Special to The Globe and Mail
Published Friday, September 23, 2016

What motivates interprovincial migration in Canada? Are people drawn to a new region by a perceived better quality of life? Or are they simply fleeing economic hardship and moving to where the jobs are?

While it’s difficult to generalize across all regions of the country, out-migration from Alberta shows that it’s a bit complicated. Sometimes migrants are pushed out, but sometimes they are pulled away.

In the most recent snapshot of interprovincial migration, Alberta is now seeing a net loss of migrants to both Ontario and British Columbia. Combined, these two provinces are the destination of nearly two-thirds of people leaving Alberta. That reverses a powerful trend of in-migration over the period 2010 to 2014. With the petroleum sector in a nasty slump and the province now stuck in a second year of recession, it’s neither surprising nor unexpected that more Albertans are leaving than arriving.

The graph above shows total out-migration from Alberta to Ontario and B.C. over the past 40 years. (The graph does not show net migration, which would show that in-migration to Alberta has generally outpaced out-migration). What stands out in the graph is that while there are occasional surges of out-migration to both provinces, the surges are not concurrent. That suggests the reasons Albertans move to B.C. are different than the reasons they move to Ontario. Out-migration from Alberta to B.C. swelled to nearly 8,000 per quarter in 1979 and 1980, and again in the early 1990s (see graph). These were years when Alberta’s economy was actually performing reasonably well – the unemployment rate in 1980 was a mere 3.9 per cent. In 1990, it was 6.9 per cent, which is high for Alberta but lower than B.C.’s rate of 8.4 that year.

There was another wave of out-migration from Alberta to B.C. in 2007. Labour markets in both provinces were doing well, but Alberta was still the stronger market. In that year, Alberta’s white-hot economy actually saw severe labour shortages; the unemployment rate was 3.6 per cent. Still, people kept moving to B.C.
This suggests that lifestyle, not economics, prompts Albertans to move to B.C. The mild climate on the coast, the hot, dry summers in the interior and the recreational opportunities throughout the province make it very attractive. There’s a reason why people retire to British Columbia.

Ontario, on the other hand, tends to be the destination of migrants who may simply be out of work opportunities. Massive waves of migrants moved from Alberta to Ontario during the downturns of 1984 and 1986, when Alberta’s unemployment rate was a miserable 11.4 per cent and 10 per cent, respectively. That stands in sharp contrast to Ontario’s economy, which was ramping up. Riding a wave of well-paying manufacturing jobs, its unemployment rate fell to a low of 5 per cent in the late eighties.

The pattern that emerges is one showing there are different reasons for out-migration from Alberta. British Columbia tends to draw people, regardless of economic conditions. Ontario, on the other hand, tends to receive those pushed out of a lousy job market.

Currently, both provinces are seeing rising migration from Alberta – a rare instance when the cycles are in sync. With the highest unemployment west of New Brunswick, Alberta’s tough economy is unfortunately driving some job seekers out of the province. Ontario’s economic growth is easily outperforming Alberta’s this year, but it’s hardly booming. The province’s unemployment rate is still near 6.5 per cent. That’s why there has been a rise, but not yet a massive tsunami, of migration from Alberta to Ontario. The opportunities in the latter are simply not all that much better.

British Columbia, on the other hand, is enjoying its day in the economic sun. With the strongest labour market in the country and an economy fuelled by offshore investment, B.C. is by far the preferred destination of job seekers from Alberta. Not only does the province offer plenty of jobs, there are daffodils in February in Stanley Park.

Indeed, if it wasn’t for the unattainable cost of real estate in the lower mainland, out-migration from Alberta might be higher still.
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Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline

Special to The Globe and Mail
Published Thursday, September 8, 2016


Still dazed by oil’s price collapse in 2014, Alberta’s economy is gradually finding its feet. All eyes have been fixed on the drama playing out in the oil patch, but all the while other sectors have been quietly developing new products and markets.

