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JANUARY- 
BRUARY 1967 
VOL. 5 
No. 1-2 






DEPARTMENT OF ECONOMICS AND 


DEVELOPMENT 


Hon. Stanley J. Randall, Minister 


Stuart W. Clarkson, Deputy Minister 



HA 


747 

0656 

1967 

VOL.5 
NO.1-2 









CONTENTS 


The Economy in 1966 .1 

Total Production.3 

Manufacturing.4 

Mining.5 

Agriculture.6 

Forest-Based Industries.7 

Capital Investment.7 

Construction.8 

Foreign Trade.10 

Finance.11 

Employment.13 

Income.14 

Prices.15 

Sales.16 

Economic Indicators.17 


The Ontario Economic Review is prepared and edited 
monthly in the Economic Analysis Branch of the 
Department of Economics and Development and is 
available free of charge. The review is intended to 
provide current information on economic activity 
in Ontario and to act as a forum for the results of 
research in the public service on matters affectmg 
the Ontario economy. The signed articles reflect the 
opinions of their authors and do not necessarily rep¬ 
resent the views of the Economic Analysis Branch. 
All correspondence should be directed to the Editor, 
Ontario Economic Review, Office of the Chief Econ¬ 
omist, Parliament Buildings, Toronto 5. 

















THE ECONOMY: 

A LOOK BACK AT 1966 


All in all, it was a good year . . . 

Like the immediately preceding years, 1966 on the 
whole was a year of impressive growth. Gross prod¬ 
uct, manufacturing shipments, exports, income and 
employment all enjoyed gains which took them to 
record high levels. Ontario and Canada as a whole 
both shared in this continued growth of prosperity 
— a growth which has now made the period 1961 to 
1966 one of the longest expansions of the twentieth 
century. 

Several stimuli were behind this upward move¬ 
ment in 1966. Foremost of these was capital invest¬ 
ment, as indeed it has been for the past few years. 
Business investment rose close to 15 per cent from 
1965 to 1966, as non-residential construction activity 
in particular continued its high-speed advance. Ex¬ 
ports were another driving force. Canada’s sales 
initiative and generally buoyant world conditions 
brought Canadian domestic exports up past the 
$10 billion mark, an annual gain of over 18 per cent. 
The other stimulus was government spending which, 
including all levels of government, increased ap¬ 
proximately 15 per cent. Provincial and municipal 
government spending increased slightly more rapid¬ 
ly than that of the federal government. It was the 
borrowings from the Canada and Quebec pension 
plan funds that permitted these two levels of gov¬ 
ernment to continue their substantial capital expen¬ 
diture programs during a year of rather tight money 
conditions. 

These stimuli produced in Canada a record value 
for gross national product. In 1966 Canada’s GNP 
soared to $57.8 billion, 10.9 per cent higher than the 
$52.1 billion of 1965. Ontario’s gross provincial prod¬ 
uct approached $23 billion at the same time, up 
almost as much in percentage terms. For both 
Ontario and Canada as a whole, however, an unusu¬ 
ally high rate of increase in prices reduced real 
growth to between approximately five and six per 
cent. Despite the fact that Ontario has less than 35 
per cent of the nation’s population, the provincial 
total^ for wages and salaries reached $10.4 billion 
last year — over 40 per cent of the Canadian figure. 
Estimated per capita personal income was approxi¬ 
mately $2,500, one.of the highest figures of all the 


provinces. Another indication of Ontario’s favour¬ 
able performance is the record value recorded in 
manufacturing shipments. These increased almost 
10 per cent, rising from $17.6 billion in 1965 to $19.3 
billion in 1966. And no list of Ontario’s accomplish¬ 
ments could omit the impressive employment record 
of last year: a four per cent increase in the labour 
force was matched by a four per cent increase in 
employment — leaving an unemployment rate of 2.5 
per cent, well below the average of 4.2 per cent 
recorded for the rest of the nation. 

. . . but it was a year with a difference 

While overall growth in Ontario — and Canada — 
was admittedly quite impressive, 1966 was not a 
year free of problems. In fact, a look at develop¬ 
ments during the year unfolds a fairly different pic¬ 
ture of the economy, a picture that annual statistics 
are not able to give. 

Were it necessary to attach a label to the econ¬ 
omy’s performance, perhaps it would be named the 
year of readjustment. In the early years of the cur¬ 
rent expansion there was for the most part a certain 
degree of slack — slack which could be taken up as 
the economy heightened the pace of its advance. 
But by 1965 there were visible signs that this slack 
had disappeared: unemployment was down to a very 
low figure, and the heightened demands in the 
economy began to push prices upward at a faster 
and faster rate. These signs evoked some concern 
about the gradual build-up of inflationary pressures, 
and led to more and more credit tightening during 
1965. One of the first visible effects on the economy 
was a shift away from mortgage lending, producing 
a noticeable decline in the number of housing starts 
in the fall. Nevertheless, the pressures of demand 
remained strong right to the end of 1965. 

It was in this setting that 1966 began. The econ¬ 
omy was moving ahead too quickly, in effect ad¬ 
vancing at an unsustainable rate. There were visible 
signs of the frantic pace of the economy: new non- 
residential construction (seasonally adjusted) in the 
first quarter of the year rose over eight per cent from 
the last quarter of 1965; and exports in the first few 
months, stimulated by the Canada-United States 


1 


Automotive Free Trade Agreement, were 20 per 
cent higher than in corresponding months of 1965. 
Contributing to this was a jump in personal expen¬ 
diture beyond the very high level reached in the 
fourth quarter of 1965. (A small part of this increase 
could be attributed to the high level of retail sales in 
Ontario in anticipation of a two per cent increase 
in Ontario’s retail sales tax.) The combined effect 
was to produce a GNP registering the strongest 
quarterly gain of the current expansion. Unfortu¬ 
nately there was another effect — the largest quar¬ 
terly price increase in several years. While much of 
the increase was attributable to the sharp rise in 
the food price index — which was largely due to 
certain independent factors — there were conspicu¬ 
ous increases in most of the other categories. 

With this apparently inflationary situation facing 
the federal government, the decision was taken 
to supplement monetary tightening with other re¬ 
straints. In his March budget the Minister of Fi¬ 
nance, Mitchell Sharp, put into effect a new device 
for postponing business investment. A five per cent 
refundable tax was imposed on corporation cash 
profits in excess of $30,000, payable for 18 months 
beginning May 1st. In addition to this, capital cost 
allowances on most building and machinery items 
were reduced for an 18 month period, and personal 
income taxes were increased on average and above- 
average incomes (reduced slightly on low incomes), 
offsetting the tax cuts of the previous year. A request 
that business postpone capital outlays was accom¬ 
panied by a statement of the federal government’s 
intention to postpone 10 per cent of its own con¬ 
struction program for the fiscal year 1966-67. 

The immediate effect of these measures was to 
produce a levelling out in economic activity in the 
second quarter of the year. Production reached a 
plateau, as the Index of Industrial Production re¬ 
mained virtually stable. Hardest hit was the dur¬ 
ables manufacturing sector, due to a sharp decline 
in automobile sales. (While the Canadian measures 
of restraint may have contributed to this, the drop 
in sales was actually a North-America-wide phenom¬ 
enon.) Inventories mounted very sharply in the 
April-to-June period as retail sales plummeted. 

The rate of increase in Canada’s business invest¬ 
ment began to react only slowly to these restraining 
forces. In fact, investment in new plant and equip¬ 
ment increased three per cent from the first quarter. 
Non-residential construction, however, was hit hard 
and increased less than one per cent. The quarterly 
rate of growth in CNP (seasonally adjusted at an¬ 
nual rates) dropped from 4.6 per cent in the first 
quarter to 2.2 per cent in the second. 


The third quarter of the year presented a rather 
mixed picture, although the net effect was a very 
minimal increase of 0.6 per cent in GNP over the 
second quarter (all of this was accounted for by 
price increases). Personal expenditure on consumer 
goods and services rose over three per cent, in fact 
the largest quarterly gain of the current expansion, 
both in value and real terms. Increased spending on 
new cars was one major contributor to this gain, and 
was the result of special discounts offered to clear 
existing inventories (before the new models arrived) 
and the earlier-than-usual introduction of new model 
cars. The demand for other goods and services 
showed a marked improvement as well, as did the 
demand for goods for export. 

But this improvement was not at all reflected in 
increased industrial production. Large expenditures 
on consumer goods were instead met by reducing 
inventories (and by increasing imports). The Index 
of Industrial Production actually declined, though 
admittedly because of the output-curtailing effects 
of strikes, particularly in the mining industry. Manu¬ 
facturing production itself barely managed to re¬ 
main at the level of the previous quarter. Business 
investment dropped about three per cent, with large 
declines experienced in both residential and non- 
residential construction. 

The final few months of the year saw the Cana¬ 
dian economy turn upward from this period of 
virtually no growth. Although new residential 
construction was still hampered by lack of funds 
and continued to decline, business investment in 
plant and equipment and non-residential construc¬ 
tion improved. Consumer spending rose too, but not 
at the same rate as it had in the third quarter. Once 
again it was a sagging car market that offset 
increased purchases of non-durables and services. 
Business non-farm inventories increased slightly. 

The steady rise of prices, which had been the 
object of widespread concern throughout much of 
the year, finally settled down to a more moderate, 
though still not small rate of increase. Food prices in 
fact showed almost no increase at all in the last part 
of 1966. 

The year of readjustment 

This quarterly approach to developments in the econ¬ 
omy does indeed reveal facts otherwise concealed in 
the annual aggregates. It is now possible to see 1966 
as a year which began with economic growth climb¬ 
ing at a tremendous — and unsustainable — pace; a 
year in which there followed a sharp curtailment of 
expansion, with production reaching a plateau. 


followed by a gradual movement toward re-estab¬ 
lishing a moderate and sustainable rate of expansion. 
By the end of the year there were signs that the 
readjustment was under way, but that some time 
would have to pass before discovering if the sus¬ 
tainable rate of growth attained was also the desir¬ 
able rate. The problem continues to be one of select¬ 
ing policies which on the one hand promote economic 
growth, but which on the other do not give rise to 
rapid price increases. 

In the first quarter of 1966, when the economy 
was expanding extremely rapidly and when policies 
of restraint were announced, some disagreement was 
voiced as to the suitability of these new measures. 
The feeling was that the economy could not sustain 
its rapid growth in any event, and that it would 
on its own accord, under existing tight money 
conditions, begin to slow down. Introducing new 
policies of restraint on investment, it was maintained, 
would only serve to dampen the economy beyond 
the desirable point, bringing the expansion to a 
standstill. From the developments of the second and 
third quarters it is quite apparent that this did in¬ 
deed take place. It is possible to debate the extent to 
which the slowdown resulted from cooling and not 
from the negative effects of industrial disputes; but 
there can be little doubt that the dampening mea¬ 
sures did contribute significantly to a rather marked 
cutback in the growth of the economy. 

A major part of the argument against the restric¬ 
tion of investment was based on the contention that 
investment in plant and equipment and construction 
had to be sustained at an adequate level to keep 
productivity increases from slowing down in the 
long run. Signs that existing productivity (or output 
per man-year) was not increasing fast enough were 
evident last year. In fact, average increases in wages 
and salaries considerably exceeded gains in produc¬ 
tivity. The general decline of economic activity in 
the second and third quarters resulted in a produc¬ 
tivity increase of only approximately one per cent in 
the non-agricultural sector. This was considerably 
less than the three per cent advances of 1964 and 
1965, and below the 2.3 per cent target for annual 
growth set by the Economic Council of Canada. 

These considerations point out the problems that 
can and have arisen in the economy. They also em¬ 
phasize that there is a need for continued improve¬ 
ment in the economy. While the readjustment of 
the latter half of the year put the economy in the 
right direction, there is still some way to go before 
economic growth is re-established at a desirable 
level. The least that can be said of the experience 
of the past year is that it has demonstrated that care 


must be taken to maintain and increase our pros¬ 
perity. Without this care the economy faces the 
alternative problems of either inadequate growth or 
rapidly rising prices. 

Total Production 

Rising prices did much to bring both Canada’s gross 
national product and Ontario’s gross provincial 
product to levels considerably above the previous 
year. In Canada, CNF rose to $57,781 million, 10.9 
per cent higher than the $52,109 milHon recorded in 
1965; however, real growth — discounting the 4.6 
per cent increase in prices — only reached 5.9 per 
cent. Thus, although the actual growth in CNF was 
greater than it had been over the past several years, 
real growth was below that of 1964 and 1965, and 
only a little above that of 1963. 

SEASONALLY ADJUSTED 



IMl 1M3 1M4 ms IMS 


Ontario’s gross provincial product approached $23 
billion last year, having reached $20.8 billion the year 
before. Real growth was more than five per cent. 
While this real growth, like that of Canada’s, was 
below the level of the past few years, a look at the 
general trend of the 1960’s indicates that real growth 
in 1966 was just about the same as the average 
annual growth of the 1960-1966 period. 

Canada’s real non-agricultural production, as mea¬ 
sured by the Indexes of Real Domestic Froduct,^ 
increased 6.3 per cent in 1966. 

IThe indexes, which are preliminary for 1966, are based on 
1949 = 100. Real domestic product at factor cost (the sum 
of the unduplicated output of all industries located in 
Canada) is an elaboration of the supply side of the National 
Accounts; it differs conceptually from constant dollar expen¬ 
diture on GNP by (1) including income paid to non¬ 
residents, (2) excluding income received from non-residents, 
and (3) excluding “indirect taxes less subsidies”. In addi¬ 
tion, statistical differences may exist between these two 
measures. 


3 
















The growth of goods production surpassed that of 
service producing industries, the former rising 7.5 
per cent and the latter 5.2 per cent. 

The largest advance of all industry groups was 
recorded in electric power and gas utilities, which 
rose 12.4 per cent. Some indication of a similar gain 
in Ontario is given in the accompanying chart on 
primary energy demand in Ontario, based on statis¬ 
tics provided by the Ontario Hydro-Electric Power 
Commission. 


SEASONALLY ADJUSTED 


J 

LION KWH 

ER YEAR 

















*5 






FRIM 

ARY ENERGY 

DEMAND - C 

>NTARIO (0.1 

I.P.C.) 


ll I I I I 11 11 I I I I 11 I I I 11 I I I ll 111 I I I I I 11 1 11 I I I I I I I I I I I I I I 11 I I M I 

J J J J J 

IM3 1M3 1964 IMS 1966 


Data on manufacturing shipments — the one current 
indicator providing provincial statistics on manufac¬ 
turing — reveal that last year 52.6 per cent of all 
manufacturing shipments originated in Ontario. For 
Ontario the 1966 figure of $19,324.8 million repre¬ 
sented an increase of 9.8 per cent from the previous 
year; for Canada the $36,725.5 million figure repre¬ 
sented a gain of 9.3 per cent. 

SEASONALLY ADJUSTED 



INDEX OF MANUFACTURING PRODUCTION - CANADA 


ll 11 11 111 I 11 I . 111 111 ll111 I 11 1111ll I I 111 11 I I 1 1 111 I I I 11 11 I 

J J J J J 

1962 1963 1964 1965 1966 


The second highest growth in Canada’s industrial 
groups was a 10.4 per cent increase in the relatively 
small fishing and trapping category. Transportation, 
storage and communication, one of the important 
service-producing categories, was next at just over 
eight per cent; good gains in the transportation and 
storage sectors were slightly offset by a somewhat 
lower rate of growth in the communication sector. 

Manufacturing industries advanced 7.3 per cent 
last year, with equal rates of growth recorded in 
both durables and non-durables. Construction and 
mining followed with gains of 7.0 per cent and 6.8 
per cent respectively. Forestry and finance, insur¬ 
ance and real estate both recorded increases of over 
five per cent, while trade and community, recrea¬ 
tion, business and personal service followed with 
over four per cent. Public administration and 
defense came last with real growth of just less than 
three per cent. 

Though complete statisties on real agricultural 
production are not yet available, it is believed that 
the gain ranks with the other fastest-growing indus¬ 
trial groups. 

Manufacturing 

The signifieanee of manufacturing to Ontario is 
reflected in the fact that the province accounts for 
over one half of the nation’s manufacturing activity. 


Last year’s 7.3 per cent gain in Canada’s manu¬ 
facturing production, as measured by the Index of 
Manufacturing Production, was not one shared 
equally by all manufacturing industries. Some, like 
electrical apparatus and supplies, expanded signi¬ 
ficantly, while others like non-metallie mineral 
products were barely able to register a gain. 

Durables in particular were hard hit, at least in 
relation to the performances of reeent years. Where¬ 
as durables had been expanding more rapidly than 
non-durables, last year both advanced 7.3 per cent 
in real terms. For non-durables this meant an 
improvement over 1965’s gain of just over six per 
cent. But for durables it was a come-down from a 
gain of 11.5 per cent in 1965. In fact it was the 
smallest percentage gain since 1961. 

One major difference last year was the disap¬ 
pointing growth of the transportation equipment 
group, particularly motor vehicles and parts. The 
seeond quarter slump in auto sales and subsequent 
production adjustment led to approximate annual 
gains of only seven per cent in motor vehicles and 
nine per cent in motor vehicle parts, small gains in 
comparison to the more than 20 per cent increases of 
the previous year. These gains were relatively small 
despite the near tripling of automotive exports, 
directly attributable to the Canada-United States 
Automotive Free Trade Agreement. With domestic 


4 





























sales barely advancing, a large part of the existing 
demand was met by the reduction of inventories. 

In terms of the actual number of motor vehicles 
produced in Canada, there was an increase of 5.4 
per cent, as the number rose from 855,476 units in 
1965 to 902,096 units in 1966. 

Another group of durables, iron and steel prod¬ 
ucts, suflFered as a result of the second quarter 
decline. The 1965 increase recorded in this group 
was cut in half in 1966 and was recorded at 5.7 per 
cent. Steel ingot production in fact declined by 0.5 
per cent, to 9,814,065 tons. 

The one component of durables which performed 
well was electrical apparatus and supplies; it in¬ 
creased 15.5 per cent last year. The recorded gains 
in the remaining durables were small, ranging from 
just over two per cent for wood products to 4.7 per 
cent for non-ferrous metal products. 

Leading the non-durables (aside from the 10.3 
per cent gain in miscellaneous manufacturing) was 
the chemicals and allied products group, up 9.6 per 
cent. Other above-average gains were in paper 
products (nine per cent) and products of petroleum 
and coal (7.4 per cent). Rubber products industries, 
enjoying a high demand for their products, includ¬ 
ing replacement tires, rose 8.9 per cent. Printing, 
publishing and allied industries equalled the non¬ 
durables average at 7.3 per cent. Below average were 
the gains in foods and beverages ( 6.1 per cent), 
tobacco and tobacco products (six per cent), textiles 
(5.6 per cent), clothing (4.7 per cent) and leather 
products ( 1.2 per cent). 

Mining 

Ontario’s mineral production in 1966 fell 2.8 per 
cent short of the previous year’s revised record level 
of $992.8 million. According to DBS preliminary fig¬ 
ures, the total value of mineral production was 
$964.5 million. 

Throughout the rest of Canada the mining indus¬ 
try enjoyed a fairly good year as the value of min¬ 
eral production rose about 10 per cent. Behind this 
upward movement was the expansion of iron ore 
production in Newfoundland, copper and asbestos 
in Quebec, potash and crude petroleum in Saskat¬ 
chewan, crude petroleum in Alberta, copper in 
British Columbia and lead and zinc in the North¬ 
west Territories. The decline in Ontario, as well as 
in Manitoba and the Yukon, left the whole of Canada 
with a 6.9 per cent gain over 1965. The value of 
production rose from $3,745.5 million in 1965 to 
$4,003.8 million in 1966. 

It is significant to note, of course, that the increase 
in the dollar value of Canada’s mining production 


was due in part to rising prices. Copper, for instance, 
is one metal whose price increase significantly af¬ 
fected the overall picture. The increase in the value 
of Canada’s copper production represented about 
one third of the increase in Canada’s entire mineral 
production. Yet while the value of copper produc¬ 
tion was up $83.0 million or over 20 per cent, the 
volume of production, expressed in pounds, was up 
less than two per cent. 

One important factor aflFecting Ontario’s mining 
industry was the strike at the International Nickel 
Company of Canada in Sudbury. Nickel is a very 
important part of Ontario’s mining industry; except 
for 1958 and 1959 when uranium production was 
extremely high, nickel has always been the leading 
mineral in Ontario. The effect of the strike was to 
cut the province’s nickel production by $25 million 
— almost as much as the $28 million decline in the 
whole of Ontario’s mining industry. 

Five other metals in addition to nickel play a very 
important part in shaping developments in Ontario 
in both the metals group and the mining industry 
as a whole. In 1966 these six metals — nickel, copper, 
iron ore, gold, uranium and the platinum group — 
accounted for almost three quarters of all mineral 
production in the province. Declines in all but one of 
these were instrumental in bringing the total down 


MINERAL PRODUCTION IN ONTARIO 



1965 

1966 

1966/65 

% 

Change 


$ Million 

Metals 

776.0 

747.0 

— 3.7 

Nickel 

316.3 

291.2 

— 8.0 

Copper 

161.7 

188.0 

16.3 

Iron Ore 

94.2 

83.0 

—11.9 

Cold 

73.4 

62.1 

—15.4 

Uranium (U 3 O 8 ) 

47.2 

40.5 

—14.2 

Platinum Group 

36.1 

31.2 

—13.5 

Non-metallics 

23.1 

22.6 

— 2.1 

Salt 

15.5 

14.3 

— 7.5 

Fuels 

8.9 

10.0 

12.0 

Natural gas 

4.9 

5.8 

18.7 

Crude petroleum 

4.1 

4.3 

4.1 

Structural Materials 

184.7 

184.8 

0.1 

Sand and gravel 

63.4 

61.9 

— 2.3 

Cement 

50.1 

51.3 

2.5 

Stone 

32.3 

31.0 

— 4.0 

Clay products 

25.1 

27.1 

7.8 

Total Minerals 

992.8 

964.5 

— 2.8 


Source: DBS, 1966 Preliminary Estimates. 


5 







from 1965. The table on page 5 indicates the extent 
of the decline in each of these metals, as well as in 
the other major groups of minerals. 

Even copper, Ontario’s second ranking metal and 
the one major metal to increase in value, fared 
poorly last year. The entire 16.3 per cent increase in 
value was due to significantly higher copper prices. 
The number of pounds produced actually declined 
by just over three per cent. Iron ore production 
dropped almost 12 per cent; at the same time the 
iron mining industry’s capacity to produce iron pel¬ 
lets remained at a little over four million tons a year. 

The decline in gold mining last year was a con¬ 
tinuation of a trend started in the early 1960’s. Since 
1960, when the amount of gold mined annually was 
2.7 million ounces, production has dropped more 
than one third, or more than one million ounces. The 
problem continues to be one of a fixed price for gold 
in the face of mounting production costs, along with 
a shortage of experienced underground workers. 
Several producers shut down because of a lack of 
economic ore. 

Although uranium production continued its sharp 
decline from the record high of almost $270 million 
in 1959, there were hopeful signs of a revival in the 
near future. One such sign was an Ontario Hydro 
contract awarded to Rio Algom Mines Limited and 
Eldorado Mining and Refining Limited for defivery 
of up to 1,100 tons of uranium oxide up to 1973 and 
a further 5,500 tons up to 1980; another was the 
agreement between Rio Algom and the United 
Kingdom Atomic Energy Commission for the sale of 
two million pounds of uranium oxide a year from 
1972 to 1980. 

The last major metal, the platinum group, is de¬ 
rived from the copper refining process. A lower 
volume of production of the latter metal was there¬ 
fore largely responsible for the decline in platinum 
production. 

Aside from the 3.7 per cent decline in Ontario’s 
metal production, there was a decline of 21 per cent 
in non-metallics and virtually no change in struc¬ 
tural materials. The one category which did rise im¬ 
pressively was fuels, the smallest of the four basic 
groups. The increase in natural gas production was 
the main contributor to its 12 per cent increase in 
value. 

Agriculture 

1966 was a productive year for Ontario farmers as 
total farm cash receipts again passed the billion 
dollar mark, rising to $1,204.5 million. 

The value of field crop production in the province 
rose to $602 million in the past year, an increase of 


8.9 per cent over the 1965 total of $553 million. This 
improvement reflected generally favourable condi¬ 
tions and a slight increase in the acreage under field 
crops — a total of 7.8 million acres. 

However drought conditions in July did affect 
crops in some areas of Ontario, principally in the 
Niagara Region, the Georgian Bay Region, and in 
Prince Edward and Frontenac counties. 

Winter wheat, soybeans, and shelled corn pro¬ 
duced record yields per acre during the past season. 

Total production of the four principal feed grains 
in Ontario (oats, barley, mixed grains, and shelled 
corn) is estimated at 184.6 million bushels in 1966, 
down 9.6 per cent from 1965. This decrease was due 
to a large reduction in acreage under oats and mixed 
grains and a lower yield per acre for each crop 
except shelled corn. 

An excellent crop of good quality hay was har¬ 
vested in Ontario last year. Total production is esti¬ 
mated at 7,219,000 tons, an increase of 32 per cent 
over the unusually poor 1965 season. 

The soybean crop was the largest in Ontario’s 
history, both in yield per acre (32.3 bushels esti¬ 
mated average) and in total production (estimated 
at 8,656,000 bushels). 

A sharp increase in the acreage under tobacco 
yielded a total production of about 215 million 
pounds of flue-cured tobacco, 38 per cent more than 
the previous year. However the yield was somewhat 
lower than expected due to an early frost. Low 
inventories and strong demand for cigarettes in 
Canada and abroad produced a high average selling 
price of 71.36 cents per pound for the 1966 flue- 
cured tobacco crop. 

Looking at livestock, graded cattle sales at public 
stock yards fell about seven per cent to 495,525 in 
1966 from 529,534 the previous year. However cattle 
prices were higher; average price per hundred¬ 
weight for choice steers rose from $25.20 in 1965 to 
$27.05 in 1966. 

Hog sales at public stock yards increased from 
434,553 in 1965 to 436,050 in 1966. Average prices 
for grade A dressed hogs rose slightly from $33.40 
per hundredweight in 1965 to $33.90 in 1966. 

Total milk production in Ontario during 1966 was 
about 6.8 billion pounds, with a cash value of $248 
million. 

In the 1966 dairy year, agreement was reached be¬ 
tween the Ministers of Agriculture for Canada, On¬ 
tario and Quebec with respect to the federal and 
provincial price support and subsidization programs 
for manufacturing milk. For the remainder of that 


6 


dairy support year, Ontario was to institute a pro¬ 
vincial subsidy on the basis of 25 cents per hundred 
pounds for manufacturing milk. Quebec was to 
continue its existing subsidy policy. The Ministers 
agreed that the Canadian Dairy Commission should 
assume complete responsibility for support and sub¬ 
sidization of manufacturing milk at the beginning 
of the next dairy year on April 1, 1967. The support 
program to be established at that time was to in¬ 
clude an increase in price of at least 25 cents per 
hundredweight, basis 3.5 per cent milk fat. It was 
agreed that the provinces of Ontario and Quebec 
would withdraw subsidies as of March 31, 1967; 
and that it was essential that provincial mechanisms 
be in effect that would assure that the benefits of 
the program accrue to the producers. 

Ontario produced 103.4 million pounds of butter 
during 1966, valued at $63,395,000. Cheddar cheese 
production reached 89.3 million -pounds and was 
valued at $30,781,000. 

Adverse weather conditions affected fruit and 
vegetable crops in many areas in Ontario during the 
past year. 

Of the nine principal fruit crops grown in the 
province five suffered declines in production in 1966 
while four — apples, cherries, peaches, and pears — 
showed an increase of eight per cent, 21 per cent, 
seven per cent and 15 per cent respectively over 
1965. 

Vegetable crops suffered from a lack of moisture 
in most areas of the province with the exception of 
Essex and Kent counties. 

Asparagus production in 1966 is estimated at 
3,869,000 pounds, down seven per cent from 1965. 
Tomatoes for fresh market were down 12 per cent 
to 1,260,000 bushels. Planted acreage in onions de¬ 
creased to 4,600 acres, while production dropped 34 
per cent to an estimated 61,000 tons in 1966. 

Forest-Based Industries 

Ontario’s pulp and paper industry continued a high 
level of production, occupying fourth rank among 
the manufacturing industries. In 1966 the woodcut 
increased by an estimated 10 per cent compared 
with 1965 and the volume of pulp produced rose by 
an estimated eight per cent. The volume of paper 
and paperboard produced rose an estimated 10 per 
cent; sawmills also increased their output by 10 
per cent. 

In the newsprint industry installed capacity passed 
the two million ton mark. Output of newsprint is 
estimated to have been 10 per cent larger than in 
1965. Prices of paper, newsprint and lumber rose 
last year. 


The selling value of factory shipments originating 
in the wood industries (excluding furniture) was 
more than $200 million. The forest-based industries, 
employing about 41,000 in the production of pulp, 
paper and paper products and 36,000 in the wood 
industries, paid out salaries and wages in excess 
of $300 million. 

While no new mills were established in the pulp 
and paper industry in 1966, major expansions were 
completed or were under way in the existing mills. 
These expansions were particularly beneficial be¬ 
cause they took place in the Kraft paper sector of 
the industry; the production of Kraft paper makes 
possible a wider utilization of tree species. 

The total value of shipments in the pulp and 
paper industry is estimated to have reached the 
$650 million mark. 

Capital Investment 

Capital investment was one of the prime moving 
forces in the Canadian economy last year, outpacing 
the growth of CNP. Public and private investment 
reached $14,897 million, an increase of 15.7 per 
cent from the $12,865 million of 1965. Business 
gross fixed capital formation, making up over 80 per 
cent of this investment, increased 14.7 per cent, al¬ 
most the same rate. This represented the combined 
effect of a three per cent decline in residential con¬ 
struction and increases of 19.6 per cent and 16.0 per 
cent in new non-residential construction and new 
machinery and equipment respectively. 

As a percentage of GNP, business capital invest¬ 
ment continued to rise through the first half of 1966. 
Expo and other projects undertaken across the na¬ 
tion played a part in contributing to this high rate 
of growth. However the measures introduced by the 
federal government to curb what were deemed in¬ 
flationary pressures soon affected the growth of this 
investment. The first measures to delay capital out¬ 
lays came in the March budget with the introduction 
of a five per cent refundable tax on corporate cash 
profits above $30,000, temporarily reduced busi¬ 
ness depreciation allowances on most building and 
machinery items, and a delay in a proposed five per 
cent cut in the federal sales tax on production 
machinery. High borrowing costs as. well as high 
construction costs were further disincentives. The 
effects of these disincentives became evident in the 
third quarter of the year. Business fixed capital in¬ 
vestment (seasonally adjusted at annual rates) de¬ 
clined; as a percentage of GNP it dropped from 21.4 
per cent in the second quarter to 20.7 per cent in the 
third, due to declines in both residential and non- 
residential construction. 


7 


NEW PRIVATE AND PUBLIC INVESTMENT IN ONTARIO 


Construction Machinery ir Equipment _ Total 




1965 

1966 

1966/65 

% 

Change 

1965 

1966 

1966/65 

% 

Change 

1965 

1966 

1966/65 

% 



$ Million 

$ Million 

$ Million 

Change 

1. 

Primary Industries and 
Construction Industry 

105.5 

179.3 

70.0 

254.0 

304.3 

19.8 

359.5 

483.6 

34.5 

2. 

Manufacturing 

280.3 

387.5 

38.2 

901.6 

975.4 

8.2 

1,181.9 

1,362.9 

15.3 


Food and Beverages 

21.6 

28.9 

33.8 

64.1 

63.3 

-1.2 

85.7 

92.2 

7.6 


Rubber 

2.9 

5.5 

89.7 

15.0 

19.9 

32.7 

17.9 

25.4 

41.9 


Textile 

18.2 

18.3 

0.5 

46.6 

39.6 

-15.0 

64.8 

57.9 

-10.6 


Clothing and Knitting Mills 

I.l 

2.7 

145.5 

4.9 

6.1 

24.5 

6.0 

8.8 

46.7 


Wood 

5.2 

4.1 

-21.2 

9.0 

8.7 

-3.3 

14.2 

12.8 

-9.9 


Furniture and Fixtures 

4.2 

6.9 

64.3 

3.6 

6.0 

66.7 

7.8 

12.9 

65.4 


Paper and Allied Industries 

24.4 

19.2 

-21.3 

83.9 

74.4 

-11.3 

108.3 

93.6 

-13.6 


Printing, Publishing and 

Allied Industries 

6.1 

6.8 

11-5 

15.6 

17.1 

9.6 

21.7 

23.9 

10.1 


Primary Metal 

27.3 

41.5 

52.0 

128.7 

152.9 

18.8 

156.0 

194.4 

24.6 


Metal Fabrieating 

24.1 

22.3 

-7.5 

52.7 

61.5 

16.7 

76.8 

83.8 

9.1 


Maehinery 

9.8 

17.4 

77.6 

25.2 

25.8 

2.4 

35.0 

43.2 

23.4 


Transportation Equipment 

44.8 

76.7 

71.2 

131.4 

136.7 

4.0 

176.2 

213.4 

21.1 


Electrical Products 

II.9 

24.2 

103.4 

28.8 

47.6 

65.3 

40.7 

71.8 

76.4 


Non-metallic Mineral Products 

10.5 

26.0 

147.6 

28.6 

54.8 

91.6 

39.1 

80.8 

106.6 


Petroleum and Coal Products 

12.6 

36.0 

185.7 

3.1 

2.7 

-12.9 

15.7 

38.7 

146.5 


Chemicals and Chemical 
Products 

44.0 

36.5 

-17.0 

111.6 

97.7 

-12.5 

155.6 

134.2 

-13.8 


Miscellaneous 

9.2 

10.8 

17.4 

19.2 

22.3 

16.1 

28.4 

33.1 

16.5 


Other Manufacturing 

2.4 

3.7 

54.2 

129.6 

138.3 

6.7 

132.0 

142.0 

7.6 

3. 

Utilities 

310.1 

413.1 

33.2 

379.8 

390.9 

2.9 

689.9 

804.0 

16.5 

4. 

Trade, Finance and 

Commercial Services 

248.0 

287.5 

15.9 

212.2 

250.4 

18.0 

460.2 

537.9 

16.9 

5. 

Housing 

802.6 

875.5 

9.1 

— 

— 

— 

802.6 

875.5 

9.1 

6. 

Institutional Services and 
Government Departments 

786.0 

929.8 

18.3 

98.2 

121.2 

23.4 

884.2 

1,051.0 

18.9 


TOTAL PRIVATE AND PUBLIC 
INVESTMENT IN ONTARIO 

2,532.5 

3,072.7 

21.3 

1,845.8 

2,042.2 

10.6 

4,378.3 

5,114.9 

16.8 


Note: 1966 expenditures are preliminary. 

Source: DBS, Private and Public Investment in Canada, Outlook 1967 (61-205). 


One added measure coming at the end of the year 
was the addition of one per cent to the federal sales 
tax (production machinery and building materials 
excepted). 

Ontario’s performance in public and private in¬ 
vestment outshone that of the rest of the nation last 
year. Total investment in the province increased 
16.8 per cent as opposed to just over 15 per cent 
elsewhere in Canada. While Ontario did not match 
the 20.8 per cent increase in machinery and equip¬ 
ment, it did outstrip the rest of the nation 21.3 per 
cent to 12.4 per cent in construction investment. The 
above table shows the size and growth of investment 
in Ontario last year. 

Total investment in 1966 was $5,114.9 million, 
16.8 per cent higher than in 1965. This total was 
made up of $3,072.7 million for construction and 
$2,042.2 million for machinery and equipment. 


The greatest growth took place in the combined 
primary and construction industries. Certain lar¬ 
ger manufacturing industries expanded investment 
sharply as well: printing, pubhshing and allied 
industries, transportation industries, electrical prod¬ 
ucts, and non-metallic mineral products. Three in 
particular — textiles, paper and allied industries 
and chemicals and chemical products — actually cut 
expenditures last year. The net result was an overall 
increase of 15.3 per cent in manufacturing invest¬ 
ment, made up of a 38.2 per cent increase in con¬ 
struction and an 8.2 per cent rise in investment in 
machinery and equipment. 

Construction 

Construction in Ontario was somewhat mixed in 
1966, as residential and non-residential construction 
followed somewhat different paths. In terms of 


8 












activity initiated, residential construction showed a 
pronounced decline while non-residential construc¬ 
tion climbed upward. The value of residential build¬ 
ing permits issued (both new and repair construc¬ 
tion) was down 5.8 per cent while permits for non- 
residential construction rose 19.8 per cent. Total 
permits increased to $1,729.7 million, a rise of 7.9 
per cent. 


VALUE OF BUILDING PERMITS ISSUED 
IN ONTARIO 



1965 

1966 

1966/65 

% 


$ Million 

Change 

Residential Gonstruction 

772.6 

727.9 

—5.8 

New residential 

746.0 

697.7 

—6.5 

Repair residential 

26.6 

30.2 

13.6 

Non-Residential 




Gonstruction 

888.6 

1,064.8 

19.8 

Industrial 

212.3 

281.5 

32.6 

Gommercial 

275.8 

300.1 

8.8 

Institutional and 




government 

400.6 

483.2 

20.6 

Total Gonstruction 

1,661.2 

1,792.7 

7.9 


Note: Columns may not add due to rounding. 

Source: DBS, Building Permits (64-001). 

The sharp decline in residential construction — 
particularly in apartments — actually began in the 
second half of 1965 and continued on throughout 
most of 1966. Several factors were important. For 
one, the institutional lenders substantially reduced 
their mortgage lending activities. Behind this was 
an increase in the competitive demand for invest¬ 
ment funds for non-housing purposes, a result of the 
tighter credit conditions. This made the mortgage 
market less attractive for investors. The prime rate 
on conventional mortgages did rise from 7.5 per cent 
to as high as 8.0 per cent, but this did not noticeably 
alter the pattern set. The maximum NHA rate was 
also raised, first from 6 V 4 per cent to 6 % per cent in 
January, and then to 7 y 4 per cent in November, but 
the mortgage market remained a somewhat ineffec¬ 
tive competitor to other forms of investment. Aside 
from the reduced attractiveness of investment in 
mortgages, a reduced level of savings going to the 
customary mortgage lending institutions also added 
to the difficulties. Lending institutions — including 
trust, loan and insurance companies — generally cut 
mortgage loan approvals by about one third. The 
discontinuation of the Winter House-Building In¬ 
centive Program for 1966-67, announced earlier in 


the year, was quite conceivably another contributor 
to the reduced rate of growth in residential con¬ 
struction. 

