Ontario's Development and Economic Prospects

DR. C. C. GOLDRING: During the present season, the members of the Empire Club of Canada have heard addresses concerning conditions in several far-off countries, including South Africa, Australia, India, and Ceylon. We have had guests from the British Isles and from the United States. Several Canadians have given us information concerning the national affairs of this country. It seems particularly appropriate, therefore, that for our last meeting of the 1955-56 season we should have a speaker who will talk to us about the native province of most of us and the adopted province of many.

After graduating from the University of Toronto and taking post-graduate work in England in Economics, Mr. George Gathercole has worked for the Provincial Government for some eleven years and has held a variety of posts dealing with the financial affairs of the Province of Ontario. From 1945 to 1950 he was the Assistant Provincial Statistician of the Government of Ontario. In 1951 he was appointed Provincial Economist and in 1954 he was made Assistant Comptroller of Finances. He was appointed Deputy Minister of the new Department of Economics on January 1st, 1956. He has found time for relaxation, too, and is Vice-President of the Mississauga Golf and Country Club.

We welcome this distinguished Economist to our meeting today and he will address us on the subject "Ontario's Economic Prospects."

MR. GEORGE GATHERCOLE: If anyone thinks I am here to sing the praises of this Province, he is correct. I had resolved on this course before I learned that my Minister, the Honourable Dana Porter, as well as my old chief and dear friend, Chester Walters, were to be here today and, in fact, seated at this head table. But my course, in any event would have been the same, for so spectacular has been the economic expansion of this Province in the last decade and a half that it would be difficult for anyone to describe it without using superlatives. Last year, the physical volume of production of this Province was nearly three times that of 1939. The people of Ontario alone produced more goods in physical terms, after allowing for price changes, than all the people of Canada in the year before World War II.

While our population has increased 43 percent since 1939, our output of primary iron and steel, motor vehicles, electric power and dwelling units has trebled. Our capacity to produce refrigerators, electric and gas stoves and appliances of all kinds has multiplied many times. The physical output of our pulp and paper industry has more than doubled, while our mining industry, with its rich and widespread discoveries of uranium, nickel, copper, and zinc, has advanced as never before. Agriculture, with a fifth fewer farmers and a fourth smaller labour force, has increased its manpower productivity by 75 per cent and output by 28 per cent.

Judged by consumer purchases, living standards in the Province have increased 60 per cent since just before World War II. At the same time, we have been ploughing back into capital investment of all kinds - the fruits of which we will not fully harvest for some years in the future - over one-fifth of our total provincial product. The benefits of our increasing population have not been concentrated in any one segment of our population: they have been widely spread over the Province and among nearly all income groups. Salaries, wages, profits and dividends have all increased far more than the rise in consumer prices.

Many factors have combined to bring about this result, and if we are to comprehend what lies ahead, we will need to understand some of the underlying forces in this development, as well as the problems which have arisen.

Basic to our whole development has been the growth in our population. Back in the 1930's our population was growing at a rate of 35,000 to 40,000 a year. In recent years, it has been increasing at an annual rate of nearly 150,000. This growth of nearly 3 per cent annually, which is nearly double the annual rate of increase in the United States and exceeds that of the rest of Canada, stems, of course, from two main forces-our natural increase and immigration. The immigration to this Province from foreign countries has been at an extraordinarily high level since the end of World War 11. In the past decade, 636,000 immigrants, 52 per cent of all those coming to Canada, have settled in Ontario, bringing new trades and skills, their capital and their savings. Never, since the coming of the United Empire Loyalists, has such a high percentage of immigrants chosen Ontario as their place of residence.

But important as immigration has been, it has not been so large a factor in our growth as the increase in our own native-born. Last year, our natural increase was 95,000, nearly four times that in 1939. I well remember the dismal prophecies of the 1930's when Ontario's maximum population was projected at 5 million, not to be reached until 1970. The fact is that our population in this Province is now over 5.3 million, and it is expected to reach 6 million in the early 1960'x. The rise in our birth rate, which underlies this growth, has been one of the most remarkable phenomena of this century. In 16 years our birth rate has soared - from 17.3 per thousand in 1939 to 27.l in 1955 - and last year was the highest in our history. The annual number of births has more than doubled. In 1955 there were over 140,000 newborn children in this Province compared with 64,000 in 1939.

