Alberta vs. Quebec and Equalization

[Conaeolos]

Like I said before regional representation would not benefit Alberta and the West, the East would still dominate 6-4, Alberta would actually have less power. The big winners would be the maritimes and they have different interests to the West.

I think this point is also a point worth discussing. The reason the political and economic differences of the Maritimes doesn’t bother Alberta like Quebec is she is self-aware of her past benefits from the bigger provinces and recognizing’s that due to the urban/rural potential Quebec and Ontario should always be haves and are simply gaming the system; compared to, the Maritimes which is simply finding a footing.

Let’s break down the numbers. The Maritimes population is approximately half the size of Alberta with Alberta’s GDP per capital about 29% bigger. They collected $17,495 per citizen and spent $24,722 per citizen. That is a subsidy of 41% (compared to Quebec’s 9%) and costs the national pot approximately $16.6 billion or 9 billion in transfers. For that, the Maritimes saw a 7% percent raise in GDP per capita. Investment adjusted for size stills 36% more than Quebec and 19% more than Ontario. I would also note excluding oil and gas investments in Alberta their diversification investments still see 14% more investment than the Maritimes, or 55% more than Quebec, 37% more than Ontario with oil and gas 173% and 143% respectively.

If that doesn’t concern you let’s compare when Ontario is even being subsidized like in 2014. Alberta had 41% of the total national economic investment despite only having only 17% of the national GDP and 11% of the population. Quebec and Ontario taking an approximately 9% subsidy or $28.4 billion from debt and other provinces. In the same time they saw investment 36% of total economic national investment, Ontario being 23% and Quebec 13%. They were 63% of the population and 56% of the economy. This all despite they are both well located and well positioned to be the economic heart.

Again to put that in prospective that would mean Alberta was outperforming conservative economic viability at 289% that of the mean. Well Ontario and Quebec was preforming 44% worse than should be expected with all things level. Excluding only AB oil and gas, Alberta was still outperforming the mean by 48% will contributing an extra 23.5 billion (11%) of the federal tax revenue outside Alberta.

But is that their fair share?
How do you compare taxation when so many factors? I think tax burden is a good measure (taxes paid per capita / mean income): Quebec by that measure is 58%. Ontario 54%. Alberta 55%. By GDP per capita to better reflect difference in income distribution: 36%, 31% & 28%. Canadian average being 56% & 32%. Those extra % differences if applied would actually likely only bring in enough to cover the current 8-9 billion deficit or under. Alberta debt is only 120% of current revenues 18% GDP. Ontario's debt meanwhile is 2.2x current revenues and 42% of GDP. Quebec's debt is 1.5x current revenues, 1.9x without transfers, and 44% of GDP.

 

[Conaeolos]

Spend $2-3 billion a year on R&D at Alberta Universities (government funding only).

Unfortunately not that simple. The U of C and U of A already are target of recruitment for tech centers like California and Seattle. The mean salary in those areas are CA:$120,562USD WA:$93,135USD raising with AB at $47,429USD and falling. This shows that supply in this sense already unweights demand and a surge of new talent is more likely to cause a stronger brain drain than a tech boom. Not to mention infrastructure is less suitable due to high energy costs and low density to justify top tier bandwidth.

If we average total Canadian investment across determine a baseline based on provincial GDP %. The top three growing industries in Alberta are Oil and Gas (250%+), Construction (72%+) & Agriculture (56%+). The industries showing the below expected investment: Information and cultural industries (-25%) , Utilities (-23%), Health care and social assistance(-22%) educational services(-21%), public administration(-17%) and manufacturing(-9.6%). All the rest are being invested in around or above average. With the exception of manufacturing from that list of those below normal is actually above average when using the more appropriate baseline based of population instead of GDP.

So really the only industry Alberta is not actively diversifying into is manufacturing and the reasoning is simple: there is no clear export market.
Ontario on the other hand by this same measurement system is a very different story. The only target industries for investment are Finance and insurance (39%) & Information and cultural industries (16%). Most are at average to below in terms of what can be expected. Oil& gas (inc mining) even corrected for AB is still 79% under what should be expected. Is Ontario mineral poor or just uninterested on proven performers such a refineries for AB oil?

You want to get rich you invest in what is working and minimize what is failing like Alberta. Not virtue signal about diversity when your one of the worst offenders.

 

[Surrealistik]

Alberta is definitely in a transition with lots of challenges...

