Mirko Bibic

May 23, 2023

Canada’s history is marked by its unique geography. You cannot understand the country’s economic, political, and social developments without factoring in its large land mass and sparse population.

One consequence has been the persistence of regional economic disparities. Government mechanisms such as equalization and regional development agencies have sought to reduce these place-based differences with respect to economic growth, investment, and job creation. Yet the historical track record is generally underwhelming. Many papers have been written on the issue and regional economic disparities have not only persisted but they have arguably gotten worse in recent decades.

The good news is that there are promising developments occurring at the intersection of technology and work that hold out the potential for extending economic growth and opportunity more broadly across the country’s geography. It ought to be a priority for Canadian policymakers to support these developments and in so doing diminish the extent to which your postal code holds determinative power over your future.

Let us start with a picture of Canada’s unique economic geography. It is easy to forget that the country’s mix of land and people is unique around the world. Consider that, among G7 countries, Canada’s population density (people per square kilometre of land area) is incomparable. The G7 average, excluding Canada in 2020, was 203.7 people per square kilometre. The average for the Organisation for Economic Co-operation and Development (OECD) countries was 38.6. In Canada, it was 4.

Canada’s population is among the most highly concentrated in urban areas of any country in the world. A small number of major cities have come to play a disproportionate role in the country’s overall population and economic output.

Job creation is a good example. In the three years prior to the COVID pandemic, nearly two-thirds of net new jobs created in Canada were concentrated in Montréal, Toronto, and Vancouver. That share surpasses three-quarters when Ottawa-Gatineau, Calgary, and Edmonton are included. In some rural and remote parts of the country, communities still have not even fully recovered the jobs that were lost during the 2008-09 global recession.

The upshot: Today, 60 percent of Canada’s economic output and national employment comes from cities with 500,000 residents or more. Toronto alone is responsible for 20 percent. Big cities have come to dominate the country’s key economic metrics.

Smaller and rural communities, by contrast, have generally not experienced similar levels of GDP and employment growth. Their experiences over the past few decades have instead tended to be marked by lower levels of labour force participation, income growth, and entrepreneurship.

These trends – sometimes referred to as “urban agglomeration” – are not unique to Canada. Virtually every advanced economy has experienced a rise in place-based disparities in an era of what Canadian urban scholar Richard Florida has called “superstar cities.”

Second, it is overwhelmingly positive that Canada’s major cities are hubs of innovation, immigration, and ideas. It would be a huge mistake to direct legitimate concerns about regional economic disparities into an anti-cities agenda. The ongoing success of places like Toronto, Montreal and Vancouver is fundamental to the overall success of the country.

However, there is reason to be focused on addressing regional economic disparities by extending economic growth and opportunity to every corner of the country. A recently published Bell Public Policy paper states that progress along these lines would not only strengthen social cohesion and political stability in an era of growing polarization, but it would also bring expression to the promise of Canada as a place of economic inclusion and broad-based opportunity.

Herein lies the potential represented by the growing interplay between technology and work. The consequences could be positive and significant.

A recently published Bell Public Policy paper states that progress along these lines would not only strengthen social cohesion and political stability in an era of growing polarization, but it would also bring expression to the promise of Canada as a place of economic inclusion and broad-based opportunity.

Starting with technology, major investments in broadband infrastructure – including $4 billion per year on average by Bell over the past decade and as much as $14 billion over the past three years alone – are having a leveling effect across big cities and small communities. In particular, they are leveling the playing field with respect to diffusion of technologies, enabling entrepreneurs to reach new markets and customers through digital commerce, and helping key sectors such as agriculture and agri-food, mining, and energy to make their operations more productive and sustainable. This has the potential to be a major catalyst for economic activity in smaller and rural communities.

As for workplace arrangements, the historic disruption of the pandemic has planted the seeds for potentially lasting changes to where and how we work. Enabled by new technologies (or increased use of pre-existing technologies), we are starting to see a redefinition of the concept of the workplace, based on the elimination of the distinction between where people live and where they work.

The evidence from Canada and the United States suggests that some, possibly many, people and firms are indeed relocating from major cities to peripheral communities. In 2022, for instance, although Toronto added 138,240 net residents relative to the previous year, it added 159,679 immigrants, which means that approximately 78,000 people actually left over the course of the year. This is not an aberration. Each year since the pandemic began, Toronto has lost people on a net outflow of residents – the most in at least a generation.

The question, of course, is what does this mean for policymakers?

There are various policy areas that will need to be considered as part of any strategy to leverage these developments in the name of reducing regional economic disparities. If the goal is a future in which geography matters less, then serious policy consideration will need to be given to issues such as education, housing, immigration, and investment.

One example is broadband policy. Progress on reducing place-based disparities will require significant capital investment in broadband infrastructure in these communities. Government policy will therefore need to create the conditions for such investment by being fast, efficient, and enabling firms to earn a reasonable rate of return rooted in market forces.

Policy choices that further prescribe wholesale access to cable and fibre networks will distort investment decisions in favour of large, dense cities and undermine the goal of boosting growth and opportunity more broadly across the country.

Inclusive economic growth and opportunity will not happen on its own. It will require coherent, consistently applied public policy at the federal level and business-led initiatives to achieve it. It is ultimately up to the private and public sectors, working together, to seize this once-in-a-life opportunity. Our communities and our country will be better for it.

Mirko Bibic is President and CEO of BCE (Bell Canada Enterprises) and President of Bell Canada, Canada’s largest communications company.