When I was at University twenty years ago, I listened to many predictions that the Province of Quebec, in consequence of its higher birth rate, would soon be the most populated province in this Dominion. One hears little of that now, and with good reason. What has happened is this: whereas Quebec's birth rate has increased only moderately over the last decade and a half, Ontario's has surged ahead. All through the 1930's and up to and including 1952, the number of births in Quebec exceeded those in Ontario. During the last three years this situation has been reversed. The number of births, in this Province has exceeded those in Quebec; and although their birth rate is still slightly above ours-about 29 per thousand in Quebec to 27 in Ontario - the gap has narrowed perceptibly. Over the last decade and a half our population has increased by the same percentage as Quebec's while our numerical increase has, of course, been appreciably greater.

What has caused this astonishing rise in Ontarios birth rate? Full employment and improved living standards have, of course, played a part. The migration to the suburban areas, where conditions are more favourable to family well-being, has exercised an influence. But, undoubtedly, one of the most important reasons is a basic change in social attitudes toward the family. It has simply become fashionable to have children. The day of the very large family of 7, 8 or 9 children is not being revived, but there is a most conspicuous upward trend in the number of families with 3, 4 and 5 children.

Ontario's population, as I have said, is now over 5,300,000. It has increased by l.6 million in the last decade and a half. In Ontario's Submission to the Royal Commission on Canada's Economic Prospects a further increase of 700,000 in the next five years is projected, bringing our population to about 6 million by 1961. On the assumption of a continuation of reasonably high levels of immigration and births, it is anticipated that an additional 2.2 million people will be added by 1975, giving us a projected population of 8.2 million people in that year. The implications of this population growth have major significance to all classes of people, professions, businesses and governments. With the rise in births, the increase in the number of children has far outpaced the increase in other segments of our population. This creates a number of formidable problems, including the provision of educational facilities and teaching staff, to which I shall refer later. At this point I should like to turn to the second factor in our economic expansion, namely, the increase in our labour force and employment.

Since 1939 our labour force has increased from about 1 1/2 million to slightly over 2 million - a rise of 35 percent. The increase in employment has, however, been more pronounced. Few of us can think back to the 1930's without shuddering at the atrocious waste of manpower and other resources in those days, when unemployment in 1932-33 ran up to nearly 27 per cent of the labour force and even in 1939 averaged over 14 per cent. One of the principal factors in the rise of Ontario's production and living standards since the War has been our ability to maintain, save for brief periods, employment at the remarkably high level of over 97 per cent of the total work force.

At present, the supply of labour, particularly of highly qualified workers, is very tight. It is inevitable, with the increase in our school and pre-school population as well as the relatively rapid rise in the over-seventy age group, that the ratio of our work force to total population would decline. In fact, that group-twenty to sixty-four years of age - which comprises by far the major part of our labour force has been declining in relation to our total population since 1941. The percentage dropped from 59 percent in that year to 55.5 percent last year, and this trend is expected to continue downward, reaching 51 percent about 1970. Were it now for the high rate of immigration and the influx of women into the work force, the labour shortage would be more serious. At present, 25 per cent of Ontario's labour force is composed of females, as against 20 percent before World War II and 14 percent at the turn of the century. This declining proportion of labour force to total population imposes an additional load on all workers.

The shortage of engineers and technicians has received considerable attention. But there is also a serious shortage of physicians, physicists, chemists, accountants and virtually all professional classes, even economists. There is a desperate shortage of dentists, and it will get worse before it gets better. It must be borne in mind that while there was a moderate rise in the number of Ontario births during the early War years, the main upward trend did not begin until 1946. A significantly larger out turn of well-educated experienced personnel cannot, therefore, be expected for another two decades. Thus, barring a serious economic slump, there will be a shortage of highly qualified workers for the next quarter of a century.

