Should Government Jobs Move To Small Town Ontario?

Recently, at the Rural Ontario Mayors Association (ROMA) conference, the provincial government promised many measures for rural Ontarians. Notably among them were stable infrastructure funding, continued broadband support, and more natural gas expansion.

All of these promises reflect priorities of rural communities, but they primarily surround one key line from the government’s ROMA press release is that these investments will “remove barriers to job creation and attract investment and skilled workers that will help regions grow.” At its essence, every dollar spent in rural Ontario right now is about one thing – jobs.

Currently, the government is hoping these increased investments will indirectly lead to job creation, but if they want to create jobs they should explore the option of giving jobs directly to rural Ontario and smaller towns by moving the physical location of government agencies to these parts of the province.

Why Rural and Small Town Ontario?

Recently the Ontario government has been able to boast about impressive job creation numbers. Last year there were 320,000 net new jobs created across the country but 243,000 of them were in Ontario alone, or 76% of all new jobs created. That job growth has led to a provincial unemployment rate of just 5.3% as of December 2019.

Despite the impressive growth, the jobs report does not tell the whole story. According to Statistics Canada, between December 2018 and December 2019 Ontario lost nearly 27,000 net manufacturing jobs and over 6,000 net jobs in the utilities sector. Though construction jobs helped offset some of those losses in the goods-producing sector, those losses were really offset by large gains in knowledge-based service jobs.

In the same time period, nearly 40,000 net new jobs in the finance industry, more than 55,000 in the professional and scientific services field, 50,000 in health care, and another 32,000 in public administration. All told, the goods-producing sector dropped 1,600 net jobs while the service sector picked up more than 244,000 net new jobs.

Noted Canadian scholar Sean Speer has written extensively about this trend of moving from a goods-based economy to what he calls an ‘intangibles economy’ that has concentrated wealth in urban areas. The statistics Speer has illustrated in recent works can be mind boggling:

  • Of Ontario’s 865,000 net jobs created between January2008 and August 2019, 75 per cent were concentrated in Toronto and 12 per cent were in Ottawa
  • More than 60 percent ofCanada’s economic output and national employment comes from cities with 500,000 or more residents….Toronto is responsible for roughly 20 percent alone
  • The parts of Ontario that do not belong to a census metropolitan area lost 76,000 jobs between 2008 and 2019

Quite simply, the people who made things with their hands tended to live in rural areas. Those jobs are being replaced by people who work primarily with their brains and those jobs tend to be in urban centers – even more specifically, the Greater Toronto Area and Ottawa. Speer has gone on to call this rural displacement “…the most important political economy challenge facing our society.”

This is why broadband access, natural gas, and new roadways are of such critical importance in rural Ontario. By modernizing these places they have a chance to attract new jobs and reinvigorate their struggling economies. That strategy is worth a shot, but perhaps, so is just directly moving jobs there today that the government controls.

Why Move Government Offices – The History:

In the United States, President Donald Trump’s administration has been reviewing the possibility of moving agency headquarters, culminating in moving the U.S Department of Agriculture’s Economic Research Service and National Institute of Food and Agriculture to Kansas City, Missouri. The North Carolina state government is moving its Division of Motor Vehicles from the capital of Raleigh to the struggling town of Rocky Mount. Even renowned urban scholar Richard Florida has written that it is time to consider moving agencies.

When it comes to Ontario, it is important to realize this is not necessarily a new concept. Most of the Ministry of Agriculture is in Guelph, Ontario Lottery and Gaming (OLG) used to be solely headquartered in Sault Ste. Marie, and the Ontario Provincial Police were headquartered in downtown Toronto until they were moved to Orillia in 1995.

Even the 2019 provincial budget (p46) contemplated the idea, suggesting it would “assess the geographical location of agency headquarters such as TVOntario and the Workplace Safety and Insurance Board,” which both happen to be located in Toronto proper. Most recently, Ontario Liberal Leadership contender Steven Del Duca committed to decentralizing government agencies outside of the Greater Toronto Hamilton Area in his Plan for Rural Progress.

Why Move Government Offices – The Positives:

So, why move these headquarters? Aside from the obvious benefits of rural job creation and cheaper office rent, there are many ancillary benefits that come as a result. Spinoff jobs associated with the relocation of several hundred well-paid government employees is the first. These families will need to purchase houses, goods and services, and enroll in new recreational programs – all creating additional jobs in smaller town Ontario.

Not only do the direct employees need jobs, but many related businesses in the supply chain often want to be close to their relevant government agencies. In Guelph, the Ministry of Agriculture has ensured that most Ontario agriculture organizations are also located there, and the local University has become a world leader in agriculture research and related programming. In Sault Ste. Marie, gaming companies moved to the Northern town. For example, one employer alone that makes scratch tickets employs 20% as many people as the OLG office currently employs. Essentially, industry hubs can form.

Inevitably some employees would not make the move to a new town, accepting transfers or severances instead. Given the Ontario government’s is currently offering to package out civil servants in order to right-size the bureaucracy, this may help them achieve that goal faster. Employees could be hired locally, and local colleges or universities could create everything from co-op programs to innovative new courses to train future workers for these professions.

The employees themselves would also see their dollar go further. Salaries would not decrease, but the purchasing power of that salary would grow. According to the real estate data aggregator zolo.ca, the average home price in Orillia is just shy of $400,000 while the average price in Toronto is more than double at $850,000. In addition, commute times could be demonstrably shorter leaving more family time for employees.

Additionally, scholars like Florida have argued there are ancillary benefits to the government as well. By sharing the wealth of government employment in different parts of a governing area, you bring government closer to the people. They better understand and appreciate the positive role government can play, rather than lamenting the public servants who work in the largest cities getting paid with their tax dollars.

Another ancillary benefit, argued by author Matthew Yglesias, is that physical separation between agencies and government is a good thing. Many Ontario agencies are supposed to act independent of government direction, be them regulators or Crown businesses, so why do they need to be located right next to politicians? These agencies have even less reason to be headquartered in a capital region compared to a government Ministry that may need to interact with its Minister or political staff daily.

Why Move Government Offices – The Negatives:

Of course, the largest negative to a decision like this is the very real toll on the employees associated with any such move. Families would potentially be moved farther apart from loved ones and friends and children would have to switch schools. In addition, many spouses may not have jobs that are as easily transferrable as the agency employees may be. Essentially, life would be significantly disrupted for these workers.

To accommodate for these realities, these transitions are normally done in a phased approach and transfers or buyouts are made available where possible for employees who do not wish to move. These moves cannot happen overnight, and they do not need to move to the furthest possible location. For example, moving a downtown Toronto agency like the Workplace Safety and Insurance Board to a town like Oshawa that has just lost its largest employer in General Motors, would be a minimal disruption with maximum effect.

Government would also need to change the way it operates. That is much easier said than done, but increases in the use of video conferencing, for example, would need to be fully embraced to keep travel costs back to the capital region to a minimum. The effectiveness of that agency would also take a temporary hit, with staff more focused on packing boxes than doing their actual jobs.

Most importantly, governments of all stripes would have to realize that this is not a permanent fix to the problem, but rather a step in the right direction. Investments, like the ones the government is currently making in infrastructure, will need to continue and much thought will need to be given to helping diversify rural economies.

If the challenges that Speer eloquently refers to in rural Ontario are not taken seriously, then Ontario could have a serious problem on its hands – both politically and economically. Moving government offices will not fix that problem, but it may delay it.

You can find the short form version of our Institute article here – https://www.qpbriefing.com/2020/02/05/davidson-moving-government-offices-out-of-toronto-would-help-spread-the-wealth/