The
Economic Freedom
Network

Provincial Economic Freedom in Canada 1981-1998

by Faisal Arman, Dexter Samida, and Michael Walker

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Economic Freedom Analysis of the Provinces

Manitoba

Manitoba is currently the fifth most economically free province in Canada. This province's economic freedom rating declined from 5.5 in 1981 to 4.3 in 1993. Since 1993, there have been modest gains in economic freedom.

The decline from 1981 through 1993 occurred as a consequence of increases in government consumption as a percentage of GDP from 21.5 percent to 27 percent and an increase in transfers and subsidies as a percentage of GDP from 4.2 percent to 6.3 percent. Other provinces displayed similar trends. In Alberta, government consumption rose from 15.6 percent to 19.9 percent of the provincial economy; in Ontario it rose from 17 percent to 19.7 percent. The percentage of the provincial economy devoted to transfers and subsidies went from 4.2 percent to 5.5 percent in Alberta and 3.3 percent to 5.6 percent in Ontario between 1981 and 1993.

From 1993 through 1996, this province made modest improvements in its freedom rating, going from 4.3 in 1993 to 5.0 in the 1998 estimate. Manitoba's most significant strides were made in 1994 and 1995 and are attributable to a decline in government consumption as a percentage of GDP from 27 percent to 24.9 percent, and a decline in transfers and subsidies from 1993 to 1995 from 6.3 percent to 5.2 percent. By comparison, Alberta, the top ranked province, reduced government consumption to 15.8 percent of the provincial economy, and transfers and subsidies to 3.7 percent of the provincial economy.

To its detriment, Manitoba has a large government business-enterprise sector, whose net worth, liabilities, and debt guarantees equal almost 30 percent of its GDP. This will be lowered in future rankings due to the privatization of Manitoba Telephone System (now Manitoba Telephone Services, Inc.) in January 1997. Additionally, relative to other provinces this province scores low points in the corporate taxation component.

While ranking fifth overall, Manitoba should pay close attention to the marginal tax changes being enacted in other provinces. While the absolute level of economic freedom for each province is important, the relative level should not be neglected.

The cost to the people of Manitoba for not being as economically free as Alberta is about $6,500 to $7,400 per person. Given this significant sum, further government encroachment in the economy seems unjustified.

Manitoba:Ranking for Components of the Index of Provincial Economic Freedom

	1981	1985	1989	1993	1994	1995	1998 (est.)
I.Government Operations and Regulations	5	5	5	(tie) 7	(tie) 7	4	4
II.Takings and Discriminatory Taxation	3	2	8	7	6	7	7
III.Interprovincial Trade	3	3	3	3	3	3	3
IV.Regulation of the Labour Market	5	(tie) 4	(tie) 4	(tie) 2	(tie) 2	(tie) 2	(tie) 2

Part 1: Economic Freedom Ratings for the Components and Various Area and Summary Indexes: 1981, 1985, 1989, 1993, 1994, 1995, 1998 estimate.

	IPEF	Ranking
1981	5.5	5
1985	5.5	4
1989	5.3	5
1993	4.3	7
1994	4.6	6
1995	4.9	5
1998	5.0	5
			IPEF (1998 est.):		4.9	Trend:	Increasing

Components of Economic Freedom
			1981	1985	1989	1993	1994	1995	1998 est.
I. Government Operations and Regulations			5.6	5.5	5.3	3.7	3.9	4.8	5.0
(a) Consumption Expenditures (% of GDP)			6.0	5.0	4.0	3.0	4.0	4.0	5.0
(b) Government Enterprises and Guarantees			4.0	4.0	4.0	4.0	4.0	4.0	4.0
(c) Price Controls			6.0	6.0	6.0	6.0	6.0	6.0	6.0
(d) Regulatory Effort			6.0	6.5	7.0	2.0	2.0	5.0	5.0

II. Takings and Discriminatory Taxation			5.3	5.2	4.7	3.8	4.3	4.3	4.3
(a) Transfers and Subsidies (% of GDP)			9.0	8.0	7.0	6.0	7.0	8.0	8.0
(b) Top Marginal Tax Rate and Threshold			1.0	0.0	4.0	4.0	4.0	4.0	4.0
(c) Direct Corporate Taxes (% of profits)			6.0	8.0	4.0	1.0	2.0	1.0	1.0
(d) Provincial Sales Tax			6.0	6.0	4.0	4.0	4.0	4.0	4.0