In the hope of spurring residential construction 
by maintaining a competitive interest rate on home 
ownership and rental housing loans, an Order-in- 
Council was passed in November, 1966, linking 
these rates to the changing yields on long-term Gov¬ 
ernment of Ganada bonds. The rate was to be IV 2 
per cent above that applicable to federal securities. 
The move to a 7 y 4 per cent rate that month was 
arrived at by this method. Adjustments afterward 
were to be made following a quarterly review. 

Statistics show just how sharp the drop in residen¬ 
tial construction activity actually was. Dwelling unit 
starts all across Ontario numbered 52,355 units; in 
urban centres of 5,000 population and over they 
numbered 45,359 — a drop of 24.2 per cent from 
1965.2 

As can be seen from the table on page 10, the 
situation in Toronto was especially bad, with a sharp 
decline experienced in the past year. Representing 
almost one-half of the provincial total, Toronto’s 
figures have had a pronounced impact on the whole 
of Ontario. 

While the year as a whole presented a bleak pic¬ 
ture, there actually were a few months in which the 
number of starts in Ontario exceeded the figure for 
1965. The significant case was January, when 
dwelling unit starts in Toronto soared 70 per cent 
higher than 12 months earlier; this combined with 
a smaller increase throughout other centres to pro¬ 
duce an overall increase of almost 43 per cent. 
Toronto experienced another good month in March 
with apartment and row housing starts rising mark¬ 
edly. However the poor showing elsewhere in the 
province left the total down some 15 per cent. There 
was a very mild improvement in September and 
October — at least for centres outside of Toronto — 
as starts began to move toward their 1965 monthly 
levels. In October the total was actually one per cent 
above the level of 12 months earlier. Directly res¬ 
ponsible for this was the early introduction of a 
GHMG direct lending program (in recent years 
similar programs had been started a month or so 
later in the year). Yet these few signs of improve¬ 
ment did little to alter the rather sharp overall de¬ 
cline indicated by the full year figures. 

^Although the number of dwelling unit completions in On¬ 
tario in 1966 — 61,196 units — was more than 20 per cent 
higher than the year before, this can be considered partially 
the result of the high level of construction activity initiated 
in 1965. The reduced number of starts has left the number 
of dwelling units under construction at the end of 1966 
about one third lower than one year earlier. 


9 








DWELLING STARTS IN SELECTED ONTARIO CENTRES 



1964 

1965 

1966 

1965/64 

1966/65 

Urban Area 


Number 


% Change 

Toronto 

28,810 

32,506 

22,155 

12.8 

-31.8 

Ottawa-Hull 

5,711 

5,051 

4,436 

-11.6 

-12.2 

Hamilton 

5,670 

4,519 

4,201 

-20.3 

-7.0 

Kitchener 

3,173 

2,820 

2,432 

-11.1 

-13.8 

London 

2,668 

2,466 

1,936 

-7.6 

-21.5 

Windsor 

1,125 

1,523 

1,365 

35.4 

-10.4 

St. Catharines 

1,481 

1,308 

1,060 

-11.7 

-19.0 

Oshawa 

1,591 

2,164 

991 

36.6 

-54.2 

Sarnia 

484 

565 

693 

16.7 

22.7 

Kingston 

785 

1,203 

651 

53.2 

-45.9 

Guelph 

612 

586 

505 

-4.2 

-13.8 

Ft. William-Pt. Arthur 

534 

525 

485 

-1.7 

-7.6 

Brantford 

575 

613 

431 

6.6 

-29.7 

Sault Ste. Marie 

616 

325 

414 

-47.2 

27.4 

Niagara Falls 

313 

290 

292 

-7.3 

0.7 

Sudbury 

271 

309 

394 

14.0 

27.5 

Peterborough 

390 

298 

305 

-23.6 

2.3 

Welland 

177 

194 

301 

9.6 

55.2 

Timmins 

82 

111 

69 

35.4 

-37.8 

Total Ontario Centres of 5,000 Population and Over 

57,446 

59,829 

45,359 

4.1 

-24.2 


Source: CMHC, Canadian Housing Statistics. 


Foreign Trade 

Trade development during 1966 provided one of the 
brightest pictures in the Canadian economy. While 
imports as well as exports rose substantially, exports 
held a slight edge. 

Exports and imports of goods and services ^ rose 
15.4 per cent and 13.6 per cent respectively from 
1965 to 1966. Exports rose from $11,156 milhon to 
$12,869 million, imports from $12,297 million to 
$13,970 million. 


Canada’s export balance on total merchandise 
trade rose from $133.5 million in 1965 to $459.0 mil¬ 
lion last year. This is derived from the $10,325.8 
million figure for total exports (including re¬ 
exports ) and the $9,866.8 million recorded for total 
imports. 

On a country basis Canada’s import balance with 
the United States declined, almost entirely a direct 
result of an improved balance in automotive trade. 

^As presented in the National Accounts. 


CANADIAN DOMESTIC EXPORTS, 1963 - 1966 


1963 

1964 1965 

1966 

64/63 65/64 66/65 


$ Million 


% Change 


By Commodity Group: 

Live Animals 

42.0 

34.5 

79.1 

78.0 

—17.8 

129.3 

— 1.4 

Food, feed, beverages 

1,419.9 

1,805.9 

1,629.8 

1 ,888.6 

27.2 

— 9.7 

15.9 

and tobacco 

Inedible crude materials 

1,426.0 

1,616.1 

1,763.7 

1,947.4 

13.3 

9.1 

10.4 

Inedible fabricated materials 

3,106.9 

3,502.5 

3,728.8 

4,012.1 

12.7 

6.5 

7.6 

Inedible end products 

779.1 

1,109.0 

1,300.1 

2,119.3 

42.3 

17.2 

63.0 

Special transactions — trade 

24.7 

26.2 

23.5 

25.3 

5.9 

—10.2 

7.7 

Total 

6,798.5 

8,094.2 

8,525.1 

10,070.8 

19.1 

5.3 

18.1 

By Geographic Group: 

United States 

3,766.4 

4,271.1 

4,840.5 

6,027.7 

13.4 

13.3 

24.5 

United Kingdom 

1,006.8 

1,199.8 

1,174.3 

1 ,122.6 

19.2 

— 2.1 

— 4.4 

All others 

2,025.3 

2,623.4 

2,510.3 

2,920.5 

29.5 

— 4.3 

16.3 


Source: DBS, Summary of Exports (65-002). 


10 














The excess of imports over exports declined from 
$1,012.1 million in 1965 to $906.3 million last year. 
The United Kingdom’s persistent economic problems 
led it to reduce its purchases from Canada last year, 
thereby reducing Canada’s favourable balance of 
trade with that country. The export balance fell 
from $566.3 million in 1965 to $487.1 million last 
year. Large wheat sales to communist countries 
played an important role in improving Canada’s ex¬ 
port balance with the other countries of the world. 
From 1965 to 1966, this balance climbed from $579.3 
million to $872.9 million, an increase of 50 per cent. 

Domestic exports reached $10,070.8 million last 
year, up 18.1 per cent from 1965’s $8,525.1 million. 
Relatively buoyant conditions in other parts of the 
world were instrumental in this impressive growth. 

The area of greatest advancement proved to be 
non-food end products, or finished goods. This group 
of exports, which has increased its share of total 
exports from less than 12 per cent in 1963 to 21 per 
cent in 1966, outshone all other groups last year, 
rising by a spectacular 63 per cent. Most of this 
fillip was provided by the 179 per cent expansion of 
motor vehicle and parts exports, almost entirely a 
result of the Canada-United States Automotive Free 
Trade Agreement. 


TOTAL MOTOR VEHICLE AND PARTS 
EXPORTS 



1965 

1966 

1966/65 

% 


$ Million 

Change 

Passenger automobiles 

and ehassis 

148.6 

429.6 

189.0 

Other motor vehicles 

34.5 

173.3 

401.8 

Motor vehiele engines 

and parts 

44.4 

137.9 

210.8 

Motor vehicle parts. 

exeept engine 

128.4 

252.9 

96.9 

Total: 

356.0 

993.6 

179.1 


Source: DBS, Summary of Exports (65-002). 


Continued economic expansion in the United 
States and the needs created by the United States 
military involvements accounted for a lot of Can¬ 
ada’s growing exports, just as it has in the past. The 
importance of the U.S. economy to Canada’s exports 
is apparent from the high percentage of exports 
going to that country: in 1966 Canada exported to 
the United States over three quarters of its non-food 
end products, almost 70 per cent of its fabricated 
materials and almost 60 per cent of its crude ma¬ 
terials. 


With over one half of Canada’s manufacturing 
production originating in Ontario, it is easy to see 
the particular significance to Ontario of rapidly 
rising exports of manufactured goods. What may be 
less obvious — but nevertheless valid — is the im¬ 
portance to Ontario of exports such as wheat. While 
wheat exports come mainly from the Prairies the 
income it provides is extremely important to On¬ 
tario; for with this income individuals will purchase 
additional goods such as automobiles, agricultural 
implements, etc. — goods produced mainly in 
Ontario. 

With this in mind it is not difficult to picture the 
benefit to Ontario — and to all of Canada — of the 
mounting value of wheat and wheat flour exports. 
In 1966 these exports ran to $1,143.9 million, a rise 
of 26 per cent from the previous year (and even 
slightly higher than the record $1,123.8 million 
recorded in 1964). As in 1964 the large increase was 
accounted for by the purchases made by communist 
countries. 

Canadian imports last year almost matched the 
growth of exports, rising 14.3 per cent to a level of 
$9,866.8 million. Aside from the increases needed to 
accommodate the rapid economic growth in this 
country, the bulk of the gains were directly attri¬ 
butable to the Canada-United States Automotive 
Free Trade Agreement. As a result of this, Canada’s 
total imports of motor vehicles and parts rose by 
40.5 per cent. Such a high rate of increase might at 
first appear distressing, but it is not so when eom- 
pared with the 179.1 per cent increase in automotive 
exports. 

As might be expected, by far the major portion of 
the automotive imports came from the United 
States. This produced a level of imports from the 
United States 18 per cent higher than the previous 
year; it also increased the share of total imports com¬ 
ing from the U.S. to over 72 per cent. Of this U.S. 
total of $7,135.9 million, over three fifths were finish¬ 
ed manufactured goods. Canada also increased its 
imports from the United Kingdom, but by the rather 
small figure of 4.1 per eent. 

Imports from all other countries advaneed ap¬ 
proximately six per cent. 

Finance 

Inflationary pressures exerted a dominant influence 
on the Canadian economy in 1966. The fundamental 
eharacter of this inflation, however, ehanged con¬ 
siderably over the course of the year. 

At the start of the year the economy was straining 
its productive capacities and operating near a state 
of full employment in order to sustain growth. This 


11 








condition coupled with demand pressures resulted 
in an inflationary situation. By mid-year public con¬ 
cern over excessive price pressures was rapidly 
mounting. In response the federal government initi¬ 
ated measures to restrain the pressures of exeessive 
demand. 

Initially, steps were taken to restrain credit condi¬ 
tions. As a consequence interest rates rose and bond 
market prices declined until the end of August. 
Indications that the federal government’s policy was 
having its desired effect first appeared in July as 
business spending began to slow down. However, 
during August, interest rates rose again, due largely 
to wage demand pressures and tight money condi¬ 
tions in the United States, and to the concern that, 
unlike spending in the private seetor, government 
spending was not being reduced. The rise of inter¬ 
est rates to almost crisis levels was based on an 
emotional response rather than the functions of 
supply and demand: when the government clarified 
its responsibilities and position, the trend of rising 
interest rates was altered. This the government 
achieved by assuming a very firm position with 
respect to striking railway men, and by announcing 
that government capital spending was to be imme¬ 
diately cut back and that the finance department 
would present, in the near future, a mini-budget 
calling for increased taxes. The rate at which interest 
rates then eased was governed by an unusually 
large volume of new long-term bond financings. 
With this degree of borrowing activity interest rates 
might well have risen above their August liighs. 

However, concurrent with this borrowing was 
the support rendered to the market by (1) the Bank 
of Canada stabilizing purchases in the open bond 
market and (2) the Federal Reserve Board in the 
U.S. assuming an easier stance on bank lending. 

The new bond financings carried out by the 
Government of Canada last year also did much to 
confine the rate at which capital was to be spent. 
The government’s objective of extending the term 
of the federal debt was in evidence in the first 
Canada refunding issue of the year and also in each 
of its three subsequent borrowings. 

New Canadian bond financing for 1966 totalled 
almost $6,202 million — an increase of 31.5 per cent 
over the previous year’s borrowings of $4,715 mil¬ 
lion. This 1966 total of borrowings, however, was 
influenced by the exceptionally large sale of the 
1966 series of Canada Savings Bonds and by the 
heavy corporate borrowings in the first few months 
of 1966. These borrowings in New York had been 
deferred from late 1965. Of the $1,317 million 
financed by corporations in 1966, no less than $206 


million or 15.6 per cent was issued in January, while 
the combined January-February borrowings at $349 
million represented 26.5 per cent of the year’s total. 
The sale of Canada Savings Bonds, considered part 
of total bond financings, put this volume further out 
of character since 1966 sales of $2.0 billion (as of 
November 30th) represented a significant increase 
from the preceding year’s total sales of only $683 
million. 

Although credit conditions were extremely tight 
in the United States last year, the marketing of the 
year’s total new borrowings was relatively smooth. 
Total 1966 borrowings of US $829 million repre¬ 
sented a 12.8 per cent decline in value from the U.S. 
$951 million borrowed during 1965. Before October, 
Canadian borrowings in the U.S. capital market 
were well above their value of the previous year. 
However, at this point the extremely tight credit 
conditions placed borrowing costs in the U.S. above 
those in the domestic market. 

Canada’s money supply increased from $19,947 
million to $21,373 million in 1966, or by 7.1 per 
cent, compared with a 10.9 per cent increase in 
GNP. These factors along with reduced capital 
inflows from the U.S. and the federal government’s 
pursuit of credit restraints could not on its own be 
responsible for the tight money condition which 
prevailed in Canada during late summer and the 
final quarter of the year. This phenomenon should, 
perhaps, be attributed to emotional factors: that is, 
public concern and caution resulting in a marked 
reduction in the rate at which money changed 
hands. 

A specific event which could have dampened 
investor confidence was the financial failure of the 
Prudential Finance Company. Following upon the 
disconcerting implications of the previous year’s 
collapse of both Atlantic Acceptance and British 
Mortgage and Trust Company, this no doubt served 
to further unsettle the already compromised reputa¬ 
tion of Canadian financial institutions. Efforts were 
being made, however, by both the federal and pro¬ 
vincial governments to safeguard the savings of 
investors. The Canadian Securities legislation is one 
example. The Ontario government pioneered in this 
field with its legislation already passed and pro¬ 
claimed in early 1967. In addition, financial affairs 
were to be regulated through a new bank act, 
depositors’ insurance, and revised legislation cover¬ 
ing consumer credit and the Corporation Act. 

If these precautions had been introduced in 1966, 
they might well have re-established investors’ con¬ 
fidence and averted to some degree the downward 
price movements on the stock market. The sell-off 


12 


in the summer and early fall was mainly a result of 
the loss of investors’ confidence. With interest rates 
having risen in response to credit conditions, profits 
under pressure by inflationary factors, and industry 
revising its capital expenditure programs to gear 
down to a more realistic rate of growth, equity 
prices naturally came under considerable selling 
pressures. The large institutional investor was the 
first to transfer substantial portions of equity assets 
into fixed income securities. The small investors fol¬ 
lowed, most of them having already suffered paper 
losses. The customary year-end rally involving 
extensive institutional buying never took place in 
1966. Its absence confirmed that institutional inves¬ 
tors had assumed a large cash position in order to 
report a high liquidity level in their year-end 
statements. With the large market sell-off during 
the year, this high liquidity level would thus indi¬ 
cate prudent investment management. 

Tight money conditions exerted a heavy influence 
on the performances of Canadian stock exchanges 
in 1966. With general business activity showing 
intermittent signs of weakness, prospects were that 
corporate profit margins would come under pres¬ 
sure. This, combined with the fact that borrowers 
were faced with extremely high prices for borrowed 
funds, led to a 12.9 per cent decline in the Toronto 
Stock Exchange Industrial Index last year. 


SEASONALLY ADJUSTED 



This net loss in equity values thus halted a 
general annual advance dating back more than 
three years. (However, 1965’s appreciation was a 
mere 1.6 per cent, compared with the 16.4 per cent 
and 20.7 per cent gains recorded in 1963 and 1964 
respectively.) 

Montreal’s volume declined significantly in 1966, 
while increased purchases of U.S. securities raised 
the volume of trading in the Calgary, Alberta and 
Vancouver markets. 


The total volume of equity shares traded on all 
exchanges fell to about 1.66 billion shares, a decline 
of 2.4 per cent from 1965’s 1.7 billion, and well 
below 1964’s record 1.9 billion shares. The value 
was recorded at $4.25 billion. No less than 58.8 
per cent of this volume was traded on the Toronto 
Stock Exchange. The TSE volume increased four 
per cent to 971.3 million shares while share values 
dropped nine per cent to $2.88 billion. 

Even with the high investor interest in new West 
Coast speculative securities traded in Vancouver, 
Canadians nevertheless substantially increased their 
net purchases of U.S. securities from $55 million in 
all of 1965 to more than $194 million in the first 11 
months of 1966. 

Employment 

Ontario’s labour force rose to a record level of 
2,719,000 last year, a rise of 4.0 per cent from 1965’s 
2,614,000. This growth can be attributed to several 
factors: a high level of immigration to Ontario both 
from other Canadian provinces and from other 
countries (108,000 immigrants from other countries 
— except for 1957 the highest figures of the past half 
century — named Ontario as their destination); the 
entry into the labour force of the children of the 
post-war baby boom; and the increasing participa¬ 
tion of women in the labour force. Such growth in 
Ontario, as well as in some other provinces, has 
earned for Canada the distinction of having the most 
rapidly growing labour force of any developed 
capitalist country. 

With the Ontario economy still operating at near 
capacity in many areas, the overall employment 
picture once again was impressive. In fact many 
employers had positions waiting to be filled, but 
faced a shortage of individuals to fill them. The 
number of employed individuals was 2,650,000, a 
jump of 102,000 or 4.0 per cent from 1965. The 
resulting unemployment rate was 2.5 per cent, the 
same low rate as in 1965 and the lowest in 10 years. 

Though employment was generally good, there 
was a notable deterioration for several months in 
the summer. The effects of economic cooling and a 
relatively larger-than-usual number of industrial 
disputes combined to cut employment in various 
industries, both in Ontario and Canada as a whole. 

The number of strikes in Ontario increased last 
year, and the number of man-days lost rose to ap¬ 
proximately 1.43 million in 1966 from 1.34 million 
in 1965. While this represented an increase over 
1965, in terms of Ontario’s share of the national total 
there was an actual decline. In 1965 over one-half of 


13 
















the man-days of work lost were in Ontario; in 1966 
it was only 28 per cent. 

A strike in the truck transportation industry lasted 
from the beginning of the year until the end of April. 
In July, a peak month in labour disputes, strike 
action was taken in the nickel mining industry and 
in meat packing, followed in August by a strike of 
short duration in metal fabricating. The nickel min¬ 
ing strike was resolved in August, the meat packing 
strike in October. Aside from these there were also 
nation-wide strikes in diflFerent industries throughout 
the year, including rail and air transportation. 

The expansion of employment from 1965 to 1966, 
as reported by DBS, varied somewhat from industry 
to industry: 


ESTIMATES OF EMPLOYEES BY INDUSTRY, 


ONTARIO, 

1965 AND 

19661 



1965 

1966 

1966/65 

% 

Change 


OOO’s 

Forestry 

Mines, quarries 

12.5 

12.5 

— 

and oil wells 

33.7 

33.2 

-1.5 

Manufacturing 

760.1 

807.0 

6.2 

Non durables 

339.8 

357.0 

5.1 

Durables 

420.2 

450.0 

7.1 

Construction 

127.1 

136.3 

7.2 

Transportation, communi- 



cation and other utilities 205.5 

209.7 

2.0 

Trade 

Finance, insurance 

338.7 

357.0 

5.4 

and real estate 

101.9 

105.6 

3.6 

Service 

198.2 

215.2 

8.6 

Total (specified 




industries) 

1,777.9 

1,876.5 

5.5 


’1966 statistics are preliminary. 

Source: DBS, Estimate of Employees by Province and 
Industry (72-008). 


As can be seen from the table, it was service 
industry employment which expanded most; this 
includes health services (except hospitals), motion 
picture and recreational services, services to busi¬ 
ness management, personal services (except domes¬ 
tic service) and miscellaneous services. Substantial 
gains were also recorded in construction and manu¬ 
facturing. Mines, quarrying and oil wells, suffering 
from industrial disputes, showed a decline of 1.5 
per cent in the annual average. 


Income 

The expansion of the Canadian economy last year 
was accompanied by record income levels. Exclud¬ 
ing supplementary labour income, Canada’s total 
wages and salaries rose to $28,121 milhon from 
$25,061 million in 1965. Sharply increased prices as 
well as labours strong bargaining position (under 
relatively tight labour market conditions) worked in 
labour’s favour last year; as a result there were a 
significant number of relatively large wage settle¬ 
ments throughout the year contributing to the high 
level of wages and salaries. 

SEASONALLY ADJUSTED 



Ontario shared in this expansion, accounting for 
over 41 per cent of the national total of wages and 
salaries. Growth from 1965 to 1966 was recorded at 
11.8 per cent, as wages and salaries climbed from 
$10,406 million to $11,633 million. In manufacturing 
industries, Ontario’s share was even higher, at 51.9 
per cent; the expansion of wages and salaries here 
was just over 11 per cent, from $3,771 million to 
$4,195 million. 

Available data on average weekly wages and 
salaries in Ontario show a general increase of 
approximately 5.3 per cent across the province. 

The construction industry was one of the leaders 
throughout the year, both in growth over the one- 
year period and in actual average weekly wage and 
salary^ levels. Its peak of $134 was reached jn the 
month of October. The mining industry averaged 
about $115 in 1966, with its peak of $127 coming at 
the end of the year. Others with relatively high 
levels were durables manufacturing and forestry. 
Average weekly wages and salaries in Ontario’s 

^For a detailed explanation of the concepts and methodology 
used in arriving at average weekly wages and salaries see 
DBS, Employment and Average Weekly Wages and Salaries 
(72-002). 


























GROWTH OF AVERAGE WEEKLY WAGES 
AND SALARIES IN ONTARIO’S 
INDUSTRIAL GROUPS, 1966/65 


Forestry 

1966/65 

% 

Change^ 

8.6 

Mining, including milling 

6.7 

Manufacturing 

4.7 

Durables 

3.6 

Non-durables 

6.1 

Gonstmction 

9.2 

Transportation, communieation and 
other utilities 

4.7 

Trade 

5.9 

Finance, insurance and real estate 

5.5 

Serviee 

5.4 

Industrial Gomposite 

5.3 


lApproximations based on unweighted averages of available 
monthly data. 

Source: Derived from DBS, Employment and Average Week¬ 
ly Wages and Salaries (72-002). 

industrial composite were approximately $100, one 
of the highest figures of all the provinces. The high 
figure of more than $102 was reached in October. 

Per capita personal income in the province 
approached $2,500 in 1966, up substantially from 
$2,296 in 1965. 

Prices 

Rising prices were the object of a great deal of 
attention last year. Unlike recent years, last year’s 
4.6 per cent increase in the Gross National Expendi¬ 
ture implicit price indexes® was generally viewed as 
excessive. From 1962 to 1965, for example, this 
annual increase ranged from 1.5 per cent to 2.8 per 
cent. 

Almost all of the major implicit price indexes 
showed greater increases than the year before. Busi¬ 
ness gross fixed capital formation was the one ex¬ 
ception, dropping from a 4.3 per cent increase in 
1965 to a 3.8 per cent increase last year. The rate of 
growth in that price index slackened somewhat 
during the second and third quarters of 1966 as 
investment in residential construction and new ma¬ 
chinery and equipment dropped off; this was fol¬ 
lowed by a marked revival in the last quarter. 

As can be seen from the accompanying table, 
some increases were quite pronounced. Government 
expenditure, for one, rose 6.9 per cent, giving some 
indication of the price pressures created by the rapid 


PERGENTAGE GRANGE IN IMPLIGIT 
PRIGE INDEXES 
(Based on 1957 = 100) 



1964/63 

1965/64 

1966/65 

Personal expenditure 

1.5 

1.9 

3.5 

Non-durable goods 

1.6 

2.0 

4.1 

Durable goods 

—1.0 

—0.4 

0.0 

Total goods 

1.0 

1.4 

3.3 

of which: 

food 

1.5 

2.8 

6.1 

non-food goods 

0.9 

0.8 

1.8 

Services excluding net 

expenditure abroad 

2.4 

2.8 

3.9 

Government expenditure 

3.2 

4.1 

6.9 

Business gross fixed 

capital formation 

4.4 

4.3 

3.8 

New residential 

construction 

5.5 

4.9 

5.0 

New non-residential 

construction 

4.4 

6.1 

5.3 

New machinery 

and equipment 

3.8 

2.6 

2.1 

Exports 

1.9 

1.2 

3.3 

Imports 

1.2 

0.4 

1.8 

Gross National 

Expenditure 

2.6 

2.8 

4.6 


Source: DBS, National Accounts (13-001). 


expansion of government spending. And the export 
price index, while not increasing as much in per¬ 
centage terms, was significantly ahead of the rise 
in import prices. 

But the area of greatest concern was that of per¬ 
sonal expenditure and services. In services, notable 
increases appeared in rents and other household 
services. The increase in the implicit price index of 
personal expenditure climbed almost twice as much 
as in 1965, but this was the combined effect of 
several different developments. The one which 
attracted most attention — enough to lead house¬ 
wives to actively protest — was the rise in the price 
of food. Some indication of this is the fact that while 
all non-food goods rose 1.8 per cent last year, food 

“These indexes reflect the aggregate price trends of all goods 
and services entered in the calculation of GNP and GNE in 
the National Accounts. They are percentage ratios express¬ 
ing the relationship at any given time between GNP esti¬ 
mates calculated in current and constant dollars, the 
difference between them being the implied measure of 
price change from the base year. Each component measured 
is weighted according to its relative importance in terms of 
expenditures, thereby continuously compounding straight 
price changes with changing expenditure patterns. 


15 








prices soared 6.1 per cent. This one important devel¬ 
opment was instrumental in shaping the overall 
increase in the index for personal expenditure. As a 
matter of fact, while non-durables (which includes 
food) was up over four per cent, the price of dur¬ 
able goods actually stood still. 

While a lot of attention was directed toward the 
general rise in food prices, there appears to have 
been too little awareness that a good part of the 
food price increase was due to individual factors — 
factors which unfortunately coincided in 1966. Some 
of these were the tight supply situation associated 
with the hog cycle, several poor vegetable crops, 
and the prolonged strike at a major meat packing 
plant. 

Turning to the more conventional Consumer Price 
Index for Canada® (based on 1949 = 100), the im¬ 
portance of the rise in food is brought out once 
again: that index showed food prices rising 6.3 per 
cent from 1965, compared with a 3.7 per cent in¬ 
crease for all items in the index. Clothing and health 
and personal care were a distant second and third 
with increases of 3.8 per cent and 3.1 per cent 
respectively. 

In Toronto and Ottawa, the two centres covered 
in Ontario, roughly similar patterns were evident. 
In Toronto, food rose 7.2 per cent, followed by 
clothing with 4.8 per cent and tobacco and alcohol 
with 4.4 per cent. Ottawa’s major increases were in 
food (6.6 per cent), tobacco and alcohol (4.3 per 
cent) and clothing (4.1 per cent). The all-items 
index rose 4.4 per cent in Toronto and 3.8 per 
cent in Ottawa. 

Sales 

Retail sales in Ontario rose 6.4 per cent last year, 
despite a continent-wide slump in the market for 
automobiles. Total sales climbed to $8,527 million 
from 1965’s record high of $8,018 million. In terms 
of percentage growth Ontario’s increase was exactly 
the same as that of all of the other provinces com¬ 
bined. 

Sales of all food and beverage stores — the largest 
type of retail outlet, accounting for about 30 cents 
out of every retail dollar — increased by over seven 
per cent. The next largest group, motor vehicle 
dealers, experienced the smallest gain, rising only 
0.6 per cent from 1965. Department stores, the third 
largest group in terms of sales, expanded sales 5.7 
per cent. 

Leading all groups in sales increases were variety 
stores, up 14 per cent, followed by furniture, appli¬ 
ance and radio stores (10.6 per cent) and hardware 
stores (10.4 per cent). 


Sales were quite uneven throughout 1966, parti¬ 
cularly in motor vehicles. The year began very 
strongly with consumer demand at a very high level. 
This strong tide, coupled with an added burst in 
buying associated with the announced April increase 
in Ontario’s sales tax, made March a peak month, 
with total retail sales up 22.5 per cent from the pre¬ 
vious March. But around April, sales slumped 
badly across all of Canada and the United States. 
In June, sales pushed up slightly, only to falter again 
the following month. Another mild revival came in 
August and September, but sales lost their momen¬ 
tum again in October. During the last two months 
of the year sales began a slow upward climb. 

Hardest hit of all were motor vehicle dealers: the 
growth of their sales fluctuated severely. In March, 
Ontario’s motor vehicle dealers were enjoying sales 
41 per cent higher than 12 months before. But by 
April they were down 27.2 per cent. Sales revived 
in August, only after large discounts were provided 
on cars about to be dated by the release of the new 
models. This spurt was short-lived, and November 
and December sales were down from a year before. 
Full year sales were up only 0.6 per cent — less than 
any other type of retail outlet. 

In spite of the auto slump most other retail busi¬ 
nesses enjoyed good gains. All categories increased 
sales at least five per cent, except for jewellery and 
men’s clothing, which both grew by just more than 
four per cent. 

Canada’s wholesale trade followed a fairly similar 
path to retail trade dropping off in the second quar¬ 
ter of the year after a very strong first quarter; how¬ 
ever the fluctuations were not as extreme. Only in 
July and December were sales below the corres¬ 
ponding months for 1965. 

Total wholesale trade was $12,991 million for 
1966, up 5.8 per cent from 1965. Strong advances 
were made in most trades, but particularly in elec¬ 
trical supplies and construction material (up 19.4 
per cent), commercial, institutional and service 
equipment (up 19.1 per cent), household electrical 
appliances (up 16.0 per cent) and newsprint and 
paper products (up 13.1 per cent). The only major 
decline was a 13.5 per cent drop in coal and coke, 
along with a 0.4 per cent drop in certain textile and 
clothing accessory trades. 

^This index, more familiar to average consumers, measures 
changes in the average retail price of goods and services for 
personal consumption; it is based on a nationwide monthly 
survey of a fixed number of items, and weighted according 
to the purchasing patterns of moderate-income urban fami¬ 
lies of medium size as disclosed by a 1957 study. It differs 
from the implicit price index primarily in that it assumes 
fixed expenditure patterns. 


16 



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(•Figures for Canada) 



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el 1867 








MARCH- 
APRIL 1967 
VOL. 5 I 
No. 3-4 




& 





HA 


747 
0656 
1967 
VOL. 5 
NO. 3-4 





Hon. Stanley J. Randall, Minister 


Stuart W. Clarkson, Deputy Minister 


OFFICE OF THE CHIEF ECONOMIST 

H. Ian Macdonald, Chief Economist 







CONTENTS 


The Economy.1 

Fertility and Population Growth in Ontario, 

T. J. Samuel .5 

Economic Indicators.16 





THE ECONOMY 


While National Accounts figures for the last quarter 
of 1966 indicated a significant upturn from the mid- 
1966 slump, in actual fact the strong upward move¬ 
ment was largely limited to the month of October. 
Following this another plateau was reached, one 
which carried over into 1967. This plateau — which 
will very likely soon give way to new advances — 
was reflected in only small gains in production, in 
moderate increases in unemployment and in a con¬ 
tinued sag in construction activity. 

The Index of Industrial Production dipped in 
December and January, then rose a scant 0.3 per 
cent in February. Employment gains in Ontario 
were unable to match the increases in the labour 
force; as a result the seasonally-adjusted rate of 
unemployment rose from 2.4 per cent in December 
to 3.2 per cent in April. And Ontario’s construction 
activity, in terms of actual housing starts, the value 
of residential and non-residential building permits 
and the value of all construction contract awards, 
was down from 1966. However, there were signs 
that this lull in activity was coming to an end; 
Ontario’s housing starts improved in March, and 
contracts awarded in April, unlike the previous two 
months, were no longer below their 1966 level. 

Not all of the indicators were reflecting a slower 
pace of activity. Exports, for one, were 17.5 per cent 
higher in the first quarter of 1967 than in the corre¬ 
sponding period of 1966. Because the statistics rep¬ 
resent only preliminary estimates and are not broken 
down by commodity groups, it is impossible to tell 
which exports have been responsible for this gain. It 
may in fact be that some of the gain was due to a 
sudden jump in automotive exports following the 
year-end termination of a strike at General Motors’ 
Ste. Therese, Quebec plant. The possibility also 
exists that large amounts of wheat shipped as for¬ 
eign aid sharply increased the 1967 export statisties. 
Regardless of these two factors, it appears that 
exports have been holding up quite well. 


Preliminary estimates of imports indicate a gain 
of close to 15 per cent for the first quarter of the 
year. 

Production 

Production so far this year has been at somewhat 
less than a desirable level. This observation is 
based not only on the performance of the Index of 
Industrial Production, available for the first two 
months of 1967, but also on other major and more 
current economic statistics. Motor vehicle produc¬ 
tion in Canada, for instance, has been consistently 
lower than one year ago, although the diflFerence 
appears to be narrowing at present. 


CANADIAN MOTOR VEHICLE PRODUCTION 



1967 

Units 

1966 

Per Cent 
Change 

January 

80,490 

86,422 

- 6.9 

February 

74,104 

85,691 

—13.5 

March 

85,053 

96,325 

-11.7 

April 

82,978 

88,518 

— 6.3 

Year to date 

322,625 

365,956 

-11.8 


Source: DBS, Preliminary Report on the Production of Motor 
Vehicles, (42-001). 


Steel ingot production for the first four months of 
the year has only reached 3.13 million tons, 7.3 per 
cent less than in 1966. This indicator recently has 
shown some improvement as well, with the year-to- 
year change moving from a 22.0 per cent decline in 
January to an 0.4 per cent increase in April. Pro¬ 
duction in April was 848.4 thousand tons. 


1 








The seasonally-adjusted Index of Industrial Pro¬ 
duction, available for January and February, also 
points out the current sag in the economy. In Feb¬ 
ruary the Index was 279.3 (based on 1949 = 100), 
up 0.3 per cent from January, which in turn had 
been 0.3 per cent lower than December 1966. The 
unadjusted statistics indicated year-to-year gains of 
around three per cent for the first two months of the 
year. 

The most pronounced gain in the Index was in 
electric power and gas utilities, particularly in elec¬ 
tric power, which was up about 12 per cent from 
last year. Mining experienced a 10 per cent gain 
comparing January figures, but this dropped to 3.6 
per cent in February. Manufacturing remained 
about 1.5 per cent ahead of last year for the first 
two months, with non-durables up just over two per 
cent. Declines in rubber products, textiles and cloth¬ 
ing were responsible for limiting the non-durables 
group to this small gain. Durables were up barely 
one per cent, with decreases in transportation equip¬ 
ment, iron and steel products and non-metallic min¬ 
erals nearly wiping out the substantial gain in elec¬ 
trical apparatus and supplies. 

Construction 

The value of construction contract awards in On¬ 
tario for the first four months of 1967, at $636.4 
million, was five per cent lower than in 1966, accord¬ 
ing to the Southam Building Guide. Looking at indi¬ 
vidual months, February and March were below 
their 1966 levels, while January and April were 
higher. January’s 14 per cent gain this year was 
largely due to a sharp rise in the value of awards 
for manufacturing and processing plants. The re¬ 
duced value of awards for hospitals and educational 
facilities contributed to the overall declines in Feb¬ 
ruary and March (6.2 per cent and 26.9 per cent 
respectively). March was also the only month in 
which the value of residential contracts was down. 
There was, in addition, a marked drop in business 
awards that month. In April the $187.0 million value, 
of awards — reflecting a 0.8 per cent increase over 
1966 — was largely due to an exceedingly large value 
for electric power installations. 

The number of housing starts in Ontario centres 
during the first three months of this year was 5,799 
units,^ a drop of 16.6 per cent from the January to 
March period of 1966. January and February had 
considerably fewer starts in 1967 than in 1966 — 30 
per cent and 23 per cent respectively — but in March 
a 7.9 per cent increase was recorded. Metropolitan 


Toronto, accounting for roughly one half of the total 
number of starts, was down over 26 per cent for the 
quarter, comparing 1967 and 1966 figures. 

Completions in Ontario centres during the same 
period were down 4.1 per cent to 11,689 dwelling 
units. During March 4,061 units were completed. 
At March 31st, 1967, the number of dwelling units 
under construction stood at 29,842, more than a 
third lower than 12 months earlier. 

Statistics on building permits issued, though only 
available for January, confirm that both residential 
and non-residential construction were below last 
year’s level. In terms of the value of building per¬ 
mits issued, residential permits were down 8.5 per 
cent and non-residential 5.5 per cent. In the non- 
residential category, industrial permits were down 
quite sharply — 36 per cent — while commercial per¬ 
mits were 19 per cent higher. Institutional and gov¬ 
ernment permits were down five per cent. 

