Ontario’s infrastructure spending makes all Ontarians wealthier: Report

Ontario has spent an average of $10.7 billion per year on infrastructure between 2006 and 2014. Economic activity linked to these investments supports employment in the province – on average 167,000 jobs per year are due to infrastructure spending. What is less obvious, but just as crucial, is that infrastructure boosts private-sector productivity, particularly in manufacturing. adding about $1,000 per year to the income of every Ontarian.

These widespread benefits are published in “The Economic Impact of Ontario’s Infrastructure Investment Program,” released by The Conference Board of Canada.

The study calculates economic impacts associated with past and planned public infrastructure spending; it also quantifies the benefits of this investment on the province’s potential output and the income of Ontario residents. The research was funded by Infrastructure Ontario.

Ontario’s infrastructure spending will total an estimated $96.7 billion, in current dollars, from 2006 to 2014. In real 2002 dollars, the cumulative value of the past and planned investment will be $89.7 billion, with $39.9 billion toward structures and $49.8 billion in machinery and equipment.

“While infrastructure spending supports a significant number of jobs and economic activity, its greater benefit accrues over time. Good public infrastructure will bolster productivity and add to the province’s long-term potential,” said Pedro Antunes, director, National and Provincial Forecast.

For every $100 million (inflation-adjusted) invested in public infrastructure, about $114 million is produced in real GDP and about 1,670 jobs will be created for one year.

By including direct, supply chain and other impacts, economic activity in Ontario is boosted by an average of $11.3 billion annually—almost evenly split between goods and business services.  Several sectors benefit:

• Construction industry output increases by an average of $3 billion per year and nearly 49,000 construction jobs are supported annually.
• Manufacturing industries add just over $2 billion in output, and support nearly 23,000 jobs.
• Business services – including engineering, architecture, transportation, financial services, wholesale and retail, and others – increase by an average of $5.6 billion per year over 2006 to 2014. And business services employment is up by nearly 88,400 jobs annually.

Federal and provincial governments earn billions in revenue from infrastructure investment. Of the $96.7 billion that Ontario spends on infrastructure over the 2006 to 2014 period, the province recoups roughly $16.7 billion in cumulative personal and corporate income taxes, as well as indirect taxes. A similar amount is added to federal coffers.

In total, higher incomes and profits help to generate nearly $3.7 billion per year in taxes between 2006 and 2014, including $1.6 billion in personal income taxes, and $583 million per year in corporate income taxes. Indirect taxes (largely sales taxes) increase by an average by $1.6 billion annually.

The substantial number of jobs supported by infrastructure spending has helped boost net migration into Ontario by 10,700 per year. Overall, the number of unemployed people is reduced by about 62,500 per year—keeping the unemployment rate one percentage point below what it might otherwise have been.

In addition to the economic activity generated by the construction phase, infrastructure projects bolster the stock of Ontario’s physical capital and boost the productive capacity of the economy over the long term. This permanent gain for the economy – through, for example, reduced time in traffic – increased real income per resident in Ontario by $902 per person in 2012. That gain is expected to increase to $1,044 per resident by 2014.