Martin Task Force issues first annual report on improving Ontario’s productivity

Guest Contributor
November 18, 2002

An influential task force led by Roger Martin has issued its first annual report with four key recommendations for how Ontario can begin to eliminate the province’s so-called prosperity gap. The task force calls for changes in marginal tax rates, increased investment in post-secondary education and infrastructure, a recognition of the importance of urban centres and heightened aspirations by the population as a whole.

Entitled Closing the Prosperity Gap, the report was produced by the Ontario Task Force on Competitiveness, Productivity and Economic Progress, the operating arm of the Institute for Competitiveness and Prosperity (ICP). The task force is chaired by Martin, dean of the Rotman School of Management. The annual report served as the centerpiece of the recent Ontario innovation summit, where the four recommendations were encapsulated in the acronym AIMS – short for attitudes, investments, motivations and structures (see box) — and described as “high leverage improvement opportunities”.

The new report builds on two working papers released by the task force earlier this year (R$, May 22/02 & September 16/02). Its recommendations may be wide-ranging and even vague, but they draw upon a detailed analysis of Ontario’s innovative and productive capacities, and provide a starting point for moving Ontario up within its defined peer group of competing North American jurisdictions.

Currently Ontario stands at 14th in this group of 16 in terms of economic prosperity – sandwiched near the bottom of the list, just behind Indiana but ahead of Florida and Quebec (see box far right). The task force proposes advancing the province’s standing to the median level over the next decade and the key, according to its research so far, is improved productivity, using GDP per capita as the preferred method of measurement.

“This requires aggressive growth. We need two times the GDP growth that we have achieved so far,” says James Milway, ICP’s executive director. “Our job is to benchmark Ontario against the US. It’s not that interesting to see how Ontario stacks up against Manitoba, but against New York, Illinois or Massachusetts. We need to re-orient our aspirations.”

Task Force Recommendations

Heighten aspirations across Ontario

  • set a higher standard for economic progress
  • raise aspirations through increased formal education & life-long learning
  • compete globally, not locally or nationally
  • celebrate winners

Increase productivity-enhancing investments

  • recommended for all stakeholders but particularly post-secondary education
  • tuition freezes help guarantee under-funding of education
  • long-term provincial strategy to raise investment in post-secondary education by all Ontarians
  • foster diversity in post-secondary institutions

Strengthen motivations through tax reform

  • provincial & federal government should explore ways for break-through tax reform
  • high marginal tax rates reduce motivation for work, investment & high aspirations
  • Ontario’s marginal tax rate negatively affects motivations of firms & individuals

Strengthen market structures

  • explore ways to strengthen Ontario’s cities
  • ensure that programs and policies do not unduly slow natural growth & development of cities
  • develop plans and strategies to revitalize urban cores and attract and retain knowledge workers

The report notes that if Ontario achieves its goal of reaching the median level within its peer group, it will join a small handful of leading economies. In terms of GDP per capita, Ontario already ranks well against other industrialized nations – second behind the US. It also outperforms Europe’s “four motors” – the continent’s most prosperous regions of Lobardia (Italy), Baden-Wurttemberg (Germany), Rhone-Alpes (France) and Cataluna (Spain).

One of the contributing factors to Ontario’s relatively high productivity ranking is its mix of clusters. The task force notes that more analysis is required for the province’s sub-clusters but that initial evidence on 24 of the 43 sub-clusters shows a more favourable mix than the five jurisdictions they have been compared against, resulting in wages 5% higher than expected.

Mitigating against Ontario productivity is its low rate of urbanization, reflecting the increasing importance of city regions as economic drivers. By mapping productivity against the percentage of jurisdictions living in cities greater than 100,000, the report says that “44 percent of the variance in productivity between jurisdictions is related to their degree of urbanization”.

The Task Force draws on the work of Dr Richard Florida a professor from Carnegie Mellon Univ who has conducted research on the relationship between productivity and creativity. using Florida’s creative indices, Ontario cities rank well in comparison to their peer group. Toronto, for instance, ranks fourth on the “bohemian index” behind Los Angeles, New York and Vancouver, while Ottawa-Gatineau ranks in the top quartile for diversity.

Perhaps the most controversial part of the report is the recommendation for post secondary education. While Ontario fares well in its support of community colleges, it ranks poorly for per student spending on universities, with the US outspending the province by a margin of two to one. The report calls for all segments of society to increase investment, including students in the form of higher tuition fees.

“Students, government and industry all have to pay more and Ontario needs to develop a strategy,” says Milway. “We’re agnostic on who pays and we will tackle this in the future.”

Future work for the task force will include: development of a set of measures to capture outputs from education and research investments including patents and spin-offs; studying the quality of Ontario’s key clusters; studying the strength and growth of the province’s creative class; and, expanding the study of education investment to include primary and secondary levels.



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