The biggest surprise has been Alberta’s burgeoning food sector. In an ironic twist that many didn’t see coming a decade ago, the province has returned to its original roots in agriculture – but this time it’s producing consumer food products for the 21st century and finding lucrative markets around the world. It’s not just for wheat, canola and cattle. It is for niche products such as organic honey, high-protein bison, award-winning gin, unprocessed cereal products and high-value greenhouse vegetables.

In fact, in terms of dollar value, food products have overtaken refined petroleum products as the largest manufacturing sector in Alberta. In June of this year, the total value of refined petroleum slumped to $971-million (seasonally adjusted), well below the glory-days high of more than $2-billion in May 2014. On the other hand, food manufacturing has grown steadily in value to more than $1.2-billion.

The chart below shows how refined petroleum has lost ground – and food has gained – in relative terms over the last five years. With the value of production in June 2011 set equal to 100, food manufacturing now has an index value of 122, while refined petroleum manufacturing has dipped to only 64.

Admittedly, the decline in refined petroleum products has been entirely due to low prices for products such as gasoline, jet fuel and diesel. The volume of production has remained constant, and if prices were to rebound, so would the value of refined manufacturing.

Alberta’s food manufacturing, on the other hand, has grown both in value and volume terms. New products and markets have lifted food to become the province’s most valuable manufacturing segment. Three factors that have provided the spark.

The first is changing consumer preferences in food and culinary experiences. This is not restricted to Alberta: Food consumers all over the world are demanding better quality, less processing and more transparency in nutritional content. The closer to the consumer a product is farmed and produced, the better. That’s a trend that gives Alberta (and indeed much of rural Canada) a competitive advantage.

Previously, Alberta’s smaller population and geographical distance from major markets made mass food processing uneconomic. The enormous factories in Toronto or Chicago could churn out packaged cookies, boxes of colourful cereal and cans of cooked vegetables at a price point unimaginable for a small, niche producer. That’s why small pasta manufacturers on the Prairies, for example, could never compete.
Now, the tables have turned and the advantage favours the small guys. Sales of mass-produced, highly processed foods have flat-lined. Consumers are willing to pay a premium for niche products grown and produced close to home. High-end restaurants go out of their way to promote their locally sourced meat, cheese and vegetables. Back in the 1980s, Calgary restaurants would never have boasted about the cheese from Sylvan Lake (about 90 minutes northwest). But today they do – and they can command a price premium for it.

The second factor is growing markets abroad for niche Canadian food products. Tourism from China is increasing – a major Chinese airline just started non-stop flights from Beijing to Calgary. It still has a lot of growth potential, but Alberta food producers can capitalize on Chinese interest in all things Canadian. (In a recent conversation, a shop-owner in Hinton, Alta., who sells specialty foods and gifts reported that a busload of Chinese tourists stopped in the other day and “bought everything in the entire store.”)

The third factor is government support. As much as the market libertarians don’t like to admit it, there are some sectors that need a boost from the public coffers to get off the ground. The Food Processing Development Centre in Leduc – funded by Alberta Agriculture and Forestry – has helped small, niche players in the industry test recipes and develop marketing experience.

Organic honey is never going to replace a barrel of West Texas Intermediate for supremacy in Alberta. But thousands of new food producers–small and niche as they may be–can provide better balance and diversity in the province’s economy.
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Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline

Special to The Globe and Mail
Published Friday, May 20, 2016

What do you get when you combine orphaned oil and gas wells, nanotechnology, 3-D printing and a bunch of really smart geologists? Throw in a government committed to eliminating carbon-fired electricity, and you get the perfect conditions for some mind-blowing innovation in power generation.

Geologists and engineers at the University of Alberta are developing something called “low temperature micro-geothermal engines.” It may be an awkward name, but what they’re working on could be an innovative breakthrough for Alberta’s power generation aspirations. The provincial government has announced intentions to eliminate all coal-fired power by 2020 – an aggressive goal that has been applauded by many. Yet the question of how we are going to get there looms large over an economy mired in recession.

