Ontario’s Resilient Northwest Banks on Education, Public Sector and Ring of Fire Mining Developments – by Livio Di Matteo

Livio Di Matteo is a Professor of Economics at Thunder Bay’s Lakehead University where he has taught since 1990.  His research has explored the sustainability of provincial government health spending, historical wealth and asset holding and economic performance and institutions in Northwestern Ontario and the central North American economic region. He writes and comments on public policy and his articles have appeared in the National Post, Toronto Star, the Winnipeg Free Press and Thunder Bay Chronicle-Journal. Mr. Di Matteo has started an Economics Blog at http://ldimatte.shawwebspace.ca/

For an extensive list of articles on this mineral discovery, please go to: Ontario’s Ring of Fire Mineral Discovery

According to the Stockholm Resilience Center (www.stockholmresilience.org), the concept of resilience refers to the capacity of a social-ecological system to withstand perturbations from various types of shock and to then renew itself afterwards.  In other words, if a system is resilient, it can deal with change.  The forest crisis in Northwestern Ontario was a major economic shock to the region’s economy that resulted in massive employment losses and yet if one looks at the region’s economy and especially its major center – Thunder Bay – one cannot help but notice the resilience of the economy. 

Thunder Bay, which has seen three of its four pulp mills close and numerous sawmill job losses over the period 2003-2009, has witnessed increases in many indicators of economic activity suggesting that the economy has been able to adapt to the shock of the forest sector loss.

The relatively resilient economy in Northwest Ontario is being driven by three broad forces: the continued transition towards a knowledge based economy in the region, the expenditure on public sector infrastructure and the growth and development of the mining sector in the region.  The knowledge economy in Northwestern Ontario is being spearheaded by the development of the Thunder Bay Regional Health Sciences Centre (TBRHSC), the Northwestern Ontario School of Medicine (NOSM) and the research work of the Thunder Bay Regional Research Institute (TBRRI). 

The TBRHSC employs 2,500 people and has an annual budget of 280 million dollars.  In addition, the TBRRI is recruiting scientists from around the world to conduct work in the areas of molecular medicine and imaging systems and new medical research associated private sector companies are being spawned such as Sentinel and Tornado.  The other key blocks of the regional knowledge sector economy include Lakehead University with a total employment (full & part-time) of 2,000 and an annual operating budget of approximately 100 million dollars and Confederation College with 760 employees (full and part-time) and an annual operating budget of almost 70 million dollars.  In addition, the region’s manufacturers such as Bomdardier and GRK fasteners also use knowledge intensive and skilled workers and have also seen growth in their activity.  Bombardier in particular is assured a future in urban transit given the increasing demand for such systems in an urbanizing world.

With respect to public sector infrastructure, the Northwest region has recently seen millions of dollars in provincial road construction and improvements as part of a planned 273 million dollar investment in regional highways.  There are 32 projects in Northwestern Ontario nearing completion involving 494 kilometres of highway and nine bridges, which have created 1,900 construction related jobs.   In the Thunder Bay region, there is a waterfront development project underway as well as substantial recent investments in roads and bridges, a new library and trail development.

Finally, there is activity in the regional mining sector as well as the projected developments in the Ring of Fire. Ontario’s north is still a vast storehouse of forest and mineral wealth and continued growth in the economies of China, India and Brazil will eventually generate an upturn in resource prices which will spark a boom in resource commodities.   In the James Bay Lowlands, in Ontario’s so called “Ring of Fire’, there are over 100 mining companies with holdings.  Mining in Northwestern Ontario currently directly employs nearly 2,000 people with a payroll of 142 million dollars annually.  

In general, the combined economic benefits of a single “representative mine” as documented by University of Toronto economists Peter Dungan and Steve Murphy are large.  In its opening phase, a new mine generates almost 2,000 jobs annually to Ontario and adds approximately 280 million dollars to GDP and approximately 65 percent of the jobs are local or in the region where the mine is located.  Once the mine is producing, about 1,500 jobs are created annually in the local region.  In light of this analysis, the long-term potential of the Ring of Fire is enormous given its potential supplies of nickel, copper, zinc, gold, chromite and palladium.

Is all this having an effect?  While employment levels in Thunder Bay and region are still below their 2003 peak, other indicators suggest a rebounding and resilient economy.  For example, building permits in Thunder Bay over the period 1995 to 2010 have exhibited an upward linear trend.  Moreover, the total value of building permits in 2010 to date represents an increase of 44 percent over 2009.  Housing prices in Thunder Bay are also very healthy and have been on a pronounced upward trend despite the debut of the forest sector crisis.  Since 2003, the average MLS average housing price in Thunder Bay has risen from $111,927 to $153,800 in 2010 – an increase of 37 percent.  Another indicator is the passenger volume of the Thunder Bay International Airport, which is the regional airport and therefore services all of Northwestern Ontario.  Passenger volumes have increased dramatically.  Since 1998, passenger volumes have increased by 30 percent and indicate that despite the forest sector downturn there is still growing demand for air travel to and from the region.

Despite its dependence on the forest sector for nearly 20 percent of its employment, it would appear that the economic shock of the last decade in northwestern Ontario has been absorbed and adjusted to and that some positive economic change has resulted especially in the Thunder Bay region.  This does not mean the Northwest is out of the woods yet – there is still a provincial government energy policy that has resulted in high electricity prices and a Far North Act that impinges on future development.  Nevertheless, recent performance is much better than one would have expected.