Quebec Got a New Prime Minister

Mr. Philippe Couillard has become the 31^st prime minister of Quebec following the general election of April 7. His party, the Liberal Party of Quebec, has won 70 of the 125 seats in the parliament. The Quebecois Party (PQ) only won 30 seats, which made the minority government of Mrs. Pauline Marois the shortest in Quebec’s history.

The defeat of the PQ and that of its leader, Mrs. Marois, in her constituency of Charlevoix-Côte-de-Beaupré are explained by the fact that the themes tagged to her party during the election campaign, namely the charter of values and the referendum on the sovereignty of Quebec, were far away from the daily concerns of the population of the province exhibiting the lowest growth rate in Canada.

To come to power eighteen months ago, the PQ was closer to the worries of the population of Quebec when it campaigned to put an end to the student protest against the rise in tuition, to abolish the health tax, and to impose a total moratorium on the prospection and extraction of shale gas.  

Figure: Average Growth Rate and Average Share of Provinces and Territories in Canada’s Gross Domestic Product (GDP), NL: Newfoundland & Labrador, PE: Prince Edward Island, NS: Nova Scotia, NB: New Brunswick, QC: Quebec, ON: Ontario, MB: Manitoba, SK: Saskatchewan, AB: Alberta, BC: British Columbia, YT: Yukon (1981-2012), NT: Northwest Territories, NU: Nunavut (1999-2012), Data Source: Statistics Canada

The new liberal government has now to get down to stimulating Quebec’s economy. As you could see on the above figure, Quebec is the second economy of Canada after Ontario. Quebec generates,  on average, 20.83 % of Canada’s wealth but its average growth rate, which is 1.97 %, is the lowest.
This weak growth rate is attributable—to use a rather simple expression— to the exhaustion of our economy. You can observe on the above figure that the economies of the territories of Nunavut and Yukon exhibit the highest growth rates, 4.16 % and 3.82 % respectively, due to their freshness.
Like the province of Ontario, the rejuvenation and revitalization program Quebec needs is to foster the creation and expansion of small of medium size companies and support innovation within these businesses. 

Education Attainment in the Labor Force in Quebec and Canada

More and more women are becoming active in Quebec. The proportion of the female labor force that holds a university degree now exceeds that of the male labor force.  

A way of improving productivity within an economy is to encourage everyone’s access to education, especially to higher education. Higher education helps men and women acquire the skills necessary to practice a profession.
In recent years, we have witnessed governments’ effort move to fight early school dropout and help women get back to school. These government initiatives have proven successful. There are more and more women getting back into the labor force and the gap between their proportion in Quebec and the Canadian average is narrowing as one could see in figure below.  The labor force is the number of people actually available for work. 

Figure 1: Share of Female in the Labor Force, Canada and Quebec, 1990-2013, Data Source: Statistics Canada

There are still more men than women in the labor force in both Quebec and Canada. Meanwhile, the proportion of female is increasing. In 1990, women represented 44.4 % of the labor force in Quebec. In 2013, they represented 47.3 %.

In Figure 2 below, it appears that, an important and growing proportion of the female and male labor force in Quebec has a post-secondary certificate or diploma as highest degree of education. In 2013, it was respectively 42.8 % and 40.7 % of the female and male labor forces that have a post-secondary degree versus the national averages of 36 % and 34.4 %. 

Figure 2: Proportion of the Female and Male Labor Force with a Post-Secondary Certificate or Diploma as Highest Degree, Canada and Quebec, 1990-2013, Data Source: Statistics Canada

Figure 3 below shows that since 1996, the proportion of the female labor force that has a university degree in Quebec has become greater than the proportion of the male labor force that has the same degree. Compared to the national average, the proportions of the female and male labor force with a university degree are less important in Quebec. 

Figure 3: Proportion of the Female and Male Labor Force with a University Degree, Canada and Quebec, 1990-2013, Data Source: Statistics Canada

Research and Development across Canada

Quebec allocates almost the same share of its gross domestic product to research and development as the province of Ontario but the number of patents delivered in Ontario is the double of that in Quebec. This difference lies in the dynamism of the two economies.