Employment 

The somewhat slackened pace of the economy dur¬ 
ing the first few months of 1967 has been responsible 
for the growing gap between the number in the 
labour force and the number of individuals em¬ 
ployed. On a four-month average basis, Ontario’s 
labour force has risen by 118,000 or 4.4 per cent, 
while employment has risen 97,000 or 3.7 per cent. 
The result has been an increase in the average rate 
of unemployment, from 2.2 per cent for the first four 
months of 1966 to 2.9 per cent for the January to 
April period of 1967. 

Figures for the individual months of this year, 
presented in the table of economic indicators at the 
back of the Review, show the changes from month 
to month. By April the labour force had risen to 
2,841,000; with the number of individuals employed 
at 2,750,000, this left an unemployment rate of 3.2 
per cent — considerably higher than the 2.1 per cent 
recorded in April 1966. 

Canada’s experience in the first part of this year 
was similar to that of Ontario; the average labour 
force increase from 1966 was 3.7 per cent while the 
average gain in employment was 3.3 per cent. 
Average unemployment rose from 3.4 per cent in 
1966 to 3.8 per cent in 1967. By April the monthly 
unemployment rate had risen to 3.9 per cent of the 
labour force. 

1 Statistics now refer to centres of 10,000 population and over 
(based on 1966 Census Area definitions) and not 5,000 
population and over as in the past. 


2 



Retail Sales 

A complete revision of all retail sales statisties back 
to 1961 has produced a new Ontario total of $8,419 
million for 1966, 5.9 per cent higher than 1965’s 
$7,950 million. The revisions incorporate certain 
changes in the classification of several types of busi¬ 
ness, including shifts from retail to wholesale, retail 
to service and service to retail.- 

Ontario’s retail sales for the first three months of 
1967 have not fared as well as total Canadian retail 
sales. For the January to March period, sales in 
Ontario were $1,924 million, 1.3 per cent less than 
the corresponding period of 1966; Canada’s sales 
were $5,085 million, 3.5 per cent higher than the 
first three months of 1966. Comparing individual 
months for 1966 and 1967, Ontario’s retail sales were 
up 3.2 per cent in January, 1.0 per cent in February, 
but were down 6.9 per cent in March. Part of the 
explanation for this March decline lies in the fact 
that Ontario’s retail sales in March 1966 — one 
month before the increase in Ontario’s retail sales 
tax — were exceptionally high. That month, for ex¬ 
ample, motor vehicle sales soared almost 50 per cent 
higher than they had been one year earlier. 

Ontario’s variety stores enjoyed the largest gain 
for the three-month period this year, recording sales 
15 per cent higher than last year. Ceneral stores, 
fuel dealers, drug stores and garages and filling sta¬ 


tions recorded gains ranging from 10 per cent to 
seven per cent. 

Motor vehicle dealers experienced the sharpest 
reduction of all groups as sales fell to 19.3 per cent 
below last year’s three-month total. Although these 
sales have been weak this year, the spectacular fig¬ 
ure for March 1966 has exaggerated the decline. 
Motor vehicle sales were actually 0.4 per cent higher 
in January, 13.2 per cent lower in February, but 
down 32.9 per cent in March of this year. 

Others experiencing lower sales for the first quar¬ 
ter of 1967 were furniture, appliance and radio 
dealers (down 12.0 per cent), shoe stores (down 2.7 
per cent), jewellery stores (down 2.4 per cent) and 
men’s clothing stores (down 1.8 per cent). 

Prices 

Price increases this year have moderated somewhat 
from the substantial increases of 1966, although 
there have recently been certain noticeable increases 
in some price indexes. The annual increase for all 
items in the Consumer Price Index (based on 
1949 = 100) was less than three per cent in Feb¬ 
ruary and March, but more than three per cent in 
January and April. The accompanying table shows 

^For specific details consult DBS, Retail Trade 1930-1961, 
(63-510). 


THE CONSUMER PRICE INDEX IN 1967 
(1949 = 100) 



Jan. 

Monthly Index 

Feb. March 

April 

Per Cent Change from One Year Ago 
Jan. Feb. March April 

All Items 

146.0 

146.1 

146.5 

147.8 

3.4 

2.8 

2.9 

3.2 

Food 

144.9 

144.1 

143.3 

144.0 

3.1 

1.1 

-0.1 

0.2 

Housing 

147.6 

147.7 

148.4 

150.1 

3.3 

3.2 

3.6 

4.4 

Clothing 

128.6 

129.1 

130.8 

131.9 

4.8 

4.7 

5.3 

5.3 

Transportation 

153.0 

155.0 

155.6 

157.0 

2.6 

3.3 

3.7 

4.2 

Health and Personal Care 

184.9 

185.1 

185.2 

190.0 

3.8 

3.9 

4.0 

6.0 

Recreation and Reading 

161.9 

163.6 

163.7 

164.2 

4.2 

4.6 

4.5 

4.2 

Tobacco and Alcohol 

126.5 

126.8 

127.5 

127.7 

2.8 

2.8 

3.3 

2.2 


Source: DBS, Price Movements, (62-001). 


3 







these gains and the changes in individual com¬ 
ponents of the index. 

Part of the 3.2 per cent increase in April is directly 
attributable to sales tax increases in Quebec and 
Newfoundland. 

The food index, one of the principal factors in the 
Consumer Price Index’ sharp increase last year, has 
now become the most stable component. Several 
other components, however, have recorded substan¬ 
tial increases, namely health and personal care, 
clothing and housing. 

The signifieance of sales tax increases to the April 
index can be seen by comparing the two Ontario 
centres reported with the all-items index elsewhere. 
In Toronto the all-items index was 2.6 per cent 
higher than in April 1966; in Ottawa it was 1.6 per 
cent higher. Both compared favourably with the 3.2 
per cent increase for all of Canada and the 3.8 per 
cent and 3.0 per cent gains for Montreal and St. 
John’s respectively. 

Population 

Recently published census data for 1966 record 
Ontario’s population at 6,960,870 as of June 1, 1966. 
This represents an increase of 11.6 per cent from 
the 1961 census figure of 6,236,092 — second only 
to British Columbia’s 15.0 per cent increase. On¬ 
tario’s population, the largest in all of Canada, rep¬ 
resents 34.8 per cent of the Canadian total of 
20,014,880. Over 40 per cent of the increase in 
Canada since 1961 has taken place in this province. 

The latest quarterly estimates of population place 
Ontario’s figure at 7,115,000 as of April 1, 1967. 
Canada’s corresponding figure is 20,334,000. 

Kennedy Round Tariff Negotiations 

On May 16th, 1967, agreement was finally reached 
by the 44 participants in the Kennedy Round of the 
CATT negotiations. Tariff cuts averaging 33 to 35 
per cent were agreed upon, affecting an estimated 
$40 billion of trade among more than 80 countries. 
Some of the most important elements of the agree¬ 
ment are: 

• higher floor and ceiling prices for wheat; 

• tariff reductions on 6,300 industrial and farm 
items; 


• an anti-dumping accord to protect businessmen 
from foreign competitors trying to export goods 
at less than cost. 

Specific implications of the agreement for Canada 
cannot be calculated at least until the precise terms 
of settlement are made public (probably sometime 
in June). However a number of general effects can 
be predicted. 

The most important benefit to Canada may well 
be freer access to the United States market. With 
the advantages of proximity and familiarity with 
U.S. industries and markets, our exporters should 
make substantial gains. 

The lowering of tariff barriers to the Common 
Market, though of lesser importance, should also 
provide many new opportunities for Canadian 
exporters. 

Some Canadian industries will face increased 
competition from foreign products as a result of the 
lowering of certain Canadian tariff rates. In the 
short run this could produce some economic dislo¬ 
cation; but in the long run Canada will benefit from 
the more efficient use of its productive resources. 

Wheat farmers will benefit directly from the in¬ 
crease in world wheat prices, and Canadian industry 
— particularly Ontario’s — will receive indirect bene¬ 
fits based on the increased demand of farmers for 
industrial products such as farm machinery. 


THE PERFORMANCE OF 
ONTARIO’S MINING INDUSTRY 
IN 1966 

The Applied Economics Branch of the Office 
of the Chief Economist has a limited number 
of copies of this 29-page report available for 
distribution. Copies may be obtained free of 
charge by writing to: 

Ontario’s Mining Industry in 1966 
Editor, Ontario Economic Review 
Office of the Chief Economist 
Parliament Buildings 
Toronto 5, Ontario 


• an international food-aid program of 4.5 mil¬ 
lion tons a year; and 


4 



FERTILITY AND POPULATION GROWTH 

IN ONTARIO 


T. J. Samuel 

Economist, Economic Analysis Branch 
Office of the Chief Economist 


Ontario’s early 1967 population of 7.1 million con¬ 
stitutes about one third of the entire population of 
Canada. It is larger than the populations of the 
majority of American and African nations and close 
to half of the Asian nations; it is also larger than the 
populations of nations such as New Zealand, Den¬ 
mark, Finland, Ireland, Norway and Switzerland. 

Since the start of this century Ontario’s population 
has registered nearly a three-fold increase. The 
crucial demographic variable in this growth has 
been fertility. While one out of every three persons 
added to Ontario’s population has been accounted 
for by net migration (immigration minus emigra¬ 
tion), the remaining two have been the result of the 
net balance of births over deaths. 

This crucial demographic variable — fertility — 
affects the Ontario economy through its influence 
upon the level of per capita income, the level of con¬ 
sumption, the need for social investments such as 
education and medical care, the need for and the 
pattern of private investment, and the supply of 
labour. 

Since the level of fertility is so important to 
Ontario’s economy, it is intended here to look at 
Ontario’s fertility both in terms of past experience 
and future prospeets. The first section reviews the 
historical trend in Ontario’s crude birth rate and 
compares it with that of Canada and some other 
countries. The second section analyses and evaluates 
various demographic factors that are signifieant in 
determining fertility. The final section looks into 
the recent decline in Ontario’s age-specifie fertility 
ratei and the question of whether this trend will 
continue. The main points developed in the dis¬ 
cussion are brought together in the conclusion. 

THE HISTORICAL TREND IN 
ONTARIO’S CRUDE BIRTH RATE 

Crude birth rates (or births per 1,000 population) 
in Ontario and Canada for various years are shown 
in Table 1 at right. (See also Figure 1, page 6.) Both 
rates were fairly high in the 1921-25 period, but 
were reduced by the Great Depression of the 1930’s 
and by World War II. After the war Ontario’s crude 


birth rate swung upward, reaching its peak in 1957. 
Since then it has tended to decline. This trend 
is still continuing today, though in the near future, 
due to a high percentage of persons in the younger 
age groups, the crude birth rate is expected to take 
an upward trend. One thing clearly noticeable in 
Ontario’s crude birth rate is the fact that it has 
remained consistently below that for Canada. How¬ 
ever, this difference has narrowed considerably in 
recent years, as can be seen in Figure 1. 

^The age-specific fertility rate represents the ratio of the 
number of live births to women in a given age group to the 
total number of women in that age group. 


TABLE 1 

CRUDE BIRTH RATES IN ONTARIO 
AND CANADA, 1921-1966 


Year 

Ontario 

Canada 

1921-25 

23.7 

27.4 

1926-30 

21.0 

24.1 

1931-35 

18.5 

21.6 

1936-40 

17.5 

20.7 

1941-45 

19.8 

23.7 

1946-50 

24.6 

27.6 

1951 

25.0 

27.2 

1952 

25.9 

27.9 

1953 

26.3 

28.1 

1954 

26.6 

28.5 

1955 

26.5 

28.2 

1956 

26.6 

28.0 

1957 

26.8 

28.2 

1958 

26.2 

27.5 

1959 

26.3 

27.4 

1960 

26.1 

26.8 

1961 

25.3 

26.1 

1962 

24.6 

25.3 

1963 

24.1 

24.6 

1964 

23.2 

23.5 

1965 

21.0 

21.4 

1966 

19.21 

20.01 

1 Preliminary. 




Sources: DBS, Vital Statistics 1964, pp. 68 and 72-3. 
Vital Statistics 1965, p. 12. 


5 







FIGURE 1: CRUDE BIRTH RATES IN ONTARIO AND CANADA, 1921-1966 



FIGURE 2: CRUDE BIRTH RATES IN ONTARIO AND SELECTED COUNTRIES, 1950-1966 



6 

























Figure 2 compares Ontario’s crude birth rate from 
1950 to 1966 with those of a few selected countries. 
In the 1950’s there was wider variance in the crude 
birth rates of these countries than in 1966. The 
variance in crude birth rates was as much as 12 points 
(or births per 1,000 population) in 1950 but only 
two points in 1966. However, Ontario’s crude birth 
rate continues to remain high in comparison with 
the birth rates of all the countries (except Canada) 
shown in Figure 2. 

DEMOGRAPHIC FACTORS 
DETERMINING FERTILITY 

To assess the past trends in fertility with a view to 
gaining some insight into the future behaviour of 
fertility, it is necessary to probe deeper and analyse 
factors such as the following five: age at marriage, 
marriage rates, differential fertility, birth parity,- 
and age-specific fertility. 

1. Age at Marriage 

Since the number of children born to a couple is 
related to the length of the period during which the 
couple remains married, the age at marriage is one 
of the determinants of fertility. During the period 
1921-25, 61.1 per cent of all brides in Ontario were 
under 25 years of age when married; but by 1960-65 
the percentage had risen to 75.2 per cent. To assess 
the influence of age at marriage on fertility, how¬ 
ever, it is more important to look at the age of brides 
at first marriage. Table 2 provides this information. 

The percentage of girls who were under the age 
of 20 when married rose from 29.3 per cent in 1952 
to 37.5 per cent in 1961. Although the percentage 
fell slightly the following two years, by 1965 it 
had again risen to 37.2 per cent. In 1965, 84.7 per 
cent of the girls under 24 were in wedlock and were 
thus exposed to the risk of pregnancy. The per¬ 
centage of women marrying late had declined. As is 


to be expected, the tendency to marry early was 
common among men as well. In 1952, 55.1 per cent 
of all men under 24 years of age were married, while 
in 1965 this figure had risen to 64.5 per cent.^ 

It may be remembered that the lowering of the 
age of marriage in the 1950’s and 1960’s occurred 
pari passu with an increase in the percentage of 
young men imd women attending schools and uni¬ 
versities. The increasing emphasis on education, 
particularly in view of the expected increased com¬ 
petition for employment in the future, has necessi¬ 
tated the continuation of education and the acquisi¬ 
tion of skills by persons in younger age groups. This 
points to the possibility that a still higher percentage 
of the 15-24 year age group will remain in school 
in the future. At the same time the increasing 
acceptance of the new morality in sex relations and 
extensive use of the ‘pill’ before marriage will 
probably raise the age at marriage. However, it is 
unlikely that either of these factors will raise the 
age at marriage substantially in the near future. 

2. Marriage Rates 

The rate at which the population marries has a 
bearing on fertility. A population such as that of 
India, where marriage is universal, would normally 
have a higher fertility than, say, that of Ireland, 
where marriage is not universal. Statistics on 
Ontario’s marriage rates are available from 1921 
onward. The number of marriages per 1,000 popula¬ 
tion in the 15-44 year age group was 17.0 in the 
1920’s and 16.0 in the 1930’s, but it jumped to 21.9 
in the 1940’s. It then declined to 20.3 in the next 
decade and stood at 17.7 during the first five years of 
the current decade. The changes in marriage rates 
are partly a function of the age distribution of the 
population and partly a function of the prevailing 

-Birth order — first child, second child, etc. 

•^Registrar General, Vital Statistics, 1952-65. 


TABLE 2 

AGE AT FIRST MARRIAGE FOR FEMALES IN ONTARIO, 1952-1965 


Age 

1952 

1953 

1954 

1955 

1956 

1957 

1958 

1959 

I960 

1961 

1962 

1963 

1964 

1965 

Under 20 

29.3 

29.9 

30.5 

31.0 

33.3 

34.0 

35.1 

35.5 

36.5 

37.5 

37.4 

35.8 

36.1 

37.2 

24 and Under 

73.9 

74.7 

75.4 

75.4 

76.6 

77.6 

78.3 

79.3 

80.4 

81.2 

82.6 

82.8 

83.9 

84.7 

29 and Under 

89.4 

89.8 

90.1 

90.0 

90.7 

91.0 

91.5 

91.6 

91.7 

92.0 

92.4 

92.7 

93.3 

94.1 

34 and Under 

94.9 

95.0 

95.3 

95.3 

95.7 

95.7 

95.9 

95.7 

95.9 

96.0 

96.0 

96.1 

96.4 

96.9 

Total 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 


Source: Registrar General, Vital Statistics, 1952-1965. 


7 






fashion in society. Table 3 compares Ontario’s crude 
marriage rates ^ with those of Canada and a few 
selected countries. 

The crude marriage rates for all countries re¬ 
mained high during the 1946-50 period mainly 
because of the increased number of marriages after 
the return of the soldiers fighting in World War II. 
After that the rates declined in Ontario and most of 
the other countries (except Japan) until the early 
1960’s. Since 1963, however, crude marriage rates 
have increased, though only very slowly. Assuming 
the current attitude of society towards marriage 
remains unaltered, the large number of persons in 
the lower age groups means that this rate will 
undoubtedly rise. 

During the period 1961-64 Ontario’s crude mar¬ 
riage rate was 7.1; at the same time 13.8 per cent of 
the total population was in the 15-24 year age group. 
By 1971-76, however, the percentage of total popu¬ 
lation in the 15-24 year age group will have risen to 
17.0 per cent. In other words, there will be a 55.4 
per cent increase in the 15-24 year age group 
between 1961 and 1971, and a 73.6 per cent increase 
between 1961 and 1976. The above percentages 
indicate that an increase in crude marriage rates 
in the next few years ahead can be predicted. 

3. Differential Fertility 

Differential fertility means differences in human 
fertility associated with such factors as income, 
education, occupation, residence, religion and ethnic 
origin. A careful analysis of differential fertility 
would provide reliable indicators pointing to future 
trends in fertility. In spite of the importance of the 
concept of differential fertility this has been one of 


the most neglected fields of population study in 
Canada. The most reliable figures on differential 
fertility are collected by empirical investigations of 
a representative sample of the population. It has 
been necessary to look at the numerous studies con¬ 
ducted in the United States in the hope that their 
conclusions will be applicable to the Canadian 
population. 

(a) Socio-Economic Status 

The term socio-economic status may be assumed to 
be dependent primarily upon income, education and 
occupation. 

i. Income. The relationship between income and 
fertility can be investigated either with cross-sec¬ 
tional income differences at a point of time or with 
time series differences over a period of time. Fertility 
used to vary according to cross-sectional income 
differences, with income negatively correlated to 
fertility. This relationship, however, does not seem 
to hold any longer. At present the fertility differen¬ 
tials at a particular point of time, standardized for 
age, are not too different for the upper and lower 
income groups. On a time series basis, however, 
some studies conclude that if only those couples 
who practise contraception effectively were studied, 
fertility would be found to increase with income. If 
income rises very rapidly, children may become a 
source of “psychic income or satisfaction and in the 
economist’s terminology, children would be con¬ 
sidered a consumption good.”^ Thus more children 

^The number of marriages per 1,000 population. 

•'’Gary S. Becker, “An Economic Analysis of Fertility,” Demo¬ 
graphic and Economic Change in Developed Countries (Na¬ 
tional Bureau for Economic Research: Princeton), p. 210. 


TABLE 3 

CRUDE MARRIAGE RATES FOR ONTARIO AND SELECTED COUNTRIES, 1946-1965 



1946 

1947 

1948 

1949 

1950 

1951 

1952 

1953 

1954 

1955 

1956 

1957 

1958 

1959 

I960 

1961 

1962 

1963 

1964 

1965 

Ontario 

11.2 

10.5 

10.1 

9.9 

9.7 

9.8 

9.5 

9.3 

8.8 

8.5 

8.6 

8.3 

8.1 

7.8 

7.5 

7.1 

7.0 

7.0 

7.4 

CD 

Canada 

10.9 

10.2 

9.6 

9.3 

9.1 

9.2 

8.9 

8.8 

8.4 

8.2 

8.3 

8.0 

7.7 

7.6 

7.3 

7.0 

7.0 

6.9 

7.2 

7.3 

U.S.A. 

16.4 

13.9 

12.4 

10.6 

11.0 

10.4 

10.0 

9.8 

9.2 

9.3 

9.5 

8.9 

8.4 

8.5 

8.5 

8.5 

8.5 

8.8 

9.0 

9.2 

Japan 


12.0 

12.0 

10.3 

8.6 

8.0 

7.9 

7.9 

7.9 

8.0 

8.0 

8.5 

9.1 

9.2 

9.3 

9.5 

9.8 

9.8 

9.9 

9.7 

France 

12.8 

10.5 

9.8 

8.2 

7.9 

7.6 

7.4 

7.2 

7.3 

7.2 

6.7 

7.0 

7.0 

7.1 

7.0 

6.8 

6.7 

7.1 

7.2 

7.1 

Germany 

8.8 

10.0 

10.6 

10.1 

10.6 

10.3 

9.4 

9.0 

8.8 

8.8 

9.1 

9.0 

9.1 

9.2 

9.4 

9.4 

9.2 

8.8 

8.6 

8.3 

Italy 

9.2 

9.7 

8.4 

7.8 

7.7 

7.0 

7.1 

7.2 

7.5 

7.6 

7.5 

7.5 

7.6 

7.7 

7.8 

8.0 

8.1 

8.3 

8.2 

7.7 

Sweden 

9.5 

8.8 

8.4 

7.9 

7.7 

7.7 

7.4 

7.4 

7.3 

7.2 

7.1 

7.1 

6.9 

6.7 

6.7 

7.0 

7.1 

7.0 

7.6 

7.8 

U.K. 

9.0 

9.2 

9.0 

8.5 

8.1 

8.2 

7.9 

7.8 

7.7 

8.1 

7.9 

7.8 

7.5 

7.5 

7.5 

7.5 

7.4 

7.5 

7.6 

7.7 


Sources: Registrar General, Vital Statistics, 1965, p. 40. 

United Nations, Demographic Year Book, 1954 (pp. 604-5), 1959 (pp. 610-15) and 1965 (pp. 780-85). 


8 






would be wanted. However, it is doubtful that the 
income-based quantity-elasticity of children is very 
significant. It has also been postulated that “perma¬ 
nent income, the income a man expects to have over 
his life time, may be positively correlated with 
fertility, while current income is not.”*^ 

ii. Education. Among the various factors affecting 
socio-economic status and thereby fertility, educa¬ 
tion of the wife was, and continues to remain, most 
important. According to the Growth of American 
Families (GAF) study in 1960 “the relationship 
between the number of expected births and the 
educational attainment of the wife tends to be nega¬ 
tive, with significantly larger families being antici¬ 
pated by the less-educated.’”^ The lower fertility of 
more-educated wives may be explained by the 
average higher age of marriage of more-educated 
females, their stronger motivation to limit families 
(particularly if they are in the labour force), and 
their higher efficiency in the practice of contracep¬ 
tion. In 1960, according to the GAF study, those 
wives with college education and those with four 
years of high school education had 2.0 and 2.1 births 
respectively, while the wives with less than three 
years of high school education or only grade school 
education had 2.6 and 3.1 births respectively.® 
Similarly, while college-educated husbands had 2.1 
children, husbands with only grade school education 
had 2.8 children.'-^ 

The level of educational attainment in Ontario, 
both for males and females, is rising and this is 
expected to slacken fertility rates. The percentage 
of female population in the 5-24 year age group 
attending school in Ontario rose from 54.6 per cent 
in 1931 to 67.2 per cent in 1961.1*’ following 


TABLE 4 

PERGENTAGE DISTRIBUTION OF FEMALE POPULATION 15 YEARS AND OVER 
NOT ATTENDING SCHOOL BY HIGHEST LEVEL OF SCHOOLING IN ONTARIO, 1961 


Age Group 

No 

Schooling 

Elementary 

Secondary 

Some 

University 

University 

Degree 

All 

1.1 

39.7 

54.7 

2.5 

2.0 

15-19 

0.8 

24.2 

74.6 

0.4 

— 

20-24 

0.5 

21.5 

74.0 

2.6 

1.4 

25-34 

0.6 

29.8 

64.1 

2.9 

2.6 

35-44 

0.6 

34.4 

60.0 

2.7 

2.3 

45-64 

1.4 

48.0 

45.9 

2.6 

2.1 

65 & over 

2.9 

64.0 

30.5 

1.6 

1.0 


Source: DBS, 1961 Census of Canada, Bulletin 7.1-10, pp. 10-46. 


indicates the changes in the various component age 
groups: 


Age Group 

Percentage of Female Population 
in School 


1931 

1961 

5- 9 

74.1 

82.3 

10-14 

96.3 

97.6 

15-19 

39.9 

59.9 

20-24 

2.7 

5.1 

Total for 5-24 

54.6 

67.2 


Source: DBS, 1961 Census of Canada, Bulletin 7.1-10, pp. 
10-36. 


Table 4 shows the percentage distribution of female 
population in Ontario 15 years of age and over, not 
attending school, by highest level of schooling they 
have had, for the year 1961. While 70 per cent or 
more of the females in the age groups between 15 
and 34 years of age had secondary school education 
or better, progressively smaller percentages were 
recorded for the older age groups. The expected 
impact upon fertility of this higher percentage for 
females in the younger age groups is obvious. 

*’R. Freedman and L. Coombs, “Economic Considerations in 
Family Growth Decisions,” Population Studies, XX:2 (No¬ 
vember 1966), 198. 

'^P. K. Whelpton, A. A. Campbell and J. E. Patterson, 
Fertilittj and Family Planning in the United States, Princeton, 
1966, p. 93. 

^Pascal K. Whelpton, et al., loc. cit., p. 95. 

^ibid. 

lODBS, 1961 Census of Canada, Bulletin 7.1-10, pp. 10-36. 


9 












iii. Occupation. Fertility diSerentials by occupation 
in North America were quite marked in the first half 
of this century. In recent years, however, these 
differentials have narrowed considerably, though 
they have not completely disappeared. According 
to the GAF study, wives of men in farm occupations 
expected about 13 per cent more births than their 
counterparts married to men in other occupations. ^ ^ 
The wives of men in blue-collar occupations ex¬ 
pected seven per cent more births than the wives 
of men in white-collar jobs.^- Because of the ever- 
increasing number of individuals in non-farm and 
non-blue-collar occupations in Ontario (and in all 
progressive economies), it is probable that fertility 
will continue to show a downward trend. 

Though the effects of income and occupation on 
fertility differentials have become weaker in recent 
years, the combined effect of all three criteria of 
socio-economic status, viz., income, education and 
occupation, could be significant. The conclusion 
that could be drawn is that the inverse relation of 
fertility to socio-economic status is not a thing of 
the past; therefore fertility is likely to continue its 
declining trend as the socio-economic status of the 
population improves. 

(b) Residence 

According to the American demographer, William 
Petersen, “the difference in fertility between rural 
and urban residents has been one of the most 
marked, most persistent, and most significant in the 
nation’s (United States) history.”!-^ Urban fertility 
in all countries and at all times in the past has been 
lower than rural fertility. Urban living and working 
conditions, attitudes and aspirations favour this 
lower fertility for urban populations. However, 
rural-urban differences in fertility are not as signifi¬ 
cant as they once were. In 1956 the crude birth rate 
in Ontario was 25.8 for urban areas, 27.8 for rural 
areas; but by 1964 there was no significant dif¬ 
ference in the rates for rural and urban areas, both 
rates being 23.0 births per 1,000 population. The 
absence of any differential between rural and urban 
fertility in Ontario may be due to the definition 
adopted for rural and urban areas. People with 
higher socio-economic status may have moved to 
suburban communities with less than 1,000 popula¬ 
tion, while people belonging to lower socio-eco¬ 
nomic status may have continued to live in the 
larger cities. The absence of any rural-urban 
differential fertility affords no help in making obser¬ 
vations regarding the future trend of fertility based 
on residence. 


(c) Religion 

Among the various factors affecting fertility differ¬ 
ences in North America, religion has been found to 
be the most important. This has been borne out by 
the results of several investigations studying the 
fertility performance of various religious groups in 
North America. Catholics in North America were 
found to have a higher fertility than non-Catholics. 
The GAF study refers to “the larger family prefer¬ 
ences of Catholics” and observes that “religious 
preference is the best single predictor of the number 
of children a couple desires.”!^ This was one of the 
main conclusions drawn from the study. While the 
average expected number of births was 3.7 for 
Catholics, for Protestants it was only 2.9. Jews 
had the lowest fertility, both expected and realized. 
This significant differential in fertility between 
Catholics and non-Catholics could be due to (1) the 
Catholic belief that the primary purpose of marriage 
is procreation and education of children, and (2) the 
Catholic Church’s disapproval of Catholics using 
chemical or mechanical devices for contraception. 
However, the Church’s stand may soon become 
more tolerant and significantly affect Catholic fer¬ 
tility in the future. This was assumed after con¬ 
fidential information leaked out following the recent 
discussions of the Papal Commission on Birth Con¬ 
trol to the effect that the majority of the members 
of the Papal Commission had recommended for 
Catholics more freedom to use birth control methods 
other than permanent or periodic continence. 

The Catholic component of the population of 
Ontario has steadily increased in recent years due to 
this higher rate of natural increase and a higher per¬ 
centage of Catholics in the immigrant population. It 
is suspected that Ontario’s population emigrating to 
the United States consists mainly of non-Catholics, 
further helping to raise the percentage of Catholics 
in Ontario’s population. This percentage rose from 
17.1 per cent in 1871 to 21.7 per cent in 1931 and 

iiPascal K. Whelpton, et oL, loc. cit., p. 112. 

^^ihicl. 

I'AVilliam Petersen, Population (New York: the MacMillan 
Company, 1961), p. 217. 

i^Registrar General, Vital Statistics, 1956, pp. 52-54. 

i““The urban population consisted mainly of the population 
residing in cities, towns and villages of 1,000 or more whether 
incorporated or not, and comparable metropolitan areas, the 
rest of the population being classified as rural.” DBS, 1961 
Census of Canada, Bulletin 7.1-2, p. 2-2. Ontario’s urban 
population rose from 34.8 per cent of the total population in 
1901 to 71.1 per cent in 1961. 

i^^Charles Westoff, Robert G. Potter and Philip C. Sagi, The 
Third Child, Princeton, 1963, p. 79. 

1 ^Pascal K. Whelpton, et al., loc.cit., p. 71. 


10 



30.8 per cent in 1961.1* During the single decade 
1951-61, the Catholic population rose by 57.8 per 
cent. It is highly probable that Catholic immigra¬ 
tion to Ontario will continue to remain high in the 
next few years; assuming that Catholic fertility re¬ 
mains above the fertility of non-Catholics, this factor 
should stimulate, at least slightly, Ontario’s fertility. 

(d) Ethnic Origin 

Certain ethnic groups are found to have a higher 
fertility than other ethnic groups, and the propor¬ 
tion of those ethnic groups showing higher fertility 
is increasing in Ontario. However, data relating to 
fertility by ethnic groups are not available beyond 
the year 1951. Table 5 shows fertility per 1,000 
women in the major ethnic groups in Ontario and 
the percentage those ethnic groups are of the 
total population. 

In 1941 non-British ethnic groups such as French, 
German, Italian, Polish, Ukranian, Hungarian, Indian 
and Eskimo had higher fertility rates than the British 
ethnic group (which in 1941 formed 54.5 per cent of 
the total population). In 1951, all non-British ethnic 
groups except the Jews had a higher fertility than 
the British. As a result of the higher fertility of non- 
British ethnic groups and the large component of 


these high-fertility ethnic groups in the immigrant 
population of Ontario, the percentage of the British 
ethnic group in the total population has progres¬ 
sively declined. The possibility of a continuing high 
rate of immigration from countries other than 
Britain, taken together with the assumption that non- 
British ethnic groups will continue to maintain their 
higher level of fertility, points to the possibility that 
fertility may be positively affected in Ontario. 

Table 6 summarizes the expected effect of the 
factors discussed under differential fertility upon 
future fertility. 

4. Birth Parity 

The birth parity or birth order gives additional in¬ 
formation on the fertility behaviour of women. 
Table 7 provides information on live births in 
Ontario by birth order during the period 1931-1965, 
expressed as a percentage of total births. 

The proportion of first births to total births de¬ 
clined in the 1950’s and reached its lowest point in 
1963. Since then, despite a decrease in crude birth 
rates and in age-specific fertility rates, first order 
births have been found to form an increasing per- 

18DBS, Census of Canada, 1931-61. 


TABLE 5 

PEBCENTAGE OF TOTAL POPULATION AND FERTILITY PER 1000 WOMEN 
ACCORDING TO ETHNIC GROUP IN ONTARIO, 1941-1961 



British 

Irish 

French 

German 

Italian 

Dutch 

Polish 

Ukranian 

Jewish 

Hungarian 

Indian & 
Eskimo 

others 

Total 

1961 














Percentage of 
total population 

45.5 

14.0 

10.4 

6.4 

4.4 

3.1 

2.4 

2.1 

1.0 

1.0 

0.8 

8.9 

100.0 

Fertility per 

1000 women 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

1951 














Percentage of 
total population 

51.3 

15.7 

10.4 

4.8 

1.9 

2.1 

2.0 

2.0 

1.6 

0.6 

0.8 

6.7 

100.0 

Fertility per 

1000 women 

47.0 

49.7 

68.2 

48.7 

54.3 

62.8 

60.4 

60.4 

44.1 

50.6 

91.5 

n.a. 

49.9 

1941 














Percentage of 
total population 

54.5 

17.6 

9.9 

4.4 

1.6 

1.9 

1.5 

1.3 

1.8 

0.6 

0.8 

4.1 

100.0 

Fertility per 

1000 women 

35.1 

34.9 

59.6 

38.1 

38.6 

34.6 

44.0 

57.2 

28.7 

36.4 

59.7 

n.a. 

38.5 


Source: Registrar General, Vital Statistics, 1941-1951. 


11 






TABLE 6 

PROBABLE EFFECTi OF SELECTED 
SOCIO-ECONOMIC FACTORS ON ONTARIO’S 
EXPECTED FERTILITY 



Factor 

Effect upon Fertility 

1. 

Socio-economic status 

negative 


(a) Income 

no effect or 



positive 


(b) Education 

negative 


(c) Occupation 

negative 

0 

Residence 

no effect 

3. 

Religion 

positive 

4. 

Etlmic Origin 

positive 


^ Based on expected future patterns of development in the 
various factors discussed. 


centage of total births. This has come at the same 
time as a decline in the age-specific fertility rates 
for females in 15-19 and 20-24 year age groups. It is 
obvious, therefore, that this increase in first order 
births has been caused either by a greater number 
of newly married couples or by the decision of 
couples married for some time to have babies — an 
event they had been postponing. 

Second and third order births have also fallen 
slightly, particularly in 1965. However, the fall in 
fourth or higher order births has been more notice¬ 
able. Such births fell from 29 per cent of all births 
in 1961-63 to 26 per cent in 1965. It appears that 
more and more couples are deciding to limit their 
families to three children or less. 

The increase in the percentage of first order births 
would have been significant but for the decision of 
many newly married couples to postpone having 
their first child. This is evident from Table 8, show¬ 
ing first marriages for females and first births during 
the period 1952-65. 


In relating first marriages to first births, it should 
be remembered that there is a time lag between the 
two. Assuming a time lag of one year, it is found 
that up until 1957 the percentage change in first 
order births over the previous year rose more than, 
or fell less than, the percentage change in first 
marriages. There was no specific pattern between 
1958 and 1962; but from 1963 to 1965 the percentage 
change in first order births consistently rose less 
than, or fell more than, the percentage change in 
first marriages. This indicates that many newly 
married couples are postponing the birth of their 
first child. 

5. Age-Specific Fertility Rates 

For analytical purposes and for purposes of popula¬ 
tion projection it is useful to concentrate upon age- 
specific fertility rates rather than on crude birth 
rates. Age-specific fertility rate refers to the ratio of 
the number of live births to women in a given age 
group to the total number of women in that age 
group. Table 9 shows age-specific fertility rates for 
Ontario, Canada and U.S.A. for the period 1931-65. 
The most important age groups in the table are 
20-24, 25-29 and 30-34, usually accounting for 70 to 
80 per cent of total births at any time. The fertility 
of age groups 20-24, 25-29 and 30-34, as for other 
age groups, rose during the 1930’s and 1940’s and 
reached its peak in the late 1950’s. Following that, a 
declining trend was observable — particularly steep 
in recent years. Age-specific fertility in Canada for 
the age groups 20-24 and 25-29 started falling after 
reaching peaks in 1959, one year before Ontario’s 
peaks were reached. The fertility of Ontario’s 30-34 
year age group started declining earlier, from its 
1956 peak. This more or less corresponded with the 
timing of the fertility decline in the United States. 
What is going to happen to the fertility of these 
three age groups is one of the most important ques¬ 
tions facing those who attempt to project Ontario’s 
population. 


TABLE 7 

BIRTH ORDER IN ONTARIO AS A PERCENTAGE OF TOTAL LIVE BIRTHS, 1931-1965 



1931 

1941 

1946 

1951 

1956 

1961 

1962 

1963 

1964 

1965 

1st Child 

28.4 

27.8 

37.0 

30.4 

29.4 

27.6 

27.1 

27.0 

27.9 

30.8 

2nd or 3rd 
Child 

37.2 

38.3 

42.6 

47.2 

44.9 

43.8 

43.9 

43.9 

43.7 

42.9 

4th or higher 

34.4 

42.0 

20.5 

22.4 

25.8 

28.6 

29.0 

29.1 

28.4 

26.3 


Source: Registrar General, Vital Statistics, 1964 and 1965. 


12 








The less important age groups 15-19, 35-39, 40-44 
and 45-49 also experienced an unmistakable down¬ 
ward trend. The 15-19 year age group is likely to 
continue having a lower fertility because of the 
higher proportion of girls remaining in school and 
the increasing use of more efficient teclmiques of 
contraception. In the 35-39, 40-44 and 45-49 year age 
groups, fertility is expected to continue to fall due 


to the expected increasing labour force participation 
rates of those females and the use of more efficient 
techniques of contraception. 

