Canada West Foundation Blog

By: Michael Holden

The 2008-2009 recession and the still-fragile economic recovery in western Canada have amplified the urban-rural divide in regional labour markets. That large cities have been responsible for the majority of job creation in the West is hardly a recent development—the region’s nine Census Metropolitan Areas (CMAs) [1]have accounted for nearly 80% of all job growth in western Canada since 1997. However, the gap in employment growth between those nine cities and less populous areas has widened in recent years.

Not only did the West’s largest cities, on average, emerge from the recession relatively unscathed, but they have since posted much stronger job gains as well. From its pre-recession peak (November 2008) to the lowest point of the economic downturn (August 2009), western Canada lost just over 110,000 jobs. Even though our nine CMAs were home to about two thirds of all employment in the region, they accounted for just one third of those losses. Conversely, when the region began to add new jobs, it was mostly in the large cities. Since August 2009, there have been 119,000 positions created in western Canadian CMAs compared to 42,100 elsewhere in the region. In fact, smaller urban centres and rural areas have, on the whole, yet to recover their pre-recession employment levels. Meanwhile, the CMAs collectively did so in August 2010 and have been expanding ever since.

Of course, this is not to suggest that all the region’s big cities have been engines of job creation. Two cities—Vancouver and Edmonton—have been the primary drivers of employment growth, creating more jobs post-recession than all other CMAs combined. Regina and Kelowna have also posted impressive job gains, although their smaller population base means their affect on regional job creation is somewhat muted. At the other end of the spectrum, Calgary, Victoria and Abbotsford-Mission have all seen strong employment growth within the past 12 months, but there are still fewer people working in those cities today than before the recession began. In Saskatoon, there have been only modest job gains in recent months and employment remains well below pre-recession levels.

Even though most new jobs in western Canada are being created in big cities, this does not mean that employment prospects elsewhere in the region are necessarily bleak. In Manitoba, for example, employment growth outside of Winnipeg has been a lot stronger than in the province’s largest city since even before the recession began. Similarly, job creation outside of Alberta’s major urban centres has kept pace with the 4.3% average employment growth rate in Edmonton and Calgary over the past two years.

Moreover, as much as employment in western Canada’s CMAs has been rising, this increase has been counterbalanced by strong population growth; through the combined forces of urbanization, immigration and interprovincial migration, people continue to flock to our cities. Employment gains in our major centres since August 2009 has been just sufficient to absorb the growth in the urban working-age population in western Canada. Meanwhile, while job creation has, broadly speaking, been slower elsewhere in the region, so too has population growth.

These concurrent trends have created a favourable balance in western Canadian labour markets. While there remain pockets of weakness in some areas, the general situation is one where excess labour capacity in the region is moving to our major cities to absorb the growing demand for workers. As a result, the unemployment rate in urban and rural areas in western Canada has been virtually identical for several years.

1. In order of population size, western Canada’s nine Census Metropolitan Areas are: Vancouver, Calgary, Edmonton, Winnipeg, Victoria, Saskatoon, Regina, Kelowna and Abbotsford-Mission.

By Tom Carson, Director of the Manitoba Office

While there remains one more hurdle—selling 13,000 season tickets within three weeks—Winnipeg appears destined to bolster western Canada's presence in the NHL by adding another team. Yes, western Canada, with almost 31% of the nation’s population will have four (or nearly 60%) of Canada's seven NHL teams.

In 1996 when Winnipeg lost its NHL franchise, several economic factors drove the end of the city's presence in the league. These issues have since been minimized throughout the years, which should secure Winnipeg’s position in the league going forward:

The Winnipeg Arena was considered to be the finest facility in western North America when it was built in 1955, when Winnipeg was Canada's third-largest city. The Arena was renovated in 1979 and expanded to accommodate 15,565 people. Owned by an agency of the City of Winnipeg, it did not provide the revenue potential that owners needed nor the modern amenities and entertainment potential expected in today's facilities. In contrast, the city's new arena (2004) is a full season multiplex owned by True North Sports and Entertainment Limited, the owners of the new hockey club. For hockey, it can accommodate 15,015 people, which is not large by NHL standards (the smallest of 30 NHL arenas ranging from 16,234 to 21,273 seats). However, size is not everything: five NHL clubs had lower than 15,000 average attendance in 2009/10, many of them were substantially lower.

The 1996 ownership of the Winnipeg Jets did not have the means to backstop the growing financial risks that came from the rising salaries and operating costs associated with NHL expansion into the US. By comparison, True North Sports and Entertainment has spent the past decade learning the market, done its due diligence and the ownership team of David Thompson and Mark Chipman has the means and knowledge to support a team in the current Western economy, provided that the fan base is as strong as Manitobans believe.

The Canadian dollar was very weak in 1996. NHL hockey salaries were paid in US dollars and in Canada, every player's salary dollar cost the club at least $1.36. Prior to the negotiations that ended the 2004/05 lockout the NHL had no luxury tax, revenue sharing, salary cap or salary floor.

Manitoba's population was 1,134,000 in 1996, and the capital region of Winnipeg was 684,100. Today, after posting its highest growth rate in 40 years, the estimated population is projected to stand at 1,250,900 with the CMA at 764,200. Although it has the smallest NHL population by at least 250,000, the region is a deeply knowledgeable and committed hockey population.

All in all, a stronger Canadian dollar, a well-designed new facility, a province more confident in its economic future, a growing population, a greater local sense of pride and a rabid fan base are all pieces of the package that make this potential NHL franchise far different from the one Manitobans lost in 1996.

The latest research conducted by the Canada West Foundation shows that a small locally-levied sales tax, dedicated to municipal infrastructure and implemented only if voters agree in a referendum, would help western Canadian cities close the gap between their huge infrastructure needs and the funding dollars available.

The Penny Tax: A Timely Tax Innovation to Boost our Civic Investments by Casey Vander Ploeg, Senior Policy Analyst, measures the projected infrastructure needs facing western Canadian seven biggest cities over the next ten years at over $40 billion.

“Our work shows that a small voter-approved penny tax, combined with regular and comprehensive reporting by governments, could be the most visible, transparent and accountable tax in Canada,” author Casey Vander Ploeg explains. “It has so many benefits to recommend it. One that is very important is how the tax would ensure that all individuals coming into a city and use the infrastructure also help pay for it.”

The penny tax would be a tax unlike any other in Canada because of the unique features built into the tax. Such features include a capped rate so the tax cannot be raised, voter-approval for implementing the tax, and dedicating all revenue to specific municipal infrastructure projects that would also be subject to voter-approval.

“The features I like the most in our proposal is the automatic sunset and the refund of excess revenue back to taxpayers,” said Vander Ploeg. The penny tax could only be used across two municipal election cycles, after which the tax would lapse. For the tax to be used any longer than six years, voters would have to vote the tax back in along with a new set of infrastructure projects. A sales tax can also produce revenues that exceed expectations. This tax revenue could be returned to local taxpayers.

While there are challenges that require further exploration before a penny tax could be implemented, it is clear that this innovative tax option would do much to maintain, renew, and rehabilitate existing infrastructure, as well as invest in new infrastructure. Across the globe, local governments are implementing such innovation tax solutions.

This report is part of the Canada West Foundation’s Smart Financing Project, which focuses on innovative solutions to Canadian public financing challenges.

To download The Penny Tax: A Timely Tax Innovation to Boost our Civic Investments, click here.