The geothermal engines at the U of A are basically a redesign of something that’s been around for more than two centuries: the external combustion engine. Using nanotechnology – which enables scientists to construct things at the molecular level – the engines can be designed to be about the size of an inflatable kids’ pool and a couple of metres high. In the words of Dr. Jonathan Banks, the geologist and lead researcher at the university, “we’re going to optimize the bejeezus out of it” using nanotechnology.

​Built at the molecular level using 3-D printing, the units would be placed atop orphaned oil and gas wells – something Alberta has in abundance – pulling up boiling hot brine water from more than two kilometres below the Earth’s surface. Unlike natural gas, which loses a tremendous amount of heat while it is being brought to the surface, water loses very little of its heat energy while it’s pulled to the surface. The water’s heat can be converted to electricity by the micro-geothermal units, and pushed onto the grid.

No carbon. No nuclear waste. No ruined caribou habitat.

One engine could produce enough electricity to power 100 homes. And the best part of it is that using 3-D printing, the cost of producing one will be a few hundred thousand dollars, not millions or billions. They’d be compact, easy to install and simple to connect to the electricity grid.

If this innovation had taken place at the University of Copenhagen, we’d think “Oh those Danes are so clever!” If it had been in China, we would say “There goes China again, eating our lunch on innovation.” But it’s happening right here in Canada – and our response is dangerously close to a yawn. Few Canadians are even talking about the technology or the enormous opportunities it creates for geothermal energy.

There are at least two reasons why we should be jumping for joy at the prospect. The first is the potential for the province to replace coal – at least partly – as the largest source of electricity generation. That could go a long way in improving Alberta’s image, which has suffered in a world at war with carbon.

But the second reason is even more important, at least economically. The development and innovation of such power systems here in our own backyard provide the opportunity to sell the technology to the rest of the world – a world that is also keen to move away from coal, hydrocarbons and nuclear. That can provide long-lasting labour market opportunities and could help establish Alberta as a leader in renewable energy.

There are many definitions of “innovation,” but the one I use is this: the application of an existing technology to a new and very useful purpose. Here we are seeing true innovation take shape. For a very long time, it seems nanotechnology has been an invention waiting for something useful to do. But now we are seeing the emergence of something not only useful, but crucial to solving our power needs.

We need to be innovative, but we also need to recognize and capitalize on innovation when it happens. The advances in nanotechnology, 3-D printing and geology must not remain trapped in university labs. Commercializing the technology is the next step, but this is where Canadians have often fallen short. We’ve innovated something amazing – now let’s capitalize on it.

Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.

Special to The Globe and Mail
Published Friday, Apr. 22, 2016


Those who have never spent much time in either Edmonton or Calgary could be forgiven if they think the two cities have identical characters. After all, on the surface they are much the same: young cities of just more than one million, fuelled by oil, rodeos, hockey and pickup trucks. (Although don’t get stuck in stereotypes. Both are also home to superb universities, arts and culture, and culinary excellence.)
But after that, the Edmonton-Calgary comparisons end and the stark contrasts appear. Once you start peeling back the layers, there are more differences than similarities. And none of this is more evident than in the recent changes in each city’s labour market.

Between March, 2012, and March, 2016, Edmonton’s unemployment rate rose from 5.6 per cent to 6.9 per cent – an increase of a little more than one percentage point and still below the national average.
Over the same period, however, Calgary’s unemployment rate jumped from 5.1 per cent to 8.6 per cent – an increase of three-and-a-half percentage points. It now has the highest unemployment rate of any large city in the country, and is closing in on Nova Scotia’s provincial rate of 8.9 per cent. Even Windsor, Ont., and Saint John – cities that have famously struggled with weak job markets – currently have lower rates of unemployment at 7 per cent and 8.3 per cent, respectively. (All rates quoted are for March, 2016, three-month moving averages, adjusted for seasonality).

What accounts for the difference in joblessness between Alberta’s two major cities?