III. Interprovincial Trade			6.1	6.1	6.1	6.1	6.1	6.1	6.1
(a) Occupational Licensing			4.0	4.0	4.0	4.0	4.0	4.0	4.0
(b) Marketing Boards			8.0	8.0	8.0	8.0	8.0	8.0	8.0

IV. Regulation of the Labour Market			5.0	6.0	7.0	7.0	7.0	7.0	7.0
(a) Minimum Wage Legislation			5.0	6.0	7.0	7.0	7.0	7.0	7.0

Economic Freedom Rating			5.5	5.5	5.3	4.3	4.6	4.9	5.0
Ranking of Province			5	4	5	7	6	5	5

Components of Economic Freedom

I. Government Operations and Regulation
	1981	1985	1989	1993	1994	1995	1996	1997
(a) Consumption Expenditures (% of GDP)	21.5	24.5	25.7	27.0	26.4	24.9	24.2	—
(b) Government Enterprises & Guarantees	51.9	43.4	41.1	45.6	42.4	—	—	—
(c) Price Controls	Price controls are often applied in energy markets; marketing boards often influence prices of agricultural products; controls are also present in a few other areas, but most prices are determined by market forces
(d) Regulatory Effort	0.251	—	0.243	—	—	0.349	0.293	—

II. Takings and Discriminatory Taxation
(a) Transfers and Subsidies (% of GDP)	4.2	5.0	5.5	6.3	6.1	5.2	—	—
(b) Top Marginal Tax Rate and	56.0	57.7	49.7	50.4	50.4	50.4	50.4	50.4
Threshold at Which It Applies	$53,377	$62,161	$70,330	$63,315	$63,396	$63,438	$63,438	$63,409
(c) Direct Corporate Taxes (% of profits)	29%	24%	33%	38%	38%	40%	40%	40%
(d) Provincial Sales Tax	5.0	5.0	7.0	7.0	7.0	7.0	7.0	7.0

III. Interprovincial Trade
(a) Occupational Licensing	44.0	—	—	—	—	—	—	47.0
(b) Marketing Boards	10.2	9.7	10.8	9.1	9.5	9.5	9.4	—

IV. Regulation of the Labour Market
(a) Minimum Wage Legislation	56.9	52.5	46.3	47.3	45.2	45.6	45.1	—

Click Here to View Key to Areas and Components of the Index and the Weights Assigned to Each

Manitoba:Recent Economic Indicators
Population 1996 (in thousands):1,144 Average annual rate of change 1985–1996:0.55 percent
Real per-capita GDP 1996: $18,344 Average rate of economic growth 1985–1990:1.5 percent; 1991–1996:0.5 percent

	1981	1982	1983	1984	1985	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995	1996
Annual change (%) in population		0	1	1	1	1	1	0	0	0	0	0	1	1	1	1
Annual change (%) in real GDP		-1.5	2.2	11.8	3.8	1.3	1.8	-0.8	2.4	2.9	-4.7	1.2	0.9	3.7	2.4	2.9
Annual change (%) in real GDP (average of other provinces)		-3.4	4.1	5.8	4.5	3.6	4.3	5.2	2.4	-0.3	-1.7	0.8	2.3	4.1	2.3	1.4
Annual change (%) in real per-capita GDP		-2.5	0.8	10.7	2.8	0.5	1.2	-1.2	2.3	2.7	-5.2	0.7	0.4	3.2	1.8	2.2
Annual change (%) in real per-capita GDP (average of other provinces)		-3.3	3.1	3.2	3.4	2.2	2.9	3.1	1.3	-.03	-1.2	-0.6	1.6	2.8	0.9
Ratio of business investment to GDP (%)	17	14	15	15	16	18	16	16	15	14	13	12	13	13	12	13
General government budget deficit (-) or surplus (+) (% of GDP)	-1	-4	-3	-2	-2	-3	-2	0	-1	-2	-1	-3	-2	-1	+1
Unemployment Rate (%)	6	8.5	9.5	8.4	8.2	7.7	7.5	7.9	7.6	7.3	8.9	9.7	9.3	9.3	7.5	7.5

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