Despite what the federal government equalization formula says, Ontario does not really deserve to be considered a “have not” province, says research firm Global Insight Inc.

“Just as Canadians have become convinced that Ontario will fall into have-not status next year, this note argues that, by the most accepted measure of economic well-being, Ontario is still a have province and will be for at least a few more years, if not for the foreseeable future,” it says.

It notes that Ontario’s definition as a have-not province is based on the federal minister of finance’s recent report, which says that next year, for purposes of equalization payments, Ontario will fall into the have-not category, and therefore, qualify to receive equalization payments. This definition relies on a measure of fiscal capacity.

However, for years, economists have considered the best single measure of economic well-being to be real GDP per capita, and on that basis, Global Insight says that Ontario is not a have-not province this year, it will not be next year, and it may never become a have-not province. In 2007, Ontario’s real GDP per capita was 5% above the Canadian average, it reports. It is also expected to be above the Canadian average next year.

Global Insight says its forecast does see tougher times for Ontario than for the rest of Canada for the next several years. “After that, though, we expect Ontario’s economy to have restructured and to again best the Canadian average,” it adds.

“We conclude that the equalization formula provides a definition that contradicts the most accepted measure of have and have-not. As such, the equalization formula defines Ontario as a have-not province. By the most accepted measure of economic well-being, Ontario will certainly remain a have province while collecting equalization next year,” it says. “In an unfortunate twist of fate, Ontario’s equalization payments will partly be financed by B.C., whose per capita income remains well below that of Ontario.”

IE