The major factor is economic diversity. Edmonton is relatively more diversified, home to proportionately more jobs in the public sector, health care and education. And unlike the approach taken by previous provincial governments in times of economic downturn, Alberta’s current government has emphasized that it is not going to reduce employment in the public sector.

Calgary also has these sectors, to be sure, but petroleum head-office jobs account for a greater share of employment. Calgary’s total labour force is almost 5 per cent larger than Edmonton’s, but the latter has the larger university and is the centre of Alberta’s public sector.

The other difference is the type of energy sector jobs in each city. Edmonton is also an oil town, but jobs in the region tend to be more closely connected to the servicing and manufacturing of current oil production. Oil prices may have dropped, but the volume of oil being produced and refined in the province has not wavered significantly. That means jobs servicing existing production have been affected less severely.
Head-office jobs in Calgary, on the other hand, tend to focus on the planning, engineering and financing of future oil-patch investments. With many of these projects being shelved or cancelled, disproportionately more employees have lost their jobs.

The fact that Calgary’s jobless rate has jumped higher and more quickly than Edmonton’s has handed the federal government a conundrum. To address the deterioration in the petroleum sector, Ottawa has extended a few more weeks of employment-insurance eligibility to certain regions in Alberta and Saskatchewan. The program is formula-based, depending on the increase in the rate of unemployment in the region.

But because Edmonton’s rate has risen less than Calgary’s, unemployed workers in the provincial capital are not afforded the same number of weeks as their jobless counterparts in Calgary. That, Edmonton’s business and labour leaders claim, is unfair.

And unfair it is – especially to those unemployed Edmontonians in the petroleum sector. The fact that Edmonton has more government and quasi-public sector jobs than Calgary is cold comfort to a laid-off oil-field worker.

Although both cities are suffering from energy-sector woes, they both, fortunately, remain strongly entrepreneurial. This will spur new industries, new products and new services – even if the nature of these seems a bit elusive and difficult to pinpoint at the moment. The good old days of $100 (U.S.) oil are gone, and they may never return. But new days will come, better than before, anchored in a new and more diversified energy sector.
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Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.

Contributed to The Globe and Mail
Published Friday, Apr. 08, 2016

Economists love offering policy solutions. A tax cut here, an infrastructure program there – all well intended and mostly intelligent advice to politicians who are desperate to boost the real GDP. But it’s all built on a very shaky foundation. If citizens are excluded from meaningful involvement in their economic systems, none of it matters.

Donald Trump has tapped into a vein of discontent that isn’t going away, whether he wins the White House or not. Those disenfranchised from mainstream politics are connecting with Mr. Trump’s messages. They are hearing, possibly for the first time, a powerful person say things that resonate with them. And they are resonating not because they are terrible people, but rather because they’ve been left behind in America’s 21st-century economy.

Similarly, the Occupy Wall Street movement of 2011 struck a chord with another group of outsiders who felt the system was stacked against them. Because it lacked focus and organization, the protest has mostly petered out. But the discontent hasn’t. In 2016, some of those disenfranchised 99 per cent are finding their message in Bernie Sanders.

On this side of the border, the Idle No More movement of a few years ago attempted to bring aboriginal discontent to the forefront. While it did have flashes of effectiveness, it too lost momentum. But aboriginal Canadians remain largely marginalized and forgotten. Recent steps by Ottawa – mostly in reaction to the tragedies in La Loche, Sask., and the Pikangikum First Nation – are politically expedient responses. But anyone who is close to the challenges knows that simply throwing money at the problem isn’t going to solve it.
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The issues are complex, but at their root is a common thread: people are excluded from the mainstream economic and political systems that run the country. Finding ways to more fully engage marginalized people is more than just doing the morally correct thing. If extending kindness and love is not reason enough, there is a compelling economic reason for greater inclusion of those who’ve been pushed to the edges of the system.

