Catching Up with Ontario’s Economy

To illustrate the limits of average-based measurements, here’s an example from a past life teaching economics and statistics classes: Imagine a café located right next to the university. Twenty or so people are sitting inside. Almost all of them are students, earning student wages. Then, all of a sudden, the highest-paid player from [your local NHL team] walks in. If you look at the average income in this café, this café now appears to hold 21 millionaires. But the median patron is still just a first-year who’s thinking about next month’s rent.

Of course, when we’re looking at the economic performance of an entire region, we often use averages. These data require little statistical treatment, which is a plus. But median values may be preferred, when available, as they’re less sensitive to outliers.

GDP Per Capita

Outgoing premier François Legault has long been concerned by Quebec’s wealth gap with Ontario—indeed, closing this gap was a priority of his well before his first term began in 2018. And now many are reviewing his record through the lens of economic performance.

GDP per capita is a logical point of comparison. Quebec and Ontario have the most structurally similar economies, their supply chains are often interconnected and the two provinces are competing for international investment. Traditionally, progress on this front is measured using GDP per capita—the average economic output per person in the population.

And if we compare Quebec’s ratio to Ontario’s, it looks like Legault has achieved his goal: Quebec is indeed catching up. As shown with the solid line in graph 1, the difference between Quebec’s GDP per capita and Ontario’s shrunk from 13.7% in 2018 to 9.2% in 2024 before widening to 9.7% in 2025, according to our estimates. Put plainly, the gap was at its narrowest in 2024.

On the left, you can see that GDP per capita has risen 5% in Quebec since 2018 and just 0.3% in Ontario. But these average measurements are influenced by other factors, not the least of which is divergent demographic growth.

This is similar to our café example, but on a grander scale. When individuals with a different economic profile move to a province, it doesn’t necessarily mean that the residents who were there ex ante will see their individual wealth levels rise or fall… but the average can be impacted.

The dotted lines in graph 1 show the change in GDP per capita once we strip out non-permanent residents (NPRs)¹, whose population has grown substantially, especially from 2022 onward. This category includes individuals who generally earn incomes that are below the average for the native-born population, at least for their first few years in Canada. By cross-referencing various Statistics Canada data as of July 1, we see that the share of NPRs in Ontario’s population increased by 4.7 percentage points between 2018 and 2025, reaching 8.6%, compared with a 3.9‑point rise in Quebec, where it stands at 6.2%.

This difference in demographic composition may be influencing how we view Quebec’s economic performance. From this angle, the province has also continued to catch up, as GDP per capita (ex-NPR) kept growing at a faster pace in Quebec than in Ontario, up 9.4% from 2015 compared to 5.5%. Over that same period, the corresponding gap narrowed from 15.1% to 11.9%. That said, Quebec’s relative progress appears to have stalled since 2022; from then on, Ontario’s changing demographic makeup begins to weigh more heavily on the indicator.

Verdict: Quebec is catching up, but a composition effect may be artificially inflating the province’s relative gains since 2022.

Productivity

As we enter a period of slower demographic growth External link., when the working-age population is expected to stagnate at best, productivity is emerging as the holy grail of economic prosperity. In terms of productivity, Quebec has fared better than Ontario recently.

Between 2015 and 2024, productivity rose 10.2% in Quebec versus 4% in Ontario (graph 2). All the same, it’s worth pointing out that there have been no net gains since 2022. The pandemic years do complicate interpretation of these data: here again, composition effects are muddying the waters. Public health restrictions disproportionately affected sectors that typically have lower average productivity, which gave overall productivity an artificial, temporary boost. Productivity has been flat in Quebec since 2022, while it has fallen about 3% in Ontario. Although no causal relationship can be inferred from composition effects alone, this turning point coincides with the demographic changes discussed earlier, specifically the increase in NPRs.

We can also see that Quebec’s competitive advantage in terms of unit labour costs has steadily deteriorated over the last decade. Unit labour costs, defined as the ratio between compensation per hour worked and real value added per hour, went from 0.58 in Quebec in 2015 (versus 0.60 in Ontario) to 0.80 in 2024 (versus 0.79 in Ontario).

Here again, it’s worth remembering the problem with relying on averages. But this time, sector composition effects do not materially change the conclusion. In 2015, 5 of the 19 business sectors surveyed by Statistics Canada, representing 31% of jobs in Quebec, had a higher unit labour cost than in Ontario. In 2024, this proportion had grown to 12 out of 19 sectors, accounting for 67% of the province’s jobs.

Verdict: Quebec has definitely been catching up, although those relative productivity gains have not led to any competitive advantage in terms of unit labour costs. While these productivity gains may boost wages for workers in the short term, they may also undermine Quebec’s business competitiveness and investment appeal if rising labour costs outpace productivity improvements.

Employment Income

The picture is much clearer when it comes to income, although some compositional effects may still be in play. However, this indicator also has an advantage: the median is available, broken down by age group, which makes it possible to draw conclusions that apply to a larger share of the population. We can thus better assess Quebec’s progress in this area.

In 2015, Ontario’s median employment income for each age group exceeded that of Quebec by more than $5,500. By 2023, the last year for which data are available, the gap had narrowed significantly across all age groups, to $2,200 at most (graph 3).

On the one hand, some might argue that Quebec’s taxation system—more progressive and burdensome than Ontario’s—might not be reflected by a narrowing of the net income gap, to the detriment of Quebec households. But this is an overly simplistic reading of the situation. In return for those taxes, Quebecers benefit from a higher level of provincial public services, and Pierre Fortin’s research [in French only] External link. shows that several indicators, after cost-of-living adjustments, suggest that Quebec’s economy has already caught up to Ontario’s in many ways.

That said, there is still a gap in average employment income, though we know that there are limits to what this average can tell us. With Quebec’s economy facing high budget deficits, rising healthcare costs and less favourable demographics, progress on this indicator would represent additional support, both for the sustainability of public finances and Quebec’s capacity to offer more qualified, attractive employment opportunities.

Verdict: Quebec has been catching up to Ontario, indisputably.

Conclusion

The analysis is fairly clear: On three key metrics, Quebec’s economy is managing to catch up to Ontario’s. Yes, Quebec did well. Yes, the province fared better coming out of the pandemic. But we also need to admit that, if Quebec is indeed catching up, it is in part because Ontario’s performance has been weaker of late.

All the same, Ontario’s economy is still the most comparable to Quebec’s, and as such is a worthwhile benchmark—even though the former is home to most of Canada’s corporate headquarters and benefits from that concentration of industry. While these indicators may be useful for comparative analysis, one should keep in mind that in many ways, they can be a poor gauge for measuring real economic well-being [in French only] External link.. And as Theodore Roosevelt once said (or didn’t; the origin of the quote is still contested), comparison may be “the thief of joy.”

¹ NPR contributions to GDP cannot be measured precisely. This indicator isn’t meant to be read on its own; instead, it shows how changes in demographic composition affect the per capita average differently in the two provinces.