Public Infrastructure Investment in Ontario: The Importance of Staying the Course

The Ontario government recently announced a 10-year infrastructure plan entitled Building Together. It promises to build upon the long-term approach to infrastructure investment from the previous ReNew Ontario plan. As a result, the awareness of infrastructure investment in Ontario has increased. However, while the public has an intuitive understanding of the importance of infrastructure to the economic prosperity of the province, it is likely that the majority of the population does not fully recognize the personal risks associated with continued underinvestment.

This study looked to quantify the risks for individuals, business, and the government associated with infrastructure underinvestment and examined the progress made so far in mitigating these risks. The recent and proposed increases in infrastructure investment from the ReNew Ontario and Building Together plans are an important step in the right direction, but greater macroeconomic benefits can be realized with further infrastructure investment with a stronger focus on maintaining existing infrastructure. Over the next 50 years, there is a risk of public infrastructure underinvestment in Ontario that could cost the provincial economy over 1% annual growth in real gross domestic product (GDP). For individual workers, depending upon the number of years they plan on staying in the labour force, it could cost them between $20,000 and $60,000 in today’s dollars. Businesses also face the loss of an annual 0.7% increase in profits.

Quantifying the relationship between public infrastructure and economic prosperity is a challenging and complex task: there is limited information on these points. The research relies on mathematical modelling of demographics, labour force, production, taxation, and wages to estimate the long-term connections between public infrastructure investment – both on new infrastructure and on maintenance – and economic production, real after-tax wages, and real net profits after-tax. The results of this analysis are not intended to dictate public infrastructure investment policy in Ontario, but rather to emphasize the potential economic risk that Ontario’s employees and employers bear when long-term infrastructure trends tend towards persistent underinvestment.

Download the Report: Public Infrastructure Investment in Ontario The Importance of Staying the Course 2012



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