BUSINESS
01/31/2019 17:21 EST | Updated 01/31/2019 18:02 EST

Ontario Income Report Shows Damage Done By Manufacturing's Collapse

In Ontario, home of Canada's worst wage growth, it's getting harder for the poor to move up, and easier for the rich to stay rich.

Rebecca Cook / Reuters
Unifor president Jerry Dias addresses General Motors workers protesting GM's plan to close its Oshawa assembly plant, at a rally in Windsor, Ont., Jan. 11. The decline of Ontario's manufacturing base is the principal reason why the province is seeing meagre wage growth and a decline in income mobility, a new report from the FAO says.

MONTREAL — In the wake of General Motors Canada's announcement late last year that it's shutting down its iconic Oshawa assembly plant, a new report from the provincial finances watchdog highlights the damage done to Ontario's households by the decline of manufacturing.

The report on income trends, from the provincial Financial Accountability Office (FAO), found that Ontario has had far and away the worst wage growth of any province in recent decades.

After-tax incomes in Ontario grew an average of just 0.5 per cent between 2000 and 2016, compared to an average of 1 to 2 per cent for all other provinces.

Watch: Ontario's auto industry will be gone by 2030, analyst predicts. Story continues below.

Had it not been for federal and provincial government transfers to low-income and elderly households, Ontario's incomes would have actually declined in that time, the only province to have seen a drop in the wages paid by employers.

Even with help from taxes and transfers, some groups saw a decline in their incomes, namely working-age people living alone and single-parent households, the FAO report found.

Ontario's median income growth slowest among provinces between 2000 and 2016

Financial Accountability Office of Ontario
After-tax income growth (in green) was the slowest in Ontario from 2000 to 2016. But market incomes (the wages paid by employers) actually shrank over that time. Only government transfers kept Ontario's inequality from increasing..

Without government intervention, Ontario would have seen a substantial increase in inequality since 2000, the report concluded.

It also found that "income mobility" is declining in Ontario, meaning it's becoming harder for the poor to escape poverty, and easier for the rich to stay rich.

In 1987, more than four in 10 Ontarians had climbed up to the next wage rung on the income ladder in the previous five years. By 2016, only 31 per cent of Ontarians had been able to do the same.

Achieving upward mobility has become more challenging in Ontario

Financial Accountability Office of Ontario
Ontario's income mobility is on the decline. In 1987, 41 per cent of Ontarians had climbed up at least one quintile on the income ladder in the previous five years. By 2016, that had dropped to 31 per cent.

If you're in the bottom 20 per cent of earners, "chances are you're going to stay there," said Peter Weltman, Ontario's financial accountability officer. "And the chances that you stay there are greater than they were before."

The FAO report points to a number of trends behind this, notably the rise of precarious (part-time, temporary and gig economy) work, and the decline of unions' bargaining power.

But those same trends exist elsewhere in Canada and around the developed world. So what's different for Ontario?

The answer is the relentless years-long decline of the province's manufacturing sector, which was once the driving force of Canada's economy.

"Ontario was the economic engine of Canada for a long time and it's not anymore."Peter Weltman, Financial Accountability Officer of Ontario

The number of jobs in that sector in Ontario peaked in 2004, at 1.1 million, before falling to 770,000 in 2017, a net loss of more than 300,000 jobs in 13 years.

Those jobs have been replaced by largely low-paying service sector jobs.

Weltman notes that virtually all jobs created in Ontario since the start of the century have been in services, and while some of them (doctors, lawyers, engineers) are high-paying, most were created in low-paid industries like retail, restaurants and hotels.

"Ontario was the economic engine of Canada for a long time and it's not anymore," Weltman told HuffPost Canada by phone.

"That being said, we still have the third-highest median income in the country. So we're not exactly poor, (but) everyone else is effectively catching up."

The onus is on political leaders

The FAO's report doesn't offer any solutions to the problem — that's the domain of politicians, Weltman says.

The previous provincial Liberal government began playing catch-up to this issue in its last years in power, reforming various labour laws and raising the minimum wage to $14 per hour.

Another hike, to $15, had been planned for this January before the current Progressive Conservative government cancelled it as part of a rollback of the Liberals' labour reforms.

Perhaps the most adventurous part of the provincial Liberals' agenda was their basic income pilot project, which launched in three communities in 2017 but will wrap up this March, well ahead of its planned three-year time frame. The Progressive Conservative government announced last summer it was cancelling the project, despite an election vow to keep it running to its planned end.

The cancellation is now the subject of a case before the courts, with a group of basic income recipients petitioning for the right to launch a class-action lawsuit against the provincial government. They say their lives were thrown into disarray when the government ended the financial support program early.