Notwithstanding the present trend of falling 
fertility, it is unrealistic to assume that it will con¬ 
tinue to fall indefinitely or at the same rate. At some 
point in the future fertility may level off and may 
even turn up again. The question may be asked: 


TABLE 8 

FIRST MARRIAGES FOR FEMALES AND FIRST BIRTHS, ONTARIO, 1952-1965 


Year 



Number of 
First Marriages 
for Women 

Number of 

First Births 



Increase 
or Decrease of 
First Marriages 

Increase 
or Decrease of 
First Births 



Percentage 
Change of 

First Marriages 

Percentage 
Change of 
First Births 

1952 



40,951 

39,861 



— 

- - 





_ 

1953 



41,403 

40,642 



452 

781 



1.1 


2.0 

1954 



40,569 

41,910 



-834 

1,268 



-2.0 


3.1 

1955 



40,154 

41,537 



-415 

-373 



-1.0 


-0.9 

1956 



41,791 

42,167 



1,637 

376 



4.1 


1.5 

1957 



42,292 

45,015 



501 

2,848 



1.2 


6.8 

1958 



42,256 

44,908 



-36 

-107 



-0.1 


-0.2 

1959 



41,873 

45,187 



-383 

279 



-0.9 


0.6 

1960 



41,225 

44,907 



-648 

-280 



-1.6 


-0.6 

1961 



39,761 

43,449 



-1,464 

-1,458 



-3.6 


-3.2 

1962 



39,689 

42,341 



- 72 

-1,108 



-0.2 


-2.6 

1963 



40,409 

41,853 



720 

-488 



1.8 


-1.2 

1964 



43,487 

42,538 



3,078 

685 



7.6 


1.6 

1965 



45,950 

43,564 



2,463 

1,026 



5.7 


2.4 

Source: 

Registrar General, Vital Statistics, 1952-1965. 















TABLE 9 










AGE-SPECIFIC 

FERTILITY RATES 

FOR ONTARIO, 









CANADA AND THE UNITED STATES, 1931-1965 









Ntmiher of Births per 1,000 Women in Each Age Group 







Age 15-19 

Age 20-24 1 

Age 25-29 


Age 30-34 

Age 35-39 

Age 40-44 

Age 45-49 


Ont. 

Can. 

U.S. Ont. 

Can. U.S. Ont. 

Can. 

U.S. 

Ont. Can. 

U.S. Ont. Can. 

U.S. 

Ont. 

Can. U.S. 

Ont. 

Can. U.S. 

1931 

35.7 

27.7 

— 127.5 

137.1 135.1 145.2 

159.3 


114.9 136.0 

— 74.1 96.8 


28.8 

40.0 — 

3.4 

5.2 — 

1941 

36.8 

30.7 

— 133.3 

138.4 208.5 137.3 

159.8 

121.4 

96.3 122.3 

79.7 55.9 80.0 

42.5 

19.1 

31.6 13.6 

1.7 

3.7 1.3 

1951 

60.1 

48.1 

84.6 186.4 

188.7 248.4 181.8 

198.1 

171.6 

125.2 144.5 

106.4 68.1 86.5 

52.7 

21.0 

30.9 14.8 

1.9 

3.1 1.1 

1956 

66.9 

55.9 

94.2 225.8 

222.2 254.8 205.7 

220.1 

193.4 

135.6 150.3 

115.0 73.2 89.6 

59.2 

22.6 

30.8 15.6 

1.6 

2.9 1.0 

1957 

73.0 

60.2 

96.0 228.7 

227.1 252.3 209.0 

224.1 

198.4 

133.3 149.4 

116.6 74.2 90.7 

59.8 

22.6 

30.7 15.7 

1.9 

2.8 1.0 

1958 

70.6 

59.2 

91.5 228.8 

226.5 254.1 208.3 

223.3 

196.9 

133.0 147.9 

114.9 72.8 87.6 

57.6 

20.9 

28.9 15.3 

1.7 

2.7 0.9 

1959 

71.7 

60.4 

90.7 239.5 

233.8 258.1 214.7 

226.7 

198.9 

133.3 147.7 

114.8 73.0 87.3 

57.6 

20.8 

28.5 15.4 

1.7 

2.7 0.9 

1960 

70.9 

59.8 

89.1 241.2 

233.5 253.6 217.1 

224.4 

197.4 

134.7 146.2 

112.7 71.7 84.2 

56.2 

21.6 

28.5 15.5 

1.5 

2.4 0.9 

1961 

69.5 

58.2 

88.0 239.8 

233.6 243.6 211.6 

219.2 

197.9 

134.2 144.9 

113.3 69.8 81.1 

55.6 

21.9 

28.5 15.6 

1.6 

2.4 0.9 

1962 

65.3 

55.3 

81.3 241.8 

232.4 231.1 211.6 

215.6 

191.7 

134.0 143.4 

108.9 65.5 77.0 

52.7 

21.8 

27.5 14.8 

1.4 

2.1 0.9 

1963 

61.8 

53.5 

76.5 239.6 

228.2 219.9 211.0 

212.2 

185.7 

133.6 140.9 

106.2 66.0 75.7 

51.3 

21.0 

25.9 14.2 

1.2 

2.1 0.9 

1964 

59.1 

50.6 

— 229.5 

216.2 — 207.0 

206.0 

179.4 

129.5 136.0 

103.9 64.5 72.1 

50.0 

20.2 

25.0 13.8 

1.6 

2.1 0.8 

1965 

58.8 

49.5 

— 204.4 

192.4 — 185.8 

185.3 

— 

115.8 121.0 

— 59.4 66.2 

— 

17.7 

21.8 — 

1.5 

2.0 — 


Sources: DBS, Vital Statistics, 1964 (pp. 72-3) and 1965 (p. 12). 

United Nations, Demographic Year Book, 1954 (pp. 418-19) and 1965 (pp. 464-65). 


13 














why should fertility turn upward again? Professor 
Richard A. Easterlin of the University of Pennsyl¬ 
vania offers one possible explanation based on his 
study of U.S. fertility. Expectations of young couples 
hold the key to the matter. Since birth rates were 
low in the 1920’s and 1930’s there were compara¬ 
tively few youngsters searching for jobs in the late 
1940’s and 1950’s, and they, brought up in the 
austere years of the Great Depression and World 
War II, got better jobs than they expected. They 
married early and had large families. 

“But after about two decades an ‘echo effect’ 
could ])e discerned. All those postwar babies 
had grown up and were crowding into the 
labour market. Their unemployment rates were 
comparatively high and their income low; at 
least, they seemed low in relation to standards 
that had been formed in rather affluent house¬ 
holds. Young husbands began to think that 
large families were too expensive and the re¬ 
sult was the lower national birth rate.”^'-^ 

Since the age-specific fertility rates of most age 
groups started declining around the year 1960 — 
nearly two decades after they started rising — the 
upward turning point may be reached around 1980, 
two decades after 1960. This does not mean that 
age-specific fertility rates will continue to decline 
at the same rate right up to 1980. Nor does it mean 
that crude birth rates will not start rising before 
1980. Considering the large number of persons in 
the younger age groups, it is likely that an upward 
turning point in the crude birth rate is just around 
the corner. 

THE RECENT DECLINE: 
WILL IT CONTINUE? 

Why have age-specific fertility rates declined? Is 
the present trend expected to continue? The follow¬ 
ing factors may be held responsible for the decline, 
and for leading experts to believe that it will indeed 
continue. 

1. Education 

From the discussion of differential fertility it can be 
seen that women with more education generally 
have lower fertility. Since the proportion of girls 
attending schools and universities is expected to rise 
in the future, this factor will likely exert some down¬ 
ward pressure on fertility. 

2. The Spread of Fainily Limitation 

Family limitation becomes more common with more 
education and urbanization. Due to improving 


systems of communication the idea of family limita¬ 
tion accepted in the higher social circles of society 
is spreading rapidly to other segments of society by 
techniques of fashion and social example. This pro¬ 
cess may be aided by at least four factors: (a) the 
Ontario Government’s instruction that health units 
across the province be encouraged to provide family 
planning advice in the future; (b) the expected and 
impending repeal of the provision in the Ganadian 
Griminal Gode barring the dissemination of birth 
control information; (c) the availability of the ‘pill’, 
the oral contraceptive found acceptable even to 
those with low motivation for family limitation; and 
(d) the increasingly active role being played in the 
dissemination of contraceptive knowledge by volun¬ 
tary organizations such as the Planned Parenthood 
Association. It has been found that in the United 
States among white couples with the wife 18 to 39 
years old, 81 per cent had used some form of con¬ 
traception by 1960.2 0 The proportion of those using 
contraceptives in Ontario is likely to reach the same 
level in the near future, if it has not already reached 
that level. 

3. Greater Use and Effeetiveness of Contraeeptives 
The ‘pill’ has been found to be more effective than 
the traditional methods of contraception, thereby 
reducing the number of pregnancies attributable to 
the failure of contraceptives. 

4. The High and Increasing Cost of Children 
There was, and still is, an increasing emphasis on 
the ‘quality’ of children rather than on mere quan¬ 
tity. Gonsequently, children are becoming increas¬ 
ingly more expensive every year. In the United 
Kingdom, United States and Sweden, a child’s total 
consumption cost until it reaches productive age is 
estimated to be about three to four times the annual 
income of the family. 21 According to an estimate of 
the Institute of Life Insurance in the United States, 
it costs the average family in that country $23,000 
to raise a child to college age. 2 2 This has been one 
of the reasons why fertility has fallen in recent years; 
it is expected that this factor will continue to exert 
some effect in the future as well. 

i^Lawrence A. Mayer, “Why U.S. PopiJation Isn’t Ex¬ 
ploding”, Fortune (April 1967), p. 187. 

2i*Pascal K. Whelpton, et al., loc.cit., p. 221. 

21 A. Henderson, “The Cost of Children”, Population Studies, 
IV: part 3 (December 1950), 276; Louis I. Dubhn and 
Alfred J. Lotka, The Money Value of a Man, New York, 
1947, p. 57; Alva Myrdal, Nation and Family, Harper, 1940, 
p. 67. 

22Lawrence A. Mayer, loc. cit., p. 167. 


14 



5. The Housing Problem 

In recent years a serious housing problem has 
developed in some Ontario cities. This may have 
prompted some couples, especially the newly mar¬ 
ried couples living in apartments, not to have chil¬ 
dren immediately after marriage. In spite of the 
efforts being made to solve the problem, the situa¬ 
tion may not ease immediately — particularly in 
view of the large number of persons in the younger 
age groups who will likely start marrying in the near 
future. 

6. Work Experience of the Wife 

Expected and realized fertility decreases sharply 
as the work experience of the wife increases. In 
Ontario, female participation rates are increasing, 
thus cutting fertility rates. The percentage of the 
female population (15 years of age and over) in the 
labour force rose from 17.6 per cent in 1931 to 26.5 
per cent in 1951 and to 32.6 per cent in 1961.2 3 With 
increasing education, this rate is expected to rise 
in the coming years. Moreover, if the relevant 
recommendations of the Carter Commission on 
Taxation are accepted, the working mother will 
receive more tax benefits. The Royal Commission on 
the Status of Women may recommend more 
economic incentives for the working mother in order 
to keep her in the labour force. All these factors 
will push up the participation rates for women 
and probably pull down the level of fertility. 

7. The ‘Marriage Squeeze’ 

Girls normally expect to marry men two to three 
years older than themselves. Since the number of 
male ‘birth cohorts’ 2of 1943-45 is smaller than the 
number of females born in 1946-48, there is a 
marriage squeeze now. However, this may be only 
temporary. 

8. Scarcity of Suitable Job Opportunities 
Although a continuation of the favourable climate 
for economic growth in Ontario is generally ex¬ 
pected, the large number of young persons entering 
the labour force in the coming few years may pro¬ 
duce some dissatisfaction among some youths unable 
to get immediately the type of jobs they want. This 
might postpone marriage as well as the birth of 
children after marriage. 

9. More Liberal Abortion Laws 

It is to be expected that abortion laws will become 
more liberal in the future and that abortions will be 
permissible for other than strictly therapeutic 


Factors Promoting Increasing Fertility 

On the other hand, as observed during the discus¬ 
sion of differential fertility according to religion and 
ethnic group, there is the possibility that a future 
change in the composition of the population may 
spur fertility. Firstly, Catholics in North America, 
as mentioned earlier, have a higher fertility than 
non-Catholics. With the Catholic population of 
Ontario expected to rise in the future, this would 
have the effect of stimulating fertility (unless there 
is a change in Catholic fertility resulting from new 
developments regarding the use of contraceptives). 

Secondly, Ontario’s population has a large per¬ 
centage of immigrants; their number, as well as 
percentage of total population, will likely rise in 
the future. Many studies in the United States have 
shown that foreign-born women have had a higher 
level of fertility than native-born women. While the 
religious affiliation of the immigrants is important, 
it does not provide a complete answer. It is prob¬ 
able that most immigrants, once having settled in 
Canada, feel that they have attained a higher stan¬ 
dard of living than they had ever anticipated. Con¬ 
sidering their income adequate, they expect and 
get more children. Thirdly, as already noted, fertility 
in Ontario was found to be higher for certain ethnic 
groups than for others. Fertility was higher for most 
of the non-British ethnic groups — and their propor¬ 
tion of the total population has been rising. In 
view of the more liberal immigration laws recently 
announced by the Federal Minister of Manpower 
and Immigration, this could lead to rising fertility. 
These factors may not be able to stop the fertility 
decline in the next few years, but they may restrain 
the rate of fertility decline. 

Conclusion 

Future economic conditions in Ontario could be 
significantly affected by the demographic variable, 
fertility. Though the crude birth rate has been fall¬ 
ing in Ontario the last few years, the low age at 
marriage, high marriage rates and high proportion 
of persons in the younger age groups all indicate 
that the present trend of a falling crude birth rate 
will likely be halted and reversed in the near future. 
However, an examination of differential fertility as 
well as age-specific fertility shows that age-specific 
fertility rates in Ontario may continue to decline 
before they start levelling off or turning up again. 

23DBS, 1961 Census of Canada, Bulletin 3.1-1, pp. 1-4. 
2^Persons born in the same year. 


reasons. 


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ONTARIO ECONCKEC INDICATORS - SEASONALLY ADJUSTED 
(♦Figures for Ceinada) 

















The Ontario Economic Review is prepared and edited 
monthly in the Economie Analysis Branch of the 
Department of Economics and Development and is 
available free of charge. The review is intended to 
provide current information on economic activity 
in Ontario and to act as a fortim for the results of 
research in the public service on matters affecting 
the Ontario economy. The signed articles reflect the 
opinions of their authors and do not necessarily rep¬ 
resent the views of the Economic Analysis Branch. 
All correspondence should be directed to the Editor, 
Ontario Economic Review, Office of the Chief Econ¬ 
omist, Parliament Buildings, Toronto 5. 


0 -\ 1867 







MAY-JUNE 1967 
VOL. 5 
No. 5-6 


I mar 1 1 iSBi 

' sf ns 

«SR«v ^ 

DEPARTMENT OF ECONOMICS AND DEV^t^M^T * 


HA 

747 

0656 

1967 

VOL,5 

nq,5^ 


Hon. Stanley J. Randall, Minister 


Stuart W. Clarkson, Deputy Minister 


OFFICE OF THE CHIEF ECONOMIST 


H. Ian Macdonald, Chief Economist 




•nffvent*/ 









CONTENTS 


The Ontario Economy.1 

Soybeans in Ontario: Production, Utilization 

and Prospects, L. Bodnar .3 

Indicators.14 





THE ONTARIO ECONOMY 


Production 

Industrial production, somewhat unsettled in recent 
months, has now begun to make more satisfactory 
advances. During May and June, for instance, motor 
vehicle production was up 13.4 per cent and 12.0 
per cent respectively from the previous year. De¬ 
spite this the total number of motor vehicles pro¬ 
duced in 1967 — 527,070 at the end of June — was 
down 1.8 per cent from 1966. 

Steel ingot production in June was 791,000 tons, 
a decline of 7.2 per cent from June 1966. For the 
first six months production was 4.8 million tons, 
down 5.6 per cent from the 5.1 million recorded in 
the January-to-June period of 1966. 

Ontario’s manufacturing shipments in May (the 
latest month available) were valued at $1,744.8 
million, an increase of 3.5 per cent from May 1966. 
This brought the five-month total to $8,105.6 mil¬ 
lion, 1.7 per cent more than in 1966. This gain was 
exactly the same as the gain for Canada as a whole. 

The seasonally adjusted Index of Industrial Pro¬ 
duction (based on 1949 = 100) advanced to 280.7 
in April, after having slipped to a 1967 low of 276.9 
in March. This 1.4 per cent increase from March to 
April reflected increases in all the major components 
of the Index. Leading all groups was mining, with 
a 1.8 per cent increase — the result of substantial 
advances in the production of copper, nickel and 
petroleum. Manufacturing as a group rose to 249.6, 
a one-month increase of 1.4 per cent. Non-durables 
were up 1.7 per cent due to inereases in the pro¬ 
duction of brewery and distillery products, rub¬ 
ber products and textiles. Clothing, petroleum and 
coal products, and chemicals and allied products 
declined by a few percentage points. Durable manu¬ 
factures advanced 1.1 per cent, the result of signi¬ 
ficant gains in wood products and non-metallic 
mineral products. Iron and steel produets, the only 
durables sub-group to fall, dropped by one per cent. 
Electric power and gas utilities advanced 0.5 per 
cent. 

Looking at the gains from one year ago, the 
Index has risen 3.5 per cent. The electric power and 
gas utilities group has shown the greatest gain, ad¬ 
vancing 11.4 per cent. Mining is next with a 3.3 per 
cent gain, followed by a 2.5 per eent gain in manu¬ 
facturing (3.3 per cent in non-durables, 1.6 per cent 
in durables). Non-durables owed much of its in¬ 


crease to advances in foods and beverages, tobaceo, 
textiles and printing, publishing and allied indus¬ 
tries. The main durables groups to advance were 
electrical apparatus and supplies, wood produets 
and non-ferrous metal products. 

Construction 

Ontario’s construction activity in May and June, 
expressed in terms of contracts awarded, was up 
over one third from the corresponding months last 
year. In June the value of contraet awards was 
$240.5 million, compared with $179.4 million in 
June 1966. All types of construction improved, ex¬ 
cept for industrial construction which was down 
58.1 per eent. Engineering contracts showed the 
greatest advance, climbing to $64.7 million, up 148 
per cent from 1966. Residential construction awards 
totalled $76.8 million, an increase of 38 per cent. 

In terms of actual housing construction, the num¬ 
ber of dwelling unit starts in Ontario centres of 
10,000 population and over was 8,054 in June, up 
58.5 per cent from 12 months earlier. This was down 
slightly from the near-record month of May 1967, 
when starts numbered 8,213. The cumulative total 
for the first six months of 1967 was 26,141, 25 per 
cent higher than the same period last year. Of the 
larger centres, St. Catharines, Toronto, London and 
Kitchener had fairly substantial eumulative in¬ 
ereases, ranging from 43 per cent for St. Catharines 
to 22 per cent for Kitchener. Ottawa is the one 
major centre where starts have been down; by the 
end of 1967 they were down over 23 per cent. 

Dwelling unit completions in Ontario eentres of 
10,000 population and over were down over 16 per 
cent for the six-month period of 1967, in large 
measure due to a 50 per cent decline for the month 
of June. All larger centres in the province con¬ 
tributed to this deeline; in Toronto, six-month com¬ 
pletions were down 2.1 per cent, while in Ottawa 
they were down over 45 per cent. 

The number of units under construction was also 
down at the end of the first half of 1967. At June 30, 
units under construetion numbered 39,398, a deeline 
of 16.8 per cent from the 47,352 units under con¬ 
struction one year earlier. 

Employment 

The seasonally adjusted labour force in the province 
rose to 2,848,000 in June, while the number of indi- 


1 


viduals employed dropped slightly to 2,749,000. As 
a result the rate of unemployment rose from 3.1 per 
cent in May to 3.5 per cent in June. This brought 
the six-month cumulative average to 3.0 per cent for 
1967, higher than the 2.4 per cent rate registered 
in 1966. 

Statistics for all of Canada indicate that unem¬ 
ployment rose from 4.3 per cent in May to 4.4 per 
cent in June; in June of 1966 this rate was 3.6 per 
cent. For the six-month period, unemployment was 
4.0 per cent as compared with 3.5 per cent in 1966. 

Retail Trade 

Generally good advances in aU types of retail trade 
in Ontario produced an estimated value of retail 
sales of $840.5 million in June — an increase of 12.2 
per cent over June 1966. Leading all other groups 
were fuel dealers, with an advance of 24.6 per cent. 
They were followed by jewellery stores (up 20.8 
per cent), furniture, appliance and radio stores (up 

19.6 per cent) and variety stores (up 17.9 per cent). 
Grocery stores and motor vehicle dealers, two of the 
largest groups, were both up about 12 per cent. 

On a six-month cumulative basis Ontario’s retail 
trade rose 5.1 per cent between 1966 and 1967. By 
the end of June it was valued at $4,199 million. 
Motor vehicle dealers were the only group to de¬ 
cline (0.7 per cent). All others increased, ranging 
from 13.1 per cent for variety stores to 2.9 per cent 
for men’s clothing and 2.8 per cent for furniture, 
appliance and radio dealers. 

For Ganada as a whole, June statistics reveal a 

10.7 per cent increase from 1966. The six month 
total of $11,080.4 million was 6.5 per cent higher 
than last year. 

Further Information on Kennedy Round 
Trade Negotiations 

After three years of hard bargaining, the Kennedy 
Round of GATT trade negotiations were concluded 
on June 30, 1967. Results for the 50 participating 
countries should be favourable: world trade of $40 
billion will be affected and tarifiFs will be reduced 
an average of 33 per cent on all products. 

For Ganada, the agreement should open new 
areas for trade: in current trade terms over $3.0 
billion of Ganadian exports (including wheat) 
stand to benefit. Ganada will have easier access for 
exported goods and will also be assured of new 
markets for secondary manufactures. In turn, Gan¬ 
ada is cutting duties on $2.5 billion of imports. 

The agreements will give Ganada new oppor¬ 
tunities in the United States market. The U.S. will 
reduce or eliminate duties on Ganadian goods worth 


$1.92 billion in 1966 terms. Among the industries 
most favourably affected are: agriculture, receiving 
reductions on $95 million of exports; fisheries, elimi¬ 
nating duties on products valued at $91.04 million 
in 1966; forestry, eliminating duties or reducing 
them by 50 per cent on Ganadian exports worth 
$383.9 million; chemicals, reducing duties on goods 
worth $95 million; paper and paper products, re¬ 
ceiving 50 per cent reduction; and manufactured 
goods, getting 50 per cent tariff reductions on goods 
worth $700 million. 

The tariff reductions in manufactured goods will 
enable Ganadian manufacturers to produce more 
efficiently on longer production runs since larger 
markets will be made available to them. 

Ganada will reduce tariffs on more than 1,500 
items. The rates of duty on final manufactures will 
generally be about 17V2 to 20 per cent and on pro¬ 
duction machinery and other producer’s equipment 
15 per cent. Duties on numerous tropical products 
will be reduced or removed entirely to help the 
trade of developing countries. 

Since wheat exports form 10 per cent of Ganada’s 
annual exports, the Kennedy Round Gereals Agree¬ 
ment is important for Ganada. The Gereals Agree¬ 
ment settled on a higher price range for wheat and 
labelled 10 grades of wheat with maximum and 
minimum prices. The new price range has a 21 per 
cent bushel increase in both the minimum and 
maximum price for No. 1 Northern over the current 
International Wheat Agreement price range which 
expires on July 31. A multilateral aid program to 
provide 4.5 million metric tons of grain to the needy 
countries was also signed by 17 countries. Grain¬ 
importing European countries and Japan agreed to 
pay their share in cash or kind so that the major 
wheat producing countries — Ganada, United States, 
Argentina and Australia — would not have the sole 
responsibility of supplying food aid. 

The new anti-dumping code to come into effect 
July 1, 1968 should prevent the arbitrary use of 
anti-dumping duties by one country against an¬ 
other. Before duties can be applied, trading nations 
will have to prove: (1) that the product is being 
dumped; and (2) that the domestic industry is be¬ 
ing injured by the lower priced imports. 

The tariff changes will be staggered between 
January 1, 1968 to January 1, 1972 so that industries 
have sufficient time to adjust to international com¬ 
petition. Ganada and the U.S. will introduce one- 
fifth of the reductions on January 1 each year until 
1972. Japan and the European countries are ex¬ 
pected to start on July 1, 1970, putting into effect 
two-fifths of the tariff reductions. 


2 


SOYBEANS IN ONTARIO: 
Production, Utilization and Prospects 

L. Bodnar 

Agricultural Economist, Applied Economics Branch 
Office of the Chief Economist 


Though it may not be widely known, the soybean 
is today an important agricultural commodity, fre¬ 
quently used in the produetion of both vegetable 
oil and animal feed. Yet perhaps even more signi¬ 
ficant to the world as a whole is its potential use as 
a high protein food for human consumption. As 
feeding the world becomes a more and more serious 
problem, attention will have to be focused on new 
sources of food. Soybeans are such a potential food 
source. 

The soybean is the seed of a leguminous plant 
indigenous to eastern Asia. Though it is grown 
mainly in areas where the summer is hot and damp, 
it is in fact adaptable to a wide variety of climatic 
conditions, including those of parts of Canada. Vir¬ 
tually all soybean production in Canada is located 
in a few counties in southwestern Ontario. Though 
this represents but a small fraction of world produc¬ 
tion — the United States and China between them 
produce over 90 per cent of the world supply of soy¬ 
beans — this Ontario industry is important. For one 
thing, it has been growing quite impressively during 
the past two deeades. Acreage has risen from 59,000 
in 1946 to 279,000 in 1966; and the value of produc¬ 
tion during the same period has climbed from $2.4 
million to $26.8 million. 

What really makes this industry worthy of elose 
examination is its enormous future potential. Today 
Canada is able to meet only one third of her soybean 
requirements, relying on imports for the remainder. 
With the number of potential uses for soybeans 
expanding it becomes all the more important to 
examine the possibility of stepping up our own do¬ 
mestic production. Among other things, this article 
will attempt to look at the prospeets for sizable 
increases in production. 

Soybeans: An Important Source of Vegetable Oil 

The main factor behind the growing demand for 
and production of soybeans has been the rising de¬ 
mand for vegetable oil. As the major source of 
edible vegetable oil — in 1965 soybean oil repre¬ 
sented 27 per cent of the world’s total edible vege¬ 
table oil production" — soybeans have enjoyed a 
growing demand as the demand for vegetable oil 


has risen. While vegetable oil has been in eommon 
use for many centuries, it gained importance only 
after the discovery of hydrogenation, a hardening 
process, at the end of the 19th eentury. This enabled 
the margarine industry to substitute cheaper raw 
materials for the animal fats it originally used. The 
effect was to further improve the already favourable 
price position of margarine with respect to butter. 
It also increased the demand for oil and oilseed, in¬ 
cluding that of the soybean. In Canada at present 
about half of the oil used in margarine is derived 
from soybeans (see table, page 4). 

While soybean oil is very important for its use in 
margarine, it is put to other uses as well. Together 
with cottonseed, groundnut and palm oils, soybean 
oil is one of the ehief vegetable oil constituents of 
compound cooking fat, as can be seen from the 
lower half of the table on page 4. It is also used in 
the production of soap. To a lesser extent the oil 
serves as a drying agent in paints, varnishes and 
printing ink, although drying mixes using soybean 
oil are usually of an inferior quality. In addition it 
has been put to a wide range of industrial uses. 


USE OF SOYBEAN OILS, BY INDUSTRIES 
IN CANADA, 1963 


Industry 

1963 
Million lbs. 

% 

Soap and Cleaning Compounds" 

61.9 

34.2 

Miscellaneous Foods 

54.5 

30.1 

Slaughtering and Meat Packing 

37.9 

21.0 

Paint and Varnish 

12.7 

7.0 

Plastic and Synthetics 

9.1 

5.0 

Fish Products 

3.1 

1.7 

Other Chemical Industries 

1.7 

I.O 

Total 

180.9 

100.0 


includes integrated industries manufacturing margarine and 
shortening (which represent an estimated 80 to 85 per cent of 
the quantities under this item). 

Source: DBS, Vegetable Oils Industry. 


’Other significant sources of vegetable oil were peanut (18 per 
cent) sunflower seed (17 per cent), cottonseed (16 per 
cent), rapeseed (9 per cent), olive oil (6 per cent) and 
sesame seed, corn oil and safflower oil, ranging from four per 
cent to one per cent. 


3 






CANADIAN CONSUMPTION OF OILS AND FATS USED IN 
MARCARINE AND SHORTENING/ 1961-62 - 1964-65 


Crop Year 

1961-62 1962-63 1963-64 1964-65 


Margarine 

000 lbs. 

% 

000 lbs. 

% 

000 lbs. 

% 

000 lbs. 

% 

Vegetable Oils: 

100,437 

66.5 

78,302 

55.2 

89,098 

65.2 

100,016 

73.3 

Soybean 

57,195 

37.9 

48,514 

34.2 

63,928 

46.7 

73,479 

53.8 

Palm^ 

15,680 

10.4 

8,694 

6.1 

5,799 

4.3 

5,988 

4.4 

Cottonseed 

4,117 

2.7 

3,197 

2.3 

3,158 

2.3 

3,747 

2.8 

Cocoanut 

14,963 

9.9 

7,353 

5.2 

2,117 

1.6 

188 

0.1 

Other" 

8,482 

5.6 

10,544 

7.4 

14,096 

10.3 

16,614 

12.2 

Marine and Fish Oils 

43,456 

28.9 

60,482 

42.5 

43,979 

32.2 

28,715 

21.0 

Animal Oils: 

6,982 

4.6 

3,273 

2.3 

3,520 

2.6 

7,661 

5.7 

Lard 

6,978 

4.6 

3,241 

2.3 

3,504 

2.6 

7,657 

5.7 

Edible Tallow 

( 3 ) 

— 

9 

— 

16 

— 

4 

— 

Other 

4 

— 

23 

— 

— 

— 

— 

— 

Grand Total 

150,875 

100.0 

142,057 

100.0 

136,597 

100.0 

136,392 

100.0 

Shortening 









Vegetable Oils: 

95,338 

54.6 

101,497 

55.8 

106,114 

56.5 

105,183 

55.0 

Soybean 

49,696 

28.4 

52,698 

29.0 

61,344 

32.7 

58,405 

30.4 

Cottonseed 

7,818 

4.5 

6,831 

3.8 

8,226 

4.4 

11,000 

5.8 

Palm' 

19,878 

11.4 

15,129 

8.3 

11,504 

6.1 

9,310 

4.9 

Cocoanut 

2,972 

1.7 

2,223 

1.2 

2,524 

1.3 

2,804 

1.5 

Other" 

14,974 

8.6 

24,616 

13.5 

22,516 

12.0 

23,664 

12.4 

Marine and Fish Oils 

19,248 

11.0 

24,336 

13.4 

14,820 

7.9 

13,812 

7.2 

Animal Oils: 

59,822 

34.4 

56,166 

30.8 

66,783 

35.6 

72,396 

37.8 

Edible Tallow 

32,209 

18.5 

30,739 

16.9 

37,822 

20.2 

44,833 

23.4 

Lard 

24,913 

14.3 

21,989 

12.0 

27,257 

14.5 

26,253 

13.7 

Other 

2,700 

1.6 

3,438 

1.9 

1,704 

0.9 

1,310 

0.7 

Grand Total 

174,408 

100.0 

181,999 

100.0 

187,717 

100.0 

191,391 

100.0 


^All figures based on refined oil. 

Talm kernel included to December 1962; from January 1963 included with “Other”. 
“Included with “Other”. 

^Includes rapeseed oil. 

Source: Dominion Bureau of Statistics. 


Other Uses of the Soybean 

When most of the oil of the soybean has been ex¬ 
tracted^ by crushing the bean, there is left a residue 
which has further uses. Its principal use is in the 
manufacture of soybean meal for animal feed,^ 
either alone or compounded with other elements. 
The residue may also be converted into flour or 
paste for human consumption. 

Alternatively, the bean can be made into flour, 
sauce or soya milk without separating any of the 
oil at all. 

Soybean oil cake and meal are important for their 
use as high protein animal feeds. Their higher pro¬ 
tein content gives them an advantage over linseed 


oil and meal, another source of animal feed. Accord¬ 
ing to feeding manuals, the digestible protein con¬ 
tent of soybean oil cake and meal is about 40 per 
cent, while that of linseed oil cake and meal is only 
about 30 per cent. Meat meal and meat scrap, other 
sources of protein feed, contain 46 per cent digest¬ 
ible protein. 

“The oil content of soybeans is relatively low, ranging from 13 
to 20 per cent by weight. The commercial extraction rate 
usually varies from 14 to 18 per cent. 

“The demand for high protein feed has now attained such 
dimensions in the United States and western Europe that 
soybeans are as much in demand in these countries for cake 
and meal as for oil. In Canada in recent years soybean oil 
meal has represented about half of the total high protein feed 
supply. 


4 







The following table relating to the supply of high 
protein feeds in Canada gives some indication of 
the overwhelming position of soybean oil meal: 


ESTIMATE OF HIGH PROTEIN FEED SUPPLY 
IN CANADA, 1963-1965 



1963 

1964 


1965 


000 


000 


000 



Tons 

% 

Tons 

% 

Tons 

% 

Soybean Oil Meal 

Brewers’ and Distillers’ 

443 

51.9 

452 

52.0 

455 

49.9 

Dried Grains and 

Malt Sprouts 

109 

12.8 

109 

12.5 

109 

12.0 

Rapeseed Oil Meal 

23 

2.7 

26 

3.0 

36 

3.9 

Linseed Oil Meal 

29 

3.4 

38 

4.4 

25 

2.7 

Other Oil Meals 

56 

6.6 

60 

6.9 

61 

6.7 

Total Vegetable Protein 

660 

77.4 

684 

78.8 

686 

75.2 

Packinghouse By-Products 

137 

16.0 

140 

16.0 

163 

17.9 

Fishmeal 

38 

4.4 

26 

3.0 

44 

4.8 

Skim Milk, Buttermilk 

19 

2.2 

19 

2.2 

19 

2.1 

Total Animal Protein 

194 

22.6 

185 

21.2 

226 

24.8 

Total Protein Supplies 

854 

100.0 

869 

100.0 

912 

100.0 


Source: DBS, Coarse Grain Quarterly. 


It is quite possible that soybeans, as a high pro¬ 
tein food, may be used for human consumption as 
a meat substitute in the future. In the United States 
today there are some plants, operating on an experi¬ 
mental basis, producing ‘bacon’, ‘chicken soup’ and 
even ‘steaks’ made of soybeans. That which is ex¬ 
perimental today could very well be a widely used 
food of tomorrow, especially considering population 
pressures and the increasing need for low-priced 
high protein food products. 

Canadian Production 

As already mentioned, soybean production in Can¬ 
ada represents only a small portion of total world 
production. The United States is by far the largest 
producer, accounting for approximately 65 per cent 
(measured in bushels); China ranks second, pro¬ 
ducing just under 30 per cent. Canada, Brazil and 
Japan follow with obviously small shares of total 
world production. 

Two economic regions in Ontario produce almost 
all of Canada’s soybeans. The following table shows 
the distribution of soybean acreage for 1951, 1961 
and 1966. 

Despite the fact that Ontario’s soybean acreage 
has nearly doubled in 15 years, the supply has never 
come close to meeting domestic requirements. Both 
the soybean oil and meal producing industries make 


SOYBEAN ACREAGE IN ONTARIO, 
1951, 1961 AND 1966 


1951 1961 1966 

- % of Total 

Number of Acres Ontario (1966) 


Lake Erie Region 

17,814 

24,712 

37,523 

13.5 

Elgin 

11,133 

17,809 

25,093 

9.0 

Middlesex 

5,017 

6,352 

10,607 

3.8 

Norfolk 

1,233 

500 

1,593 

0.6 

Oxford 

431 

51 

230 

0.1 

Lake St.Clair Region 

133,444 

185,413 

237,765 

85.3 

Essex 

62,785 

63,605 

83,392 

29.9 

Kent 

60,320 

84,168 

96,184 

34.5 

Lambton 

10,339 

37,640 

58,189 

20.9 

Other 

3,715 

1,720 

3,561 

1.2 

TOTAL ONTARIO 

154,973 

211,845 

278,849 

100.0 


heavy demands upon the supply of soybeans. This 
problem is compounded by the fact that Canada 
exports soybeans (in crude form) equivalent to 
about half of her domestic production.^ Conse¬ 
quently the total requirements have been met by 
importing soybeans from the United States. Im¬ 
ports, in fact, make up over two thirds of the total 
Canadian supply. 


SOYBEANS IN CANADA 



1961-62 

1962-63 

1963-64 

1964-65 


Million Bu. % 

Million Bu. % 

Million Bu. % 

Million Bu. % 

Production 
Imports 
Total Supply 

6.6 33.2 

13.2 66.8 

20.0 100.0 

6.6 31.0 

14.7 69.0 

21.3 100.0 

5.0 24.2 

15.7 75.8 

20.7 100.0 

7.0 30.6 

15.8 69.4 

22.8 100.0 


The demand for soybeans in Canada can be ap¬ 
preciated by observing the extensive use of this 
particular product for oil and meal production. For 
example, from 65 to 70 per cent of Canada’s vege¬ 
table oil production involves the use of soybeans. 
Oil meal production uses soybeans to an even 
greater extent — approximately 85 per cent (see top 
left table, page 6). 

Canada at present relies heavily upon imported 
soybeans in order to produce — and export — soy¬ 
bean oil and soybean meal. In the 1964-65 crop year, 
Canada grew approximately seven million bushels 
of soybeans and exported 3.2 million bushels. This 
left less than four million bushels of domestic beans 
for soybean oil production — enough to produce 
only one fifth of the total domestic oil production of 
201 million pounds. The remaining four fifths were 
produced from imported beans. 

^Abnost all exported soybeans go to Britain, with Denmark 
and Germany receiving small additional shares. 


5 















CRUSHINGS OF VEGETABLE OIL SEEDS 
AND PRODUGTION OF OIL AND OIL 
MEAL IN GANADA, 1961-62 TO 1964-65 


Crop Year 

1961-62 1962-63 1963-64 1964-65 



Million 

lbs. 

% 

Million 

lbs. 

% 

Million 

lbs. 

