THE 2018 MANITOBA PROSPERITY REPORT. Are We There Yet? MANITOBA EMPLOYERS COUNCIL

THE 2018 MANITOBA PROSPERITY REPORT Are We There Yet? MANITOBA EMPLOYERS COUNCIL

Established in 1980, the Manitoba Employers Council (MEC) is the largest confederation of employer associations in Manitoba, representing more than 24,000 individual employers and over 300,000 Manitoba jobs. MEC thanks the following organizations for their assistance with the 4 th Edition of the Manitoba Prosperity Report: Canadian Federation of Independent Business Canadian Manufacturers & Exporters The Manitoba Chambers of Commerce Manitoba Home Builders' Association Manitoba Hotel Association Manitoba Trucking Association Merit Contractors Association of Manitoba Staffmax Staffing & Recruiting The Winnipeg Chamber of Commerce Winnipeg Construction Association Manitoba Heavy Construction Association

Contents INTRODUCTION... 1 EXECUTIVE SUMMARY... 2 AGGREGRATE INDICATORS... 4 PROVINCIAL TAX COMPARISONS... 7 FAMILY TAX COMPARISONS... 11 BUSINESS AND LABOUR COMPARISONS... 13 GOVERNMENT INDICATORS... 20 AREA OF CONCERN... 23 CONCLUSION... 24 INTRODUCTION We all want to live in a prosperous province. In a rapidly changing world, Manitoba must compete with other jurisdictions for both human and financial capital. To attract and retain capital, a competitive environment needs to be in place that sets the proper conditions, so individuals and businesses can grow and prosper. Through reviewing and analyzing key indicators we can determine whether Manitoba reached its prosperity potential relative to the neighbouring jurisdictions of British Columbia, Alberta, Saskatchewan and Ontario. If that potential wasn t reached, we present policy recommendations to achieve that prosperity. This fourth edition of the Manitoba Prosperity Report, created by the Manitoba Employers Council, updates these indicators to advance discussions about improving the conditions necessary to ensure Manitoba reaches its full potential. The Manitoba Employers Council (MEC), established in 1980, is the largest collective of individual employers and employer associations in Manitoba. MEC represents 24,000 individual employers and employer associations who collectively represent over 300,000 Manitoba jobs. MEC represents Manitoba employers in employment matters such as labour relations, human resource management, employment standards, workers compensation, and workplace safety and health. 1

EXECUTIVE SUMMARY While some improvements were made, Manitoba still struggled in most of the areas considered in this Report. In 15 of 28 indicators, relative to the four neighbouring provinces to which we are most frequently compared, Manitoba finished at the bottom. Manitoba finished second last in 6 of the 28 other indicators. In 21 of 28 indicators therefore, Manitoba finished amongst the bottom two provinces. Manitoba performed poorly in several key areas such as: Last in GDP per capita; Last in net interprovincial migration; Highest family taxes; Fewest businesses per capita; Lowest postsecondary graduation rate; Largest public-sector employment; Most expensive provincial government; and Lowest weekly earnings. Manitoba had the strongest GDP growth of the five provinces over the past decade. Despite this growth, Manitoba still has the lowest GDP per capita, more than $3,000 lower than the next closest province. Some improvements came not from anything Manitoba did, but rather changes in other provinces. For example, the recent decline in natural resource prices greatly impacted other provinces budgets, improving Manitoba s budget balance ranking. In addition, Manitoba s corporate tax rate ranking improved not from anything Manitoba did, but from other provinces increasing their corporate tax rates. Manitobans still by far face the highest personal tax rates of any province. A one income couple earning $75,000 with two children would pay close to $3,400 less tax in Saskatchewan than they would in Manitoba. The forthcoming carbon tax will also increase the tax burden. Manitoba s most recent budget showed that the carbon tax (in combination with other taxation adjustments) will net the provincial government almost $120 million in additional revenue this fiscal year. While the provincial government has promised to return that revenue in the form of future income and other tax reductions, for now Manitoba employers and their employees will be paying more in taxes. These higher taxes will further reduce our competitiveness with other jurisdictions. While this comparison only looked at the provinces that are our neighbours, it is important to recognize that Manitoba competes for investment with jurisdictions around the world. The U.S federal government has recently made several tax and regulatory changes to greatly improve their competitiveness, which correspondingly makes them a much more attractive jurisdiction for investment. To be competitive, Manitoba and its employers must have access to a skilled workforce. On a net basis Manitoba lost 50,000 people to other provinces over the last decade. While improvements were made, Manitoba has nearly the highest percentage of the labour force without a high school diploma. 2