The first of the two TV debates in view of April 7, 2014 general election took place yesterday, March 20, between the leaders of four political parties. Were debating Mrs. Françoise David for Quebec Solidaire, Mr. François Legault for  the Coalition for the Future of Quebec, Mr. Philippe Couillard for the Liberal Party of Quebec, and the outgoing Prime Minister Mrs. Pauline Marois for the Quebecois Party. Economic issues were the first of the four topics discussed. To the question which strong medicine, the party leaders were proposing to stimulate Quebec’s economy, Mrs. Marois was the only one to talk about reviving foreign trade and research and development (R&D). I found it unfortunate that she did not went deep into these points that differentiate her from her challengers.

R&D is the investment in the design of the goods that an economy will produce in the future or in the discovery of new and better ways of doing things. Nowadays, innovations resulting from R&D are protected with patents. As a matter of fact, R&D stimulates growth in an economy since it increases business investment spending and revives exports and investments abroad given the know-how domestic firms gain from it.   

In terms of percentage of its gross domestic product (GDP), Quebec invests more than any other province in Canada in R&D. As it appears in Figure 1 below, between 1981 and 2011, it is, on average, 2.02 % of Quebec’s GDP that is allocated to this activity versus 2.01 % in Ontario.

Figure 1: Share of Gross Domestic Expenditure on R&D in GDP, average, 1981-2011, Data Source: Statistics Canada, NL: Newfoundland & Labrador, PE: Prince Edward Island, NS: Nova Scotia, NB: New Brunswick, QC: Quebec, ON: Ontario, MB: Manitoba, SK: Saskatchewan, AB: Alberta, BC: British Columbia, Territories: Nunavut, Northwest Territories, and Yukon

 While the share of GDP invested in R&D is almost the same in Quebec and Ontario, the number of patents granted in Ontario is the double of that in Quebec.

Figure 2: Percentage Share of Patents Granted by the USPTO to Institutions across Canada, Average, 1980-2012, Data Source: Institute of Statistics of Quebec

Without any doubt, there is more room to entrepreneurship in Ontario than in Quebec. That is why the two provinces allocating the same share of their GDP to R&D end up with different productivities as far as patents are concerned. To be more prosperous, Quebec has to foster the creation and expansion of small and medium size companies. 

2014 General Election in Quebec: An Assessment of some Election Promises

Over the past three decades, the performance of Quebec’s economy was below that of the whole of Canada. Quebec needs to foster private investment and foreign trade, to reorganize its public finances, and fight unemployment. Do the promises of the election candidates satisfy these priorities?

On March 4, 2014, after eighteen months of minority government, Quebec’s Prime Minister, Mrs. Pauline Marois, announced the holding of a general election on April 7. As soon as the election was set off, the three main political parties, which are the Parti Québecois (PQ), the Liberal Party  of Quebec (LPQ), and the Coallition for the Future of Quebec (CAQ, for Coalition avenir Quebec), have started competing for the majority of the 125 seats in the  National Assembly making several promises.
The LPQ promises to increase private investment and create 250,000 jobs within five years through the Plan Nord, which is a program aiming at the economic development of the northern regions. The CAQ pledges to increase households’ purchasing power by abolishing both the health and education taxes, which will ease by about $ 1,000 their fiscal burden. As for the PQ, the outgoing government, it counts on its implication in the project of oil prospection and extraction at L’Île-d’Anticosti.

After presenting and comparing the performance of Quebec’s economy to the canadian Canada average, I present what should be Quebec’s priorities and very briefly assess the economic promises of the three main parties. My analysis of the condition of the economies of Quebec and Canada is a look at the growth rate of the gross domestic product (GDP) and that of some of its components, and the unemployment and inflation rates.

Economic Growth

The average annual growth rate of GDP in Quebec between 1981 and 2012 was 1.97 % versus 2.44 % for Canada as a whole. As you could see in the table below, the correlation between GDP growth rate and the growth rates of such expenditure as household consumption, business investment, and government spending are also lower in Quebec compared to the Canadian average.  

