TORONTO – Restraint measures in the 2012 Ontario budget will have a “significant” negative impact on Ontario’s economy and job numbers, says a new report from the Centre for Spatial Economics (C4SE), a leading economic forecasting firm.
“The budget measures will reduce Ontario’s real GDP growth over the next four years – by as much as 0.7% in 2014 and 0.6% in 2015,” writes the report’s author, C4SE Director Robin Somerville. “Lower economic growth reduces employment by over 100,000 people in 2015 and raises the unemployment rate by 0.9 per cent in that year.
“By 2015, [the budget] will have reduced the size of the economy by over $20 billion a year – which reduces provincial government tax revenue by between $2 billion and $2.5 billion a year.”
Cuts to public spending hurt the economy more than increases in taxes, the C4SE analysis shows.
“While the ability to tax is not without limits, raising taxes rather than cutting spending imposes lower costs on society in terms of reduced jobs and GDP while achieving the government’s objective of reducing the deficit…. If the province needs to have an adult conversation about spending, then it also needs to have a similar conversation about revenue and taxation.”
Of the 105,000 jobs lost in 2015, 40,000 will be lost in the private sector. Thirty-six cents out of every dollar in provincial program spending goes directly to the private sector, the report says. In the construction sector, 20 per cent of all jobs depend on public spending.
“The conversation about the 2012 budget has talked a lot about cuts to public services and a little bit about taxes and fairness, but hasn’t talked much about how different budget choices affect jobs and the economy,” says Warren (Smokey) Thomas, president of the Ontario Public Service Employees Union, which commissioned the C4SE report. “I don’t see how the more than half a million Ontarians who are looking for work can get much encouragement from a budget that wipes out jobs
“This report puts some hard numbers into the debate, and it also points the way forward to resolving the current budget impasse,” he said. “I sincerely hope all three parties will take these findings into consideration when they are deciding their course of action over the next week.”
Robin Somerville, Director, Centre for Spatial Economics (905) 337-3855 Randy Robinson, Political Economist, OPSEU (416) 788-9134