I come now to another major factor in our development - capital investment. In the last 16 years, nearly $19 billion has been invested in this Province in new factories, machinery and equipment, commercial buildings, housing, utilities, schools, highways, municipal roads, hospitals, waterworks, sewage plants and similar undertakings. Despite the remarkable expansion which has occurred in all parts of Canada, no province has matched the great business expansion which has occurred in Ontario. Year after year about 37 1/2 percent of Canada's total capital investment has been made in this Province. During the war and immediate post-war years, the Province and the municipalities left the field primarily to business enterprise and to essential utilities such as Ontario Hydro, without whose expansion the increase in our productive capacity and living standards could not have been realized. This has been a wise policy, for by adding to our productive capacity and our economic strength we are better able to finance the essential services which the pressure of growth now obliges the Province and the municipalities to undertake. In many of the fields within their jurisdiction, a huge backlog of need has accumulated from the 1930's and the war and immediate post-war years. In the past decade, the number of motor vehicle registrations in this Province has increased by 145 percent. The number of heavier trucks - those exceeding ten tons-has increased fifteen-fold. Moreover, motor vehicles are now being driven more miles per year. Tourist travel by motor vehicle has also been rising rapidly, adding even further to the need for expanded and improved highways and urban thoroughfares. The existing backlog of capital expenditures on highways and municipal and county roads, resulting from these combined demands, is estimated at $1-3/4 billion. If we add to these demands those which will arise from future growth, it is anticipated that an expenditure of about $3 billion will be required for highways and roads over the next decade.

The need for sewerage systems to abate and control pollution and for water works to meet the requirements of industry and residential development is pressing. Good industrial and community housekeeping dictate that the Province and municipalities shall press ahead with these works, which are estimated to cost nearly $2 1/2 billion over the next twenty years and somewhat more than half of this amount in the next decade.

Ontario Hydro is confronted with an immense task. Although it has increased its generating capacity nearly fourfold in the last decade and a half, the end of this expansion is nowhere in sight. The increase in energy generated by Hydro last year alone was 24 per cent-an astounding and completely unexpected advance. Ontario Hydro has projected that its requirements will rise from the present total of about 6 million horsepower to from 10 to 11 million horsepower by 1965 and to between 18 and 21 million horsepower by 1975.

Probably the Province's and municipalities most important problem is the provision of educational facilities. Whereas in the 1930's the average increase in enrolment in the public elementary and secondary schools was about 6,000 per year, now accommodation must be found annually for nearly 70,000 additional students, an eleven-fold increase. Although the weight of this problem has been increasing each year, there is no relief in sight. The rate of increase in elementary school enrolment is expected to climb until about 1961, while that for secondary schools will continue to rise until about 1971. It will be only after those dates that we will have the satisfaction at least of settling down to a more moderate rate of expansion. Even now, many areas which have been endeavouring to keep up with primary school expansion are hard-pressed to meet the demands for secondary schools, the real impact of which will not be felt for some years.

The universities are faced with a prodigous program of expansion, and increased assistance for their purposes is foreordained. The present full-time enrolment is 22,000 and if facilities and staff can be provided, it is anticipated that this enrolment will double by 1965 and more than quadruple by 1975.

It is gratifying and heartening that the average number of years of schooling is increasing and that each year proportionately larger numbers of pupils emerging from our elementary schools are attending secondary schools and continuing on to their matriculation and university. But all these factors combine to produce about the biggest headache that educationists, the municipalities and the Province have ever faced.

Over the next ten to fifteen years that can be no let-up in the rapid expansion of accommodation or in the challenging task of recruiting teachers for our educational system. In short, we are in a rather unique period. We are like the man struggling to climb the escarpement. When we reach the top, we may pause for breath and reconsider our position, but for the time being we are engaged in a hard climb which will tax our resources and compel us to concentrate our whole effort on the essential task.

The pressing urgency of these and many other public projects, such as hospitals and conservation works which I have not mentioned, makes it imperative that an orderly program be carried out over a number of years. These services are fundamental to our whole social and economic system. Many, such as highways and municipal roads, make a most direct contribution to reducing production costs. There is no doubt that the flexible scheduling of production and marketing, made possible by the speed and regularity with which goods can be moved over our present highways from one factory to another, has enabled a great part of our manufacturing industry to achieve unit costs of production comparable with those attainable only in the larger and more highly mechanized plants in competing countries.

It is estimated that if the requirements for all these services are met over the next ten years, the combined provincial and municipal expenditures will be $8 billion. To carry out such a large program inevitably involves the raising of additional revenues. In this connection, I may point out that neither the municipalities nor the Provincial Government of Ontario are at present spending as large a percentage of the total provincial product as they were before World War II.