Conversely Manitoba s labour force has the fewest people with either a postsecondary certificate, diploma, or degree. Manitoba also has the largest public-sector workforce of all provinces. A large public sector is costly, so it should be no surprise that Manitoba has the most expensive government, and the highest taxes. This report does not rate the quality of the services Manitobans receive for those high tax dollars, but recent reports from other organizations have underlined that Manitoba government services are often inferior to those provided in other provinces. To rectify this situation, we strongly recommend that the province work to: Reduce the size and cost of the provincial government; Reduce the province s debt load and eliminate the deficit; Reverse interprovincial migration losses; Increase high school and post-secondary graduation rates; Increase rates of entrepreneurship; Reduce red tape; Reduce personal income taxes through rate reductions and increasing brackets; Eliminate the payroll tax 3

AGGREGRATE INDICATORS Gross Domestic Product (GDP) Per Capita Manitoba Ranking: 5 th At $45,857 in 2016, Manitoba s GDP per capita is the lowest amongst the five provinces. From 2007-2016, Manitoba s GDP per capita increased by 9.68%, the largest increase amongst the five provinces. Despite this Manitoba s GDP per capita is still $3,155 lower than the next closest province. Figure 1: GDP per capita, 2007-2016 (chained 2007 dollars) $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Ontario $47,142 $46,708 $44,850 $45,690 $46,337 $46,425 $46,614 $47,423 $48,418 $49,012 Manitoba $41,809 $43,033 $42,583 $43,182 $43,757 $44,479 $45,176 $45,552 $45,647 $45,857 Saskatchewan $52,275 $54,195 $50,439 $51,963 $53,940 $53,861 $56,281 $56,652 $55,559 $54,442 Alberta $74,263 $73,745 $68,078 $70,436 $73,839 $74,923 $76,863 $79,422 $75,224 $71,469 British Columbia $46,219 $45,929 $44,203 $44,878 $45,901 $46,543 $47,239 $48,403 $49,565 $50,618 Ontario Manitoba Saskatchewan Alberta British Columbia Source: MEC Calculation, Statistics Canada CANSIM Table 051-0001, Estimates of population, by age group and sex for July 1, Canada, provinces and territories, CANSIM Table 384-0038, Gross domestic product, expenditure-based, provincial and territorial, chained 2007 dollars 4

Figure 2: Provincial GDP per capita growth, 2007-2016 (%) ON 3.97% MB 9.68% SK 4.14% AB -3.76% BC 9.52% Source: MEC Calculation, Statistics Canada CANSIM Table 051-0001, Estimates of population, by age group and sex for July 1, Canada, provinces and territories, CANSIM Table 384-0038, Gross domestic product, expenditure-based, provincial and territorial, chained 2007 dollars GDP Growth Manitoba ranking: 1 st From 2007-2016, Manitoba s GDP grew by an aggregate total of 21.56%, first amongst all five provinces. Figure 3: GDP (chained 2007 dollars, millions) Province 2007 2016 Change from 2007-2016 ON 601,735 685,008 13.84% MB 49,726 60,445 21.56% SK 52,382 62,531 19.37% AB 260,964 302,768 16.02% BC 198,326 240,824 21.43% Source: Statistics Canada, CANSIM Table 384-0038, Gross domestic product, expenditure-based, provincial and territorial 5

Population Growth Manitoba ranking: 3 rd From 2008-2017, Manitoba s population grew by 11.72%, placing them in the middle of the five provinces. In real terms Manitoba s population grew by just over 140,000 people. Figure 4: Population Growth from 2007-2016 Province 2008 Population 2017 Population Increase ON 12,882,625 14,193,384 10.17% MB 1,197,774 1,338,109 11.72% SK 1,017,346 1,163,925 14.41% AB 3,595,755 4,286,134 19.20% BC 4,349,412 4,817,160 10.75% Source: Statistics Canada, CANSIM Table 051-0001, Estimates of population, by age group and sex for July 1, Canada, provinces and territories Net interprovincial migration Manitoba ranking: 5 th From 2008-2017, Manitoba on a net basis lost over 50,000 people to other provinces, the most amongst the five provinces. Given that Manitoba has the second lowest population amongst the five provinces, this is the continuation of a very disconcerting trend. Figure 5: Net interprovincial migration from 2008-2017 Province Total in-migration Total out-migration Net migration ON 675,640 707,692 (32,052) MB 116,223 166,296 (50,073) SK 180,090 191,822 (11,732) AB 761,980 638,515 123,465 BC 555,768 458,774 96,994 Source: Statistics Canada, CANSIM Table 051-0017, interprovincial migrants, Canada, provinces and territories 6