% 

Million 

lbs. 

% 

Crushings 

1,225 

100.0 

1,298 

100.0 

1,363 

100.0 

1,465 

100.0 

Soybeans 

1,015 

82.8 

1,072 

82.6 

1,116 

81.9 

1,172 

80.0 

Flaxseed 

138 

11.3 

142 

10.9 

154 

11.3 

162 

11.0 

Other’ 

72 

5.9 

84 

6.5 

93 

6.8 

131 

9.0 

Oil 

Production 

251 

100.0 

265 

100.0 

281 

100.0 

307 

100.0 

Soybeans 

177 

70.5 

184 

69.4 

193 

68.7 

201 

65.5 

Flaxseed 

48 

19.1 

49 

18.5 

53 

18.9 

56 

18.2 

Other’ 

26 

10.4 

32 

12.1 

35 

12.5 

50 

16.3 

Oil Meal 

Production 

921 

100.0 

972 

100.0 

1,030 100.0 

1,104 100.0 

Soybeans 

792 

86.0 

837 

86.1 

883 

85.7 

930 

84.3 

Flaxseed 

86 

9.3 

86 

8.9 

96 

9.3 

102 

9.2 

Other’ 

43 

4.7 

49 

5.0 

51 

5.0 

72 

6.5 


^Includes rapeseed and sunflower seed. 

Source: Dominion Bureau of Statistics. 


Imports and Exports of Soybean Products 

Ganada must obviously import a substantial amount 
of soybeans in order to meet both domestic and 
export requirements. Yet despite this she has been 
unable to produce enough oil and meal to meet 
domestic and export market requirements for these 
two products. As a result both of these commodities 
are imported as well. Fortunately the trade balance 
in each of these two commodities has been fairly 
close, and has not even approached the heavy import 
balance in soybean trade. The following tables 
show the exact relationship between the supply and 
disposition of both soybean oil and meal. 


SOYREAN OILS: SUPPLY AND DISPOSITION 



1961-62 

1962-63 

1963-64 

1964-65 


Million 


Million 


Million 


Million 



lbs. 

% 

lbs. 

% 

lbs. 

% 

lbs. 

% 

Production 

177 

91.2 

184 

87.2 

193 

84.9 

201 

85.7 

Imports 

17 

8.8 

27 

12.8 

34 

15.1 

34 

14.3 

Total Supply 

194 100.0 

211 

100.0 

227 

100.0 

235 

100.0 

Exports 

49 

25.3 

51 

24.2 

28 

12.4 

33 

14.1 

Apparent 









Disappearance 

145 

74.7 

160 

75.8 

203 

87.6 

202 

85.9 

SOYBEAN MEAL: 

SUPPLY AND DISPOSITION 


1961-62 

1962-63 

1963-64 

1964-65 


Million 


Million 


Million 


Million 



lbs. 

% 

lbs. 

% 

lbs. 

% 

lbs. 

% 

Production 

792 

61.6 

837 

59.7 

883 

68.4 

930 

64.0 

Imports 

494 

38.4 

565 

40.3 

407 

31.6 

522 

36.0 

Total Supply : 

1,286 

100.0 

1,402 

100.0 

1,290 

100.0 

1,452 

100.0 

Exports 

384 

29.9 

466 

33.2 

422 

32.7 

534 

36.8 

Apparent 









Disappearance 

902 

70.1 

936 

66.8 

868 

67.3 

918 

63.2 


Trade statistics for the calendar years 1964 and 
1965, expressed in dollars, show the extent to which 
the import trade balance in soybeans adversely 
affects the overall trade balance in soybeans and 
soybean products. 


TRADE IN GANADIAN SOYBEANS AND 
SOYBEAN PRODUGTS 
($ Million) 




1964 



1965 



Exports 

Imports 

Balance 

Exports 

Imports 

Balance 

Soybeans 

5.8 

52.9 

-47.1 

10.0 

46.3 

-36.3 

Soybean Oil 

3.0 

3.8 

- 0-8 

4.7 

4.1 

+ 0.6 

Soybean Meal 

21.1 

17.4 

3.7 

24.3 

20.7 

+ 3.6 

Total 

29.9 

74.1 

-44.2 

39.0 

71.1 

-32.1 


One fact becomes quite apparent: Ganada, if it is 
possible, should increase her own production if she 
wishes to improve her trade position in these 
products. 

Additional Acreage of Soybeans Required for 
Import-Substitution 

In 1964-65, over 15.8 million bushels of soybeans 
were imported into Ganada from the United States. 
Assuming an average yield of 30 bushels per acre, 
close to 528,000 additional acres would be necessary 
to substitute imported soybeans with domestic pro¬ 
duction. In the same period total imports of soybean 
oil amounted to 33.7 million pounds; assuming an 18 
per cent extraction rate (a highly favourable one) 
this would correspond to 3.1 million bushels of 
soybeans, the production of which would require 
100,000 acres of soybeans. 

If export levels remain the same, total production 
including import substitution would require close 
to 630,000 acres of soybeans viore than presently 
exist in Ontario. If exports were eliminated, about 
420,000 additional acres would be necessary. As 
these estimates are based on our present population, 
it is obvious that an even larger total area will be 
required in the future to satisfy the demand of an 
increasing population. 

SOYBEAN VARIETIES AND 
TECHNIQUES OF PRODUCTION 

Soybean Varieties 

There are a number of soybean varieties available 
to meet the maturity requirements of different areas 
in Ontario. The choice of proper varieties is very 
important; without the proper variety the chance 
of obtaining good results in growing soybeans will 
be reduced. The use of a variety that, for example, 
matures too late for an area may result in a serious 
reduction in yield because of frost kill. 


6 


















Soybean varieties are distinguished by the num¬ 
ber of heat units required to mature them. While 
the earliest variety needs the fewest heat units, it 
produces lower yields than later varieties. 

Heat units are calculated on the basis of temper¬ 
atures above 50°F in daytime and 40°F at night 
during the growing season. The heat unit rating 
used for locations in Southern Ontario indicates the 
sum of heat units between the planting date and the 
autumn date when killing frost can be expected 
(one year in ten). 

Full-season varieties should be planted the third 
week of May to assure uniform maturity and high 
quality beans, while the planting of short and mid¬ 
season varieties should be carried out at the end of 
May to obtain maximum yields. Experiments indi¬ 
cate that a one-week delay in planting delays the 
date of maturity of short-season varieties by five 
days. This increases the danger of frost damage in 
the lower heat unit areas of Eastern Ontario, where 
inadequate soil drainage may set back the date of 
planting. 


At present the major soybean varieties are: 

1. Short-season varieties 

(a) Crest — 2,500 heat-unit grading 

(b) Merit — 2,600 heat-unit grading 

2. Mid-season varieties 

(a) Hardome — 2,700 heat-unit grading 

(b) Chippewa — 2,800 heat-unit grading 

3. Fidl-season varieties 

(a) Harosoy 63 — 3,100 heat-unit grading 

(b) Harman — 3,300 heat-unit grading 

Techniques of Production 

The success of soybean growing depends largely on 
one important factor: weed control. Soybeans will 
not compete with weeds, especially in their early 
stage of development, and without proper care 
yields may be disappointing. At present, weed con¬ 
trol in soybean production is mainly effected by 
mechanical devices — rotary hoes and cultivators. 
The lack of efficient and economic chemical herbi- 



AVAILABLE UNITS OF HEAT 


7 
















cides — in great supply in com production — repre¬ 
sents both a major difficulty in the expansion of the 
soybean area and a major challenge for research 
scientists. 

Soybeans fit well into any crop rotation. They 
leave a field in excellent physical condition, with a 
minimum of preparation required for the crop fol¬ 
lowing. Tests at many experimental stations have 
shown that small grains yield better on soybean 
stubble fields than on fields previously used for com 
or other small grains. Soybeans yield well following 
a heavily fertilized crop such as com or tomatoes. 
While they do well on land used for that crop the 
previous year, successive growing of the crop for 
three or four years is not a good rotation practice 
as it increases the possibilities of disease. Early 
varieties may be used to permit planting of fall 
wheat after soybean harvesting. Winter wheat, fol¬ 
lowing a soybean crop, cannot immediately make 
use of the nitrogen residue from the soybeans. 
Therefore, a fertilizer containing nitrogen to break 
down the residue has to be applied before or when 
planting the wheat. 

It appears, therefore, that the place of soybeans 
in rotation can be considered only in terms of the 
whole rotation. Whether they will precede or fol¬ 
low com or other grains depends entirely on the 
growers’ preference.'' 

ECONOMIC ASPECTS OF 
SOYBEAN PRODUCTION 

Cost of Production and Return 

The Soil and Crop Improvement Association of 
Elgin County conducted cost-return surveys for the 
period 1961 to 1965 for a number of crops (see 
table, top right). 

It should be noted that no one crop enterprise 
is most profitable for all farmers, because each 
farmer has varying quantities of resources such as 
labour, machinery, capital and land. Moreover, 
managerial skills differ among farmers. These con¬ 
dition the farmer’s ability to combine available re¬ 
sources to obtain maximum net returns. In spite of 
these varying conditions, there are certain crop re¬ 
lationships and production practices that can be 
used to assist farmers in their choice of a crop 
enterprise. 

Varying yields and prices from 1961 to 1965 in¬ 
fluenced gross returns and net returns to manage¬ 
ment, and the competitive position of the crops 
under study (see table at right). 


COMPARISON OF PRODUCTION COSTS 
AND RETURNS FOR CROPS STUDIED, 
ELCIN COUNTY, 1961 TO 1965 



Soybeans 

Grain 

Corn 

Winter 

Wheat 

Oats 

Years of Study 

1961-65 

1961-65 

1962-64 

1961-63 

Number of Records 

44 

73 

28 

31 

Yield per Acre in Bushels 

30 

88 

40 

65 

Yield per Acre in Pounds 

1,800 

4,928 

2,400 

2,210 

Per Acre 

Gross Returns 

79 

Dollars 

98 67 

41 

Measurable Costs 

40 

62 

42 

37 

Net Returns to Risk and 

Management 

39 

36 

25 

4 

Per Bushel 

Gross Returns 

2.64 

1.00 

1.67 

.64 

Measurable Costs 

1.35 

.63 

1.06 

.57 

Net Returns to Risk and 

Management 

1.29 

.37 

.61 

.07 

Per Ton 

Measurable Costs 

44.40 

25.20 

35.20 

33.40 

Net Returns to Risk and 

Management per Dol- 

lars of Cost 

.98 

.58 

.60 

.11 

Net Returns to Risk and 

Management as a Per- 

centage of Crop Value 

49% 

37% 

37% 

10% 

Labour Hours per Acre^ 

7.4 hrs. 

8.5 hrs. 

7.0 hrs. 

7.7 hrs. 


includes farmer’s own labour plus an estimate for all custom 
operations. 


YIELDS, PRICES AND RETURNS FOR SOY¬ 
BEANS, CRAIN CORN, WINTER WHEAT 
AND OATS, ELCIN COUNTY, 

1961 TO 1965 


1961 

Yield 

Bu./Acre 

Price 

$ 

Per Bu. 

Gross 

Return 

$/Acre 

Return to 
Management 
$/Acre 

Soybeans 

40 

2.50 

100 

5P 

Grain Corn 

91 

0.96 

87 

28 

Winter Wheat 

— 

— 

— 

— 

Oats 

55 

0.69 

38 

5 

1962 

Soybeans 

33 

2.42 

80 

421 

Grain Corn 

110 

0.88 

97 

36 

Winter Wheat 

37 

1.68 

62 

20 

Oats 

69 

0.59 

41 

3 

1963 

Soybeans 

29 

2.93 

85 

48^ 

Grain Corn 

89 

1.06 

94 

32 

Winter Wheat 

50 

1.68 

84 

43 

Oats 

68 

0.65 

44 

5 

1964 

Soybeans 

30 

2.77 

83 

40' 

Grain Corn 

107 

0.96 

103 

39 

Winter Wheat 

33 

1.67 

55 

12 

Oats 

— 

— 

— 

— 

1965 

Soybeans 

24 

2.54 

61 

21 

Grain Corn 

100 

1.17 

117 

51 

Winter Wheat 

— 

— 

— 

— 

Oats 

— 

— 

— 

— 


^Soybeans more profitable than grain corn. 


®From Soybeans in Canada by Ivan M. Roberts, published by 
Victory Soya Mills Limited, 1966. 


8 









The analysis of the table indicates that: 

(a) In 1961, the net return on soybeans signifi¬ 
cantly exceeded that on grain corn. For that 
year the surveyed farms obtained excellent 
yields of soybeans. 

(b) In 1962, both the yield and price of soybeans 
were lower than in the previous years, while 
the com yield was very favourable. Profit on 
soybeans still exceeded that on com, but with 
a smaller margin. 

(c) In 1963, a significant increase in the price of 
soybeans more than counteracted the unfavour¬ 
able effects of a low yield in this crop; because 
of the good yield in winter wheat, the com¬ 
petitive position of that crop improved signi¬ 
ficantly. 

(d) In 1964, the net returns on soybeans and corn 
were almost identical, while winter wheat 
showed a very low profit (due to a poor yield). 

(e) In 1965, the profitability of soybeans was far 
less than that of corn. Both the price and yield 
of soybeans were unfavourable, while the price 
of corn reached a record high. 


Calculation of Approximate Break-Even Point 

ELGIN CROP COST STUDY - SOYBEANS 
1961 TO 1965 



1961 

1962 

1963 

1964 

1965 

Number of Records Studied 

5 

10 

9 

11 

9 

Yield per Acre in Bushels 

40 

33 

29 

30 

24 

Per Acre 



Dollars 



Gross Return 

100 

80 

85 

83 

61 

Measurable Cost 

49 

38 

37 

43 

40 

Net Return to Risk and Management 

51 

42 

48 

40 

21 



Index: 

; 1961 = 

: 100 


Index of Gross Return 

100 

80 

85 

83 

61 

Index of Measurable Cost 

100 

78 

76 

88 

82 


The above figures indicate that changes in cost of 
production do not follow the fluctuations in gross 
return. In 1963, for example, the index of gross 
return (1961 = 100) was 85, the index of measur¬ 
able cost, 76. On the other hand, the index of gross 
return in 1965 was 61 while that of measurable 
cost was 82. It may be also observed that cost of 
production fluctuated less than gross return.® 

On this basis, it may be assumed that a fairly 
good approximation of the break-even point (where 
production cost equals net return) may be obtained 
by dividing cost of production by price per bushel. 


Using the data of the Elgin County Study, it is 
found that in the period 1961 to 1965, the cost of 
soybean production was $40 per acre and the price 
of soybeans $2.63, producing an approximate break¬ 
even point at 15.2 bushels. At that yield, gross re¬ 
turn approximately equalled the cost of production 
(with no net return). 

Relative Profitability 

In deciding whether he will utilize all or part of his 
land for soybean production, the farmer, in choos¬ 
ing between alternatives, must compare his net re¬ 
turn on an acre of soybeans with that expected from 
other crops. Net returns of two crops are equal 
when the differences between their corresponding 
gross returns and production costs are equal: that is 

Ra — Ca = Rb — Cb 

where R = gross return 

C = cost of production 

Assuming that grain corn has a gross return of 
$98 per acre and a cost of production of $62, and 
that the cost of production of soybeans is $40 per 
acre, then the required gross return of soybeans 
must be (98 — 62 -f 40) or $76. 

In other words, in this example gross returns on 
soybeans must be at least $76, to make this crop 
comparable with grain com. However, this is only 
an example; the break-even point and relative 
profitability of soybeans vary over time and from 
one area to another. 

Marketing and Pricing of Soybeans 

According to The Farm Product Marketing Board 
Act, “no person shall commence or continue to en¬ 
gage in the production of soybeans except under 
the authority of a Licence (issued by the Ontario 
Soybean Growers’ Marketing Board).” 

The Marketing Board acts on behalf of about 
10,000 growers who devote 20 to 25 per cent of 
their arable land, or about 250,000-260,000 acres, 
to the cultivation of soybeans. The activities of the 
Board involve sales promotion and negotiations of 
various kinds (with buyers and government agen¬ 
cies) on behalf of the growers. The Marketing 
Board is not a buyer or seller of soybeans nor — 
according to its spokesman — had it been successful 
in negotiating prices. 

The Agreement for marketing the 1966 crop of 
soybeans reads as follows: 

"Fixed costs (land, taxes, interest, depreciation) and some 
operating costs (ploughing, cultivating) remain about the 
same regardless of yield. 


9 








“1. The minimum prices for the 1966 crop of 
soybeans produced in Ontario shall be the 
trading price for each day on the open 
market basis. Prices will be predicated on 
the cost of imported soybeans, taking into 
consideration prevailing exchange rates 
and other factors.” 

The greater part of the crop is sold to the three 
crushing plants in Toronto; the balance is exported 
to the United Kingdom where it is accorded prefer¬ 
ential tariff treatment. 

As was indicated earlier, Ontario’s production is 
insufficient to meet the needs of Canadian proc¬ 
essors, and large quantities (65-70 per cent of their 
total requirements) are imported duty free from the 
United States. For this reason, the price of Ontario- 
grown soybeans is determined by the U.S. prices. 

Ontario dealers have had to maintain their prices 
a relatively fixed amount above the current Chicago 
option price; when the exchange differential and 
shipping charges are taken into account the prices 
of Canadian and United States soybeans are virtu¬ 
ally the same. 

The Soybeans Crowers’ Marketing Board has 
urged several times that substantial tariffs be im¬ 
posed on oilseeds and products. The Board reasoned 
that higher prices resulting from protection would 
encourage growers to substitute other crops for soy¬ 
beans, thus raising Canadian production of soy¬ 
beans closer to the level of Canadian consumption. 
In its submission to the Tariff Board, the Marketing 
Board pointed out: 

“The present stmcture allowing the free impor¬ 
tation of soybeans, cottonseed and peanuts 
places the Canadian production of soybeans 
on the world market in competition with the 
excess production of countries capable of tak¬ 
ing every advantage to dispose of their sur¬ 
pluses, in many cases in spite of the actual 
needs of their own citizens for a higher fat 
intake in their diets, in order to acquire 
dollars with which to trade. The excess pro¬ 
duction created in the United States by 
government support programs, we do not feel 
establishes a free trading price, although it 
cannot be established that actual dumping in 
Canada occurs. In the past, excess of supplies 
of peanut oil have depressed the price of soy¬ 
beans in Canada because of the manipulation 
of peanut oil exports by the Indian govern¬ 
ment. Recent government programs in Peru 
have released large supplies of fish meal in 
the Canadian market at sufficiently depressed 
prices to reduce the demand for soybean meal 
in Canada.”^ 

However, the Tariff Board has not considered it 
advisable to impose duties on vegetable oilseeds. Its 


reasoning is that much of the production of oilseeds 
is exported and, for that reason, must be sold at 
world prices. Because of the interchangeability of 
oils in different products, protection could not be 
achieved without increasing the duties on aU oil¬ 
seeds, oil and products; the resultant increase in 
costs and prices would be well out of proportion to 
the benefits, if any, that might accrue to domestic 
producers of oilseeds.® 

Support Price of Soybeans 

In 1958 soybeans were brought under the provisions 
of the Agricultural Stabilization Act, but since then 
the market price has exceeded the established floor 
price in most years. The floor price corresponds to 
a determined percentage (90 to 100 per cent) of the 
previous ten years’ average prices. 


ONTARIO SOYBEAN MARKETINGS, 
PRODUCER RETURNS, A.S.B. PAYMENTS 
AND PRESCRIBED PRICES 


Crop Year 
Beginning 
August 1 

Soybean 
Marketings 
000 Bus. 

Returns to Producers 
at Elevators 

A.S.B. 

Payments 

$’000 

Support Price 

% of 
Base 
% 

Actual 

$/Bus. 

Total 

$’000 

$ 

Per Bus. 

1952-53 

4.128 

10,526 

2.55 




1953-54 

5,013 

12,282 

2.45 




1954-55 

4,778 

11,467 

2.40 




1955-56 

5,993 

12,525 

2.09 




1956-57 

5,269 

11,328 

2.15 




1957-58 

6,476 

12,628 

1.95 




1958-59 

6,620 

12,716 

1.92 

1,217 

90 

2.10 

1959-60 

6,502 

12,008 

1.85 

867 

87 

2.00 

1960-61 

4,482 

8,961 

2.00 

Nil 

91 

2.00 

1961-62 

6,338 

14,260 

2.25 

Nil 

100 

2.13 

1962-63 

6,436 

15,989 

2.48 

Nil 

100 

2.14 

1963-64 

4,299 

12,048 

2.80 

Nil 

100 

2.15 

1964-65 

6,988 

19,483 

2.79 


99.3 


1965-66 

7,500 

21,375 

2.85 


not supported 


Source: Ontario Soybeans Growers’ Marketing Board. 


The floor prices established under the Agricul¬ 
tural Stabilization Board serve to provide some 
protection in the case of an extremely adverse 
market situation. This system proved very efficient 
in 1958-59 and 1959-60, when $2.08 million of sup¬ 
port was paid to soybean growers in Ontario. Since 
that time market prices (determined in the U.S.) 
have been increasing continuously, and consequent¬ 
ly there has been no need for A.S.B. payments. 

’’Submission to Tariff Board Re: Oilseeds, Vegetable Oils and 
Related Products, December 1, 1961. 

*^Report by the Tariff Board, Reference No. 131. 


10 








AREAS WITH POTENTIAL FOR 
INCREASED SOYBEAN 
PRODUCTION 

Research scientists and other experts are optimistic 
about the possibilities of increasing the acreage 
under soybeans in Ontario. I. M. Roberts, in his 
booklet Soybeans in Canada (1966) made the fol¬ 
lowing statements: 

“With the wide range from early to late matur¬ 
ing soybean varieties available, area or loca¬ 
tion is not a limitation. Yields obtained from 
soybean test plots at such places as Ottawa, 
Kemptville and Guelph in Ontario, and at Ste. 
Anne de Bellevue, Ste. Marinte and Ste. 
Eustache in Quebec, point out that if soy¬ 
beans are not being grown in these areas then 
it is not because we lack adapted varieties 
with a profitable yield potential, but because 
of a failure in the application of the cultural 
practices required to produce a paying crop.” 
“Soybeans can be successfully grown in any 
farming area south of Georgian Bay and Ren¬ 
frew Gounty in Ontario, and along the St. 
Lawrence River and the Eastern Townships 
of Quebec.” 

Some agricultural extension workers whose 
opinions were solicited were more reserved. They 
pointed out a number of valid factors limiting a 
substantial expansion of soybean acreage beyond 
the present level:® 

I. Southwestern Ontario (2,900 and more heat units) 

In Essex and Kent counties, soybean acreage 

appears to have reached the saturation point. Soy¬ 
beans occupy about 20 to 25 per cent of the area of 
total field crops and compete with both the expand¬ 
ing corn and the significant winter wheat produc¬ 
tion. Lambton County may increase the area of 
soybeans from the present 50,000 acres to 80,000- 
90,000, if large-scale drainage improvement is car¬ 
ried out. Elgin and Middlesex counties may in¬ 
crease their soybean area by 5,000 to 6,000 acres 
each. Agricultural extension workers expect major 
expansion in the com area to support the livestock 
industry in these counties. Oxford, Perth and Water¬ 
loo counties are traditionally livestock oriented; it is 
unlikely that soybeans will become a significant 
crop in these counties. 

II. Central Ontario (counties between heat unit 
lines 2,700 and 2,900) 

Research workers generally consider that this 
area has some potential for increasing soybean 
acreage. At present the counties in this area (Haldi- 
mand, Welland, Lincoln, Wentworth, Halton, Peel, 


York, parts of Ontario, Durham and Northumber¬ 
land) have an insignificant acreage under soybeans. 
Average yields are approximately 20 bushels per 
acre with a gross value of $55 to $60, while shelled 
com gives $95 to $100, and winter wheat (with 
lower production costs), $55 to $60 per acre. 

The attitude and expectations with respect to soy¬ 
beans in this area have been clearly expressed by 
one of the Agricultural Representatives who re¬ 
ported that his office over the years has promoted 
soybeans in extension through plot work and on a 
larger scale at farm level. The picture, however, has 
been rather discouraging until recently. In most 
cases the major problem has been weed control. 
Along with this, some varieties have not shown the 
results hoped for; this was reflected in shattering 
and loss at harvest. 

Viewing prospects for soybeans in this area, the 
Agricultural Representative stated: 

“As far as the future is concerned, I would ex¬ 
pect we will see an increase in the acreage of 
soybeans with improved varieties and im¬ 
proved weed control. I would not, however, 
predict too large an increase for the next two 
or three years but it will take time and good 
results on the part of those who are now in 
the soybean business to warrant any expan¬ 
sion.” 

It appears that Central Ontario as defined above 
has potential for increased soybean production. 
However, in order to achieve a breakthrough, cer¬ 
tain conditions must be fulfilled, which can be 
summed up as follows: 

(a) Better-yielding varieties should be introduced. 

(b) Chemical weed control is necessary. 

(c) Comprehensive extension and promotion work 
must be undertaken to assist the farmers. 

III. Eastern Ontario^^ (counties between heat unit 
lines 2,500 and 2,700) 

Eastern Ontario is generally considered to have a 
great potential for expanded grain production in 
general and for expanded soybean acreage in par¬ 
ticular. At present, soybean production in this area 
is negligible (50 acres in 1965), yields are low (20 
bushels per acre) and farmers are not receptive to 
the idea of introducing soybeans on a large scale. 
The limitations due to soil and climatic conditions 
are insignificant compared with those of utilization 
and marketing of soybeans and those imposed by 

“Based on views expressed by the Agricultural Representatives 
of the individual counties and other experts. 

^"Information on this area has been provided by Mr. F. Hamp¬ 
shire and Mr. J. Curtis of the Kemptville Agricultural School. 


11 



the competition for available land between soy¬ 
beans and other crops (such as com, barley, oats 
and alfalfa). 

Various estimates have been made of the poten¬ 
tial for cash cropping in Eastern Ontario. The most 
recent^ quoted a potential of 750,000 acres for grain 
crops in Eastern Ontario, about 250,000 more than 
presently grown. This would seem to be a very 
conservative estimate considering that there are 
some two million acres of land in the top three soil 
classes, most of which could theoretically be used 
for cash cropping. 

According to Agricultural Statistics for Ontario, 
1965, there are 1.9 million acres in the 11 Eastern 
Ontario counties that are at present producing field 
crops and improved pasture. On this basis there 
appears to be a potential of at least 600,000 acres 
in Eastern Ontario that could be used for grain 
production (corn, barley and soybeans). Assuming 
that all physical problems such as drainage, fertility 
and stones can be economically corrected, a goal of 
750,000 acres of grain crops in the 11 eastern coun¬ 
ties would appear to be realistic. This represents 
about 250,000 more acres of grain crops than are 
presently grown. The 750,000 acres should be 
mainly corn for silage or grain with barley as the 
next best feed crop. Soybeans should be introduced 
first of all as a ruminant protein supplement if it is 
a cheaper source of protein than urea or good alfalfa 
hay. If and when the soybean crop becomes estab¬ 
lished, it will also be used as a cash crop. From an 
economical feed production standpoint, oats will 
not compete with crops such as barley and com, 
and its acreage will decline in the future. 

Which crops are grown and in what proportion 
the land will be used in the future for hay produc¬ 
tion and pasture will depend on economic changes 
and technological advances in Eastern Ontario. It is 
fair to say that provided farmers can profitably sell 
or utilize soybeans there is no reason why this crop 
should not be grown on a large scale in Eastern 
Ontario. 

Problems to be Resolved 

Problems that must be resolved before the produc¬ 
tion of soybeans, barley and com for grain or silage 
will assume their role on Eastern Ontario farms are 
as follows: 

1. Farmers must be convinced that they will im¬ 
prove their standard of living by growing more grain 
crops. 

2. Financial institutions (Farm Credit Corpora¬ 
tion and chartered banks) must be assured that 


lending money to a soundly based grain-growing 
enterprise is a good investment. 

3. Seed suppliers must be prepared to promote 
and sell superior seed to the grower. 

4. Suppliers and distributors of fertilizers and 
pesticides will have to offer their services through 
an adequate and efficient distribution network in 
order to meet the growing demand for their prod¬ 
ucts flowing from a successfully operating grain- 
producing industry. 

5. Higher yielding soybean varieties, chemical 
weed control and comprehensive extension work 
will be needed. 

POSSIBLE EFFECTS ON 
SOYBEANS OF INCREASING 
RAPESEED UTILIZATION 

Because rapeseed competes with soybeans, the 
future of the latter very much depends on future 
developments in rapeseed production. 

In 1966, the Prairie Provinces had some 1.5 million 
acres under rapeseed. According to R. K. Downey’^ 
(Research Station, Saskatoon, Saskatchewan) the 
future development of rapeseed acreage will depend 
on two factors: 

(1) World price for rapeseed. Rapeseed prices are 
the main factor influencing seeded acreage. If 
prices remain at their present levels for a num¬ 
ber of years, acreage can be expected to climb 
gradually to about 1.7 million. 

(2) The wheat supply position. If wheat should 
become surplus, farmers in the more southerly 
regions will turn to rape production to bring in 
cash and relieve their storage problems. 

If wheat should become surplus and rapeseed 
prices remain firm, acreage could reach a maximum 
of 2.3 million.^'* 

Research on rapeseed and its derivatives is pres¬ 
ently under way, particularly with respect to 

"Estimated by Mr. J. Curtis at Fertilizer Dealer’s Day at the 
Kemptville Agricultural School in December, 1966. 

^^Information provided by Dr. R. K. Downey, in charge of 
Oilseed Crops, Research Station, Research Branch, Canada 
Department of Agriculture, Saskatoon, Saskatchewan. Ex¬ 
perts of the Canada Department of Industry expressed simi¬ 
lar views on the subject. 

’■’This estimate is based on two assumptions: (1) that 17 per 
cent of the aereage under crops is all that can be seeded to 
rape without disease and insect build-up (Northeastern 
Manitoba, northeastern and western Saskatchewan, and the 
Peace River area of Alberta have already reached or ex¬ 
ceeded this intensity of production. Where the 17 per cent 
figure has been surpassed, diseases have become trouble¬ 
some) and (2) rapeseed production will not extend into the 
Brown Soil zones unless a drought-resistant rapeseed is 
developed. 


12 



increasing the seed and oil yield per acre and 
improving quality by means of breeding and/or 
better processing methods. Excellent progress has 
been made in meeting the first objective with the 
development of several new varieties (Nugget, 
Tanka, Target and Echo). 

The quality of rapeseed oil and meal is being im¬ 
proved as well. There is now a zero erucic acid rape- 
seed oil under semi-commercial production which 
is superior to both normal rapeseed oil and soybean 
oil as a starting material for partially hydrogenated 
salad oil. As such, this oil is expected to command 
a small premium over normal rapeseed oil. Re¬ 
searchers are attempting to increase the shelf-life of 
the manufactured product and reduce the eost of 
refining. Through plant breeding, this may be 
accomplished, thereby possibly making the demand 
for rapeseed oil greater than for soybean oil. This 
may not materialize for some time, but it is a distinct 
possibility. 

Rapeseed meal, too, may soon be improved as a 
result of plant breeding and improved refining pro¬ 
cesses. In the not-too-distant future the so-called 
toxic factors and their associated problems — pos¬ 
sible metabolic upset and lack of palatability — may 
be overcome. This would provide more and stiffer 
competition to soybean products, both domestically 
and on world markets. 

Possibilities of Rapeseed Production in Ontario 

There are two species of rapeseed: Brassica campes- 
tries (Polish type) and Brassica napus (Argentine 
type). Within eaeh species are both winter and 
summer types. The winter types ean not survive the 
Western Canadian winter but in Europe they form 
the major proportion of the crop grown. Research 
workers in the Canada Department of Agriculture 
are presently engaged in assessing the potential 
of the higher yielding winter types for eastern 
Canadian eonditions. 

In Western Canada, summer type rapeseed in 
1965 averaged $43.5 gross return per acre. If winter 
resistant rapeseed could be grown in Ontario, an 
average crop would probably yield 50 bushels per 
acre. At today’s prices of $2.71 per bushel, this 
would provide a gross return of $135 per acre. As 
costs of production of rapeseed are slightly lower 
than those of soybeans, high yielding winter rape- 
seed grown in Ontario might represent a direct 
competion for soybeans. 

At present, no such winter-resistant variety of 
rapeseed is available. On the other hand, attempts 


to increase yields and oil content of soybeans even¬ 
tually will result in improving the profitability of 
soybeans. Therefore, experts generally agree that 
while rapeseed produced in Western Canada will 
eompete heavily with soybeans in both domestic 
and foreign markets, we cannot expect any signi¬ 
ficant rapeseed acreage in Ontario in the foreseeable 
future. 

CONCLUSION 

Examination of the physical conditions and of 
present and anticipated economic trends affeeting 
soybean production in Ontario has led to the con¬ 
clusion that Ontario has a potential for increasing 
its soybean acreage, provided that 

(a) a gradual change in the pattern of crop produc¬ 
tion is brought about (reducing the oats and mixed 
grain areas); 

(b) research provides higher yielding varieties, es¬ 
pecially for the area between 2,500 and 2,900 heat 
units; 

(c) reliable, cheap herbicides become available; 

(d) large scale drainage and pasture improvement 
programs are carried out; 

(e) extension efforts concentrate on disseminating 
knowledge on adequate methods of soybean grow¬ 
ing. 

The striking suceess of the Com Plan launched by 
the Ontario Government and the Ontario Agricul¬ 
tural College indicates that a Soybean Plan might 
lead to similar results. It must be taken into consid¬ 
eration, however, that in the Prairie Provinces a 
breakthrough in rapeseed utilization is within sight, 
and that this must be given careful attention when 
looking at the future of soybeans. 

To assess the merit of launching a Soybean Plan, 
leading research scientists, extension workers, repre¬ 
sentatives of the growers, breeders and processors, 
and Eederal and Provincial government experts 
might wish to meet. All aspects of the production of 
soybeans and soybean products could then be exam¬ 
ined so as to assess future soybean acreage on an 
area basis and to establish research targets. These 
considerations could then possibly lead to the estab¬ 
lishment of a “Soybean Plan”. 

Such a development could very well promote 
this relatively new agricultural sector in Ontario 
and strengthen the economic position of Ontario 
farmers. 


13 


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The Ontario Economic Review is prepared and edited 
bimonthly in the Economic Analysis Branch of the 
Department of Economics and Development and is 
available free of charge. The review is intended to 
provide current information on economic activity 
in Ontario and to act as a forum for the results of 
research in the public service on matters affecting 
the Ontario economy. The signed articles reflect the 
opinions of their authors and do not necessarily rep¬ 
resent the views of the Economic Analysis Branch. 
All correspondence should be directed to the Editor, 
Ontario Economic Review, Office of the Chief Econ¬ 
omist, Parliament Buildings, Toronto 5. 









91 186? 





He /96V 







iTL 


JULY- 

AUGUST 1967 
VOL. 5 
No. 7-8 


DEPARTMENT OF ECONOMICS AND DEVELOPMENT 

Hon. Stanley J. Randall, Minister Stuart W. Clarkson, Deputy Minister 



# 


HA 

747 

0656 

1967 

VOL,5 
NO.7-8 





CONTENTS 

The Ontario Economy.1 

Population Migration to and from Ontario, 

1870-1940, Iain C. Taylor .3 

Indicators 16 





THE ONTARIO ECONOMY 


Despite the fact that several indicators have still 
been pointing to only small advances in production, 
there is reason to believe that the slow pace of the 
economy — one which has been evident for a num¬ 
ber of months now — will pick up speed. The main 
factor producing this impression is the approaching 
completion of the inventory adjustment which has 
been taking place. With the reduction of manufac¬ 
turers’ inventories production should now be more 
directly responsive to final demand. 

Typical of the statistics which point out the lull in 
the economy is the Index of Industrial Production, 
showing only a small 0.3 per cent increase from May 
to June, and the rise in Ontario’s unemployment rate 
from 3.1 per cent in May to 3.5 per cent in June. 
However, other statistics — notably foreign trade 
and certain types of construction activity — have 
been moving ahead. 

Production 

Steel ingot production was 770,000 tons in July, a 
decline of eight per cent from July, 1966. This brings 
the seven-month total for 1967 to 5,605,000 tons, six 
per cent lower than last year. 

Motor vehicle production too was down from 1966 
— at 43,524 units in July it was down 11.7 per cent 
from last year — but this was at least in part due to 
the early commencement of new model production 
in the summer of 1966. On a cumulative basis, motor 
vehicle production for 1967 approached 571,000 
units, a decline of less than three per cent from 1966. 
Passenger car production in July was actually ahead 
of 1966 (by 7.4 per cent), but the poorer production 
figures for the first four months of this year have 
kept the cumulative figure to 7.7 per cent below 
1966. Units produced in July and the January-to-July 
period numbered 31,526 and 425,895 respectively. 

The seasonally adjusted Index of Industrial Pro¬ 
duction (based on 1949 = 100) rose to 281.1 in 
June (the latest month for which statistics are avail¬ 
able) , a fractional 0.3 per cent gain from the revised 
May figure of 280.2. Both mining and manufacturing 
contributed to the increase, advancing 1.8 per cent 
and 0.3 per cent respectively from the previous 
month; electric power and gas utilities, on the other 
hand, fell 1.6 per cent. 

Within the mining component increases in petro¬ 
leum (nearly six per cent) and asbestos (more than 
five per cent) were important factors offsetting a 
two per cent decline in metals. Lead, iron ore and 


zinc were the metals which declined (by approxi¬ 
mately two, three and 10 per cent respectively); the 
remaining metals increased in varying amounts. 

In manufacturing, the 0.3 per cent overall gain 
was made up of a 0.9 per eent rise in non-durables 
and a 0.4 per cent decline in durables. Non-durables 
rose primarily because of increases in printing, pub¬ 
lishing and allied industries (five per cent), rubber 
products (nine per cent) and products of petroleum 
and coal (four per cent). Durable manufactures fell 
due to declines ranging from three per cent in elec¬ 
trical apparatus and supplies, to one per cent in 
non-metallic products. 

