With the approval of two major pipeline projects, proponents of policies aimed at reducing income inequality should rejoice: They just (unwittingly) won the jackpot. They should regard these wealth-creating projects as one of the best and easiest ways to create good, sustainable jobs, foster wage growth, and reduce income inequality.
The energy sector has contributed to reducing the gap between the rich and the poor in resource-rich provinces. According to a 2015 study by Nicole Fortin and Thomas Lemieux of the Vancouver School of Economics at UBC, inequality declined in Alberta and Saskatchewan over the 1999-2013 period.
Furthermore, “wages in Newfoundland, Saskatchewan and Alberta grew much faster than in other provinces,” especially for low-skilled workers, who saw substantially faster growth in wages than their university-educated counterparts. In Ontario, the average wage grew by 23 percentage points less than in these three provinces since the late 1990s, where employment in the extractive resource sector soared by 50 per cent.
Fortin and Lemieux estimate that the “boom” in this sector is responsible for two thirds of the difference in wage growth between these provinces and the rest of Canada. Politicians can only dream of designing redistributive measures that could have such a large, positive impact on workers. All of this without raising taxes or creating costly new programs.
According to industry estimates, the two projects just approved by Ottawa, Enbridge’s Line 3 and Kinder Morgan’s Trans Mountain pipeline, should directly create 22,000 jobs during the construction phase and thousands more indirectly through spillover effects in the service sector. That is, thousands upon thousands of Canadian families benefiting from greater opportunities and better wages.
And these are not “McJobs” but rather high-paying work. Companies also often provide apprenticeship programs and courses to employees wanting to improve their skillsets, which have a lasting positive impact on these workers’ lives.
Of course, the government’s announcement left some things to be desired. Enbridge’s $7.9‑billion Northern Gateway project is now most probably dead, and TransCanada’s Energy East pipeline is still stalled because of aggressive activism and excruciating red tape. That’s a total of 11,000 to 12,000 annual jobs not created during the construction phase.
It is no secret that the Maritime region isn’t living through the best of times. The Energy East project would be a great help during this period of economic hardship. In New Brunswick, the Maritime province where the economic benefits of this pipeline would be most concentrated, the effect on GDP is estimated at $3.2 billion during the first nine years and another $3.3 billion during the following 20 years, for a total of over $6.5 billion added to the economy of this province alone.
But we should go beyond the regionalist approach. Provincial governments shouldn’t act like jealous siblings. We’re all winners when Saskatchewan and Alberta are thriving, and we’re all losers when huge infrastructure projects like these are gridlocked. We should strive to make our country as a whole more prosperous, even if it means that some provinces are better off for a while. One day, Ontario or Quebec might need Alberta and Saskatchewan to approve some other great project. They will assuredly remember how the Canadian family came together to help them create wealth and reduce inequality. Or how it didn’t.
Jasmin Guénette is vice president, and Karl-Javid Lalonde-Dhanji is analyst, current affairs, at the Montreal Economic Institute. The views reflected in this op-ed are their own.
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