young Absent From the Labour Force?

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Educational Attainment - Ontarians Aged 25-44

1990

2014

24

Why Are The Young Absent From the Labour Force?

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

1990

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

2011

20

12

2013

20

14

Percentage of Ontarians, Ages 25-44, With a Diploma or a Degree

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GTA Following Trends Seen in Canada and in Other

Developed Countries

1. Full time employment rates for under 24 continue to fall

with youth staying in school longer.

2. Increases in percentage of women in the workforce

tailing off.

3. Full-time employment for men not recovered from

recession

4. Workers staying on past age of 65

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No Advantage in Young Workers (2011 Census)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Percentage of the Population Between Ages 15-29 (2011 Census)

27

Basic Skills of Young Workers

0

10

20

30

40

50

60

70

16-34 Year Olds Scoring 'Below Proficiency'

Numeracy

Literacy

Tech Solving

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Future Workforce of Peel

1. Mississauga and Brampton have similar sized cohort of

15-29 year olds to other Canadian cities.

2. Start-ups founded by youth – no big demographic

advantage for the region.

3. Canada lacking in ability to create and maintain mid-

sized firms (BDC report)

4. Canada middle of pack when it comes to youth levels of

baseline skills.

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Canadian Trade Flows – Top 12 Export Destinations

0% 50% 100% 150% 200% 250%

United States

Japan

France

South Korea

Belgium

Mexico

Netherlands

United Kingdom

Italy

China

India

Hong Kong

Nominal $ Growth in Canadian Goods Exports to 12 Largest Export Markets, 2005-2014

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Top 12 Manufactured Goods Export Destinations

0% 20% 40% 60% 80% 100% 120% 140%

Japan

United States

United Kingdom

Germany

Australia

France

South Korea

Norway

Hong Kong

Italy (incl. Vatican City State)

Netherlands

Mexico

China

Nominal $ Growth in Canadian Manufacturing Exports (2005-2014)

31

Top 12 Food Manufacturing Export Destinations

0% 200% 400% 600% 800% 1000% 1200% 1400%

Japan

Taiwan

Australia

United Kingdom

Korea, South

Mexico

United States

Hong Kong

China

Russia

Vietnam

Chile

Nominal $ Growth in Canadian Food Manufacturing Exports (2005-2014)

Sectoral Model of Potential

Economic Growth

Opportunities

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Which sectors display high growth potential?

Key criteria:

• Current sector footprint (employment, output etc.)

• Sectors in which we have competitive advantages.

• Market opportunity, either regional or global

• Consistent with sustainable economic growth and

environmental risks

Additional considerations:

• labour cost, geography

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Competitive advantages

•Highly educated workforce

•Competitive tax environment and strong Foreign Direct

Investment

•Diverse immigrant communities and networks

•Arable land, natural resources, freshwater

•Safe, attractive communities and public services

•Globally competitive clusters and firms

•Dynamic global city region

•Rule of law, regulatory standards – the “Canada Brand”

•Healthy consumer market

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Some potential sustainable growth sectors

• Financial Services, including asset management

• Advanced Manufacturing

• Biomedical and Life Sciences, including pharma

• Agri-food

• Aerospace and Robotics

• Information and Communications Technology

• Creative Industries

• Logistics Management

• Environmental Technologies/cleantech

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Recommendations

Peel as Export Hub

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Growth in goods exports coming from India and China

and other developing markets – less so US. Peel well

positioned to access these markets given current

transportation infrastructure.

Deep cultural ties to growing markets, important for

establishing trade relationships.

Airport as a comparative advantage – take care with

transportation infrastructure

Focus on Strategic Sustainable Infrastructure

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Growing consensus on importance of infrastructure investments

for economic growth

Adequate infrastructure increases productivity by reducing

business costs.

Infrastructure investment has spinoff benefits (e.g., innovation,

growth in private sector expertise)

Infrastructure renewal must combine hard and soft

Not just more, but respond to emerging trends:

Economic trends (broadband, internet of things)

Transportation approaches (transit, new technologies)

Demographic needs (urbanization, aging population)

Environmental pressures (climate change, resource stress)

Other Recommendations

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Continue to encourage better data collection.

Don’t count on a return of manufacturing as it was pre-

2008

Focus on broadband

Diversity of population is a huge benefit

Skilled labour shortages and needs of business must

be considered, including shortcomings inherent to post-

secondary education system and the skills being

acquired

Beware of growing number of precarious workers

without employer-based benefits

Consider a focus on community wealth building

Do not sacrifice your competitive advantages in sectors

likely to produce high growth in the future

Five possible pieces of a federal economic agenda

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1. Repair our relationship with NAFTA partners.

2. Reduce red tape for Canadian exporters.

3. Address gridlock in GTA and streamline border-

crossings.

4. Ensure all companies can access high-speed

broadband, so as not to fall behind US competitors.

5. Expand regional airports and increase transportation

links to Pearson.

Stay Connected

Thank you

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