The major factors, the declines in iron and steel 
products and in electrical apparatus and supplies, 
could in part be attributed — either directly or in¬ 
directly — to labour disputes. Gains in transportation 
equipment, particularly a five per cent rise in motor 
vehicle production, and wood products (two per 
cent) failed to offset the losses in the other com¬ 
ponents. 

Construction 

Seasonally adjusted construction contract awards in 
Ontario, Southam Building Guides indicator of fu¬ 
ture construction activity showed housing contracts 
moving substantially upward from June to July. In 
contrast, business, industrial and engineering con¬ 
tracts dropped slightly during the same period. In 
rising to a value of $85.0 million in July from $59.6 
million in June, housing contracts approached the 
1967 high of $89.5 million set in May. The July 
figure of $133.6 million for business, industrial and 
engineering contracts, on the other hand, showed the 
second successive month of decline after a fairly 
high May figure of $153.8 million. (The 1967 peak so 
far is the $160.6 million reeorded in March.) 

On the basis of total unadjusted contract awards, 
the July 1967 total of $263.4 million was substan¬ 
tially ahead of 1966’s $199.6 million for July. This 
marked the fourth successive month in which month¬ 
ly statistics were ahead of the previous year, and the 
third successive month in which increases of more 
than 30 per cent were recorded. Clearly responsible 
for this were consistent year-over-year gains in resi¬ 
dential, institutional and engineering contracts, the 
two most significant single factors being large in¬ 
creases in hospital and electric power construetion 
awards. 


1 


Below are the large eonstruction awards ($1.0 mil¬ 
lion and over) placed recently in Ontario. 


LARGE CONSTRUCTION AWARDS PLACED 
RECENTLY IN ONTARIO 


Location 

$ Million 

Description 

Burlington 

2.0 

School 

Flesherton 

2.2 

School 

Grimsby North Twp. 

1.0 

Hospital addition 

Guelph 

1.0 

College addition 

Hamilton 

1.5 

Apartments 

London 

3.0 

Plant addition 

North York Twp. 

7.4 

College addition 

North York Twp. 

7.4 

Hospital 

Ottawa 

1.5 

Plant 

St. Catharines 

1.0 

Apartments 

Sault Ste. Marie 

1.5 

Sewer system 

Sudbury 

1.0 

Apartments 

Toronto (metro) 

22.2 

Apartments 

Toronto (metro) 

5.0 

Office buildings 

Welland 

1.2 

Sewers 

Windsor 

4.7 

Pumping station 


Continued improvement in the number of dwell¬ 
ing unit starts in 1967 in Ontario centres of 10,000 
population and over has also been evident in recent 
months. Starts in July numbered 6,326, 27.6 per 
cent higher than 12 months ago. The statistics of the 
past few months, considerably higher than those of 
the corresponding months of 1966, have brought the 
year-over-year cumulative gain for the first seven 
months to 25.8 per cent. All of the major centres 
except Kitchener participated in the July increase. 

Dwelling unit completions numbered 4,057 in 
July, down 53.2 per cent from July, 1966. This brings 
the cumulative decline for 1967 to 25.4 per cent. At 
the end of July there were 41,652 units under con¬ 
struction, a decline of some 1,000 units from the 
same time last year. 

Employment 

Ontario’s labour force, seasonally adjusted, rose to 
2,871,000 in July, an increase of 23,000 from the prev¬ 
ious month. At the same time employment increased 
by 22,000 to 2,771,000. The unemployment rate, at 
3.5 per cent, was the same as in June. For the first 
seven months of 1967 the cumulative average rate of 
unemployment has been 3.1 per cent, as compared 
with 2.4 per cent in 1966. 


Canada as a whole recorded an unemployment 
rate of 4.3 per cent in July, just slightly lower than 
June’s 4.4 per cent. This was the result of an increase 
of 74,000 in the labour force, bringing the July 
figure to 7,775,000, and a 77,000 increase in employ¬ 
ment (to 7,441,000). Canada’s unemployment rate 
for the first seven months has averaged 4.0 per cent 
compared with 3.6 per cent last year. 


Foreign Trade 

Preliminary data on Canada’s imports and exports 
(including re-exports) show that the growth of ex¬ 
ports exceeded that of imports in June. Exports, 
valued at $1,033.9 million, were up 18.6 per cent 
from June, 1966, while imports at $935.9 million 
were 3.9 per cent higher. This produced a $98.0 mil¬ 
lion balance of exports over imports for the month. 

On a cumulative basis, exports for the first six 
months of 1967 have reached $5,625.5 million, 16.8 
per cent higher than the first half of 1966. Imports 
have followed close behind, rising 14.2 per cent in 
the same period to $5,477.1 million. The export bal¬ 
ance has thus been $148.4 million as opposed to 
$20.7 million one year earlier. 

The United States, accounting for over 60 per 
cent of Canada’s export sales, has increased its pur¬ 
chases by almost 20 per cent comparing the January- 
to-June periods of 1966 and 1967. The growth of im¬ 
ports, at 15.0 per cent, has been a little smaller, 
although the dollar value of imports ($4,067.8 mil¬ 
lion) has been somewhat larger than the dollar 
value of exports ($3,524.1 million). Canada’s trade 
position with the United Kingdom has continued to 
be favourable, although imports are now growing 
slightly more rapidly than exports (9.1 per cent as 
opposed to 7.0 per cent, comparing half-year data 
for 1966 and 1967). 

Detailed export statistics, available for the first 
four months of 1967 only, reveal a 17.0 per cent 
increase in domestic exports from the corresponding 
period in 1966. \\4iile the largest category — inedible 
fabricated materials — was up 9.6 per cent to $1,384.3 
million, it was the inedible end products category 
that displayed the most impressixe growth, rising 
58 per cent. As has been the case for the past few 
years, motor vehicle exports have been veiy signi¬ 
ficant here. 


2 





POPULATION MIGRATION 
TO AND FROM ONTARIO 

1870-1940 

Iain C. Taylor 

Research Geographer, Regional Development Rranch 
Office of the Chief Economist 


This article, an extract from a longer worlc,^ attempts 
to provide new estimates of population migration 
to and from Ontario during the period 1870 to 1940 
and to indicate the composition of this migration 
with respect to the natal origin of the migrant. 

Changes in population levels express the net bal¬ 
ance of changes within a number of underlying 
components. Given a situation in which in-migration 
and out-migration from a place is zero (or the bal¬ 
ance between these two movements is zero), popu¬ 
lation growth will take place as a result of natural' 
increase. Natural change is itself a net relationship 
between the number of births and deaths.® Popula¬ 
tion changes are therefore the result of the net 
balance among four components: births, deaths, in- 
migration, and out-migration; or between the two 
net relationships, natural increase and net migration. 
Net migration as an element in changing population 
size and distribution has long been considered an 
extremely sensitive measure of economic growth and 
of changes in the regional distribution of economic 
opportunities. In particular the “net” relationship 
masks and filters out a good deal of the chance ele¬ 
ments accounting for gross migration movements.^ 
This element has thus been the subject of most re¬ 
search undertaken on population change. While this 
is understandable it should be clear that changes in 
fertility or mortality rates, or in their areal distribu¬ 
tion, control the inherent growth tendencies within 
an area. As such they deserve, perhaps, more atten¬ 
tion than has been their lot to date. 

Though the major portion of this article attempts 
to indicate some of the main features of changes 
within the balance of population in Ontario due to 
migration, towards the latter half there is a discus¬ 
sion of the relationship between this migrational 
element and that of natural increase. 

The Nature of Migration Statistics 

Migration statistics are derived from inquiries made 
concerning previous place of permanent residence 
(occasionally from inquiries made as to the intended 
place of residence of someone migrating), or by in¬ 
direct methods which derive migrational estimates 
from other statistics. In the first two eases the results, 


once gathered, have to be grouped into a specific 
set of areal units, unless they are to remain a collec¬ 
tion of point-to-point data. Migration is then said to 
have taken place when these boundaries have been 
crossed during movement. In the final case the 
spatial mesh has already been predetermined by use 
of data previously aggregated. 

The term migration is in all cases an abstraction or 
generalization, in that anyone who changes house 
can be said to migrate, in the same way as anyone 
who works outside his home can be said to com¬ 
mute. Estimates of the degree of migration thus 
depend entirely on the boundaries chosen to mea¬ 
sure it. Were a number of people to migrate the 
same distance, the number of migrants recorded 
would depend on the size of the “boundary grid”. If 
this were fine (i.e., 200 square yards) almost every¬ 
one would be a migrant. As the grid becomes 
coarser, the chances of recording out-migration be¬ 
come less. 

These strictures can generally be overlooked in 
either of two cases: first when a common set of spa¬ 
tial units is under consideration, providing the units 
do not differ radically in size® (e-g-, counties); sec¬ 
ond, when attention is focused on changes taking 
place within particular political units (as provinces 
have been considered here). It should be pointed 
out, however, that further work not yet published 
points to extremely uneven rates of growth tlirough 
migration in the province in the period under con- 

^Unpublished M.A. thesis, Components of Population Change, 
Ontario: 1850 to 1940, Department of Geography, University 
of Toronto, 1967. 

■“Natural” in this sense is used to denote change attrihutahle 
to the balance of births and deaths and is derived from the 
Latin word “natalis”. It should not be thought of in the same 
sense as “nomial” or “inevitable”. 

“Though natural increase is more common, natural decreases 
are not unknown, particularly in areas of a predominantly 
old population. 

These have been seen elsewhere to be very complex in their 
areal pattern and extremely widespread even in places of 
static or declining population. See R. D. Howland, Some 
Regional Aspects of Canada’s Economic Development, 
Royal Commission on Canada’s Economic Prospects (Gor¬ 
don Commission), 1957. 

“The role of net-migration as a component in population 
change increases as the statistical unit considered becomes 


3 



sideration. Thus provinces should not be regarded 
as internally undifferentiated when their aggregate 
characteristics are described. 

Estimates of Net Provincial Migration 

Keyfitz" was the first to attempt an estimate of net 
provincial migration movements. The year 1880 was 
selected as the starting date for his study, as it was 
the earliest period at which data on age structure by 
province for the whole of Canada were provided in 
the census. Using the survival ratio method of calcu¬ 
lating natural increase from life tables, he made a 
series of estimates of net provincial migration up to 
1950. His estimate of Ontario migration has been 
plotted in Figure 1. 


FIGURE 1 

ESTIMATIONS OF NET MIGRATION TO AND 
FROM ONTARIO, 1881-1941 



Sources: Table 1, Keyfitz® and McDougalT. 

The validity of the life tables used to make these 
calculations has, however, been questioned. No 
Canadian tables were published before 1931 and 
mortality rates can only be approximated by adapt¬ 
ing others. Keyfitz used English survival rates (age 
by age) for the period 1850 to 1931, MacDougalF 
has suggested that the use of these tables implies that 
the two countries experienced similar demographic 
conditions and he has offered an alternative. Ameri¬ 
can life tables are available for the period 1901 to 
1910 and it is thought that these approximate Cana¬ 
dian mortality experience more closely than do those 
of the English. The best estimate, MacDougall main¬ 
tains, is to employ the Ameriean tables to modify 
the English back into the nineteenth century; to use 
the American tables themselves over the decade 
1901-1910; and to use a linear interpolation of the 
United States table from this point to the Canadian 


table for 1930-32 as a measure of the survival rate 
through the period 1910-1930. He states: 

Our survival rates lie below those developed 
by Keyfitz for every age group, for every de¬ 
cade, because of our use of the American table 
for 1901-1910 and therefore our estimates of 
net migration are larger if positive, and smaller 
(in absolute value) if negative, for each de¬ 
cade than those derived by Keyfitz. (P. 165.) 

MacDougall applies his modified life tables only 
to the national and not to the provincial age struc¬ 
tures. An approximation of Ontario migration using 
his tables is attempted here by applying factors 
equal to the ratio of MaeDougall’s to Keyfitz’ esti¬ 
mates for the total net Canadian migration, to 
Keyfitz’ estimate for Ontario at each decade. 

An independent series has been eonstructed utiliz¬ 
ing the reports of the Ontario Registrar-General from 
1881** onward. The expected population, were net 
migration to have been zero, is derived not from the 
“survival ratio” ealculated by life tables but from the 
actual birth and death statistics of the Registrar- 
General. This method of ealculation leads to under¬ 
estimated net migration flows, due to the fact that; 

(a) All migrants arriving after census date (Ti) 
and leaving before eensus date (T 2 ) are not re¬ 
corded. The method, therefore, underestimates net 
out-migration. 

(b) All births and deaths reeorded are assumed to 
be those of the population resident at Ti, though in 
fact the balance of births over deaths of in-migrants 

smaller (the natural increase component operates in tlie 
reverse manner). Thus if a census tract were to be con¬ 
sidered, the migrational change component would be ex¬ 
tremely high, whereas if the world as a whole is considered 
it is zero. Comparisons between values relating to widely 
differing spatial meshes bear little meaning especially when 
they appear to be considered as absolute measvu'es regard¬ 
less of the spatial structure which determines them. Such 
comparisons can be foimd in the work of both Buckley and 
Anderson. For example: 

Although Canada has had one of the highest rates of net 
migration of any country in the world in the twentieth 
century, internal net migration has been far greater than 
international net migration . . . from 1921 to 1960. ... In 
other words . . . internal net migration was more than 
twice as large as the net movement into Canada . . . 
Thus the amount of internal net migration was large 
even when the international net migration was small. 
I. B. Anderson, “Internal Migration in Canada, 1921-1961,” 
Economic Council of Canada, Study No. 13, 1966, p. 15. 
See also K. Buckley, “Population, Labour Force and Econo¬ 
mic Growth,” Banff Business Policies Conference on Cana¬ 
dian Economic Survival, Vol. 2, 1963. 

®N. Keyfitz, “The Growth of Canadian Population,” Popula¬ 
tion Studies, Vol. 4 (1950), 47-63. 

’D. M. MacDougall, “Immigration into Canada 1851-1920,” 
Canadian Journal of Economics and Political Science, XXVII 
(1961), 162-75. 

^Statistics between 1869, when compulsory registration be¬ 
gan, and 1881 were in all probability somewhat inaccurate. 


4 





within the time-period is included in the total. As 
most in-migrant natural increase is fairly high, this 
will increase the natural increase total and hence 
underestimate migration. 

In Figure 1 estimates made in the analysis of the 
provincial birth and death statistics are shown 
alongside these two other estimates for comparison. 
Keyfitz’ estimates of net out-migration appear 
greater and his estimates of net in-migration less 
than either those made by MacDougall or those cal¬ 
culated here. The estimates presented here appear 
to conform more closely to those of MacDougall 
than those of Keyfitz. Certain differences in method 
and assumptions may go some way in accounting for 
the variation in estimates: 

(1) The survival ratio method used by Keyfitz 
and MacDougall does not take account of the move¬ 
ments of those less than 10 years old and therefore 
underestimates total migration. 

(2) In both cases life tables are used which pur¬ 
port to be true for the country at large, though not 
of course, for any particular part of it. Were the 
mortality experience of Ontario to be different from 
that of Canada, certain errors would result. 

(3) Regarding the use of the vital statistics 
method, non-registration of births or deaths directly 
affects the migrational estimates. 

Cm = Pi - (Bi - Di) 

Am r= Pi — (Bo — Do) 

Calculated migration (Cm) is less than actual 
migration (Am) with respect to population at a 
particular time-period (Pi), to the extent that the 
births are under-recorded (i.e., under-registration of 
births Bi underestimates net migration and under¬ 
registration of deaths Di overestimates net migra¬ 
tion) . It is likely, therefore, that as under-registration 
of births was generally more common than that of 
deaths, there would be differences between the esti¬ 
mates.® The use of the decennial census population 
totals does not enable any estimates to be made of 
the numbers of in-migrants who pass into and out of 
the province in the intercensal period. A great num¬ 
ber of foreign born out-migrants would be in this 
category.^ Many never intended to remain in Can¬ 
ada, and moved on to the United States after a short 
stay. The method can make no estimation of this 
number, however, and it should be pointed out that 
the economy benefited from their presence even 
though their stay was not very long. 

There are serious problems in obtaining any de¬ 
pendable estimates of migration in this period. The 
lack of internal consistency in the data, the presence 
of the unguarded international boundary and the 


complete lack of government records of emigration 
mean that a definitive population balance sheet for 
even the whole of Canada has not yet been estab- 
lished.“ Despite considerable variations in the esti¬ 
mates shown in Figure 1 it is encouraging to see a 
broad agreement on the general cycle and size of 
net population exchanges to and from the province. 

Migration to and from Ontario 

(1) In-Migration: Natal Origin of Migrants 
Migration to and from the province was made up of 
peoples of different ethnic groups. An attempt has 
been made to separate this migration into various 
components, based on the origin of the migrant, to 
see if there were significant differences in mobility. 
The calculation was made in the following manner. 

If the assumption is made that the birth and death 
rates calculated for a decade can be applied to any 
portion of the population,’® it is possible to make 
estimates of the net migration of these segments in 
the same way as total migration was calculated. The 
“expected population” (were no migration to have 
taken place) in any group of foreign-born popula¬ 
tion (that is, bom outside Ontario) is derived from 

FICURE 2 

NUMERICAL CHANCES WITHIN ONTARIO- 
BORN AND EOREICN-BORN POPULATIONS 
IN ONTARIO 



'’The comparison made between estimated losses from Ontario 
to the United States and the net change of Canadian-bom 
in the United States appears to point to a heavy underestima¬ 
tion of net out-migration from the province, particularly in 
the nineteenth century (cf. Table 7). 

^°R. Wilson, “Migration Movements in Canada, 1868-1925,” 
Canadian Historical Review, Xlll (1932), 157-82. 

“J. Pickett, “An Evaluation of Estimates of Immigration into 
Canada in the late Nineteenth Century,” Canadian Journal 
of Economics and Political Science, XXXI (1961), 449-508. 

'"This assumption is not strictly correct as differences in fer¬ 
tility and mortality are common between different immigrant 
groups and between them and tlie native population. 


5 













the population of that group at time Ti reduced 
by mortality (calculated from the provincial mor¬ 
tality rate). 

The “expected” population of Ontario-bom is de¬ 
rived from the population at Ti, reduced by mortal¬ 
ity and increased by the fertility of the entire popu¬ 
lation of the province. (Any ofFspring of foreign- 


born in Ontario is of course included as Ontario- 
born.) This can be shown diagrammatically (see 
Figure 2). 

The estimates of net group migration for the 
decade 1901-1911 were calculated as shown in Table 
1. The birth-rate during this period was 23.7 per 
cent and death rate 14.4 per cent. 


TABLE 1 

CALCULATION OF MIGRATION RATES FOR GROUPS BY NATAL ORIGIN, 1901-1911 


Birthplace 

Actual 

Population 

1901 

Calculated 

Population 

1911 

Actual 

Population 

1911 

Net 

Migration 


“FOREIGN 

"-BORN 

Fe 

F‘ 

(F‘-Fe) 

Canada (outside Ontario) 

74,027 

(F’-Fm) 

63,367 

83,750 

20,383 

British Isles 

244,539 

209,325 

353,597 

144,272 

British Possessions 

2,708 

2,318 

5,418 

3,163 

U.S.A. 

44,175 

37,814 

55,676 

17,862 

European 

30,895 

26,446 

86,969 

60,523 

Others 

1,843 

1,577 

6,123 

4,546 


ONTARIO-BORN 

O' Oe 

0‘ 

1 

o 

Ontario 

1,784,760 

2,045,113 

1,935,696 

-109,417 

With regard to the Ontario-bom, the calculated 


Oe=Oi -f 9.3 (01) -f 23.7 (Fi) 

population (Oe) equals the natural increase of the 
Ontario-bom at Ti plus the births derived from the 


100 100 
=1,784,760 -f 165,983 4- 94,370 

foreign-born (Fb), or =2,045,113. 

Similar calculations were made for the six decades 
under consideration; the results are presented in 
Table 2. 

TABLE 2 

MIGRATION TO ONTARIO BY NATAL ORIGIN, 1881-1941 

Origin 

1881/91 1891/1901 

1901/11 

1911/21 1921/31 

1931/41 

Canada (outside Ontario) 

16,009 11,297 

20,383 

44,589 45,890 

87,382 

British Isles 

14,493 — 44,340 

144,272 

146,258 118,091 

- 17,556 

British Possessions 

985 85 

3,163 

4,512 4,051 

1,214 

U.S.A. 

2,612 6,512 

17,862 

22,848 10,284 

7,735 

Europe 

5,237 5,586 

60,523 

28,261 104,284 

30,371 

Others 

1,632 — 605 

4,546 

3,057 2,767 

2,827 

Ontario 

—77,346 —105,843 

—109,417 

-131,266 -130,701 

— 4,217 

Net Provincial Migration 

-36,378 -127,478 

141,332 

116,259 154,259 

107,756 




6 










This information, shown in Figure 3, draws atten¬ 
tion to the different migration patterns of the various 
groups showing how net provineial migration is a 
result of the net relationship among these migration 
streams. 


FIGURE 3 

ESTIMATION OF NET MIGRATION BY NATAL 
GROUP IN ONTARIO, 1881-1941 



Source: Table 2. 

Net out-migration of Ontario-born has consistently 
been the most important negative factor in the com¬ 
position of total provincial migration,'* and also one 
of the most significant absolute movements. The size 
of this movement was fairly consistent, rising slowly 
between the periods 1881/91 and 1911/21. The mo¬ 
bility of Ontario-born vis-a-vis other groups is not 
as high as it may appear. The high proportion of 
Ontario-born to the total population should be con¬ 
sidered together with the fact that migration of 
foreign-bom represented at least the second such 
move. What is perhaps more significant is the con¬ 
sistent out-migrational level of Ontario-bom and its 
apparent lack of correlation with economic condi¬ 
tions in the province. The 1931-41 period is the only 
major exception to this tendency. 

If net out-migration of Ontario-born remained 
fairly consistent, it follows that the fluctuation in 
total net migration was the result of changes in 
movements of the other groups. Persons bom in the 
British Isles made up the largest migrant group 
among those born outside Ontario. They were also 
the most mobile, and appear to have responded 
markedly to changes in the economic situation.'^ 
Thus the economic depression and the opening of 
the West in the 1890’s resulted in a net out-migration 
of 44,000; the more affluent period between 1901 
and 1931 in a net in-migration of over 100,000 per 
decade. 


During this period the inward movement of 
British-born entirely compensated for the out- 
movement of Ontario-bom, and the net inward 
movement of the other groups served to give the 
province a positive balance. 

European migrations exhibited similar general 
trends to those of the British, though on a smaller 
scale. The number of Europeans entering the prov¬ 
ince has greatly increased since the beginning of the 
20th centuiy but considerable declines in this migra¬ 
tion were sustained in both the 1911-1921 and 1931- 
1941 decades. High levels of immigration into 
Ontario during the 1920’s indicated the end of the 
Prairie colonization era. Ontario gained 43 per cent 
of the total Ganadian net immigration into urban, 
and 52 per cent of the net immigration into mral 
areas.'* 

The movement of those born within Ganada but 
outside Ontario, showed little similarity to the mi¬ 
gration trends of either the Ontario-bom or the 
other groups. The movement has always been posi¬ 
tive and it has gradually increased throughout the 
1881-1941 period. Net in-movement of United States- 
bom has generally been the smallest of the five 
groups under examination. The greatest inward 
movement occurred during the years 1911-1921. 

The 1931-1941 decade warrants some special 
examination because of its dissimilarity with any 
previous period, marked as it was by a number of 
unprecedented population movements. For the first 
time, net Ontario-bom out-migration was insignifi¬ 
cant (only 4,217), indicating that the usual volume of 
out-migration was checked. More significantly, a 
considerable return movement was probably in pro¬ 
gress, particularly of those Ontario-born domiciled 
elsewhere for at least 10 years. For the first time, 
immigration into the province by other Ganadians 
came close to equalling the peak number of Euro¬ 
pean immigrants (attained during the previous 
decade). 

In-migration of non-Ganadians to the province, 
however, dropped to its lowest level since the 1890’s 
and there was actually an out-migration of British- 
born during the decade. These changes were largely 
a reflection of world-wide economic adversity. Gan- 

^“With the exception of the decade 1931-1941 when it was 
narrowly surpassed by the net out-migration of British-born. 
^‘This was probably the result of the generally higher socio¬ 
economic level of British-born compared to the other immi¬ 
grant groups. 

‘“W. B. Hurd and J. C. Cameron, “Population Movements in 
Canada 1921-1931 and tlieir Implications,” Papers and Pro¬ 
ceedings of the Canadian Political Science Association, IV 
(1934), 220-37. 


7 












ada imposed a number of restrictions and as a result 
immigration declined to a record low/*" 

During the period 1881-1941 as a whole, it seems 
that the movement of people to the province had 
two facets. Movement of Canadian-born people 
(both those from elsewhere in Canada and Ontario) 
was aflFected by circumstances different from those 
affecting immigrants. 

For fifty years, net out-migration of Ontario-bom 
continued at a fairly constant rate, and at a quite 
considerable level. In-migration of other Canadians 
increased gradually from a low base during the nine¬ 
teenth century. During the 1930’s the relative pros¬ 
perity of the province compared with the rest of the 
country attracted a greater number of Canadians 
born outside the province than ever before, together 
with a considerable number of Ontario-bom who 
had previously lived in other parts. 

Foreign immigration has largely served to com¬ 
pensate for the loss of Ontario-bom to other areas 
and any net provincial in-migration has been due 
to an increased volume of this movement. The 
attraction of the province to non-Canadians how¬ 
ever has varied considerably through time. The 
British-bom appeared to be the most sensitive to 
changes in economic conditions, and the only group 
other than the Ontario-bom ever to sustain any net 
out-migration. 

(2) In-Migration: Province of Origin of Canadian- 
born Migrants 

It is possible to make estimations of the origin of 
the Canadian-born population moving into Ontario 
between 1881 and 1941 by using Canadian census 
material. The statistics in Tables 3 and 4 and Figure 
4 have been derived from the “Population by Birth¬ 
place” tables in the census reports, retabulated by 
Buckley. 

Differences in totals between two census years, if 
positive, represent the absolute minimal net migra¬ 
tion movements into Ontario from the other prov¬ 
inces. Actual migration would invariably have been 
higher than this, as deaths among the non-Ontario- 


bom within the province during the period are not 
taken into account. 

The earliest censuses indicate that during the 
nineteenth century Quebec was Ontario’s main 
source of Canadian-born in-migrants. They were 
chiefly destined for the newly opened lands of the 
northern Clay Belt, and later, the mining towns of 
the North. There was probably some movement too 
into the eastern counties of the province. There 
was, however, little in-movement of any other 
group into the province in this 30-year period. 

In-migration was at its lowest during the 1891- 
1901 decade due partly to the economic depression 
in Ontario and the more attractive opportunities for 
settlement offered elsewhere. There was even a re¬ 
turn movement to the Maritime Provinces, almost 
equal in size to the numbers who moved to Ontario 
during the previous 30 years. 

Migration of Canadian-born into the province 
continued at a low level in the first decade of the 
twentieth century, despite increased economic op¬ 
portunities (the fact that the province was able to 
attract an estimated 77,500 immigrants reflects this). 
It appears that for Canadians, however, the West 
still offered the best prospects. 

The transition from a province of net out-migra¬ 
tion to one of net in-migration began in the 1911- 
1921 period, when net out-migration of Canadian- 
born declined to only 2,700 from a figure of 147,000 
in the previous period (see Table 3). Quebec was 
once again the chief source of this in-movement, 

^“Under the provision of an Order-in-CouncU of August 1930, 

immigration was restricted to the following classes: 

(1) British subjects from the British Isles or the Dominions 
and having sufficient funds to maintain themselves until 
employment was secured. 

(2) United States citizens coming in from that covmtry and 
having similar financial resomces. 

(3) Agriculturalists having sufficient means to farm in 
Canada. 

(4) Wives and unmarried children (under 18 years of age) of 
persons who were already legal residents of Canada and 
who were in a position to support their famihes. 


TABLE 3 

NET MIGRATION OF CANADIAN-BORN TO AND FROM ONTARIO, 1871-1941 

(Thousands of persons) 


1871-1881 

1881-1891 

1891-1901 

1901-1911 

1911-1921 

1921-1931 

1931-1941 

-1.42 

-4.56 

-5.17 

-14.73 

-0.27 

5.14 

10.03 


Source: M. C. Urquart, K. A. M. Buckley, eds.. Historical Statistics of Canada (Toronto: Cambridge University Press, 1965), 
Series A215, p. 21. 


8 






TABLE 4 

DECENNIAL CHANGE IN CANADIAN-BORN (NON-ONTARIO) RESIDENTS OF ONTARIO, 

1871-1941 

(Thousands of persons^) 


Province of Birth 

1871-1881 

1881-1891 

1891-1901 

1901-1911 

1911-1921 

1921-1931 

1931-1941 

TOTAL 








Canadian-bom 








Residents of Ontario 

315.0 

215.2 

144.9 

156.9 

270.5 

340.6 

429.4 

Born in Ontario 

304.3 

204.5 

144.7 

150.9 

239.7 

303.5 

356.8 

Born in Other 








Provinces 

10.7 

10.7 

3.0 

5.9 

27.3 

37.0 

72.6 

Prince Edward Island 

0.7 

0.1 

0.1 

— 

0.3 

0.5 

0.8 

Nova Scotia 

0.1 

1.0 

—1.7 

1.5 

2.8 

4.4 

3.4 

New Brunswick 

-0.1 

— 

-0.5 

0.5 

1.8 

3.3 

3.1 

Quebec 

9.9 

8.4 

3.0 

3.0 

16.9 

10.7 

11.9 

Manitoba 

— 

1.2 

1.1 

0.3 

3.8 

8.3 

33.7 

Saskatchewan / 





2.9 

5.8 

22.9 

Alberta ^ 

0.2 

— 

0.6 

0.2 

1.6 

2.6 

6.2 

British Columbia 


0.2 

0.2 

0.2 

1.2 

1.2 

2.6 

Yukon and N.W.T. 




0.3 

-0.2 

— 

— 


^ Figures may not add to total due to rounding. 

Sources: K. Buckley, “Historical Estimates of Internal Migration,” Canadian Political Science Association, Conference on Statis¬ 
tics, 1960, Papers (Toronto: University of Toronto Press, 1962); and Census of Canada, 1941, General Review, Vol. 1, Table 
21, 653-664. 


though significant migration was recorded also from 
Manitoba, Saskatchewan and the Maritimes. Net in¬ 
movement" during this period amounted to 27,300 
and this was increased to 37,000 during the 1920’s. 
Quebec was still the main origin of in-migrants but 
the movement was now approaehed in size by those 
from both the Prairie and the Maritime provinces. 

The trend reaehed its peak in the depression era. 
Ontario was, more than any other province, the 
destination of the thousands leaving behind them 
the disastrous economic and climatic conditions of 
the Prairies. The influx of these people bears com¬ 
parison in numerical terms to the original outflow 
of Ontario migrants 50 years earlier. Persons in 
Ontario, born in Saskatchewan and Manitoba alone, 
increased by 33,400, but in-movement was not 
only from these areas. Every province (except 
Quebec) showed a record in-movement of popula¬ 
tion into Ontario during this period. 

Attention was turned to migrational movement 
in the 1941 census. All those enumerated were 
asked about previous residence in other provinces. 


Migrants were tabulated by province of origin and 
by two periods of movement, 1931-1941 and before 
1931. 

The results include within them both the foreign- 
bom resident in Canada in 1931 and also re-mig¬ 
rated Ontario-bom, and are therefore larger than 
the figures used earlier, which relate only to the 
Canadian-born. 

The figures, reproduced in Table 5, illustrate a 
similar situation to that described above. Quebec 
was Ontario’s chief partner in population exchanges. 
In only one case was there a negative net exchange 
with another province (British Columbia) and that 
figure was fairly insignifieant. Manitoba and Sask¬ 
atchewan provided almost half the in-migrants (46.3 
per cent) and Quebec another one-third (34.1 per 
cent). 

^^Net movement of Canadians to and from Ontario is ealcu- 
lated by the change in Ontario-bom in each province com¬ 
pared with the change of Canadian-born for each province, 
resident in Ontario (i.e., the difference between the values 
in Tables 4 and 6). 


9 







FIGURE 4 


NET CHANGES IN NUMBERS OF 
CANADIAN-BORN (NON-ONTARIO) 
RESIDENTS OF ONTARIO AND 
ONTARIO-BORN BY PROVINCE, 1871-1941 

Province 


Ten 

Thousand 


BC 


A* 


S’ 


M 


NB 


NS 


PEI 



Decade 

Ending 

1881 


1891 







1911 


1 - 


Net Decennial Change in Canadian 
(Non-Ontario) born Resident in Ontario 

Increase 



Decrease 

Increase 

Net Decennial Change in Ontario-born 
Resident in each Province 


Source: Tables 4 and 6. 


10 






































































FIGURE 4 (continued) 



BC A 


S 


Province 

Q NB NS PEI 



Source: Tables 4 and 6. 


11 

































































































































































































































































































































TABLE 5 

MIGRATION BETWEEN ONTARIO 
AND OTHER PROVINCES, 1931-1941 




P.E.I. 

N.S. 

N.B. 

P.Q. 

Man. 

Sask. 

Alta. 

B.C. 

Total 

1. In-Migration to 

No. 

993 

5,217 

4,386 

46,903 

32,435 

31,227 

10,184 

6,227 

37,698 

Ontario 

% 

0.7 

3.8 

3.2 

34.1 

23.6 

22.7 

7.4 

4.5 

100.0 

2. Out-Migration 

No. 

249 

3,830 

1,983 

38,507 

8,125 

3,843 

4,093 

8,730 

69,392 

from Ontario 

% 

0.4 

5.5 

2.9 

55.5 

11.7 

5.5 

5.9 

12.6 

100.0 

3. Net Movement 

No. 

744 

1,387 

2,403 

8,396 

24,310 

27,384 

6,091 

2,503 

68,306 

4. In-Migration of 

N on-Native-Born 

200 

1,800 

1,300 

35,000 

20,600 

9,400 

3,900 

3,600 

75,800 


Residents^ 


H.e., In-migration to Ontario recorded in 1941, by province of residence in 1931, excluding only residents bom in the particular 
province under consideration. 

Source: Rows 1, 2, 3: Census of Canada, 1941, General Review and Summary Tables, Vol. 1, Table 9, 597. 

Row 4; difference between 1931 and 1941 columns. Table 4, and Row 1 above. 


TABLE 6 

DECENNIAL CHANGE IN ONTARIO-BORN BY PROVINCE OF RESIDENCE, 1871-1941 

(Thousands of persons^) 


Province of Residence 

1871-1881 

1881-1891 

1891-1901 

1901-1911 

1911-1921 

1921-1931 

1931-1941 

TOTAL 








Ontario-bom Population 

329.2 

260.7 

199.4 

304.2 

273.2 

289.1 

329.2 

Living in Ontario 

Living in 

304.3 

204.5 

144.7 

150.9 

239.7 

303.5 

356.8 

Other Provinces 

24.8 

56.3 

54.7 

153.3 

33.6 

14.5 

27.6 

Prince Edward Island 

— 

— 

— 

— 

0.1 

— 

0.1 

Nova Scotia 

0.1 

0.4 

0.2 

-0.1 

0.7 

0.3 

2.0 

New Brunswick 

0.1 

— 

0.3 

0.1 

0.7 

0.1 

0.9 

Quebec 

3.4 

5.1 

4.8 

1.6 

13.4 

19.8 

15.1 

Manitoba 

19.1 

27.5 

21.0 

5.5 

-0.6 

—10.6 

—11.6 

Saskatchewan } 

0.5 

13.1 

14.7 

80.2 

8.8 

-18.5 

-23.6 

Alberta ^ 




45.2 

11.4 

— 9.7 

—10.2 

British Columbia 

1.6 

11.1 

11.9 

21.9 

4.9 

4.1 

— 0.3 

Yukon and N.W.T. 



2.0 

-1.3 

-0.3 

— 0.1 

0.1 


^Figures may not add to total due to roimding. 

Source: Buckley (1962); and Census of Canada, 1941, General Review, Vol. 1, Table 21, 653-664. 


12 








Table 5 indicates that net migration statistics 
frequently disguise very high absolute values. The 
return movement to the Maritimes equalled over 
half the in-movement from those provinces into 
Ontario. Even movements into the Prairies reduced 
the net in-migration total into Ontario of Prairie 
residents by almost 16,000 persons. 

• By comparing the total in-migrant population 
from Table 5, row 1 with the decennial change in 
Canadian (non-Ontario) bom, resident in Ontario 
(calculated from “Province of Birth” tables in the 
census. Table 3), an estimate of the combined in- 
migration of all Canadians not bom in the province 
under consideration, together with foreign-born 
migrants, can be derived as a residual. This element 
was particularly large in the migration from Quebec 
and Manitoba, where it accounted for approxi¬ 
mately two-thirds of the total in-movement into 
Ontario. The residual was lower in Saskatchewan, 
Alberta and the Maritimes. 

(3) Migration of Ontario-born within Canada 
Considering now the destination of the Ontario- 
born migrants, one can utilize the census tables 
“Province of Birth” together with American census 
material. Table 6 indicates the decennial change in 
Ontario-born by province of residence, and Figure 
4 expresses this graphically. These estimations 


represent the minimum net movement of Ontario- 
born to other provinces during each period. 

The first federal censuses record that migration 
westward from Ontario had aheady begun in the 
1870’s. It was, however, confined in this decade 
largely to Manitoba. In the following two decades, 
movement to the other western provinces began, 
and this reached a peak in the massive migratory 
movement in the period 1901 to 1911.“ 

After 1911, however, this movement appears to 
have begun to wane. In Manitoba, new arrivals of 
Ontario-bom were not suflBciently large to offset 
the numbers dying, so the census records a decline 
in the numbers resident in that province. The fol¬ 
lowing decade shows clearly that a return move¬ 
ment of Ontario-born took place. 

(4) Migration of Ontario-horn to the United States 
Table 7 relates the net migrational movement 
from Ontario to other parts of Canada (derived 
from the census tables of birthplace) to the esti¬ 
mates made earlier of net migrational movements 

'®It should be pointed out that although movements are indi¬ 
cated here as having taken place from Ontario to each 
province, some movement may be due to re-migration of 
Ontario-born. Thus the 80,200 increase that was recorded in 
Saskatchewan between 1901 and 1911 would include any 
Ontario-bom who had moved there from Manitoba where 
they had previously been emnnerated by the 1901 census. 


