Has Quebec’s Standard of Living Been Catching Up?

Quebec’s relative growth performance with Ontario has always been an issue of concern for economic historians. In his paper Pierre Fortin discusses trends in Quebec’s real domestic income relative to that in Ontario over the last half-century. He finds that per capita real domestic income in Quebec, as a percentage of that in Ontario, fell from 78 per cent in 1926 to 74 per cent at the end of the 1950s, with a particularly steep decline during World War II. After WWII, it then started an upward climb, reaching 86 per cent in 1999, and exhibited a particularly strong performance in the 1975–85 period. Fortin sees the WWII slump related to the proportionally smaller number of men in Quebec enrolled in the armed forces, which reduced the share of overall military pay going to Quebec. He attributes what he calls the big bubble of the 1975–85 period to the strong cyclical expansion associated with a large number of major projects accompanied by a wage explosion. The key development Fortin seeks to explain is the 12 percentage point increase in Quebec’s per capita real domestic income from 74 per cent of that in Ontario in 1960 to 86 per cent in 1999. He decomposes this change into three sources: productivity, employment and the demographic structure, and finds that faster growth in output per worker in Quebec was the most important factor, accounting for 55 per cent of the decline in the gap. In 1999, output per worker in Quebec was 93 per cent of that in Ontario, up from 83 per cent in 1954. Faster growth in the working age population accounted for 35 per cent of the decline in the income gap, and more rapid rate of increase in the employment rate for 10 per cent. Fortin points out that the massive investment Quebec has made in education has greatly reduced that gap in average years of schooling between persons in Quebec and Ontario. Indeed, in 1991 the average 25-year-old man had received more years of schooling in Quebec than in Ontario. This development bodes well for future income growth. Equally, Quebec has also done well in investment in infrastructure and equipment and in research and development. Fortin explains the continued income gap with Ontario by the long gestation period required before the education revolution filters up to all age groups.