Betting on a return of the oil boom is just awful policy. Sure it may conceivably happen, but it would probably be at least a decade or two out, and with production being higher than ever, and much of Alberta's oil being relatively high cost, combined with the maturation of battery tech and green technologies, slowing global growth, the creeping popularization of nuclearization, electric cars and so on, no real stock should be placed in the return of the $160 / barrel messiah.

Higher taxes in AB though is almost most certian to make a bad situation worse. Spending there is already above average. It just richer.

The proposal was taxes would increase commensurate with and in proportion to the dividends of diversification investments; the standard Keynesian approach.

LOL. Dwarfs? How? Ontario's certianly our most devloped economy and doing better but she is still broke and propped up by a low dollar...

As to Ontario, yes, it dwarfs it in the most recent figures provided. One might argue about Alberta's advantages in per capita terms but I'm not sure how relevant that really is. For example, in terms of GDP per capita, as say Nunavut, Saskatchewan and the Northwest Territories have demonstrated, it's pretty easy to have an outsized capita ratios with low populations. As to benefiting from the low Canadian dollar, the dollar's natural state is trading at an advantageous discount to the US dollar; it's really a question of the extent. by the way, no one said that Ontario would be the pillar or Atlas on which the national economy is upheld in tough times, but while we're on the subject, that sure as hell ain't Alberta either. In terms of diversification, Ontario is quite diversified and certainly much more so than Alberta:

Ontario: https://www.statista.com/statistics/607895/gdp-distribution-of-ontario-canada-by-industry/

Alberta: https://www.statista.com/statistics/608354/gdp-distribution-of-alberta-canada-by-industry/

You act like there is an equal Canadian sector to AB oil & gas. There is not. By every metric Alberta is the top preforming province for investing hard in diversifying her economy. in fact, had she kept the rewards all in provience likely wouldn't even need the sector anymore. Many major national companies outside energy having their started there, heard of: West-jet, Freedom Mobile(Shaw), Forzani group, Agrium, Rexal, Landmark, Bioware, Booster Juice, the Brick, PCL, Pizza 73, Booster Juice etc etc

That's the point they are taking those actions. A lot more than most of Canada.It is down right misinformative to say they rest on oil. You know what would help everyone: not chasing away any capital including the oil and gas sector for no other reason except to purposefully reducing oil exports[not demand].

The bottom line is that as of 2017, you have 21% of the Albertan economy tied up in oil and gas extraction, and accelerating existing diversification initiatives is obviously a good idea in light of O&G's bleak near to mid term future, nevermind the lack of wisdom in having such an inordinate focus on one industry in general. If they're invested more at the moment in diversification that's great and expected: because they should and must.

AB in her stuggling times has still given into the national Canadian pot over a $100 billion dollars(1/3 the federal budet) in just the last 5 years and remains the region most attractive to investment by size. Hurt Alberta. You hurt the economic engine of the Country. And as I've said many times such thinking will break up the country and has alrady chased away people like me. So it's worth considering even if just as an average Canadian.

The idea here has been to help Alberta accelerate diversification initiatives and thus help it, not hurt it. Yes, they're already taking action, but I think the federal govt could step in and help as despite such efforts Alberta's economy is factually one of the least diversified in the country.

 

[Lord Tammerlain]

Unfortunately not that simple. The U of C and U of A already are target of recruitment for tech centers like California and Seattle. The mean salary in those areas are CA:$120,562USD WA:$93,135USD raising with AB at $47,429USD and falling. This shows that supply in this sense already unweights demand and a surge of new talent is more likely to cause a stronger brain drain than a tech boom. Not to mention infrastructure is less suitable due to high energy costs and low density to justify top tier bandwidth.

If we average total Canadian investment across determine a baseline based on provincial GDP %. The top three growing industries in Alberta are Oil and Gas (250%+), Construction (72%+) & Agriculture (56%+). The industries showing the below expected investment: Information and cultural industries (-25%) , Utilities (-23%), Health care and social assistance(-22%) educational services(-21%), public administration(-17%) and manufacturing(-9.6%). All the rest are being invested in around or above average. With the exception of manufacturing from that list of those below normal is actually above average when using the more appropriate baseline based of population instead of GDP.

So really the only industry Alberta is not actively diversifying into is manufacturing and the reasoning is simple: there is no clear export market.
Ontario on the other hand by this same measurement system is a very different story. The only target industries for investment are Finance and insurance (39%) & Information and cultural industries (16%). Most are at average to below in terms of what can be expected. Oil& gas (inc mining) even corrected for AB is still 79% under what should be expected. Is Ontario mineral poor or just uninterested on proven performers such a refineries for AB oil?