PROVINCIAL TAX COMPARISONS General Corporate Tax Rate Manitoba ranking: Tied 2 nd Ontario is the only province of the five with a general corporate tax rate below 12.0%, they are at 11.5%. Manitoba s corporate tax rate has been 12.0% since July 1, 2009. It should be noted that Manitoba s improvement in this category since the last Prosperity Report hasn t come from anything Manitoba has done, but rather from other provinces raising their corporate tax rates. Small Business Tax Rate Manitoba ranking: 1 st Manitoba is the only province in Canada with a small business tax rate of 0.0%. Ontario s small business tax rate is 3.5%, with the other three provinces having a tax rate of 2.0%. Small Business Exemption Level Manitoba ranking: 5th Currently at $450,000 Manitoba s small business exemption level is at the lowest rate amongst all provinces. Manitoba s most recent provincial budget contained a commitment to raise the small business exemption level to $500,000 on January 1, 2019. Increasing the threshold to $500,000 would put Manitoba in line with the rest of the other provinces, only Saskatchewan has a higher threshold. Figure 6: Small Business Exemption Level by Province B.C AB SK MB ON $500,000 $500,000 $600,000 $450,000 $500,000 Source: 2018 Province of Manitoba Budget 7

Provincial Sales Tax Manitoba ranking: Tied 4th Manitoba ties Ontario for the highest sales tax rate at 8%. The Ontario sales tax rate is harmonized with the federal Goods and Services Tax, the only province of the five with such an arrangement. With the promised one percent sales tax cut, Manitoba would move up to a tie for third with British Columbia. Figure 7: Provincial Sales Tax Rates B.C AB SK MB ON 7.0% 0.0% 6.0% 8.0% 8.0% Source: 2018 Province of Manitoba Budget Payroll Tax Manitoba ranking: 5 th British Columbia s most recent budget included a commitment to introduce a payroll tax on Jan.1, 2019. The new payroll tax was to start at $500,000 of payroll in B.C, and the highest tax rate of 1.95% would kick in at $1,500,000 of payroll. While the payroll taxes start at different thresholds, Manitoba will still have the highest rate at 2.15% if B.C follows through on their new tax. Figure 8: Payroll Taxes by Province Threshold Tax Starts Threshold where Highest Tax Rate Starts Highest Tax Rate B.C AB SK MB ON NA NA NA $1,250,000 $0 1 NA NA NA $2,500,00 $400,000 NA NA NA 2.15% 1.95% Source: Provincial Departments of Finance 1 There are varying exemptions available for Ontario employers for them to not pay the tax. 8

Highest Personal Income Tax Rate Manitoba ranking: 4 th Manitoba has the second highest top income tax rate amongst all provinces. When you add in the effect of federal taxes, Manitoban s in the top federal tax bracket lose over half their incomes in taxes to the provincial and federal governments. Manitoba s highest income tax rate also starts at the lowest level of all five provinces, over $60,000 lower in income as compared to the next province. Figure 9: Top Personal Income Tax Rate and Bracket Highest Income Tax Rate Highest Income Tax Bracket Starts B.C AB SK MB ON 16.80% 15.00% 14.50% 17.40% 20.53% $150,001 $307,548 $129,215 $68,822 $220,001 KPMG Canadian Personal Tax Tables Lowest Personal Income Tax Rate Manitoba ranking: 5 th Manitoba s first income tax bracket has the highest rate and lowest threshold amongst all five provinces. Figure 10: Top Personal Income Tax Rate and Bracket Lowest Income Tax Rate Lowest Income Tax Bracket Ends B.C AB SK MB ON 5.06% 10.00% 10.50% 10.80% 5.05% $39,676 $128,145 $45,225 $31,843 $42,960 KPMG Canadian Personal Tax Tables 9

