Tuesday, January 20, 2015

On the inevitability of out-migration from Atlantic Canada

Halifax, capital of the Atlantic Canadian province of Nova Scotia, has some serious demographic issues. In May of last year, the Halifax Chronicle-Herald's Brent Bundale and Davene Jeffrey summarized the findings of the Halifax Index 2014. Bundale had noted in 2012 that a relatively strong Haligonian economy could be threatened by labour shortages. This has become a serious problem.

Halifax is facing a population crisis as fewer people move to the city and more pack their bags for other parts of the country, a new report says.

Immigration to Nova Scotia’s biggest city hit an eight-year low last year, while outmigration to other parts of Canada spiked to its highest level in over a decade, the report found.

Halifax’s population grew 0.4 per cent last year, half the municipality’s normal rate and lagging behind most Canadian cities.
“If our population declines, our fiscal sustainability is threatened,” Paul Kent and Fred Morley, both with the Greater Halifax Partnership, said in an introduction to the Halifax Index 2014.

“The biggest challenge we face as a community is hanging on to our new graduates and attracting immigrants.”

Parts of the index mirror findings of the Ray Ivany-led report released earlier this year on improving the province’s economy. A key finding of the Ivany report was that Nova Scotia must grow its population through immigration and encouraging students to stay.

One noteworthy thing about all this is that, by the standards of Atlantic Canada, Halifax is in relatively good shape. It attracts large numbers of migrants from throughout Atlantic Canada and from Nova Scotia, and it attracts a disproportionately large share of Atlantic Canada's immigrants. Port Hawkesbury, a Cape Breton town and noteworthy source of migrants whose mayor was interviewed in connection with the collapse of the new migration of Atlantic Canadians to Alberta, is not so favoured at all.

John Phyne and Linda Harling-Stalker's paper "'Good to be Alberta Bound?': Out-Migration, In-Migration and the Strait Region of Nova Scotia, 2001-2006", concentrating on the area of northern Nova Scotia including Port Hawkesbury, is a solid paper combining economics and ethnography. It makes a case that, outside of relatively favoured areas like Halifax, substantial out-migration is inevitable. With limited options for well-paying employment, a dispersed and highly rural population structure, a century-long perspective on migration seeing it as an inevitable life stage, little lasting in-migration (whether from other regions of Canada or from non-Canadian sources), and sustained below-replacement fertility rates, the authors predicted the decay of that region's fabric. That decay, I would suggest, can be generalized to the whole of the area.

These constraints on the labour force will limit the region's growth. A Toronto Dominion February 2012 report, "Estimating Longer-Term Growth Prospects in Canada's Provincial Economies", makes just this point.

Québec, the Maritimes, and Manitoba rounded out the middle-to-bottom positions. We see that productivity gains among the group were tightly clustered (1.1-1.5%). Therefore, the difference in the headline GDP growth number among these five provinces stemmed primarily from labour supply growth. Québec generally had a lower labour force participation rate than the others in large part due to an older populace. However, this did not translate into lacklustre labour supply growth because of the province’s ability to attract about 15-20% of all new immigrants admitted to Canada each year. Of the group, Prince Edward Island (PEI) recorded the highest labour supply growth of roughly 1.0% per year from 1990-2007. While annual population gains within PEI were not significant, the labour force participation rate did increase by more than three percentage points over the benchmark period. In comparison to both Québec and PEI, the remaining three provinces (Nova Scotia, New Brunswick and Manitoba) fell somewhere in the middle on labour supply growth front. In spite of their underlying differences, economic growth among the five provinces in this group came in at 1.8-2.4% per year.

Worse will come.

The expected outflow of individuals to other parts of the country, combined with struggles to attract international migrants, weigh down the labour supply prospects for Québec and the Atlantic provinces. Our projections have Québec clocking in at a mere 0.3% labour supply growth over 2016-21. The numbers for the Atlantic provinces are not much better. Combining these disappointing numbers, with lacklustre productivity gains, results in economic growth range from 1.1% to 1.4% per year in each of these provinces.

In response to these demographic constraints, papers like the Canadian Federation of Independent Business' October 2009 "The Future of Atlantic Canada: Dealing with the Demographic Drought" (authored by Amelia DeMarco and Bradley George) and the Centre for the Study of Living Standards' December 2009 "The Productivity Performance of Atlantic Canada" (authored by Peter Harrison and Andrew Sharpe) have identified improving productivity as the only way forward for the Atlantic Canadian economy. The problem, as especially the last paper notes, is that there have been many calls to imrpove productivity in Atlantic Canada but little success. The economic structure of the region, concentrated in low-productivity resource industries and retail, is resistant. What economic convergence has come, in Newfoundland and Labrador, has come from offshore oil driving strong growth in the past decade. Will this last even for Newfoundland? Will the remainder of Atlantic Canada enjoy similar bounty? I have my doubts.

In the meanwhile, as a 2013 Canadian Press report drawing on Statistics Canada's migration information notes, there are entirely rational reasons for Atlantic Canadians to continue to migrate.

BMO economist Robert Kavcic said inter-provincial migration was well established in the early 2000s as Alberta emerged as the country’s growth engine, but stalled somewhat during the 2008-09 recession.

“Now we’re at the part of the cycle where Alberta (is growing strong again), the unemployment rate is down to around four per cent, and Atlantic Canada has lost a lot of momentum because a lot of the fiscal stimulus there has wound down,” he explained.

He noted that while all provinces are losing workers to Alberta and to a lesser extent Saskatchewan, the drain was especially dramatic in Atlantic Canada, where out migration hit 11,000, or 0.5 per cent of the population, during the last 12-month period for which there is data.

The major factor for the movement is availability of work, the report says. Alberta and Saskatchewan lead the nation with unemployment rates of 4.4 and 3.6 per cent respectively, well below the 6.9 per cent national average. The four Atlantic provinces, meanwhile, have jobless rates ranging from 9.1 per cent in Nova Scotia to 11.0 per cent in Newfoundland and Labrador.

As well, average hourly wages are now $6 higher in Alberta than they are in Atlantic Canada — the highest gap on record — and about $4 higher than in Ontario and British Columbia.

[. . .]

Among the least attractive of the 19 areas surveyed, BMO listed Prince Edward Island, Nova Scotia, London, Ont., and New Brunswick in that order from the bottom.

The inevitability of further out-migration from Atlantic Canada, to Ontario or Alberta or Saskatchewan or anywhere sufficient jobs are availabile, seems inescapable. Equally inescapable is the likelihood that, the more out-migration occurs, the more there will be economic incentives for out-migration as the region's economy continues to fall further behind its peers. As Phyne and Harling-Starker's paper noted, Ireland only managed to reverse similarly high levels of emigration with by developing an economic miracle. Even that didn't last. Absent something surprising, I fear Atlantic Canada might be heading into a feedback loop. Certain favoured areas, like Halifax, might do well. The rest, though?

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