TABLE 7 

NET MIGRATION OF ONTARIO-BORN TO UNITED STATES, 1881-1941 

(Number of persons^) 



(1) 

Net Migration of 
Ontario-born 
from the Province 

(2) 

Net Migration of 
Ontario-horn 
to Rest of Canada 

(3) 

Net Migration of 
Ontario-born 
to United States 

(4) 

Net Change of 
Canadian-born 
in United States 

1881-1891 

77,000 

56,300 

20,700 

264,000 

1891-1901 

105,000 

54,700 

50,300 

199,000 

1901-1911 

109,000 

153,300 

— 44,300 

24,000 

1911-1921 

131,000 

33,600 

97,400 

- 80,000 

1921-1931 

130,000 

— 14,500 

148,000 

161,000 

1931-1941 

4,200 

- 27,600 

31,800 



^Figures have been rormded to nearest hundreds. 

Sources: Colmnn (1): Table 2. 

Column (2): difference between numbers of Ontario-bom enumerated in other provinces at successive census dates. 
Table 6. 

Column (4): Tmesdell.“ 


13 






to and from Ontario alone. The diflFerence between 
these two sets of figures represents an estimate of 
the number of Ontario migrants to the United States 
during this period."" 

The results, if placed alongside the increases of 
Canadian-born in the United States as calculated 
by TruesdelU appear far too low. Ontario-born 
population would have represented a far greater 
proportion of the total increase of Canadian-bom 
population in the United States. Tliis must point, 
therefore — providing the United States Census is 
accepted as reliable — to a probable underestimation 
of net out-migration from the province, especially 
during the 19th century when calculations have been 
based on Ontario’s unreliable vital statistics. 

If the estimated migration of Ontario-bom with 
respect to the United States is treated as a general 
indication of trends, three periods are evident: 

In the first (1881 to 1901) out-movement of 
Ontario-born to the United States took place, pro¬ 
bably to the mid-western states, which were being 
settled at this time. 

The second period (1901 to 1911) coincided with 
the opening of the Canadian Prairies and there 
occurred an influx back into Canada of Ontario- 
bom formerly living south of the border. Studness"" 
states that the Canadian emigration to the United 
States Mid-West had slowed by the 1890’s and 
“by 1900 the tide had turned in favour of American 
in-migration to Canada.” It also coincides with the 
flattening of the growth curve of Canadians in the 
United States as noted by Truesdell. 

The period after 1911 is characterized by renewed 
out-flows of population to the United States — par¬ 
ticularly heavy in the years of American prosperity 
during the 1920’s, but less so during the 1930’s.^ 

Conclusion: Components of Population Changes 

The population history of the province appears to 
fall broadly into three periods: that prior to 1901, 
the period following this date until 1931 and the 
period between 1931 and 1941 (Figure 3). The dis¬ 
tinguishing features of the first period relate to the 
declining rate of natural increase, the resvdt of a 
falling birth-rate which reached a low in the 1890’s. 
Out-migration was responsible for the loss of 
approximately one sixth and one third, respectively, 
of the natural increase over the last two decades in 
the nineteenth century. At no time, therefore, were 
absolute losses in population recorded between the 
two decades, though growth in this period was very 
slow. 

The second period was marked by a slowly rising 
rate of natural increase and in-migration into the 


province. Natural increase represented the largest 
component of change, providing between 60 and 
70 per cent of the total increases made in the period. 
The third period exhibited marked declines in 


“Province of Origin” tables are included in the tabula¬ 
tion of the Canadian-bom in the United States Census. It is 
assumed here that out-movement from Ontario to places out¬ 
side Canada is almost entirely across the border to the United 
States. 

“L. E. Truesdell, The Canadian-born in the United States, 
The Relations of Canada and the United States Series (To¬ 
ronto: The Ryerson Press, 1943). 

^^C. M. Studness, “Economic Opportunity and the Westward 
Movement of Canadians in the Latter Half of the Nineteenth 
Century,” Canadian Journal of Economics and Political Sci¬ 
ence, XXX (1964), 570-584. 

^"This occurred despite the general decreases of Canadian- 
bom within tire United States: there must tlierefore have 
been a compensating return movement of Canadian-born 
back into Canada, but to provinces other than Ontario. 

FIGURE 5 

COMPONENTS OF POPULATION CHANGE 
IN ONTARIO, 1881-1941 


Percentage 

Increase 



Rate 



Sources: Tables and Reports of the Registrar General, Ontario, 
1881-1941. 


14 








both natural increase (the result of a sharply 
reduced fertility rate) and in-migration. Con¬ 
sequently, the absolute rate of increase was the 
lowest recorded. The relationship between the 
natural increase and migration component remained 
very similar, however, with natural increase still 
responsible for 70 per cent of the population 
increase. 

In only one decade, therefore, was natural in¬ 
crease superseded as the dominant element in 


population change. Population increases in Ontario 
throughout the period under consideration have 
been largely the result of internal natural increase. 
Between the years 1911 and 1941, net in-migration 
played an important role in supplementing this 
increase and actual gains in population were 
greater by between a quarter and a third due to 
this element. In the period 1881 to 1901 out-migra¬ 
tion represented a substantial drain to the pro¬ 
vince’s growth through natural change. 



15 


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The Ontario Economic Review is prepared and edited 
bimonthly in the Economic Analysis Branch of the 
Department of Economics and Development and is 
available free of charge. The review is intended to 
provide current information on economic activity 
in Ontario and to act as a forum for the results of 
research in the public service on matters affecting 
the Ontario economy. The signed articles reflect the 
opinions of their authors and do not necessarily rep¬ 
resent the views of the Economic Analysis Branch. 
All correspondence should be directed to the Editor, 
Ontario Economic Review, Office of the Chief Econ¬ 
omist, Parliament Buildings, Toronto 5. 


1867 



ne /.96V 







NTARIO 


CONOMIC 


EVIEW 



SEPTEMBER- 
OCTOBER 1967 
VOL. 5 
No. 9-10 


Hon. Stanley J. Randall, Minister 


Stuart W. Clarkson, Deputy Minister 



OFFICE OF THE CHIEF ECONOMIST 


HA 

7A7 

0656 

1967 
VOL. 5 

NOj 9-10 




H. Ian Macdonald, Chief Economist 




CONTENTS 

The Ontario Economy.1 

Towards A Theory of Provincial-Municipal Grants, 

Malcolm Martini .5 

Indicators.12 





THE ONTARIO ECONOMY 


Production 

Latest statistics available indicate a softening in the 
production of steel, one of the important elements 
in overall production. During September, produc¬ 
tion fell to 744,052 tons, down from 821,332 tons in 
September 1966. In August, steel production was 
818,894 tons, reflecting an increase of 8.2 per cent 
over 12 months ago. To some extent this can be 
seen as a response to the slackened pace of non- 
residential construction and to the conditions created 
by the construction strike affecting structural steel. 
This has now brought total steel ingot production 
for 1967 to 7,167,131 tons, down 4.9 per cent from 
last year. 

Motor vehicle production picked up considerably 
with the start of the new model year, partly in res¬ 
ponse to the threatened shortages resulting from the 
U.S. Ford strike. Preliminary figures indicate pro¬ 
duction of 33,109 units in August and 75,235 units 
in September, 168 per cent and 31 per cent respec¬ 
tively ahead of the corresponding months in 1966. 
This has brought total motor vehicle production for 
1967 to 679,685 units, 3.7 per cent ahead of the 
January to September period of 1966. 

August statistics for Canada’s seasonally adjusted 
Index of Industrial Production (based on 1949 rr: 
100), at a level of 284.2, indicate a 0.4 per cent 
increase from July. The entire gain came from manu¬ 
facturing, particularly durables, as mining and elec¬ 
tric power and gas utilities both declined over the 
month. 

Non-ferrous metal products made the most signi¬ 
ficant contribution to the 1.0 per cent gain in durable 
manufactures, rising 9.0 per cent in one month. This 
gain, occurring mainly in smelting and refining, was 
the combined result of recovery from both labour 
disputes and from production cutbacks in July. 
Non-metallic mineral products further contributed 
to the gain, rising 6.1 per cent. Motor vehicle pro¬ 
duction, climbing 5.8 per cent, helped bring the 
overall increase in transportation equipment to 2.8 
per cent. Offsetting these gains somewhat were 


declines in wood products (0.2 per cent), iron and 
steel products (0.7 per cent) and electrical appara¬ 
tus and supplies (4.5 per cent). The decline in this 
last group was primarily a result of reduced pro¬ 
duction of black and white television sets. 

In non-durables, a substantial increase in syn¬ 
thetic textiles and silk production resulted in a 
10.4 per cent increase in the textiles group. This was 
the major factor accounting for the 0.5 per cent 
gain in total non-durables. Otherwise six of the 
remaining 10 categories declined over the month, 
with the four increases coming in chemicals and 
allied products (2.4 per cent), products of petroleum 
and coal (1.9 per cent), printing, publishing and 
allied industries (0.8 per cent) and paper products 
(0.2 per cent). 

The mining index fell 0.6 per cent over the 
month, as non-metals and fuels both declined. 
Partially compensating was a 0.8 per cent increase 
in metal production, led by a 7.7 per cent increase 
in nickel production. 

A decline of 0.2 per cent was recorded in electric 
power and gas utilities, as electric power declined 
0.4 per cent and gas rose 0.7 per cent. 

Total statistics comparing the first eight months 
of 1967 and 1966 show a 2.7 per cent increase in the 
overall Index of Industrial Production this year. 
Electric power and gas utilities were up 10.9 per 
cent, followed by mining which rose 6.1 per eent. 
The 1.1 per cent gain in manufactures was made up 
of a 1.9 per cent increase in non-durables and a 0.1 
per cent gain in durables. 

Manufacturing shipments in July, the latest month 
for which statistics are available, were valued at 
$1,491.6 million, 4.8 per cent above July 1966. The 
total for the January to July period, at $11,399.0 
million, reflects an increase of 2.4 per cent from 
1966. 

Construction 

Southam Building Guide recorded reduced values 
for construction contract awards in Ontario in 
August and September compared with last year. 


1 


Values of $181.2 million and $170.4 million for 
August and September were 8.9 per cent and 7.2 
per cent lower respectively than in 1966. This is in 
large a reflection of the generally reduced levels of 
industrial and institutional construction activity. In 
September, for example, institutional construction 
awards were down 42.8 per cent from 1966, largely 
due to the very large awards made for schools and 
colleges last year. Industrial awards were down 
74.5 per cent, as manufacturing and processing plant 
construction awards dropped from $36 million to 
$8.6 million. Business construction awards remained 
virtually unchanged. There was a significant rise in 
residential — particularly apartment — awards, how¬ 
ever, as the September value rose from $43.6 million 
in 1966 to $72.3 million in 1967, a rise of 65.8 per 
cent. Engineering awards were up 19.0 per cent. 

“Big Jobs” for the months of August and Septem¬ 
ber, each valued at $1.0 million or more, totalled 
over $102 million. Some are listed below; 


LARGE CONSTRUCTION AWARDS PLACED 
RECENTLY IN ONTARIO 


Location 

$ Million 

Description 

Brampton 

3.3 

Reformatory 

Burlington 

1.1 

Plant 

Cobourg 

1.0 

Warehouse addition 

Cornwall 

3.0 

Hospital addition 

Eergus 

1.8 

School addition 

Guelph 

1.0 

University building 

London 

1.5 

School 

London 

1.0 

Apartments 

Markham Twp. 

1.2 

Plant 

Nepean Twp. 

1.1 

Housing services 

North York Twp. 

3.5 

Office building 

Oakville 

1.2 

Water treatment plan 

Oakville 

1.0 

Bridge 

Oshawa 

2.0 

Department store 

Ottawa 

18.6 

Initial work on federal 
office building 

Ottawa 

1.3 

College addition 

Peterborough 

3.8 

College addition 

Port Arthur 

1.0 

University building 

Sudbury 

1.2 

Apartments 

Thorold 

2.2 

Plant 

Thorold Twp. 

4.6 

Marine project 

Toronto (metro) 

31.4 

Apartments 

Toronto (metro) 

6.0 

Schools 

Windsor 

1.0 

Shopping centre 

Various locations 

4.1 

Provincial highway 
projects 


Despite the lower value of awards in August and 
September, the total for 1967 to date has been 
larger than the corresponding period last year. In 
the January to September period this year Ontario’s 
total construction contract awards reached $1,761 
million, 8.1 per cent more than the $1,629 million of 
the same period in 1966. Reduced total values were 
recorded in business construction awards, down 
34.4 per cent to $135.9 million; industrial awards, 
down 25.3 per cent to $242.4 million; and institu¬ 
tional awards, down 9.1 per cent to $349.6 million. 
Buoying up the overall total has been the significant 
65.6 per cent increase in engineering awards, rising 
from $251.7 million to $416.9 million; and the 33.7 
per cent increase in residential awards, from $461.1 
million in 1966 to $616.2 million in 1967. 

In residential construction activity the actual 
number of dwelling unit starts has been showing 
marked improvement in recent months. In Ontario 
centres with populations of 10,000 and over the 
number of starts reached 6,128 in August and 6,622 
in September (reflecting gains of 56.5 per cent and 
75.9 per cent over the same months of 1966). This 
brought total starts for the nine month period to 
45,217, up 35.0 per cent from last year. September 
starts in Toronto at 4,346, brought the cumulative 
total to 24,969, almost 50 per cent higher than last 
year. The cumulative totals and percentage changes 
for other major centres in Ontario were as follows: 
Hamilton, 3,786 units, up 28.2 per cent; Ottawa, 
2,329 units, down 13.5 per cent; Kitchener, 2,008 
units, up 10.6 per cent; London 1,932 units, up 29.9 
per cent; St. Catharines, 1,236 units, up 68.2 per 
cent; and Windsor, 1,004 units, down 5.8 per cent. 

Dwelling unit completions numbered 4,618 in 
August and 4,644 in September, bringing the total 
to date for 1967 to 35,553 — down 23.2 per cent from 
the January to September period of 1966. All of the 
above-mentioned centres with the exception of 
Windsor have had fewer completions this year. 

At September 30,1967, there were 45,113 dwelling 
units under construetion in urban Ontario, 16.4 per 
cent more than the 38,763 units under construction 
one year earlier. 

Retail Sales 

Sales at the retail level in Ontario showed marked 
improvement during August and September, after 
having barely achieved a three per cent annual 
increase in July. As a result of sales of $687.1 mil¬ 
lion in August and $740.3 million in September, 
representing gains of 6.7 per cent and 8.8 per cent 
respectively from 12 months earlier, the cumulative 


2 




value of Ontario’s retail sales rose to $6.34 billion, 
5.5 per cent higher than in the corresponding 1966 
period. 

Canada enjoyed the same 8.8 per cent increase 
in sales for September, bringing the cumulative 
national figure to $16.81 bilHon, an increase of 6.5 
per cent from last year. 

On an individual group basis, Ontario’s variety 
stores' experienced the largest yearly gain in Sep¬ 
tember, increasing sales by 14.9 per cent. These 
stores have led all others on a cumulative basis as 
well, moving 13.4 per cent ahead of the nine month 
total for 1966. Motor vehicle dealers, one of the 
largest groups, were 8.8 per cent ahead for Septem¬ 
ber, but were still down 0.2 per cent on a cumula¬ 
tive basis from 1966. Other groups which recorded 
substantial annual gains for September were 
women’s and men’s clothing (13.1 per cent and 
11.7 per cent respectively), general stores (12.8 per 
cent) and hardware stores (11.4 per cent). Jewel¬ 
lery stores, only 1.0 per cent ahead for September, 
experienced the smallest gain. 

ECC's Fourth Annual Review 

The Canadian economy has achieved a remarkable 
increase in output since 1961 mainly through an 
expansion of the labour force and a drawing in of 
economic slack. To maintain a satisfactory rate of 
economic growth it is now necessary for the pro¬ 
ductivity of existing factors of production to 
increase. 

The Economic Council of Canada’s fourth annual 
review released in September recommends that 
monetary and fiscal policies — the major demand 
policies — steer the economy to potential economic 
growth over the medium-term future rather than 
simply be a reaction to emergent short-term devel¬ 
opments. Demand policies should facilitate monetary 
expansion that avoid large surges of new money 
creation, and should prevent the increase in overall 
government expenditures from outpacing revenue 
gains. Supply policies must promote efficiency in 
the use of the factors of production and upgrade 
these factors by greater research and education. 
Adult education and training programs should be 
expanded, and regional income disparities reduced. 

The Council’s 273-page review identifies main 
trends in the present economy and makes forecasts 
for the future. The four major concerns now are: 
rising government expenditures, problems of urban¬ 
ization, scale and specialization in manufacturing 
and population and labour force growth. 


Government Expenditures 

Total government expenditures at all levels of 
government rose by 35 per cent between 1963 and 
1966. (The comparable U.S. figure was only 25 per 
cent in spite of the Vietnam war.) The continuing 
increase in government spending in 1966 and 1967 
is now outpacing the rise in tax revenue. Covern- 
ments must eliminate waste in existing programs 
and develop techniques for; determining objectives 
and priorities; evaluating the impact of different 
government programs in relation to their cost; and 
coordinating spending among the three levels of 
government. All expenditure programs must be sub¬ 
jected to cost-benefit analysis and ways developed 
to evaluate the usefulness of alternative expenditure 
patterns. And finally, governments should not hesi¬ 
tate in discontinuing those programs which are 
clearly obsolete. 

Problems of Urbanization 

While the Council’s recommendations for control¬ 
ling expenditures are applicable to all levels of 
government, its examination of urban growth is 
particularly relevant to Southern Ontario and the 
Ontario Government. It foresees continuing rapid 
increases in urban population (Ontario’s will in¬ 
crease by 42 per cent over the next 15 years), urban 
area and urban problems. The impact of this growth 
can be reflected in continuing housing shortages, 
worsening air and water pollution, transportation 
and traffic deficiencies, and increasing territorial 
requirements both for development and for recrea¬ 
tion. 

To meet these challenges all across Canada long- 
range comprehensive planning of urban space is 
essential. The Council calls upon all provinces to 
strengthen legislative provisions to bring about 
effective planning and the execution of development 
plans. 

To help solve the major problem of the shortage 
of housing (over 750,000 new housing units will 
have to be constructed over the four years to 1970), 
the Council recommends that the federal sales tax 
on building materials be revised and public authori¬ 
ties acquire land for residential use in ways that 
would prevent rising land prices. 

The concomitant of urban population growth has 
been rural population decline. Rural adjustment 
schemes, such as those in the ARDA program, must 
be more clearly defined and evaluated if they are 
to achieve their aims. 

Scale and Specialization in Manufacturing 

The recurrent theme of productivity appears again 

in the study of Canadian manufacturing. Although 


3 


relevant Canadian wages are 25 per cent below the 
U.S., product prices are 10 per cent higher. Canadian 
manufacturing productivity is about one third lower 
than the U.S. because most Canadian plants have 
a greater diversity of products and shorter produc¬ 
tion runs, and Canadian tariffs raise the cost of im¬ 
ports, making it profitable for Canadian plants to 
produce even small quantities of the product. 

The recommended remedy is tariff reduction on 
manufactured products, allowing Canada free access 
to larger markets, at the same time exposing it to 
more international competition. 

Population and Labour Force Growth 
Demographic changes in Canada are more dramatic 
now than in any other industrial country. The Coun¬ 
cil expects a total population of over 25 million by 
1980, with the total labour force expected to increase 
by 43 per cent, or by 3V2 million from 1965 to 1980. 
Canada has, and will continue to have, a young 
population — about half of it under 25. This implies 
a wave of new marriages, raising the number of 
households from 5.1 million to an expected 7.5 mil¬ 
lion by 1980. 

The average annual growth of 3.2 per cent in the 
labour force will be even faster than that of the 
population as a whole. This is the result of a young 
population, high immigration rates, and increasing 
female participation. With the particularly rapid 
expansion of the labour force, it should make it 
relatively easier to provide for the collective needs 
of the population. 

However, the urban pressures will be enormous. 
While total population will rise by 26 per cent be¬ 


tween now and 1980, urban population will rise 
by 40 per cent, and large-city population (over 
100,000) by 60 per cent. The largest absolute gain 
will be in Ontario: it will have 2.3 milhon more 
people in its cities and towns. Toronto, Hamilton 
and Ottawa are likely to be the fastest growing 
cities. 


NEW PUBLICATION: THE ECONOMIC PROCESS 

In 1966 the Department of Economics and Devel¬ 
opment published The Economy of Ontario, a 
booklet providing simplified economic material 
directly related to Ontario. 

The Department has now published a com¬ 
panion piece to the first booklet entitled The 
Economic Process. This booklet, written by Beryl 
Joyner of the Economic Planning Branch, provides 
a simple description of the economic process and 
how it works. It first provides a concept of the 
economic process in its simplest form, and then 
elaborates this concept in such a way that the 
relation of each topic discussed to the whole pro¬ 
cess is apparent. 

Financed jointly by the departments of Econo¬ 
mics and Development and Education, the booklet 
has been distributed in limited numbers within 
the government and to secondary schools. Col¬ 
leges of Applied Arts and Technology, libraries 
and the news media. 

The booklets are available to the public at a 
cost of 50e each. For copies write to: 

Economic Booklets, 

Information Services Branch, 

Department of Economics and Development, 
950 Yonge St., Toronto 5. 


4 



TOWARDS A THEORY 
OF PROVINCIAL-MUNICIPAL GRANTS' 


Malcolm Martini 
Research Planner 


Discussions of grants have tended to be of two 
types: purely theoretical comments or very practical 
studies of partieular systems of grants." Admittedly 
there are a number of studies'* whieh have attempted 
to wed theory and praetiee, but this has usually been 
at the federal-provineial level of grant distribution. 
At the provineial-munieipal level the bent is definite¬ 
ly toward the practieal. 

Given the option, a practical approach is prefer¬ 
able. It is also neeessary if a theory which can pass 
empirical tests is to evolve. Nevertheless, this writer 
feels that the infusion of theory into the study of 
grants would be benefieial. Accordingly this paper 
deals with the theoretieal side of grants. 

DEFINITIONS 

A grant is a transfer of money, serviees, or material 
from a donor, for example, the Province of Ontario, 
to a receiver, in this ease any of the nearly 1,000 
municipalities in the provinee. A grant formula 
deseribes the terms under whieh grants are paid. 
A grant formula’s properties are what differentiate 
it from other grants. For instance, the formula may 
be eonditional or unconditional. A grant formula 
may therefore be elassified by its properties. The 
effects of the grant formula are the results both on 
the donor and the recipient. Does the donor aehieve 
his purpose? How is the reeipient’s expenditure pat¬ 
tern affeeted? These are some of the important 
questions relating to the effeets of the grant formula. 
As will be shown here, it is impossible to make any 
statements about grant formulae unless their pro¬ 
perties are known and the finaneial situation of 
an individual munieipality is understood. 

THE PROPERTIES OF 
GRANT FORMULAE 

There are seven basic properties of grants: con¬ 
ditionality, generality, variability, equity, method of 
payment, size and demand.^ The first and second 
properties are generally lumped together, but 
separating them here brings out a very specifie 
meaning to the mueh-used term ‘conditional’. Con¬ 
ditionality here refers to the eonditions whieh the 
reeipient must meet before he is to reeeive a grant. 
Generality refers to the scope a municipality has in 
spending the money it reeeives. 


There is a tendency to equate eonditionality and 
generality. But as has just been shown, eondition¬ 
ality refers to the regulations which must be com¬ 
plied with if the grant is to be made, while generality 
relates only to the elass of items for whieh grants 
will be authorized. For instance under the Family 
Benefits Aet (formerly the General Welfare Assis¬ 
tance Aet)® the provinee pays 80 per eenf of the 
cost of fuel for people who pass a means test. The 
eonditional element is that the municipality pay the 
other 20 per eent and maintain reeords in aeeord- 
anee with the regulations preseribed under the Aet. 
The general aspeet is that the grant be made for 
fuel. Undoubtedly in some eases this is a fine dis- 
tinetion but it is nevertheless a neeessary one. 

A third property of a grant formula is its variabi¬ 
lity. Variability refers to the amount of the grant 
paid with differing munieipal eontributions and by 
different munieipalities at different times. In turn a 
formula may range from variable to invariable or 
fixed. The variation may be with eurrent expenditure 
and be of theoretically infinite amount, or it may 
vary up to a maximum expenditure beyond whieh it 
does not change. Many eonstruction grant formulae 
are of this variable type. Under the Homes for 
Retarded Children Aet,^ the provinee pays con- 
struetion costs of “$2,500 per bed or 50 per eent, 
whiehever is the lesser.” A grant formula may also 
call for variations in payment in aeeordanee with 

This paper derives largely from the first chapter of the 
author’s M.A. thesis entitled Welfare Grants to Ontario 
Municipalities, Carleton University, Ottawa, 1967. The 
author, formerly employed with the Regional Development 
Branch in the Office of the Chief Economist, is now with the 
firm of Proctor, Redfem, Bousfield and Bacon. 

-An e.xample of the former is A. William’s Public Finance and 
Budgetary Policy (New York: Praeger, 1963); an example 
of the latter is the Saskatchewan Local Government Con¬ 
tinuing Committee’s Local Government in Saskatchewan 
(Regina: Queen’s Printer, 1961); another example is the 
recently published Report of the Ontario Committee on 
Taxation (Toronto: Queen’s Printer, 1967). 

■'Among them D. 'V. Smiley’s Conditional Grants and 
Canadian Federalism (Toronto: Canadian Tax Foundation, 
1963). 

The first five have been outlined in D. N. Chester’s Central 
and Local Government ( London: MacMillan, 1951). 

■’^RSO 1960, Chapter 164, RRO 1960 207, sec. 13, and SO 
1966, Chapter 54. 

"Fifty percentage points of its payment are made by the fed¬ 
eral government. 

’SO 1962-3, Chapter 57, sec. 5. 


5 



the amount of service provided. There are few of 
these in the legislation. The closest is the Welfare 
Units Act® which authorizes the payment of 50 per 
cent of the salary of the administrator if a welfare 
unit is established. However, this act has never 
really been operative. In addition to being paid by 
per cent or by each unit, a grant may be fixed. That 
is, whether a service is provided or not, a fixed or 
what is sometimes called a block grant is made. 

The fourth property is equity. Does the grant vary 
according to the municipality’s ability to pay? Does 
it take into account the need of the municipality 
for a particular service? One example of a formula 
with the equity property is the Municipal Uncon¬ 
ditional Grants Act® which makes larger per capita 
payments to larger municipalities on the premise 
that the larger municipalities have greater per 
capita expenditures. 

A fifth property of a formula is the method of 
payment. Payment may be in cash and/or in kind. 
In Ontario payment is generally made in cash, the 
closest thing to a payment in kind being joint or 
shared programs with provincial aid in the form of 
technical or professional assistance. 

All of the five major properties just mentioned — 
conditionality, generality, variability, equity and 
method of payment — may vary in intensity. For 
instance the variability of a formula is greatest in 
a formula which varies as either a per cent of service 
costs or with the quantity of the service provided. 
Chester calls such a formula a directly variable grant 
formula. Less variable are formulae which vary 
directly but only up to a certain cost or quantity. 
These formulae are referred to as limited and varia¬ 
ble. The least variable of the grant formulae are 
those which give only a fixed amount of money. 
Some writers call these block or fixed. 

The equity property also varies in strength. In this 
article, equity can be roughly classed as high, med¬ 
ium, low, or non-existent. There are very few 
examples of truly equitable grants, making this 
particular property most notable for its absence. 

Payment can be made in cash, in kind, or in 
some combination of the two. 

The remaining two properties of grant formulae 
— two of the most important — are size and 
demand.'® Size refers to the proportion of the costs 
of the service provided for by the grant. Demand 
relates to the relative position of the service in the 
municipality’s overall service demands: municipal 
demand for libraries is relatively low while demand 
for schools is high. As with the other five properties, 
size and demand may vary in intensity. 


Grants therefore have seven basic properties, 
making it possible to describe a grant formula as a 
large, conditional, specific, non-equitable, cash 
grant formula of low demand and limited varia¬ 
bility. 

THE EFFECTS OF 
GRANT FORMULAE 

A grant formula can affect either of the two 
agents. It can affect the donor, for instance, by its 
success or failure to achieve his aims. It can affect 
the recipient in a number of ways, only one of 
which is the much decried alteration of his expendi¬ 
ture pattern. Before delving into the relationships 
between various types of grant formulae and their 
effects it would be useful to establish the broad 
range of effects. 

The Effects on the Donor 

The most important effect on the donor is the 
achievement of his original intention. This effect, 
which may be called the purpose effect, has many 
facets. The donor may wish to relieve the burden of 
taxation on local property, to equalize costs among 
municipalities, to encourage a particular program, 
or to establish a minimum service standard; again 
the purpose may be to preserve municipal autonomy, 
or to give a local touch to the administration of 
the service. These are the reasons for reducing the 
financial burden, but they assume that the serviee is 
to be offered basically by the municipality. 

The making of grants is as much a part of the 
process of political give and take as any other part 
of the governmental and bureaucratic process. To 
assume that the compromise which evolves has a 
clear-cut purpose — and the same one originally 
intended by the original instigator — would be 
wrong. The only way the donor can be sure that 
the compromise which evolves is satisfactory is by 
knowing what effects the fonnula has had on both 
the service and the municipality. When these effects 
are known it will be possible to assess the perform¬ 
ance of the system. 

The Effects on the Recipient 

The effects on the donor are of interest in this study 
only insofar as it is necessary to know the purpose 
of a grant formula to know whether or not its 
intention has been fulfilled. Of more immediate 

«RSO 1960, Chapter 428. 

’’RSO 1960, Chapter 259. 

^"In subsequent chapters of the thesis it was shown that unless 
the grant made was very large (at least 80 per cent of the 
total costs exclusive of administration to the municipality), a 
municipality would not accept tlie grant unless its demand 
for the service was high . 


6 



importance to this paper is the question of the 
effects on the municipalities. It is possible to argue 
that if a municipality takes the grant, it agrees to 
all the ramifications involved and is willing to 
accept the consequences at the polls or elsewhere. 
Such an assumption presumes that the municipality 
has a choice in acceptance and also that it knows 
the consequences of its actions. It also presumes 
that it has some sort of bargaining power with the 
province. None of these free market conditions 
obtain; first of all a municipality has very limited 
finaneial resources, and second, it is the creature of 
the agent with whom it is bargaining. A systematic 
breakdown of the possible effects a grant formula 
may have is therefore in order. Basically there are 
six effects. 

1. The Income Effect: 

Every grant which a municipality accepts will nor¬ 
mally increase its income. However if the expense 
associated with the acceptance of the terms of the 
grant formula exceeds the amount of the grant, 
then in financial terms, though not necessarily in 
services, the municipal government may be poorer. 
In most cases the effect is positive but depending 
on the conditions outlined above and on the effeets 
which follow, it may be negative. 

2. The Substitution Effect: 

Despite the conditions in the grant formula, it does 
not follow that the money which is granted to a 
municipality will be wholly allocated to that service. 
If for instance the service is already well established, 
the grant may be tantamount to a gift. That is, the 
money will be used on the service but municipal 
funds hitherto allocated to that service will be 
shifted to other purposes. The operation of this 
effect will be a function of the municipality’s exist¬ 
ing commitment and attitudes toward the grant- 
aided service. 

3. The Expenditure Effect: 

This refers to the amount of money spent on the 
service or the total amount of money spent by the 
municipality. When it refers to the amount spent 
on the service it will be known as the service expen¬ 
diture effect, and when it refers to the amount 
spent by the municipality on the whole it will be 
known as the total municipal expenditure effect. 

The next three effects are more difficult to 
measure, if indeed they can be, but they are really 
the crux of all arguments about grant formulae. 

4. The Service Quality Effect: 

It does not necessarily follow that an increase in 


expenditures will result in higher service quality. 
The substitution effect may work so that the service 
will not even be extended. All that may happen is 
that there may be procedural or accounting im¬ 
provements which may assist administration without 
assisting the service. There are three parts to the 
service quality question. The first relates to the 
extension of the service and may be called the 
service extension effect. This refers to the question 
of whether or not more of the service is offered. 
The second effect is service quality itself. In the 
case of welfare, advice through a counselling service 
may be just as important as money. The third cate¬ 
gory is service administration. This has some over¬ 
lap with the service quality effect insofar as better 
administration may improve the quality of the 
service rendered to the public. This refers to 
whether or not better accounting and other pro¬ 
cedures are adopted, that is, more simplified ones, 
placing less of a burden on administrators. 

-These three sub-effects are obviously subject to 
considerable interpretation. The service extension 
effect is straightforward enough, but the question 
of improvement of service either in terms of the 
people served or administratively raises a number 
of problems. One authority has pointed out that 
one of the most important aspects of grant formula 
administration is the increase in communications 
between senior and local governments with respect 
to methods and need.” This kind of improvement 
is difficult to document. In terms of administrative 
procedures, it depends to a large degree on which 
side one is looking from. There is a difference be¬ 
tween a procedure stressing financial accountability 
which the grantor may favour, and one placing its 
emphasis on service which the municipality may 
prefer. 

5. The Equalization Effect: 

This refers to the amount of consideration a grant 
formula gives to the differing needs and resources 
of the municipalities who might use it, and is similar 
to the equity property alluded to previously. Equity 
is in part a function of the need for the service, 
and it is not at all clear that the need for the service 
bears any relation to wealth. The larger is a muni¬ 
cipality, the larger is the number of different types 
of expenditures it is likely to make. The greater 
the variety of services it offers, the less likely is 
one service to be able to increase its share of total 
municipal expenditure and the more likely are the 
income and substitution effects to be high. That 

“Smiley, op. cit., page 40. 


7 



is, a large and wealthy municipality is more likely 
to reap greater financial benefits from any form of 
grant than a smaller less wealthy one. The reasons 
for this will be considered later. 

The question of equity is then reduced to the 
question of whether or not large municipalities are 
in greater need of funds than smaller ones. The 
question is one that can only be answered by 
looking at the total expenditure requirements and 
fiscal capacity of a given municipality at a given 
time. Presumably therefore, the equity content of 
a grant formula increases with the degree to which 
the total municipal revenue picture is considered. 
No less important is reference to the need for a 
particular service. Noth withstanding the considera¬ 
tion of the total municipal financial picture, a 
formula can easily aid a service which the muni¬ 
cipality may feel needs less aid than others. Yet 
the grant might be accepted either because the 
municipality feels it can shift some expenditures 
into other services or because it actually wants the 
service although less than it wants another service. 
A truly equitable formula should be so designed 
that a municipality will qualify for a grant only 
if it needs the service or the increase in the service 
that the grant formula is aiding. 

6 . The Autonomy Effect: 

This particular eflFect has probably received more 
attention than any of the others. It is closely related 
to the substitution effect in that it is concerned with 
the extent to which a municipality is forced to 
accept the grant, its conditions and the use of the 
money for the purpose intended. Will, for instance, 
the acceptance of the formula bring the municipa¬ 
lity to adopt new administrative procedures, or 
have the procedures which are adopted already 
exceeded the requirements of the formula? Will the 
municipality have to divert resources from other 
uses to finance the shared part of the grant? Can 
the municipality say no to accepting the conditions 
of the formula? Again it appears that size and need 
for the grant-aided service are the key determinants. 

THE RELATION BETWEEN 
EFFECTS AND PROPERTIES 

The seven basic properties, six major effects, and 
the effects on the donor, can be synthesized to show 
what types of grant formulae are most likely to 
produce what effects. In the remainder of this 
article such an attempt will be made.'^ Size and 
demand show up as properties which condition 
the importance of all other properties. The validity 


of this argument will be apparent as the discussion 
of properties and effects proceeds. 

Most municipalities would argue that they know 
what is best in the way of services for their con¬ 
stituents, and that therefore, any grants which are 
made should be made unconditionally. This argu¬ 
ment has some validity which can be demonstrated 
with the aid of Figure 1, which is an indifference 
curve diagram variously used by economists to 
show preferences that consumers have between 
goods or groups of goods as the relative costs of the 
goods either in dollars or some other measure 
changes. Here the quantity of a cluster of services 
Y is measured on the vertical axis and those of 
service X on the horizontal. The line AB represents 
the various combinations of X and Y which the 
municipality can have at a given revenue level. The 
curves (indifference curves) to D 3 represent the 
preferences a municipality would have for various 
combinations of X and Y. These curves will be 
concave to the origin for almost all municipal ser¬ 
vices because municipalities are likely to prefer a 
larger variety of services, some of which may be 
relatively expensive, to a large amount of only one 
service even though it may be obtained relatively 
cheaply. In the economist’s terms, the marginal rate 
of substitution of services Y for service X will in¬ 
crease as the quantity of X that the municipality 
has increases. 

Given the indifference curves set in Figure 1 and 
the budgetary constraint of AB, a municipality will 
most satisfy its desires for services by choosing an 
amount OE of Y and OF of X. At this point the 
ratio between what the municipality views as the 
“costs” of the two service sets will be exactly equal 
to the preference the municipality has for one set of 
services over the other. 

Quantity of 

Services Y 



’"The method used will draw on the procedures laid out by 
Williams in Public Finance and Budgetary Policy and Ches¬ 
ter in Central and Local Government. 


8 









An unconditional grant would have the effect of 
an increase in municipal revenue, moving AB out¬ 
ward, for instance, to GH, enabling the municipality 
to purchase more of both X and Y. In Figure 1 the 
municipality would choose to have OEi of Y and 
OFi of X. A conditional grant which gave an equiva¬ 
lent sum to the municipality but only for service X 
would have the effect of changing the budget line 
AB to ACH; that is, the price of X relative to Y 
would fall but only up to the point of the limits of 
the total amount of the grant. (The grant then is 
variable and limited but the effect of the limitation 
is similar to an effect resulting from conditionality 
if it is assumed that the conditionality places limits 
on the freedom of municipal action.) The munici¬ 
pality would choose a combination of X and Y 
equal to OF 2 and OE 2 respectively in which OF 2 is 
more than OFt but OE 2 is less than OEi. It will be 
on an indifference curve D 2 , lower than D 3 for the 
unconditional grant, indicating that in terms of its 
preferences its position has changed for the worse. 

