Ontario lags behind U.S. prosperity

TheStar.com – Business/Companies
Published On Tue Nov 23 2010.    Emily Mathieu, Business Reporter

Ontario continues to lag behind parts of the U.S. in terms of economic prosperity, thanks to an innovation gap pervading the public and private sector, according to a new report.

“Ontario has got lots of building blocks but we haven’t seemed to have been able to put them together yet . . . especially around an innovation agenda,” said James Milway, executive director the Institute for Competitiveness & Prosperity.

Tuesday’s report entitled Today’s Innovation, Tomorrow’s Prosperity was produced by The Task Force on Competitiveness, Productivity and Economic Progress.

In the report Ontario was compared with 14 U.S. states with more than 6 million people, or at least one half of the province’s population. The province is behind U.S. states when it comes to investing in machinery, equipment and software to make workers more productive, the report showed.

The business sector also falls short in terms of investment in research and development.

Milway, also executive director the Martin Prosperity Institute at the Rotman School of Management, said the majority of public policy is not geared toward promoting innovation, but more toward invention and hard sciences.

In 2009, Ontario’s Gross Domestic Product per capita of $44,200 was “$6,900 below the median of the sixteen largest states and provinces in North America,” the report showed.

In terms of prosperity Ontario still ranks above Quebec — the second Canadian province included – but the gap is closing quickly.

If Ontario was able to improve productivity and close that GDP per capita gap it would translate into “an increase of $10,100 in after-tax disposable income for the average Ontario household of 2.7 persons,” according to the report.

It would also “generate $31 billion in tax revenues for all three levels of government in Ontario.”

Milway said Ontario residents need to boost investment in their own education, to ensure opportunity for individual growth and to contribute to a knowledge-based economy.

Businesses need better management, or senior employers dedicated to making innovation a higher priority than the bottom line, he said.

The report touched on manufacturing, noting management is among the world’s best, but managers fail through a lack of willingness to “keep and promote high performers and to deal promptly with poor performers.”

Milway said the provincial and federal government has helped secure some investment in innovation through the harmonized sales tax and corporate tax cuts. But all Canadians should also seek ways to increase trade with developed and developing nations, said Milway.

“That will open up markets that will demand innovation and it will also bring in more competition that will spur on innovation.”

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