Basic Personal Exemption Manitoba ranking: 5th Currently Manitoba has the lowest basic personal amount of the five provinces. Figure 11: Basic personal exemption by province B.C AB SK MB ON 2016 $10,027 $18,451 $15,843 $9,134 $10,011 2017 $10,208 $18,690 $16,065 $9,271 $10,071 2018 $10,412 $18,915 $16,065 $9,382 $10,354 Source: Government of Manitoba 2017-2018 Budgets 10

FAMILY TAX COMPARISONS Manitoba ranking: 5th This comparison looks at the total tax burden facing families at four different income levels. The comparison looks at what families pay in provincial income taxes, provincial sales taxes, fuel taxes, health premiums and payroll taxes. All figures for the family tax comparisons are sourced from the 2018 Alberta provincial budget. Figure 12: Total taxes on a one income couple earning $35,000 with two children $2,500 $2,000 $1,500 $1,908 $2,180 $1,000 $500 $- $(500) $(1,000) $458 AB BC SK MB ON $(668) $(1,500) $(2,000) $(2,500) $(1,831) Figure 13: Total taxes on one income couple earning $75,000 with two children $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $- $7,687 $7,234 $5,531 $4,306 $2,755 AB BC SK MB ON 11

Figure 14: Total taxes on dual income couple earning $100,000 with two children $12,000 $10,000 $10,375 $8,965 $8,000 $6,000 $4,000 $5,210 $6,433 $6,387 $2,000 $- AB BC SK MB ON Figure 15: Total taxes on dual income couple earning $200,000 with two children $30,000 $25,000 $25,636 $21,278 $20,000 $15,000 $13,612 $14,645 $17,570 $10,000 $5,000 $- AB BC SK MB ON 12

BUSINESS AND LABOUR COMPARISONS Businesses Per Capita Manitoba ranking: 5 th There are over 41,000 businesses that employ Manitobans. That is the lowest business establishment count of all five provinces, giving Manitoba the fewest businesses per capita. Figure 16: Residents per business B.C AB SK MB ON 2017 24.3 24.4 27.1 32.4 30.6 Source: MEC Calculation, Statistics Canada CANSIM Table 051-0001, Estimates of population, by age group and sex for July 1, Canada, provinces and territories, Statistics Canada CANSIM Table 552-0007, Canadian business counts Head Offices Per Capita Manitoba ranking: 2 nd All five provinces lost head offices over the five-year period measured, and when combined with rising populations, the head offices per capita counts grew for all provinces. Despite this Manitoba has the second most head offices per capita. Figure 17: Residents per head office B.C AB SK MB ON 2012 14,252 9,726 11,553 11,470 12,117 2013 14,389 10,045 11,753 11,718 12,391 2014 14,845 10,401 11,796 11,860 12,562 2015 15,095 10,823 12,568 12,107 12,674 2016 15,497 11,061 12,905 12,205 12,822 Source: MEC Calculation, Statistics Canada CANSIM Table 051-0001, Estimates of population, by age group and sex for July 1, Canada, provinces and territories, Statistics Canada CANSIM Table 528-0002, Head offices 13

Private Capital Investment Per Capita Manitoba ranking: 4 th Despite the greatest increase in private capital spending, Manitoba still has the least investment of any of the five provinces. Investment levels are over $3 billion lower than the next closest province. Figure 18: Change in total private capital investment from 2007 to 2016, (2007 dollars) B.C AB SK MB ON 9.94% -10.57% 25.28% 36.20% 9.52% Source: MEC Calculation, Statistics Canada, CANSIM Table 384-0038, Gross domestic product, expenditure-based, provincial and territorial, Business gross fixed capital formation. Figure 19: Total private capital investment per capita excluding government spending (2007 dollars) $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $- 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Ontario $7,601 $7,432 $6,496 $6,873 $7,246 $7,382 $6,992 $7,362 $7,769 $7,603 Manitoba $6,277 $6,791 $6,331 $7,196 $7,104 $7,355 $7,525 $7,955 $7,794 $7,715 Saskatchewan $10,798 $12,216 $12,076 $13,840 $15,245 $16,618 $17,826 $18,249 $14,459 $11,801 Alberta $22,760 $22,359 $15,499 $19,107 $21,290 $23,437 $25,725 $26,478 $20,761 $16,884 British Columbia $9,801 $9,832 $8,389 $8,802 $9,230 $9,610 $9,376 $9,923 $9,545 $9,718 Ontario Manitoba Saskatchewan Alberta British Columbia Source: MEC Calculation, Statistics Canada, CANSIM Table 384-0038, Gross domestic product, expenditure-based, provincial and territorial, Business gross fixed capital formation. Statistics Canada CANSIM Table 051-0001, Estimates of population, by age group and sex for July 1, Canada, provinces and territories 14

