What does really matter when it comes to the City of Ottawa’s Economic Development Strategy?

The City of Ottawa’s Economic Strategy 2015 Update known as Partnerships for Innovation has its vision to be a leader in innovation for economic prosperity. This vision statement is based on the following assessment:

Today’s economy is global, competitive, and rapidly evolving through technology and innovation. To excel and outperform, municipalities are proactively investing in economic development initiatives that encourage investment attraction and business expansion and retention, foster entrepreneurship and innovation, strengthen tourism, and provide the necessary tools and research to make informed decisions.

The City’s Economic Strategy is also derived from the argument that Ottawa’s dependency on the federal government has in fact discouraged new investment on the part of private industry and indeed, has created a situation where the local economy is in imminent peril because of its downsizing and spending cuts.

The City’s Strategy is based on 4 pillars: Investment Attraction and Business Expansion and Retention, Entrepreneurship, Tourism Development, and Research and Information Tools. According to the Strategy, encouraging economic diversification (i.e. reducing the economic dependency on the federal government) is essential to ensuring future prosperity and knowledge-based / advanced technology start ups are the critical parts of achieving this vision.

Invest Ottawa is the City’s primary partner in economic development delivery. The arm’s length organization carries out economic development programs and initiatives in the areas of entrepreneurial mentorship, start-up development, business incubation services, commercialization, targeted sector development, investment attraction, business retention, expansion, and global trade development.

The case for developing local economic development strategies based on job creation is perhaps an easy one to make especially for smaller or more rural communities. Several communities in Eastern and Northern Ontario, for example. are facing long term structural declines in their manufacturing or resource bases leading to chronic unemployment and the outward movement of younger labour force members or even overall depopulation.

When it comes to larger cities like Ottawa, one might argue that job growth will only lead to more in-migration of new workers adding to the population size over the long run. It is debatable if an Ottawa of 2 million people offers a better quality of life or better jobs compared to its current population of about 1.4 million (including Gatineau). Perhaps bigger cities offer greater cultural and recreational diversity and consumer choice, but larger cities also tend to have greater diseconomies such as traffic congestion, higher crime rates, high housing costs etc. Being the Capital City of Canada has also provided Ottawa with a rich diversity of cultural and recreational opportunities that typically would not be found in other cities of similar size.

Instead of just looking at the real or absolute annual job creation numbers, one may argue that it is the rate of employment growth that is more important. Cities that have rapid increases in employment numbers like what Calgary experienced during the oil boom years also tend to have shortages in affordable housing supply, increased traffic congestion, negative environmental impacts, inflationary prices in consumer goods and salaries etc. that accompanies rapid population growth and heavy in-migration of people. Pressure is also placed on the local government to add to its infrastructure (sewers, roads, parks etc.) and services (police and fire protection, garbage collection, snow removal etc.) to meet the growing demands of a rapidly increasing population base. At the other end, communities experiencing slow gains in employment or even job losses, may also experience chronic unemployment leading to an out-migration of younger and/or more educated workers, more empty stores, a deteriorating housing stock and increased fiscal pressure on municipalities to maintain services in the face of a smaller assessment base.

It is difficult and perhaps even unnecessary to come up with a precise optimum rate of local job growth. As a basic minimum, new job gains (new start-ups, expansion of existing firms etc.) should at least match the number of job losses (business failures, business contractions) over a given period of time. The rate of job growth could also be matched with the number of new entrants or graduates from educational institutions into the local labour force.

By focusing on business investment and job creation, the City’s Strategy also overlooks what should be the primary end goal of economic development which is to improve the quality of life for all residents whereby everyone has the opportunity to share in economic prosperity and wealth creation- often referred to as inclusive economic growth. Sustained growth in the local advanced technology sectors, which is the primary focus of the City’s Economic Development Strategy and of Invest Ottawa, may lead to “good”, well paying jobs attracting skilled, educated, young workers. However, such jobs offer limited opportunities to the existing unemployed members of the local labour force supply or to youth with less education and skills. Moreover, the better educated, higher skilled workers also tend to be more mobile in terms of being able to find alternative job opportunities in different locations when technology companies downsize or close down completely or start new companies themselves.

Very few are going to argue having a robust technology sector creating well paying jobs is not important to the sustainable high quality of life in the community. Ottawa’s level of excellence as a vibrant, inclusive community, however, cannot be just measured in terms of the number of new 30 something tech millionaires or the number of successful IPO’s launched or the number of high tech jobs created.  Such metrics represent a very narrow picture of economic development success in improving Ottawa’s quality of life. It would be at least as important to measure the success level of the City’s and Invest Ottawa’s economic development initiatives in terms of meaningful social objectives.

A 2013 report on youth employment in Ottawa published by the Social Planning Council stated, for example, that youth employment has recovered slowly since the 2008 recession. The report further noted that “very few consider their current jobs to be “good jobs”, but there is a widespread acceptance that young workers are disadvantaged by their limited professional experience and the perception of young workers as “risks” compared to experienced workers” (p.10). The City of Ottawa’s web site shows that the median monthly social assistance case load was 5,259 per 100,000 households in 2015 compared to 4,396 in 2014 – a one-year increase of almost 20%. Based on Statistics Canada’s data and definitions, the percentage of total persons in low income in Ottawa-Gatineau increased from 8.0% in 2007 (one year before the “Great Recession” to 11.8% in 2013 corresponding to an increase of 84.4% in total numbers. The average 2015 total unemployment rate in metro Ottawa (excluding Gatineau) stood at 6.3%, slightly above the pre-recession 2007 rate of 5.1%. However, the unemployment rates for individuals between 15 and 24 years of age, increased from 11.3% in 2007 to 15.5% in 2015.

Even the high tech sector in Ottawa has not been a significant source of net employment growth. Contrary to Invest Ottawa’s claim that the local technology companies are closing in on record employment, according to Statistics Canada’s Labour Force Survey, the annual average total employees in the Information, Telecommunications and Communications (ITC) sector in the Ottawa-Gatineau CMA was 39,600 compared to 57,200 in 2014 and well below the 2000 peak high of 67,400 before the collapse of Nortel Networks.

There are many positive aspects of the City’s Economic Development strategy but I believe it needs to move away from its almost obsession with the technology sector and place more emphasis on people and broader social and community results and less on businesses and job creation.

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