Commission on the Reform of Ontario's Public Services

The Ontario government must issue a broad discussion paper this year on where it wants to
take the economy over time. Such a report, which would replace the relatively sterile exercise
of the mandated long-term economic and fiscal outlook, could form the basis of debate on this
issue. It is vital that the discussion paper deal with far more than numbers and budget
balances. It should address the fundamental issues that matter to Ontarians — jobs, income
and improving people’s lives.
Understand Productivity Challenges
Ontario’s economic vision must also generate interest in and understanding of productivity. 2
The aging of Ontario’s population means that labour-force growth will slow; this means that
productivity growth is becoming increasingly important to economic success. Despite this
importance, governments fear the word “productivity” because of public misunderstanding of
its meaning. Polls and focus groups tend to find that many Canadians believe productivity
means working harder for less pay — the opposite of an economist’s definition.
Economists and other analysts have compiled lists in recent decades of the actions they
believe are needed to improve Canada’s productivity performance. Elements in common on
many of these lists include the following:
� Low, stable inflation;
� Lower public debt-to-GDP ratios;
� Free trade externally and internally;
� Promotion of competition, including removal of foreign ownership restrictions;
� Removal of barriers to firm growth, including the jump in taxation rates from small to large
businesses;
� Removal of work disincentives, including those embedded in Employment Insurance;
� Reduction in regulatory burden;
� Lower taxes on capital;
� Lower marginal personal income tax rates, especially for very low- and modest-income
Canadians (although this might raise labour-force participation rather than productivity);
� A shift away from taxing income and capital towards taxing consumption;
� Improvement in the selection and integration of immigrants;
� Increased investment in public infrastructure, especially transportation and electricity;
2 The analysis in this section is drawn directly from Don Drummond’s paper, “Confessions of a Serial Productivity Researcher,” International
Productivity Monitor 22, (Fall 2011), pp. 3–10, downloaded from http://www.csls.ca/ipm/22/IPM-22-Drummond.pdf.
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