Labour Force Manitoba ranking: 4 th In real terms Manitoba s labour force grew by over 50,000 workers over the past decade. However, in percentage terms that was the second worst growth rate amongst all provinces, ahead of only Ontario. A province s labour force is the total number of all employed individuals, and the unemployed (those without work, available to work and seeking work). Figure 20: Labour force growth B.C AB SK MB ON 10.70% 16.52% 12.29% 8.48% 7.14% Source: Statistics Canada, CANSIM TABLE 282-0002, Labour force survey estimates Unemployment Rate Manitoba ranking: 2 nd All four provinces beside Ontario saw an increase in the unemployment period over the time. Over the past couple years Manitoba has had the second lowest unemployment rate behind British Columbia. Figure 21: Unemployment rate by province 10 9 8 7 6 5 4 3 2 1 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Ontario 6.6 9.1 8.7 7.9 7.9 7.6 7.3 6.8 6.5 6 Manitoba 4.2 5.2 5.4 5.5 5.3 5.4 5.4 5.6 6.1 5.4 Saskatchewan 4 4.9 5.2 4.9 4.7 4.1 3.8 5 6.3 6.3 Alberta 3.6 6.5 6.6 5.4 4.6 4.6 4.7 6 8.1 7.8 British Columbia 4.6 7.7 7.6 7.5 6.8 6.6 6.1 6.2 6 5.1 Ontario Manitoba Saskatchewan Alberta British Columbia Source: Statistics Canada, CANSIM TABLE 282-0002, Labour force survey estimates 15

High School Graduation Rates Manitoba ranking: 4 th Despite making the largest improvement amongst the five provinces over the past decade, Manitoba has the second highest percentage of workers in the labour force without a high school diploma. Important to note that this only measure graduation rates, and not students academic performance. Recent reports have shown that Manitoba student s test scores are improving, but we still lag most provinces when it comes to student achievement. Figure 22: Labour force with no degree/certificate/diploma 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ON 12.8% 12.1% 11.3% 11.0% 10.5% 10.1% 9.6% 9.0% 8.8% 8.5% MB 18.4% 17.2% 16.3% 15.4% 15.2% 14.8% 13.9% 12.5% 12.5% 11.7% SK 17.4% 15.7% 15.3% 15.4% 14.6% 13.1% 13.3% 13.1% 12.5% 11.8% AB 14.9% 13.9% 13.4% 13.1% 12.7% 12.0% 11.7% 11.4% 10.2% 9.9% BC 12.5% 11.2% 11.0% 9.7% 9.9% 9.0% 8.5% 8.4% 8.8% 8.4% ON MB SK AB BC Source: Statistics Canada, CANSIM Table 282-0209, Labour force survey estimates by educational degree 16

Postsecondary Graduation Rates Manitoba ranking: 5 th Despite improvements over the past decade, Manitoba ranks fifth for the percentage of the labour force with a postsecondary diploma or certificate, or a university degree. Similar to the high school graduation rates indicator, it is important to note that this metric does not measure the academic achievement levels of the student, or measure the quality of their education, just how many graduated. Figure 23: Labour force with a postsecondary diploma or certificate, or a university degree 69.0% 64.0% 59.0% 54.0% 49.0% 44.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ON 59.4% 60.0% 60.6% 61.4% 62.3% 62.7% 62.6% 64.8% 65.9% 65.6% MB 48.8% 49.9% 51.0% 50.8% 52.9% 51.8% 53.1% 55.7% 55.6% 56.5% SK 49.2% 50.0% 51.3% 51.8% 52.8% 53.4% 54.4% 55.0% 57.0% 56.9% AB 54.3% 56.1% 56.8% 56.7% 57.3% 57.7% 59.0% 60.6% 62.4% 62.4% BC 55.0% 56.0% 56.8% 59.0% 59.3% 60.1% 60.7% 61.7% 61.4% 62.5% ON MB SK AB BC Source: Statistics Canada, CANSIM Table 282-0209, Labour force survey estimates by educational degree 17

