National Post · Feb. 9, 2012 - Quebec's provincial per capita GDP - $40,270 in 2010 - stands at just 85% of the national average of $47,438. Only three provinces have proportionately smaller economies: New Brunswick ($38,940), Nova Scotia ($38,478) and P.E.I. ($34,723). Even Newfoundland and Labrador, habitually the basket case of Confederation, now has a significantly stronger economy, with per capita provincial GDP of $55,186, thanks to its recent natural resource boom.
As recently as 1995, Quebec's per capita economic strength was over 90% of the national average. What has happened since?
According to a new study of provincial economies by l'École des Hautes Études Commerciales de Montréal (HEC), the problem is not so much Quebec declining as it is other provinces racing ahead much faster. The study's author, economist Martin Coiteux, concludes that if Quebec doesn't take action to increase the productivity of its labour force and spur development of its natural resources, "it runs the risk of finding itself last among Canadian provinces with respect to income and standard of living."
This isn't a new warning. Eight years ago, no less a Quebec icon than former premier Lucien Bouchard called on his province - both the people and the government - to rethink the "Quebec model" of economic development. Mr. Bouchard and 11 others, who became known as Les Lucides, said it was time to "wake up" from the twin notions that the provincial government was better suited than private investors to decide future economic development, and that the province's extensive social safety net could be bankrolled indefinitely. They recommended free-market reforms to unleash the province's enormous economic potential, and more userpay social programs to curb government spending and debt.
Les Lucides were met by Les Solidaires, a group of union activists, left-wing intellectuals and special interests who insisted that Quebec's high-tax, big-spending, centrally planned approach was working just fine. Unfortunately, Les Solidaires' approach has prevailed. For instance, Quebec sits on one of the continent's largest shale-gas deposits, but thanks to a reluctance on the part of provincial politicians, development is at a standstill.
As Mr. Bouchard pointed out eight years ago, in the 25 years prior to 2005, Quebecers pulled level with the rest of Canada in years of education received; and francophones were close to income parity with anglophones. The gap in unemployment rates between Quebec and Ontario, too, had closed from over five percentage points to under two.
Yet the gap between Quebec and Ontario is widening again. According to the HEC study, Ontarians enjoy an annual income advantage of nearly $10,000 over Quebecers - and this is at a time when the regulation-heavy, high-taxing McGuinty government is slowing Ontario's growth. Even though Ontario's growth is slipping, Quebec is failing to keep up with its neighbour.
Mr. Coiteux explained that "proportionately, fewer Quebecers work [than other Canadians]. They work fewer hours on average. And they earn an hourly pay that's lower than that of most other Canadians." In Quebec, the percentage of working-age residents in the labour market is under 65%. In Alberta, it's nine percentage points higher. And Alberta's labour market is expanding, while Quebec's is stagnating.
None of this is to say that Quebecers are lazy or unwilling to take entrepreneurial risks. The more likely culprit is the political culture. The provincial government can rely on Ottawa shipping in $8-billion to $10-billion a year in equalization payments. Quebec receives half of all the federal top-up funds distributed to have-nots in a year. So the province's politicians can get away with wasteful collectivist schemes, like $7-a-day daycare. Were equalization to end, Quebecers would work harder and invest more. They wouldn't have any other choice.
Undoubtedly, Quebec's political class instead will use the HEC figures to claim Ottawa is being too stingy with the province. They will insist the province's declining economic strength is proof the feds have discriminated against Quebec. In this, the provincial politicians will undoubtedly be joined by Quebec's NDP caucus in Ottawa.
In the past, Ottawa has given in to such demands. But in Stephen Harper's Conservatives, we finally have a government that is not dependent on Quebec for its majority status. One can only hope that the Prime Minister will be the one to give Quebec the tough love that its economy has needed for many years.