You want to get rich you invest in what is working and minimize what is failing like Alberta. Not virtue signal about diversity when your one of the worst offenders.

Note

I did not just mean the electronics, computer and software sectors. It could be medical, materials science, etc. In fact I would rather stay away from electronics as it is already a sector with heavy investment in R&D

 

[Conaeolos]

Alberta's economy is factually one of the least diversified in the country

LIE!

Only when you refuse to account for how much oil and gas is an outlier and thus throws off the relative health of the other sectors. In 2013 for example, that sectors was $78.9 billion with $60.9 billion in new capital, 77% investing, $93,939 / po stakeholder. That’s not easy to complete with and it skews the statistics.

Removing oil and gas, AB's other sectors would still average 6% higher relative GDP to ON and the breakdown would change to: real estate(12%),construction(12%),manufacturing(8%),Health(7%)… which is even more balanced/diversified than Ontario.

no one said that Ontario would be the pillar or Atlas on which the national economy is upheld in tough times, but while we're on the subject, that sure as hell ain't Alberta either.

I am not sure what your argument here, the less and less net contributors there are the more the economy as a whole slows. There needs to be regions that are investing and growing to be a healthy nation. AB, BC & ON have been the bedrock of that. AB by far the most generous with ~250+ billion dollars(5x current provincial budget) being redistributed somewhere other than Alberta over the last 20 year and not even Alberta is asking that to stop.

Ontario and Quebec are the ones showing low investment and interest in their diversification.

Ontario is quite diversified and certainly much more so than Alberta

Numbers need to be compared to something to be meaningful.

Let do that, shall we stating with Ontario’s #1 sector Real estate:
Ontario’s Real estate sector is estimated to be $107.3 Billion with $5.5 Billion in new capital investment.
That’s only mean 5% of the sector is investing and the current benefits per stakeholder ~$58,000

AB’s Real estate sector is estimated to be only $32.7 Billion with $2.5 Billion in new capital investment.
That’s means 8% investment in market growth and current GDP / po stakeholder of ~$68,125

IOW adjusting for size difference; AB sector is 17% larger; 60% more geared to grow. If we use % of GDP AB's 30% the size where in we'd expected it to be 15%.

Manufacturing:
Ontario’s manufacturing sector is estimated to be $96.3 Billion with $6 Billion in new capital investment.
That’s ~6% of the sector investing and current GDP / po stakeholder of ~$58,363

AB manufacturing (most ignored area) is estimated to be $21.3 Billion with $2.2 Billion in new capital investment.
That still 10% of the sector investing and current GDP / po stakeholder of ~ $77,176

IOW adjusting for size difference; AB sector is 32% larger; 60% more geared to grow.
If we use % of GDP AB's 22% the size where in we'd expected it to be 15%.
.
Now let’s talk Oil and Gas (mining).
Ontario’s sector is estimated at $7.6 billion with $2.3 billion in new capital investment.
That is 30% of the sector investing and current GDP / po stakeholder of ~$58,461

AB’s Sector is estimated at $69.6 billion with $23.7 billion in new capital investment.
That is 34% of the sector investing and current GDP / po stakeholder of ~$77,333

IOW adjusting for size difference; AB sector is 31% larger; 13% more geared to grow.

So please stop saying AB is in need of federal help or is too focused on oil. It's a lie. They are the model and the economic leader.

 

[Conaeolos]

Nunavut, Saskatchewan and the Northwest Territories have demonstrated, it's pretty easy to have an outsized capita ratios with low populations.

That is exactly why I am using comparisons not just comparing using GDP per capita. Again these are measurable and comparable things, you can account for, so let’s check them out:

Saskatchewan: Takes in $19,746 per citizen and spent $20,614 per citizen. Saskatchewan thus is subsidized by the nation/debt 1 Billion. Her economic impact adjusted per capita is 18% above expected by population. Her tax burden is 26% by medium income & 28% by GDP. Investment wise she seeing 62% more investment than is expected to by % GDP.

In other words a growing region but not yet a net contributor.

Northwest Territories Takes in $298,664 per citizen spent $661,441 per citizen. NWT thus is subsidized by the nation/debt 1.6 billion. Her economic impact adjusted per capita is 186% above that expected by population. Her tax burden is -335% by medium and -308% by GDP. Investment wise she is seeing 46% more investment than expected by % GDP.

In other words a strange but growing region but not even in the ball park of a net contributor.