These public service requirements will entail a relatively high level of expenditures on the part of both the Province and the municipalities for many years and will therefore give support and stability to the whole economy. Not that this influence should be exaggerated, for their combined expenditures represent only 9 percent of the total value of production of goods and services in the Province. Nevertheless, it has in the past exercised - and I have no doubt will continue in the future to exercise - a counterbalancing influence conductive to general economic stability. The importance of promoting the even development of the Province and of avoiding excesses should never be forgotten, and thus I come to the fourth point - and perhaps the most important of all - to which I wish to refer.

It has to do with the maintenance of public confidence. If we learned anything from the 1930's, it was that doubts and uncertainties can confuse and enfeeble the Nation, the Province and its people, while, on the other hand, a confident people can accomplish miracles. For a decade and a half, the mood of the people has been one of great confidence. It was not shaken by the mild recessions during the winters of 1949-50 and 1954-55, and it helped us to weather those economic flurries. Public confidence is therefore a precious element in maintaining a vigorous, fully-employed economy. But it can also be a very sensitive element and may be readily undermined by excesses, whether they involve running into debt beyond our means, misjudging the capacity of the market to absorb our production, or something else.

Our industrial structure is, of course, capable of an enormous volume of production and it tends, on occasion, to produce more goods than, for the time being, can be absorbed in the market. Over the past decade and a half, aided by the backlog of demand left by the war years, there have been relatively few pauses in the upward surge in industrial production. But now much of the froth has been blown off the top of this demand. Many industries have been obliged to readjust to the new conditions and this carries a warning to others.

It is encouraging that an increasing number of businesses are establishing offices to assess economic trends as accurately as possible and particularly those relating to the absorptive capacity of the market for their output. A number of industries have also made gratifying strides in diversifying their operations and taking other special measures to avoid seasonal unemployment. The volume of unemployment in Ontario during the winter months is double that during the balance of the year. The construction industry, among others, has made many praiseworthy efforts designed to regularize employment the year round. All these serve to reinforce economic stability and public confidence.

It is inevitable that in a swiftly-moving economy, there will be dislocations, occasional unemployment and loss of income. We cannot expect a trouble-free economy. What all of us must endeavour to do is to see that when some sectors of industry are contracting others are expanding, so that the whole economy is kept moving forward, employing the full resources of our people. To this end, we will need imagination, enterprise, the capacity for adaptability and public confidence.

We in Ontario are blessed with exceptional opportunities, which carry with them a great challenge to make our free enterprise system work. Even the most phlegmatic person would acknowledge that both our short-run and long-run futures are exceedingly bright. The decline in farm income, which has persisted since 1951, was arrested last year and with the growth in population, it is difficult to be pessimistic over its long term prospects. The future of forestry and mining, related as it is to the growing demand and diminishing resources of the United States, is extremely promising.

The recent discoveries of massive quantities of uranium, iron and base metals have changed the whole character of Ontario mining. Gold has lost its supremacy to nickel and copper. The value of iron ore output has increased a hundredfold since before World War II, and is continuing to expand. The Province's uranium discoveries have been among the most spectacular developments in our whole history. Spelled out in the value of capital investment and general economic development they will be of the utmost significance. Already Ontario uranium mines have purchase contracts for an amount exceeding half a billion dollars. In forestry, technology is constantly providing new opportunities for the use of wood. The bonding of lumber is a case in point. By means of this process, small pieces of wood may be glued together to form panels in a variety of sizes and shapes. Based partly on greater use of hardwoods, newsprint production is continuing to expand but even more striking increases are occurring in the output of paperboard, wrapping, tissue, book and writing papers. The paper industry presents a picture of increasing divisibility and viability.

As the site of half of Canada's manufacturing industry, Ontario is far more than a hewer of wood and a drawer of water. It is true that we cannot share in some of the advantages which arise from the economies of the division of labour resulting from serving a mass domestic market, but we have made up for many of them by other means, as our advanced processing and fabricating industries clearly show. And we can continue to improve our position by achieving higher levels of technical skill, by greater enterprise and research and by so planning our communities as to reduce industrial costs. In this way, we can move forward towards a greater diversification and industrial balance that will make us less vulnerable to the vicissitudes of technical change and shifts in external demands that plagued us in the 1930's. It is in this direction that higher living standards lie. Obviously, we cannot be content to stand still. We have made great gains over the last fifteen years and there is no reason why we should not surpass them in the future.