Table: Average Annual Growth Rate of Real GDP and some of its Components, and Correlation Coefficients, Quebec and Canada, 1981-2012, Data Source: Statistics Canada

In Quebec and in Canada as a whole, it is household consumption expenditure that stimulates growth. The contribution of consumption to GDP average growth is 1.33 % in Quebec versus 1.41 % for Canada. On Figure 1, I have broken down GDP average growth rate between its main components. 

Figure 1: Average Growth Rate of Expenditure-Based Real GDP and Percentage Contribution of its Components, Quebec and Canada, 1981-2012, Data Source: Statistics Canada

Household consumption is an important and increasing component  of GDP in Quebec and Canada. Quebec as well as the rest of the country consume more than half of its production.

Figure 2: Share of Household Consumption, Business Investment, Government Spending, and Other Spending, in Real GDP, 1981-2012, Data Source: Statistics Canada

Figure 2 above shows that the shares of household consumption and government spending are more important in Quebec. On the other hand, as for business investment, its share in GDP is more important in all Canada than in Quebec.

Unemployment Rate

Unemployment rate, i.e., the proportion of the active population looking for a main work, is higher in Quebec. As one could see on Figure 2 below, the deviation of unemployment rate in Quebec from the national average is decreasing over time. In May and August 1982, this difference was at the high of 3.6 %. In February 2014, it came down to .8%.

Figure 3: Unemployment Rate, Quebec and Canada, 1981:M1-2014:M2, Data Source: Statistics Canada

Inflation Rate

All items consumer prix index (CPI), i.e., the ratio of their current price to their price in 2002, the base year, tends to be slightly lower in Quebec than the national average. The upper panel of figure 4 below plots the monthly CPI and the lower part of this figure plots the annual inflation rate, which is the percentage deviation of two successive annual CPIs.

Figure 4: Monthly Consumer Price Index (1981:M1-2014:M1) and Annual Inflation Rate (1981-2013), Quebec and Canada, Data Source: Statistics Canada

 In 1993, the inflation rate in Quebec was 1.52 % lower than the national average but this gap is decreasing over time.

What Should Be the Priorities of the Next Government of Quebec?

• Fostering private investment — As it appears in the second panel of Figure 2, the share of business investment in GDP has always been lower in Quebec relatively to the whole Canada. This average is 14 % in Quebec versus 17 % for the whole Canada.
• Reorganizing the public finances – The third panel of Figure 2 shows that the share of government spending (the consumption and investment of the public administration) in Quebec’s GDP has always been higher, on average 29 % in Quebec versus 26 % in all Canada.
• Fostering foreign trade – Net exports, i.e., the difference between exports and imports, are included in the other spending in the fourth panel of Figure 2.
• Fighting unemployment – Quebec ranks among the provinceswhere unemployment rate is high in Canada.

A Brief Assessment of the Economic Promises of the Main Parties

The LPQ wants to revive private investment and create jobs through the Plan Nord. This promise satisfies three of the above priorities but does not tackle the issue of reorganizing public finances.

The CAQ wants to increase the purchasing power of households by abolishing both the health and education taxes. It also wants to reorganize public finances by freezing the number of civil servants. Increasing households’ purchasing power will stimulate growth. One could clearly see from the table above that there is a .81 correlation between household consumption and GDP growth in Quebec. But could the CAQ hold this promise? The PQ alredy promised in vane in 2012 to abolish the health tax. The CAQ takes seriously the priority of reorganizing public finances but does not say yet much about fighting unemployment and reviving private investment.  

The PQ wants to go on with its project of oil prospection and eventual extraction at L’Île-d’Anticosti. This project, if it comes true, will deliver jobs and generate revenues for the government. For the time being, no one can tell with certainty if there is oil at L’Île-d’Anticosti and for ecological reasons,  it is not everyone who is supporting this project. Besides, with its sovereignist speech, the PQ has to further demonstrate that Quebec could do better outside than within Canada.