Alberta Takes in $21,594 per citizen spending $18,345 per citizen. AB thus contributes 14 billion to the nation or $434 per non Albertan. Her economic impact adjusted per capita is 32% above expected by population. Her tax burden is 23% by medium income & 28% by GDP. Investment wise she seeing 46% more investment than expected by % GDP. Excluding ‘oil and gas’ she exactly as expected which means adjusted for population 46% more investment than most provinces.

In other words despite struggling remains a growing region & a very large contributor.

Ontario Takes in $18,296 per citizen spending $17,246 per citizen. ON thus contributes 15 billion to the nation or $672 per non Ontarian. Her economic impact adjusted per capita is 1% below that expected by population. Her tax burden is 25% by medium income & 31% by GDP. Investment wise she seeing 20% less investment than expected by % GDP.

In other words Ontario is net contributor but unlikely to remain one due to below average provincial spending, slow growth, lack of investment in diversification, etc etc Ontario is also far from the consistent net contributor like AB nor is it always the case of netting more than Alberta.

Quebec Takes in $18,302 per citizen spending $19,863 per citizen. QU thus is subsidized by the nation/debt 13 billion. Her economic impact adjusted per capita is 14% less than expected by population. Her tax burden is 36% by medium income and 31% by GDP. Investment wise she is seeing 19% less investment than expected by % GDP. Less 30% when lower GDP to population is taken into account.

Quebec is an economic basket case with horrible prospects that needs to lower her taxes and the 22 Billion in direct equalization transfer from the federal government are making it worse not better.

Maritimes Takes in $17,495 per citizen and spent $24,722 per citizen. MT thus is subsided by the nation/debt 16.6 billion. Her economic impact adjusted per capita is only 3% less than expected. Her tax burden is 29% medium and 31% by GDP. Investment wise she is seeing 7% more investment than expected by % GDP.

The Maritimes is struggling but clearly utilizing the 9 billion in direct transfers and national programs to pull themselves up.

 

[Surrealistik]

LIE!

Only when you refuse to account for how much oil and gas is an outlier and thus throws off the relative health of the other sectors. In 2013 for example, that sectors was $78.9 billion with $60.9 billion in new capital, 77% investing, $93,939 / po stakeholder. That’s not easy to complete with and it skews the statistics.

Removing oil and gas, AB's other sectors would still average 6% higher relative GDP to ON and the breakdown would change to: real estate(12%),construction(12%),manufacturing(8%),Health(7%)… which is even more balanced/diversified than Ontario.

First of all, let's use contemporary numbers; say 2017 and beyond. Second, you don't get to discount the skewing aspect of Alberta's biggest sector by far; I mean that's the fundamental problem after all.

Standard deviation, as typical variance from the norm is significantly lower in Ontario's case: 3.65 SD (as in 68% of industries fall within a band of +/- 3.65% of the 5% GDP average) among 20 industry groups vs 4.68 for Alberta as of 2017 per the data I linked. Mathematically per these contemporary numbers, it's clear that diversification in Ontario is greater, and significantly exceeds that of Alberta due to a more uniform distribution.

I am not sure what your argument here, the less and less net contributors there are the more the economy as a whole slows. There needs to be regions that are investing and growing to be a healthy nation. AB, BC & ON have been the bedrock of that. AB by far the most generous with ~250+ billion dollars(5x current provincial budget) being redistributed somewhere other than Alberta over the last 20 year and not even Alberta is asking that to stop.

Ontario and Quebec are the ones showing low investment and interest in their diversification.

My argument is pretty simple: Ontario is no Atlas, nor have I claimed it to be as much, and neither is Alberta, despite its contributions; a benefactor of ailing provinces no doubt, but no one is an indispensable pillar here. $12.5 billion a year does not a saviour of the confederation make (and to be honest, this is largely an irrelevant dick wagging tangent aside RE: the actual topic of discussion).

Ontario is already plenty diversified as above; I'm not certain why it needs to stress further diversification. Quebec's standard deviation among its industries (again per the 20 industry groups as above) is even lower than Ontario's at 3.42.

Numbers need to be compared to something to be meaningful.

Not sure where (or when) you're getting your numbers; contemporary investment numbers I'm producing from here as of 2017: https://www150.statcan.gc.ca/t1/tbl...0009601&pickMembers[0]=1.7&pickMembers[1]=2.1

https://www150.statcan.gc.ca/t1/tbl...0009601&pickMembers[0]=1.7&pickMembers[1]=2.1

Scarily enough, of Alberta's 2017 $72.7 billion dollars in fixed capital investment, $30.9 billion alone is attributable to mining, quarrying and oil and gas extraction; no one sector comes remotely so close to domineering investment in Ontario.