Social and political stability are the basic building blocks on which a successful economy is built. This is a lesson that troubled nations like Venezuela and Brazil are currently learning. If people lose faith in governments, if they become so hopeless about finding a way to achieve and succeed in the system, the system itself will start to collapse.

And following that will be an outflow of capital investment, entrepreneurial energy and intellectual might. Money, businesses and educated people – if they start pouring out, the economy doesn’t stand a chance.
While Canadians have just elected a Prime Minister who shares virtually nothing with Mr. Trump, we cannot be smug. We face challenges of exclusion as well. Aboriginals are the most obvious, but they are not the only ones. Canadians ensnared in poverty and homelessness also struggle within a system that, at times, makes no sense. How can they get a job or a bank account or a cellphone – things most of us take for granted – if they have no physical address?

The economics of inclusion is complicated. It’s glib to suggest that, if we are all just a bit nicer to each other, all will be well. The reasons for political and economic exclusion are sometimes generations old, and they won’t be solved overnight. Nor is it possible to offer practical solutions in the confines of this column.

Regardless of who wins the White House, the United States ignores at its peril the festering rage of those who’ve been pushed aside and trampled by The American Dream. A loss for Donald Trump won’t make the rage go away (in fact, it could make it worse). And in Canada, throwing cash at the plight of our own discouraged and excluded citizens does nothing to get at the root of the problems.

Making our education, social and economic systems more inclusive is not easy work. And it’s more than about being big, kind-hearted Canadians. It’s an economic imperative. Our American friends are in some trouble – now, more than ever, Canada needs to show leadership in how it’s done.

Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.

Special to The Globe and Mail
Published Thursday, Mar. 10, 2016


In 1869, Massachusetts was facing a serious problem. The state was falling behind economically because of trade with Europe and the importation of what were regarded as superior goods. Furniture, mechanical items, industrial machinery – the quality and design of the domestic goods just couldn’t compare with the imports. Massachusetts’ furniture was, well, ugly.


The solution? Legislators were petitioned by educators and business interests to introduce An Act Related to Free Instruction in Drawing. Known more commonly as the Massachusetts Drawing Act of 1870, it mandated the instruction of creative and technical drawing in schools.


It was one of the first examples of art education – both creative and expressive art, as well as industrial art – to be introduced as part of the broader school curriculum. And while drawing may seem like a trivial concept, it helped revolutionize industrial design and manufacturing in the state. Eventually, it established Massachusetts as a leader in furniture and industrial design.


Drawing. Something as simple as teaching children how to draw, create, explore and invent with a pencil and paper did more to boost the economy of the region than the memorization of the multiplication table or the regurgitation of historical facts.


This isn’t to say that math, history and other subjects are unimportant for future economic growth. They are essential. But combining a mastery of math, social science and literature with drawing – something creative and visual – gave Massachusetts an economic edge.


Today, Canada faces the same problem Massachusetts did 146 years ago. We are falling behind the rest of the world in a number of areas. Some see cost as the problem: Canadian manufacturers simply can’t compete with Mexico, Bangladesh and other countries where labour costs are lower. Some see tariff barriers on imports as the solution. Some call for tax credits and other financial incentives.


While there may be a time and place for government actions, perhaps the Massachusetts Drawing Act provides some guidance for what we really need.


Some of our students might well benefit from drawing lessons. But more broadly, all students could benefit from design lessons. We need the Design Act of 2017, an intentional effort to instill a design emphasis into our education systems.


Good design is really just applying systematic thinking to problem-solving. Usually we think of design in the visual industries: interior design, graphic design, clothing design. These are important industries in Canada, but good design mentality can be applied to all of our major industries.


How can we design systems to extract natural resources in a way that is more efficient and less harmful to the environment? How can Canadian manufacturers design better and more visually appealing consumer goods? How can Canadian architects lead the world in designing more efficient and aesthetically pleasing buildings, pushing the edges of architecture rather than following the Dutch, Danish and Spanish designers a decade or two later?


None of these problems are solved with import tariffs or tax credits. All of them can be solved with good design, but that requires a shift in the way we teach and train our students.