Workforce Composition Manitoba ranking: 5 th This indicator looks at the percentage of all employees who are employed in the public sector as a percentage of all employed. Manitoba has consistently had the highest composition of public sector workers amongst the five provinces. As one of the main cost drivers of government, getting Manitoba s percentages in line with the other provinces will improve efficiency and reduce costs. Figure 24: Percentage of public sector employees to total employed 29.00% 27.00% 25.00% 23.00% 21.00% 19.00% 17.00% 15.00% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ON 19.10% 19.18% 19.19% 19.42% 19.16% 19.26% 19.02% 18.71% 18.64% 18.60% MB 25.93% 26.32% 26.52% 26.27% 25.62% 24.94% 25.57% 25.93% 25.61% 25.02% SK 24.44% 25.02% 24.57% 24.69% 24.55% 24.40% 23.85% 24.34% 24.45% 24.46% AB 16.92% 17.90% 18.03% 16.77% 16.81% 16.57% 16.26% 17.78% 18.60% 19.05% BC 18.03% 18.35% 18.24% 18.61% 18.57% 18.75% 18.44% 18.43% 17.94% 17.68% ON MB SK AB BC Source: MEC Calculation, Statistics Canada, CANSIM 282-0089, Labour Force Survey, employment by class of worker 18

Average Weekly Earnings Manitoba ranking: 5 th Average weekly earnings increased by 22.24% in Manitoba over the past decade, the third highest amount amongst the five provinces. This has helped Manitoba narrow the gap with the other provinces, but we still rank at the bottom. Figure 25: Average weekly earnings growth Province Change from 2007-2016 ON 18.39% MB 22.24% SK 29.10% AB 22.55% BC 19.62% Source: MEC Calculation, Statistics Canada, CANSIM Table 281-0027, Survey of Employment, Payroll and Hours (SEPH), average weekly earnings by type of employee, overtime status and detailed North American Industry Classification System (NAICS), industrial aggregate excluding unclassified businesses Figure 26: Average weekly earnings, 2008-2017 (current dollars) $1,200 $1,150 $1,100 $1,050 $1,000 $950 $900 $850 $800 $750 $700 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Ontario $838 $849 $881 $893 $906 $920 $938 $963 $974 $993 Manitoba $745 $765 $781 $800 $822 $827 $863 $880 $889 $911 Saskatchewan $783 $802 $843 $875 $918 $945 $975 $981 $988 $1,010 Alberta $922 $948 $991 $1,034 $1,070 $1,108 $1,149 $1,146 $1,119 $1,130 British Columbia $788 $795 $818 $841 $866 $875 $897 $910 $920 $943 Ontario Manitoba Saskatchewan Alberta British Columbia Source: Statistics Canada, CANSIM Table 281-0027, Survey of Employment, Payroll and Hours (SEPH), average weekly earnings by type of employee, overtime status and detailed North American Industry Classification System (NAICS), industrial aggregate excluding unclassified businesses 19

GOVERNMENT INDICATORS Program Expenses Manitoba ranking: 5 th This metric measures provincial government program expenditures to the province s GDP. While the cost of all provincial governments increased, Manitoba has consistently been the most expensive. It is important to recognize that this metric doesn t measure the quality of provincial program expenditures, just how expensive they are relative to GDP. Figure 27: Total Program Expenditures as a Percentage of GDP 26.00% 24.00% 22.00% 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ON 14.30% 15.72% 16.36% 17.81% 18.18% 18.09% 17.76% 17.85% 17.71% 18.70% MB 20.42% 21.48% 22.02% 22.63% 23.11% 24.95% 23.32% 23.85% 24.61% 24.89% SK 16.18% 16.40% 20.12% 21.44% 21.91% 22.27% 21.94% 20.87% 21.44% 23.43% AB 11.29% 13.45% 15.99% 15.13% 14.57% 14.79% 14.68% 15.06% 15.16% 15.95% BC 16.35% 17.54% 18.72% 18.76% 18.73% 18.75% 18.82% 18.19% 18.02% 18.27% ON MB SK AB BC Source: MEC calculation, Statistics Canada, CANSIM Table 384-0038. Department of Finance Canada Fiscal Reference Tables 20