So please stop saying AB is in need of federal help or is too focused on oil. It's a lie. They are the model and the economic leader.

Superb. Alberta is the hub on which Canada turns, has no excess reliant on a struggling sector, and is the national paragon of economic prowess; clearly. I'm convinced!

In that case, please continue to make those equalization payments while oil and gas blatantly continue to (and will continue to) languish while they still constitute over a fifth of the Albertan economy and just under half of its fixed capital investment; naturally without a dime of federal assistance towards reorienting a single solitary thing as it is obviously unneeded per that superior rugged Albertan self-reliance.

Clearly your personal investment on this topic vastly exceeds my own so I think I'll leave it here.

 

[Conaeolos]

Clearly your personal investment on this topic vastly exceeds my own so I think I'll leave it here.

I am sorry to hear that. I was quite enjoying a discussion where the basis was more grounded. Thanks for such intelligent and grounded responses. I’ll try to wrap up. eace

First of all, let's use contemporary numbers; say 2017 and beyond. Second, you don't get to discount the skewing aspect of Alberta's biggest sector by far; I mean that's the fundamental problem after all.

I’ve noted when not using 2017/2018 data. Growth is relative to what came before and so the older data speaks to why it is so large and an outlier. So for example, let see what happen if we transplant oil and gas industries and corresponding population units: Ontario new oil and gas sector is 4th(8%). If done in 2013 2nd(10.5%). AB new oil and gas is in 13th place.

Your SD calculations:
ON SD: 3.65 -> ~3.56. Quebec: SD ~3.48 -> ~4.68. BC: SD: 3.81 -> 7.92. SASK SD 4.13 -> 10.77.

AB SD meanwhile in all these scenarios changes from 4.68 -> 2.8.

My point isn't one aimed at some technical win, AB simply doesn’t have under preforming sectors. She does have an Oil & Gas outlier raising all boats. Even if you completely rained in the sector Alberta would still have a GDP per capita at least 8% higher than the average. As to why Alberta doesn’t have other sectors like that it’s just a matter of time, sustainable population growth & dealing with struggles of her location.

Uniform distribution is meaningless if taken out of context of economic growth. Diversification is about relative investment and how these economies are looking to change in the future. Alberta is one of the most diversified and healthy economies in the country and certainly more so than Ontario & Quebec. When you look at capital investment you see more health across the board and still diversifying. Ontario meanwhile is still taking actions which concentrate their stability on their top sectors of Finance and Manufacturing, both seeing restricted growth keeping your simplified diversity measures down. Her weakest sectors on the other hand like agriculture and mining though are in no way growing at a rate set to catch up.

I'm not certain why it(ON) needs to stress further diversification.

The point of diversification is not to see your top sectors fall closer to your average but to see the bottom rising at higher than expected growth rate due to benefits from the top even if it comes at the cost of lower growth rights in those primary sectors. Ontario’s key sectors are all very vulnerable and showing signs of fatigue. Their bottom performers are not being invested in. AB meanwhile has a diversified safety just a very powerful leader.

When looking at these numbers it shows diversification (based on investment) efforts are most necessary in the East although BC is also a prime target and one I think Alberta would rather get the attention.

Not sure where (or when) you're getting your numbers

Same places perhaps different table, I am testing out some custom software : -)

Scarily enough, of Alberta's 2017 $72.7 billion dollars in fixed capital investment, $30.9 billion alone is attributable to mining, quarrying and oil and gas extraction; no one sector comes remotely so close to domineering investment in Ontario.

Not at all scary. The current size of the industry determines the investment not the economy as a whole. The Industry is still investing which is good. What is of most concerning to me is the rate of that investment is falling due to capital fight and preventable policy choices. Investment which could be spent here going outside Canada to the detriment of the country.

equalization payments while oil and gas blatantly continue...

Miss the point perhaps: such ‘federal’ assistance wouldn’t even start until that spending was over the 13 billion Albertans already net contribute. Alberta already has solid government spending per citizen so its shortsighted. Alberta is also already well place to manage the after effects of slower oil & gas sector. If Alberta just took higher taxes provincially for example the net effect would be reducing their by comparison manage debt at the cost of how much goes to help outside Alberta.

Spending needs to go into regions that are using it to grow, which is not Quebec! Spending money on diversifying Alberta is how so much of this investment goes to waste. This mismatch in thinking combined with only 11% in voting power – is why I predict in the long term it is very likely AB get courted to the US and Canada falls apart.

Thanks again for you replies. Have a good one. eace