From an early age, children need to have a designer’s mentality infused into the curriculum. This doesn’t mean less math, science or social studies – just the opposite. It means teaching these subjects in a way that encourages the student to solve problems. That’s what good design does.


The failing Massachusetts economy wasn’t solved with import tariffs, tax credits or some wild Buy America scheme. It was solved when educators gave children pencils and paper, and said, “Draw something, create something, design something.”


But the economic success that the Drawing Act brought to the state was not immediate – it took a decade or more to see results. It’s a good lesson – there are no quick fixes to curing our economic woes. It may take some time, but infusing design into our education systems will give our economy an edge. It can become Canada’s special sauce.
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​Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline

Contributed to The Globe and Mail
Published Friday, Feb. 26, 2016
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‘Should I stick it out in Calgary,” he asked me with a worried look, “… or should I look for jobs in other cities?”

It was a good question, but one without an obvious answer. The middle-aged engineer was attending a panel discussion a few weeks ago in Calgary targeted at mid-level professionals who had lost their jobs. They’re collateral damage of the oil price collapse that has gripped Alberta and sent the province’s unemployment rate higher than the national average for the first time since 1988.

It highlights an interesting dilemma – a tension between economic theory and economic development policy. The former would suggest that labour mobility is a good thing, particularly in a large and diverse economy such as Canada. But the latter would consider it a negative if the region in question is at risk of losing people.

A few years ago, when Canadians from other provinces were flooding into Alberta, such labour mobility was a godsend. Without these waves of incoming labour, employers would have had an even more difficult time filling positions. Wages would have skyrocketed even more than they did.

But now the tide has turned, and local economic development policies are targeting ways to keep labour here in the province – which actually runs counter to the principles of labour mobility. There’s an obvious reason to want to hoard workers: If they leave, it will create a tight labour market all over again when the province starts to recover. But if too many out-of-work Albertans stay, it will push the unemployment rate even higher and increase the competition for scarce jobs.

The tension between theory and policy underscores how, when it comes to the economy, there’s often more than one correct answer. The cold-hearted economist in me likes the idea of labour mobility in Canada. It helps lubricate the gears of the labour market, keeps regional labour situations balanced and equalizes wages across the country. At least in theory.

But the Alberta citizen in me hates to see people leave – all Canadians do, when it means watching friends and family pack up and move to find work. It comes at enormous social costs to households and communities—costs that are all too familiar in much of rural Atlantic Canada and the Prairies. And for economic development boards, there’s a strong incentive to discourage out-migration. Not only will an exodus of labour make it hard for businesses to fill positions in the future, it leaves a hole in everything from the residential housing market to retail and personal services. Fewer people means fewer consumers (employed or not).

From the federal government’s perspective, increased labour mobility across the country is preferable. Workers relocating to take jobs will reduce employment insurance costs. Greater mobility was the goal when the government introduced changes a few years back to tighten EI eligibility. And through the tax system, Canadians can claim some moving expenses related to relocation for employment. The message is loud and clear: If you’re out of work, move to where the jobs are.

But municipal and regional economic development offices often introduce policies that run counter to the federal ones. The local policies are designed to encourage unemployed workers to stay put, often offering job retraining, temporary positions or opportunities to upgrade skills – all the while hoping and praying that the economy actually does bounce back in short order and create jobs.

Traditionally I have fallen squarely in the policy camp that favours and encourages labour mobility – but that may be because I’m an economist in a province that has normally experienced a shortage of workers.

But in 2016 Alberta is likely to see some out-migration, and now I’m seeing the greater complexity of the situation. The social costs of labour mobility are not usually accounted for, nor are the costs to employers of future labour shortages. But even if they’re not easily quantifiable, they should still be taken into consideration.

As the old Indigo Girls folk song goes: “There’s more than one answer to these questions, pointing me in a crooked line.” Economists don’t like to admit it, but we’ve got a lot of crooked lines.
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Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.