Budget Balance Manitoba ranking: 3 rd This indicator measures each province s budget balance to its GDP. Over the past decade each province s budgetary situation deteriorated. It should be noted that Manitoba s third place showing is largely the result of the resource price decline which caused a drastic decline in provincial revenues in Saskatchewan and Alberta. Figure 28: Provincial Budget Balance as a Percentage of GDP 6.50% 4.50% 2.50% 0.50% -1.50% -3.50% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ON 0.38% 0.10% -1.10% -3.21% -2.28% -2.08% -1.46% -1.61% -1.54% -0.51% MB 0.98% 1.08% 0.87% -0.35% -0.34% -1.80% -0.98% -0.89% -0.73% -1.40% SK 1.10% 3.40% 5.69% -0.75% -0.02% -0.18% 0.06% 0.93% 0.10% -2.43% AB 3.41% 0.92% -0.37% -0.18% -0.81% -0.04% -1.01% -0.09% 0.35% -2.13% BC 2.01% 1.37% 0.04% -0.90% -0.12% -0.87% -0.53% 0.14% 0.72% 0.34% ON MB SK AB BC Source: MEC calculation, Statistics Canada, CANSIM Table 384-0038. Department of Finance Canada Fiscal Reference Tables 21

Provincial Net Debt Manitoba Ranking: 4 th Net debt is a government s financial assets minus total liabilities. Manitoba s net debt to GDP ratio grew by over 60% over the past decade, and Manitoba has the second worst net debt to GDP ratio amongst the five provinces. Figure 29: Net Debt as a Percentage of GDP 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ON 25.55% 26.03% 29.09% 32.26% 34.90% 37.83% 39.89% 41.18% 42.62% 43.12% MB 21.72% 20.49% 22.18% 22.08% 23.14% 26.03% 27.67% 29.60% 32.98% 35.46% SK 13.97% 10.65% 6.75% 6.52% 6.58% 7.77% 8.22% 7.27% 8.83% 12.63% AB -13.08% -13.22% -12.66% -10.39% -7.74% -6.53% -4.70% -3.99% -4.15% -1.29% BC 12.36% 11.97% 13.48% 14.71% 15.54% 16.87% 17.51% 17.22% 16.59% 16.44% ON MB SK AB BC Source: MEC calculation, Statistics Canada, CANSIM Table 384-0038. Department of Finance Canada Fiscal Reference Tables 22

AREA OF CONCERN In the next several years northern Manitoba faces several immense economic challenges. Mine closures will mean the north will lose over 1,000 jobs in the mineral resource sector in just a few years. With an average wage of well over $100,000, those good high paying jobs will be tough to replicate. In addition, construction on Manitoba Hydro s two mega-projects, Keeyask and BiPole 3 will commence in the next several years. The construction phases of both projects combined required close to 13,000- person years of employment. Similar to the mineral resource sector, once construction on the two projects is completed, many will be out of work. While not all the affected workers live in northern Manitoba, the economic spinoffs in the north created from housing and feeding a workforce in the thousands is immense. Households in northern Manitoba already have lower incomes than the Manitoba average, the losses of these high paying private sector jobs will exacerbate the situation. Northern Manitoba s economy is also already heavily reliant on the public sector, a trend that will continue with the closures of those mines and the Hydro projects finishing. 23

CONCLUSION Of the 28 indicators included in this report, Manitoba ranked: 5 th in 15 indicators 4 th in 6 indicators 3 rd in 2 indicators 2 nd in 3 indicators 1 st in 2 indicators Given these poor results, improvements need to be made to increase the province s prosperity, which increases all our standards of living. Recently steps have been taken to reduce the regulatory burden, but time will tell what results those provincial actions will have. Some minor income tax reductions have occurred, but we still lag other provinces. The provincial government has stated a goal of becoming the most improved province in Canada. To get there we strongly recommend a path forward based on: Reducing the size and cost of the provincial government; Reducing the province s debt load and eliminating the deficit; Reversing interprovincial migration losses; Increasing high school and post-secondary graduation rates; Increasing rates of entrepreneurship; Reducing red tape; Reducing personal income taxes through rate reductions and increasing brackets; Eliminating the payroll tax By focusing on these measures, we can increase investment into Manitoba. If we want a brighter future tomorrow in Manitoba, we need increased investment today. Increased investment leads to greater economic growth, increased innovation and higher productivity. This leads to higher wages and incomes, and a higher standard of living and increased prosperity for all Manitobans. 24