But against the municipal view that a conditional 
grant is always inferior to an unconditional grant 
is the point that its position is worsened only if 
its preferences are such that the indifference curve 
for the conditional grant is above C, because at C 
or below there is no difference between the uncon¬ 
ditional and conditional grant possibilities. Thus a 
municipality is better off with an unconditional 
grant only if it has to buy more of X or Y than it 
would have with the conditional grant. It should be 
noted, however, that so long as the amount it 
receives is the same from both grants a municipa¬ 
lity is never worse off with an unconditional grant 
and sometimes better off than it is with a conditional 
grant. 

It is now possible to outline some of the relations 
between effects and conditionality. The income 
effect can apply when the grant is either con¬ 
ditional or unconditional. It will always apply to 
an unconditional grant and may apply to con¬ 
ditional grants. Unless the standard established 
involves the maintenance of the grant-aided service 
at a level sufficient to prevent a shifting of funds, 
the substitution effect can also apply. It should be 
remembered that the ability to substitute will be 
greater in those municipalities where the service is 
already offered. 

Large urban municipalities may have higher sub¬ 
stitution effects than small rural ones because 
services in the former are more likely to have 
reached provincial standards. The substitution effect 
will be lowest when the grant is 'small’ — that is 
when the contribution that the province makes is 


low relative to the amount the municipality has to 
pay — and when demand is high; variation in either 
case may not be direct. The income and substitution 
effects obviously condition the effect on service 
e.xpenditure. If the substitution effect is low, expen¬ 
diture will probably rise. 

The effect on service quality is also a function of 
the substitution and income effects. But it is also a 
function of the administrative requirements that are 
established under the conditions of the formula. 
This effect depends on the quality of the conditions 
and the subsequent administration of them. Never¬ 
theless from the point of view of the province 
a conditional grant is more likely to guarantee a 
given performance level than an unconditional one. 
This presumes two things. First, that the conditions 
are significant, that is, they do not require pro- 
cedimes that are already in existenee and a level of 
service already attained; and second, that the pro¬ 
cedures they do prescribe attain the purpose 
intended. 

The equalization effect has very little to do with 
conditionality. The autonomy effect, the key argu¬ 
ment in most discussions of grants, does relate to 
conditionality, but only insofar as the e.xpenditure 
and/or administration pattern is altered by the 
acceptance of the grant. An unconditional grant will 
not affect autonomy. A conditional grant may. In 
a line of argument similar to that on substitution, it 
can be argued that autonomy is affected more, the 
poorer and smaller is the municipality, for such 
municipalities may have not only little choice in 
accepting the grant to begin with but are also likely 
to have small substitution effects. For some muni¬ 
cipalities greater autonomy in the sense of freedom 
from the pressures of taxpayers or recipients of the 
service may result. If the municipality can say that 
by reaching prescribed provincial standards its 
service is at a satisfactory level, it may avoid having 
to make further expenditures. The desirability of 
such a situation is questionable. 

In conclusion, then, the question of conditionality 
is relevant only to the extent that the expenditure 
or the administrative pattern of the municipality is 
altered by acceptance of the grant. 

The effects of generality are very much like those 
of conditionality. If it is irrelevant to the donor 
where the money goes, then so long as a certain 
performance standard — whatever it may be — is 
attained, generality becomes a neutral factor and 
conditionality is the only relevant one. But if it is 
clearly specified that the money must be used for 
a given service then the question of substitutability 
becomes relevant. As was noted earlier, larger muni- 


9 


cipalities will probably be able to shift expenditures 
and therefore will have their autonomy less affected. 
In terms of the expenditure effect, the results will be 
the same as for conditionality. Service quality is also 
similar to conditionality, but because the donor will 
probably check to make sure that the money was 
spent on the service, it is more likely that the quality 
of the service will improve or at least change after 
a grant is applied to it. This is of course subject to 
the constraint that quality initially is lower than the 
grant formula would have prescribed. Total expen¬ 
diture will be affected by the grant in much the 
same way as the conditional property affected it, 
while the equity effect will again be inoperative. 

Most grant formulae are variable to some degree. 
Earlier it was noted that variable grants could be 
broken into a spectrum of block, service unit, 
limited, and directly variable formulae. The effects 
on the municipality will vary with the type of varia¬ 
bility. However, some general statements may be 
made. Figure 2 shows how the total amount a 
municipality spends can rise with the amount it 
receives from the province in a conditional grant 
formula. 


MUNICIPAL 

SHARE 



The more the municipality spends on the grant- 
aided service, the more it receives from the pro¬ 
vince. Any grant enables the municipality to spend 
more without having to pay the full costs. There¬ 
fore, what has been said about the income and 
substitution effects earlier also applies here. How¬ 
ever, since the grant is variable the municipality is 
likely to have a less strong substitution effect 
because the temptation to get more of a service, 
especially if it can get it at little cost to itself, will 
be very great. Because a variable grant increases 
with the municipality’s willingness to contribute 
and because in many cases the amount of the service 
can be greatly increased without much affecting the 


rates of municipal taxation, the municipality is 
likely to exploit the grant to the fullest extent. The 
donor will realize this and fairly extensive adminis¬ 
trative controls are likely to result. These controls 
will probably be the more extensive the higher is 
the share of the province in the service. If, as in 
the case of Ontario welfare grants, the federal 
government makes a substantial contribution to the 
provincial share, the controls may be even tighter. 
Remembering the great temptation on the part of 
the municipality to take full advantage of a variable 
grant formula, and the low substitution effect, the 
effect on municipal autonomy of variable grants 
can be considerable. 

As with the specific grant, the associated increase 
in provincial control is likely to mean an improve¬ 
ment in service quality. There will be more people 
concerned with the expenditure and administration 
and possibly better liaison with people more know¬ 
ledgeable in the administration of the service. 

There is a possibility of an equalization effect, 
especially if the grant is large and the demand for 
it high. Again such an effect is subject to tbe degree 
to which a municipality is able to shift the expen¬ 
diture on the grant over to other items. The effect 
is similar to that of the unconditional property. Note 
that the equalization effect will be lower if the 
formula is based on unit costs of providing the 
service than if it is based on average costs, for the 
municipality will get less as its contribution in¬ 
creases. This assumes that the marginal costs of 
providing the service are declining with increases 
in the amount of the service offered. Marginal costs 
in welfare are related to staff. Administrative costs 
will decline until additional staff is acquired. With 
staff acquisition, costs will rise by the amount of 
salaries paid. 

A limited grant may have an adverse effect on a 
municipality by preventing it from realizing econo¬ 
mies of scale. It seems possible that the common pro¬ 
vincial practice of using a formula of $X or which¬ 
ever is the lesser per unit assures that the province 
and not the municipality benefits from economies of 
scale. Limitations, then, serve to insure that on a 
unit cost basis no grant formula benefits one muni¬ 
cipality more than another, but they may at the 
same time remove what automatic equalization 
effects may be built into a variable grant formula. 

The last important grant formula property is that 
of equity. With equity there is a dilemma. A muni¬ 
cipality which offered a service before a grant 
formula was made available would get no reward 
for its initiative while one which lacked initiative 
would be rewarded by being assisted. 


10 
























A grant concerned with equity traditionally is a 
general, unconditional and variable one. Sueh 
theories as those supporting Graham’s^ municipal 
equalization grants are correctly based on the notion 
that a grant formula should form part of a total 
system of municipal financial assistance designed 
to restore autonomy to municipalities in those fields 
where they should have autonomy. The point here 
is that it does not follow that a specifie conditional 
grant cannot have as mueh of an equity property as 
its categorical opposite. The real question is on what 
to base the equity formula. 

Population and assessment are two often sug¬ 
gested eriteria. But a formula based on population 
in Ontario would assume that the needs and costs 
of municipal services and municipal capacity (per 
capita) are identical, which is unlikely. Therefore 
variations in social characteristics such as age, 
family size and personal ineome have to be con¬ 
sidered. Similarly population densities are relevant 
beeause different densities mean that service costs 
will vary. More pipes will be needed to sewer a 
large area with the same size population than a 
small one; more time will have to be spent by social 
workers in getting to their eases. Yet conversely, a 
large but low density area may not need sewers or 
welfare at all. Even if the assessment criterion were 
technieally adequate to measure municipal fiscal 
capacity, that is, if there were uniform assessment 
throughout the province, this criterion would suffer 
because it only considers one aspect of fiscal ability. 
The modem preference for progressive taxation 
whieh is not a feature of the property tax makes 
reliance on assessment criteria even more dubious. 

Therefore the solution to equity is a complicated 
one. A truly equitable grant formula must take into 


account the income of the munieipality, ineluding 
the wealth of its inhabitants, the need for particular 
services and the varying costs of these services. 
Any system which ignores these factors, or which 
uses only partial measures, sueh as population or 
assessment, is something less than equitable. 

SUMMARY 

A general knowledge of what the effects of a 
grant formula might be, makes it possible to suggest 
what the legislators and their assistants had in mind 
when they originally made them up. 

If a grant is unconditional, fixed, and general it 
can be assumed that the legislators wanted to assist 
municipalities without infringing on their autonomy. 
If it has some sort of equity element tacked on, we 
know that they wished to help poor municipalities. 
If, on the other hand, the formula is conditional, 
specific and variable, we can assume that the major 
purpose is to see that a particular service is offered 
at a certain minimum standard, presumably high, 
throughout the province; there may of course be an 
equity element, but the legislators then are likely 
to be largely unconcerned with the question of 
municipal autonomy. From the exclusion of an 
equity prineiple in a grant formula, a number of 
other important implications arise. The most im¬ 
portant is that there might be no attempt to treat 
municipal finance as a total question involving the 
coordination of public services. Again, theoretically, 
the conclusion may be that the grantor considers 
the service more important than the munieipal 
autonomy which it appears to transeend. 

Graham, Fiscal Adjustment and Economic Development 
(Toronto: University of Toronto Press, 1963). 


11 



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The Ontario Economic Review is prepared and edited 
bimonthly in the Economic Analysis Branch of the 
Department of Economics and Development and is 
available free of charge. The review is intended to 
provide current information on economic activity 
in Ontario and to act as a forum for the results of 
research in the public service on matters affecting 
the Ontario economy. The signed articles reflect the 
opinions of their authors and do not necessarily rep¬ 
resent the views of the Economic Analysis Branch. 
All correspondence should be directed to the Editor, 
Ontario Economic Review, Office of the Chief Econ¬ 
omist, Parliament Buildings, Toronto 5. 


















► 

A . 






NOVEMBER- 
DECEMBER U 
VOL. 5 
No. 11-12 




DEPARTMENT OF ECONOMICS AND DEVELOPMENT 


Stuart W. Clarkson, Deputy Minister 


Hon. Stanley J. Randall, Minister 


HA 

7A7 

0656 

1967 

VOL,5 

NO. 11-12 


OFFICE OF THE CHIEF ECONOMIST 


H. Ian Macdonald, Chief Economist 




MAB 


1981 


1 







CONTENTS 

The Ontario Economy.1 

Ontario in Confederation.3 

Ontario’s Demand for Industrial and Agricultural 

Machinery to 1976, Robert H. Frank .5 

Appendix.17 

Economic Indicators.18 







THE ONTARIO ECONOMY 


Recently published GNP statistics for the third 
quarter of 1967 have provided further evidence of 
the general slowdown in the economy. Canada’s 
GNP, at $61,872 million (seasonally adjusted at 
annual rates), was only slightly higher than the 
$61,592 million recorded in the second quarter. 
When price increases are discounted this actually 
reflects a small decline in GNP, the first since the 
third quarter of 1966. 

The main forces of expansion during this quarter 
were personal demand, which rose $800 million or 
2.1 per cent from the previous quarter; residential 
construction (up 9.2 per cent); and business inven¬ 
tory accumulation, which reversed its recent trend 
toward a diminishing rate of accumulation (in part 
due to a rise in auto inventories in preparation for 
the impact of U.S. auto strikes). Countering these 
positive forces were declines in investment in plant 
and equipment, government expenditure on goods 
and services, and (merchandise) exports. 

Gains on the income side were mainly in labour 
income, which rose two per cent principally be¬ 
cause of higher average earnings, and in net cor¬ 
porate profits. Accrued net income of farm 
operators declined signihcantly. 

Prices increased less than one per cent in the 
third quarter, lower than in recently preceding 
quarters. The largest gain was in the index for con¬ 
sumer expenditure, up 1.4 per cent. Most other 
categories advanced at slower rates than previously; 
in the case of construction the rate was much slower 
largely due to lower wage increases. 

Signs of the slowing in the economy have been 
apparent even beyond the third quarter of 1967. In 
October and November unemployment in Ontario 
was recorded at 3.8 per cent and 3.3 per cent respec¬ 
tively. In November the labour force was at 
2,849,000, the same as in September; but employ¬ 
ment at 2,755,000 was down 5,000 compared with 
that month. 

Gonstruction contract awards in Ontario, as re¬ 
ported by the Southam Building Guide, reached 
$201.1 million in October and $189.0 million in 
November (not adjusted for seasonal variation). 
The higher October figure actually represented a 
decline of 6.4 per cent from the corresponding 1966 
figure, due to sharp declines in institutional and 
industrial awards and despite a two-third increase in 
the value of residential contracts. Awards in Novem¬ 
ber, though lower than in October, were 13.5 per 
cent higher than in November 1966; residential, 


business and engineering gains were responsible for 
this. 

“Big Jobs” —each valued at $1.0 million or more 
were valued at approximately $83.1 million in Octo¬ 
ber and $57.2 million in November. Some are listed 
below: 


LARGE GONSTRUGTION AWARDS PLAGED 
REGENTLY IN ONTARIO 


Location 

$ Million 

Description 

Alexandria 

1.5 

High school addition 

Etobicoke Twp. 

1.7 

Warehouse 

Guelph 

Gwillimbury 

3.0 

School 

East Twp. 

1.6 

Housing 

Hamilton 

6.5 

Apartments 

Kingston 

2.2 

Gollege addition 

Kingston 

2.0 

Hospital nurses’ 
residence 

Kitchener 

1.8 

Apartments 

Kitchener-Waterloo 

3.6 

Provincial 

expressway 

London 

2.0 

Housing 

London 

1.5 

Apartments 

Milton 

1.0 

School addition 

North York Twp. 

1.0 

Office and warehouse 

Oakville 

1.6 

Dam 

Ottawa 

2.0 

Office building 
addition 

Ottawa 

1.4 

Apartments 

Pembroke 

1.5 

Home for aged 

Peterborough 

4.5 

Apartments 

Port Arthur 

8.1 

University building 

St. Gatharines 

2.0 

School 

Sault Ste. Marie 

1.0 

School addition 

Smiths Falls 

2.9 

Hospital additions 

Sudbury 

4.0 

Gollege addition 

Teck Twp. 

5.0 

School 

Toronto 

3.5 

Industrial mall 

Toronto 

2.0 

Medical building 

Toronto (metro) 

32.9 

Apartments 

Toronto (metro) 

6.1 

Schools & college 
buildings 

Toronto Twp. 

5.0 

Shopping centre 

Trenton 

1.0 

Hospital addition 

Waterloo 

2.5 

Office building 
addition 

Whitby 

2.0 

Hospital addition 

Woodstock 

1.7 

Home for aged 

Various locations 

5.1 

Provincial highwa)' 
contracts 


1 





October and November statistics have now 
brought the cumulative total for all awards in 
Ontario to $2,154.7 million, $144.6 million or 7.2 per 
cent higher than in the January-November period of 
1966. Engineering and residential construction have 
been the propellants, the other categories having 
declined from last year. 

In Ontario’s residential construction, the number 
of dwelling starts (not adjusted for seasonal varia¬ 
tion ) reached 6,209 in October — up 35.7 per cent 
from one year earlier — and then moderated to 
4,790 starts in November, an annual gain of 3.8 per 
cent. These gains were recorded despite the absence 
of a Fall program of direct CMHC loans to builders 
this year. For 1967 to date, starts have risen 31.7 
per cent, from 42,685 in 1966 to 56,216 this year. 

Dwelling completions, up 52.8 per cent and 8.4 
per cent in October and November respectively, 
have now brought the cumulative 1967 total to 
46,976 units — still down 15 per cent from 1966 

Canada’s industrial production, according to the 
seasonally adjusted Index of Industrial Production, 
declined 0.8 per cent from September to Oetober, 
falling to 282.5 (based on 1949 = 100). 

The decline was entirely concentrated in manu¬ 
facturing which fell 1.5 per cent. Mining rose 0.7 
per cent and electric power and gas utilities 2.2 per 
cent. A major portion of the decline in manufactur¬ 
ing can be attributed to the direct effects of labour 
disputes in wood products and the indirect effects of 
the U.S. auto strikes. 

Steel production, for which November statistics 
are available, continued to fall short of last year’s 
monthly figures. In November, 772,734 tons of steel 
ingots were produced, 1.5 per cent lower than 12 
months earlier. For the year to date production was 
8,780,987 tons, representing a decline of 4.2 per cent 
from last year. 

Manufacturers’ shipments from Ontario were 
valued at $1,718.7 million in October, a rise of 1.7 
per cent from October 1966. As a result the 10- 
month total now is $16,354.8 million, 2.8 per cent 
higher than in 1966. 

1967 Supplemental Budget 

In a move intended to combat inflationary pressures 
in the economy. Finance Alinister Sharp on Novem¬ 
ber 30 brought down a supplemental budget, high¬ 
lighted by selective tax increases. 

— Effective January 1, 1968, a special personal 
income surtax of 5 per cent (of the amount by which 
basic tax exceeds $100) will be imposed up to a limit 
of $600. For a $7,000-a-year family man with two 


children, this means an increase of $29 in personal 
income tax. 

— The instalment payments of corporate income 
tax are to be moved ahead two months, thereby in¬ 
creasing revenue in fiscal 1968-69. 

— The refundable five per cent tax on corporation 
cash profits imposed last year is to be repaid begin¬ 
ning in June, 1968. Repayment of one month’s 
receipts will be made every second month through 
to May, 1970. 

— Effective December 1, 1967, the excise duty on 
all alcoholic beverages is increased approximately 
10 per cent; the excise duty on distilled spirits rises 
from $13 per proof gallon to $14.25, and on Cana¬ 
dian brandy rises from $11 to $12.25. 

— The excise duty on beer is raised four cents a 
gallon to 42 cents. 

— The excise tax on wine with low alcoholic con¬ 
tent is increased 2 V 2 cents a gallon; for other wines it 
is increased five cents a gallon. 

— The tax on cigarettes is increased 1/10 of a cent 
per package or two cents for a pack of 20 cigarettes. 

— The excise tax on cigars is increased from 15 
per cent of the manufacturer’s selling price to 17y2 
per cent. On cut tobacco and pipe tobacco the in¬ 
crease is from 80 cents a pound to 90 cents a pound. 

In addition to these tax changes, other measures 
were announeed: 

— Capital spending, subsidies and lending pro¬ 
grams (including housing loans) are to be redueed. 

— Growth of the civil service is to be restrained. 

— Capital loans to Air Canada are to be curbed. 

While acknowledging the contribution of the Car¬ 
ter Royal Commission Report, the Minister stated 
that tax reforms will not involve the radically differ¬ 
ent approach of the Carter Royal Commission Re¬ 
port, but will be more in the nature of reforms of 
the existing tax structure. 

The budget deficit for the current fiscal year, fore¬ 
cast at $740 million in June was now revised to $785 
million, based on expenditures of $9,900 million and 
revenues of $9,115 million. For 1968-69 a deficit of 
$80 million was predicted, with expenditures and 
revenues of $10,300 million and $10,220 million 
respectively. 

Devaluation of the British Pound 

On November 18, the British government announced 
a 14.3 per cent devaluation of the pound intended to 
solve the country’s recurrent balance of payments 
crises and remove the mounting pressure on the 


2 


pound. In support of this move, which brought the 
pound down to U.S. $2.40 from U.S. $2.80 (and to 
$2.57 from $3.00 in Canadian dollars), several other 
measures were taken: 

— the Bank of England rate for borrowing was 
raised from to eight per cent; 

— defence spending cuts of more than $300 mil¬ 
lion were announced; 

— Corporation tax was raised from 40 to 42y2 per 
cent; and 

— the export rebate was abolished. 


In addition the British government made clear its 
intention to keep a close watch on wages, prices and 
dividends, restrict bank advances to borrowers other 
than exporters, and cut back public spending in 
general. 

Within a few days 21 other countries announced 
currency devaluations of varying degrees: Barba¬ 
dos, Bermuda, Ceylon, Cyprus, Denmark, Fiji, Gam¬ 
bia, Guyana, Hong Kong, Israel, Jamaica, Malawi, 
Malaysia, Malta, Mauritius, Nepal, New Zealand, 
Republic of Ireland, Sierra Leone, Spain, and 
Trinidad-Tobago. 


ONTARIO IN CONFEDERATION 


“We have come to a period in the history of this 
young country where premature dissolution seems 
to be at hand. What will be the outcome? How long 
can the present fabric last? Can it last at all?” 

Sir Wilfrid Laurier’s question is more than seventy 
years old. Yet it might have been posed yesterday, a 
fact which may indicate that Canadians are the vic¬ 
tims of chronic anxiety about ‘the State of the Union’. 
More likely, the question may be viewed as an 
inevitable result of the tension inherent in any 
federal system. If such a system is to work effectively, 
it requires frequent reappraisal. 

Whatever our interpretation of the question, it is 
still germane today, and its tone is just as urgent. 
Indeed, the changes in Canada’s political, economic 
and cultural character, particularly over the last 
decade, have added new dimensions to the chal¬ 
lenge of maintaining a viable federalism. 

Ontario's Role 

As the wealthiest and most populous of Canada’s 
ten provinces, with some fifty per cent of the nation’s 
manufacturing capacity, Ontario has a heavy stake 
in the future of Canada, a future which has lately 
been clouded by severe strains in the federal system. 

Because of its concern, the Government of 
Ontario considered it necessary to convene the Con¬ 
federation of Tomorrow Conference held in Toronto 
last November. In his opening statement to the Con¬ 
ference Mr. Robarts aptly summarized Ontario’s 
attitude: 

For a number of years we have been aware of 
and concerned about the developing tensions 
within Canada, and, more particularly, about 
the direction in which we were headed. It 


seemed to us that not only were we tending to 
ignore the implications of the cultural com¬ 
plexity of this country, but we were also mak¬ 
ing a series of decisions that subtly, but 
nonetheless forcibly, were changing the politi¬ 
cal and economic character of Canada . . . these 
decisions were often in response to short-term, 
specific problems rather than the result of a set 
of commonly agreed principles and a knowl¬ 
edge of clearly defined purposes ... I can 
only say that these trends preoccupied our 
thoughts to the point where we felt some 
initiative, some action, had to be taken. 

Ontario Advisory Committee on Confederation 

Well before the Confederation of Tomorrow Con¬ 
ference, Ontario had been quietly reassessing its 
role within Confederation. In January, 1965, the 
Government announced the appointment of the 
Ontario Advisory Committee on Confederation. 
Composed largely of prominent Ontario scholars, 
the Committee was established to advise the Gov¬ 
ernment especially on the problems pertinent to 
Ontario’s role in Confederation. Meeting on a month¬ 
ly basis, it has conducted much of its work in three 
sub-committees: one dealing with constitutional 
questions, a second with economic and fiscal prob¬ 
lems, and a third with questions of a cultural and 
educational nature. 

The constitutional sub-committee has discussed 
such questions as the need for and method of 
amending the Constitution, the role and structure of 
the Supreme Court and the role of a province in 
international relations. 

The economic and fiscal sub-committee j'er- 
formed an advisory role in the development of 
Ontario’s position at the Tax Structure Commiitee 


3 


meeting, called in September, 1966, to consider the 
quinquennial federal-provincial fiscal arrangements. 
Apart from this advisory role, the sub-committee has 
focussed its discussions primarily on the economic 
and financial implications of the establishment of a 
national capital district, and on the administrative 
problems of managing our water resources. 

The cultural sub-committee has done considerable 
research into the question of French-language edu¬ 
cation in Ontario; the use of French in the province 
in other areas such as the judicial system, local gov¬ 
ernment, and departments and agencies of the 
Ontario Government; and the possibility of creating 
bilingual districts within Ontario. It should also be 
noted that a report by this sub-committee formed 
the basis for the establishment last year of a cultural 
and educational exchange program administered by 
the Ontario Department of Education. 

Much of the work of the Committee was gathered 
together in a three-volume collection of studies 
entitled Background Papers and Reports which was 
tabled in the Legislature last spring and which was 
published in a single-volume edition last October. 

The Secretariat 

Following the appointment of the Advisory Com¬ 
mittee, the Federal-Provincial Affairs Secretariat 
was formally established within the Ontario Civil 
Service in 1966 as a branch in the Office of the 
Chief Economist, Department of Economics and 
Development. In December, 1967, that Office be¬ 
came part of the Treasury Department and the Chief 
Economist, Mr. H. I. Macdonald, became Deputy 
Provincial Treasurer (Finance and Economics). He 
remains Chairman of the Advisory Committee and 
the Secretariat will continue to report to him. 

As originally defined, the Secretariat’s role is a 
dual one: it is responsible for initiating studies with¬ 
in the area of federal-provincial affairs, and for 
co-ordinating many of the federal-provincial and 
interprovincial relations of Ontario government 
departments and agencies. 

Within this context, it has developed certain 
specific responsibilities. As the secretariat to the 
Advisory Committee, it prepares the agenda for the 
monthly meetings, undertakes to write the drafts for 
a variety of research projects, and handles requests 
for information. It is also engaged in preparing 
background studies and research papers necessary 
for the consideration of an Ontario position in the 
current discussions on the future of the Canadian 
federal system. In addition, during the recent Con¬ 
federation of Tomorrow Conference, both the 
Advisory Committee and the Secretariat were given 


special responsibility for contacts with other prov¬ 
inces and for the preparation of the Conference 
agenda. The Secretariat also prepared a set of five 
background papers on the main themes of the Con¬ 
ference setting out many of the proposed options for 
reform of the federal system. 

The Secretariat also translates and prepares a 
monthly summary of selected items from the Que- 
bee and French-language press in Canada, and from 
time to time prepares summaries (if necessary, in 
translation) of various books and articles for distri¬ 
bution to the Advisory Committee and within the 
Government. 

The Confederation of Tomorrow Conference 

In a sense, the Confederation of Tomorrow Confer¬ 
ence signalled ‘the end of the beginning’. It climaxed 
two years of study on those problems of Canadian 
federalism especially affecting the Ontario Govern¬ 
ment. At the same time, the Conference opened the 
way for a detailed series of discussions on the goals, 
the structure and the institutions of Canadian 
federalism. 

The aims of the Conference reflected Ontario’s 
own awareness of the need for a thorough reapprai¬ 
sal of Confederation. First, the public nature of the 
Conference was designed to help Canadians be 
more aware of and better understand the complex¬ 
ities of their country. Second, the Conference was 
intended as merely the first of a series of discussions 
on the present problems and future shape of Can¬ 
adian federalism. In line with this latter aim, the 
Conference concluded with the establishment by 
unanimous resolution of a continuing Committee on 
Confederation eomposed of the Premiers of Nova 
Scotia, Quebec, Ontario and Alberta whose function 
it would be: 

... to analyze the proceedings and results of 
the Confederation of Tomorrow Conference 
and explore the subjects and the form for 
future discussion [and to] pay particular 
attention to the problems of constitutional 
change, regional disparities, language prac¬ 
tices and rights. 

Ontario has thus contributed to the continuing 
debate on Confederation. This process, the recent 
publieation of the first volume of the Royal Com¬ 
mission on Bilingualism and Biculturalism, and the 
forthcoming conference called by the Federal 
Government to discuss a wide range of constitutional 
problems have made Canadians everywhere more 
conscious of the need to adapt their federal system 
to the demands of their second century. 


4 


ONTARIO’S DEMAND FOR INDUSTRIAL AND 
AGRICULTURAL MACHINERY TO 1976 

Robert H. Frank 

Chief, Industry Studies Section, Applied Economics Branch 
Office of the Chief Economist 


INTRODUCTION 

This study' represents a preliminary analysis of the 
structure and the potential long-term prospects for 
the machinery industry in Canada and Ontario. 
It is based largely on statistical data and tabula¬ 
tions relating to domestic production, the trading 
position, and domestic demand for industrial and 
agricultural machinery, with emphasis on recent 
economic trends and developments. 

The first section provides a brief survey of the 
industry’s historical development with special refer¬ 
ence to the Ontario scene. Subsequent sections 
examine in detail the structure of the Canadian and 
Ontario markets for farm and industrial machinery. 

To assess the actual and potential size of the 
Ontario market and its degree of dependence on 
foreign supply, statistically estimated time series of 
provincial imports and exports of machinery have 
been derived from available national data using 
statistically consistent and optimally unbiased allo¬ 
cators as a basis for the estimating procedure." 

The final section of the report provides long-term 
projections of demand for machinery in Canada and 
Ontario to 1976. Forecasts at the national level are 
consistent with the recent macro-economic projec¬ 
tions by the Economic Council of Canada while the 
provincial estimates largely reflect recent trends and 
anticipated structural changes in Ontario’s economy. 

HISTORICAL BACKGROUND 

Development of the Farm Machinery Industry 

During the first half of the nineteenth century small 
companies gradually emerged which were to replace 
local blacksmith shops as the major producers of 
agricultural implements in Canada. However, the 
further evolution from small scale to factory-based 
manufacturing operations was impeded by the frag¬ 
mentation and small size of the Canadian market. 

A relatively small Canadian market, scarce capital, 
and a lack of research facilities limited the industry’s 
ability to pioneer innovations in Canada, making it 
almost entirely dependent on the United States for 
technical guidance and the development of new 
products. Yet in spite of the advantages enjoyed by 
the United States industry, almost no imports of 


farm machinery entered Canada until about 1875. 
Several factors were responsible for this: the almost 
totally insignificant size of the Canadian market; the 
lack of adequate transportation facilities between 
the two countries; the still elementary nature of the 
implements themselves; the need for local repair 
and servicing facilities; and the lower cost in Can¬ 
ada of labour and certain materials. In addition the 
protection of the 10 per cent tariff established in 
1847 further discouraged imports, leaving the Ca¬ 
nadian farm implements industry to develop — par¬ 
tially under licensing agreements with American 
firms — almost free from competition. 

The 1861 census shows 46 companies, with com¬ 
bined annual sales of $413,000, engaged primarily 
in the manufacture of agricultural implements. De¬ 
velopment of the industry up to this date was sig¬ 
nificantly aided by the expansion of the market for 
North American grain in the early nineteenth cen¬ 
tury. From 1861 to 1871 the Canadian industry grew 
very rapidly, and by the end of this period there 
were 252 companies in existence with total sales of 
$2,685,000. The appreciable increase in output was 
generated by factors as diverse as the disruptive 
effects of the Civil War on the American economy, 
the relatively high price of wheat and the compara¬ 
tive shortage of farm labour in that period. The 
growing popularity of harvesting machinery was 
important too; by eliminating the slowness of reap¬ 
ing and binding grain by hand, this machinery in¬ 
creased the number of acres a farmer could effec¬ 
tively cultivate. 

From its inception the industry exhibited a clear 
tendency to concentrate in Ontario. In 1871, Ontario 
accounted for output of farm machinery valued at 
$2,292,000, about 85 per cent of the Canadian total.* 
In the last quarter of the nineteenth century the 

’The author acknowledges with appreciation the contribution 
of Mrs. O. 1. Mico and Mrs. P. S. Fromstein, economists with 
the Applied Economics Branch, in assisting with the pre¬ 
liminary research and preparing the statistical tabulations for 
this project. 

"The recent DBS compilation of Ontario exports for 1965, 
though not fully comparable in commodity and time cover¬ 
age, appears to be essentially in agreement with these esti¬ 
mates. 

Tn recent years, about 90 per cent of Canada’s output of 
agricultural machinery has been produced in Ontario. 


5 



Canadian industry gradually concentrated in the 
southern part of the province, remaining there since 
that time. 

Canadian production of agricultural machinery 
continued to increase rapidly between 1875 and 
1929. The key factor in this period was undoubtedly 
the great development of the western wheat econ¬ 
omy, itself made possible by a substantial increase 
in the use of machinery in farming operations. 


CANADIAN MARKET FOR FARM 
MACHINERY, SELECTED YEARS, 1881-1929 

($ Million) 



Domestic 

Production 

Imports 

Ex])orts 

Domestic 

Demand 

1881 

4.4 

0.2 

_ 

4.6 

1891 

7.5 

0.2 

0.3 

7.4 

1901 

9.6 

1.9 

1.7 

9.8 

1910 

20.7 

5.1 

4.3 

21.5 

1920 

50.3 

23.1 

12.2 

61.2 

1925 

24.8 

11.2 

12.4 

23.6 

1929 

40.7 

31.8 

20.1 

52.4 


The industry’s expansion was facilitated, at least 
in the earlier part of this period, by tariff protection. 
As part of the National Policy, the import duty on 
agricultural machinery was raised from the level of 
ITVz per cent imposed in 1874 to 25 per cent in 1879, 
and then to 35 per cent in 1883. In 1894, the tariff 
was lowered to 20 per cent, a level which probably 
still gave a significant amount of protection to the 
Canadian industry. Thereafter the tariff was reduced 
a number of times until, by 1922, the rates on most 
items of agricultural machinery ranged from six to 
IVz per cent. They remained at this level until 1930. 

It was during the 1875-1929 period that the major 
large-scale farm machinery companies in Canada 
developed. In both Canada and the United States a 
number of mergers took place, with the result that 
“full-line” companies emerged, producing both seed¬ 
ing and harvesting machinery. By far the most 
important of these amalgamations in Canada was 
between the Massey Manufacturing Company and 
A. Harris, Son and Company, subsequently involv¬ 
ing the takeover of a number of smaller firms. The 
Cockshutt Plow Company also expanded in this 
period and in 1909 acquired an interest in the Frost 
and Wood Company, a producer of harvesting 
machinery. Largely because of the 20 per cent tariff 
prevailing at that time, the International Harvester 
Company established a fully-owned subsidiary plant 
in Hainilton, Ontario. By 1914, Canadian farm ma¬ 


chinery production was mainly in the hands of these 
three large and diversified firms located in Ontario. 

Despite existing tariff protection, imports of agri¬ 
cultural machinery grew appreciably during this 
period. Partially offsetting the tariff protection was 
the freight rate advantage that the American indus¬ 
try, located west of Chicago, enjoyed on shipments 
to western Canada. Not until 1919 were freight rates 
from eastern Canada made competitive. Also, the 
fact that the Canadian season for selling agricultural 
machinery came after that in the United States led 
American producers to sell surplus machinery in 
Canada at low prices rather than carry over to the 
next year. 

The development of tractors, the vast majority of 
which were (and still are) manufactured in the 
United States, gave further impetus to the growth 
of imports as Canadian firms found it difficult to sell 
farm implements without an accompanying line of 
tractors. Thus, Massey-Harris purchased the J. I. 
Case Plow Company of Wisconsin and thereafter 
used its facilities for production of tractors for both 
the American and Canadian markets. In order to 
compete in the domestic market, Cockshutt arranged 
to import tractors made by the American firm of 
Allis-Chalmers. 

Canadian exports of farm machinery, largely to 
Europe, Commonwealth countries and South 
America, also increased rapidly between 1875 and 
1929. After 1913, when the United States tariff on 
imported agricultural machinery was discontinued, 
Canadian firms began to supply a portion of the 
American market. However, exports to the United 
States remained a relatively small sector of total 
Canadian exports until after the second world war. 

The depression of the 1930’s along with severe 
drought conditions in western Canada resulted in a 
sharp decline in output of farm machineiy in Can¬ 
ada. Between 1928 and 1933, production decreased 
by about 88 per cent, a far more serious contraction 
than occurred in comparable industries such as pri¬ 
mary iron and steel, motor vehicles and industrial 
machinery. Canadian exports of farm machinery de¬ 
clined from $20 million in 1929 to $1.5 million in 
1933 as other countries introduced quotas and higher 
tariffs to protect their own industries and retaliate 
against restrictions imposed on their exports. 

The recovery of the industry in the latter half of 
the 1930’s was relatively slow and incomplete; by 
1939 total output had risen only to about 50 per cent 
of its 1929 level. However, by the end of World 
War H, the farm machinery industry was in a rela¬ 
tively stronger position than in 1939. The effect of 


6 





restrictions on the production of agricultural ma¬ 
chinery imposed during the war was more than 
offset by government contracts which allowed the 
industry to make such improvements as extending 
manufacturing facilities and rehabilitating plants 
and equipment. Thus the industry was quite well- 
equipped to handle the heavy demand of the 
post-war period, a demand due not only to the post¬ 
ponement of purchases during wartime but also to 
post-war high wages, inflationary trends, scarcity of 
labour, and rising world demand for North American 
agricultural products. 

The removal of the Canadian tariff on agricultural 
machinery in 1944 created free trade conditions be¬ 
tween Canada and the United States. As a result, 
companies with plants on both sides of the border 
proceeded to integrate their production facilities. 
These structural changes, together with the develop¬ 
ment of the self-propelled combine in Canada, led 
to a substantial increase in Canadian exports to the 
United States: in the peak year 1952, over 80 per 
cent of Canada’s $105.4 million of exports were 
shipped to the United States. 

During the early post-war period there were great 
gains in Canadian production. In 1952 the value of 
agricultural machinery produced reached $194.7 
million. However, in the next few years production 
fell off substantially, and by 1954 it was valued at 
only $113.1 million. 

Throughout this entire period the value of imports 
continued to exceed the value of domestic 
production. 

CANADIAN PRODUCTION AND IMPORTS 
OF FARM MACHINERY, 
SELECTED YEARS, 1939-1954 
($ Million) 



Domestic Production 

Imports 

1939 

16.0 

20.9 

1946 

54.0 

68.4 

1949 

169.6 

177.2 

1952 

194.7 

197.3 

1953 

159.9 

209.1 

1954 

113.1 

143.2 


Development of the Industrial Machinery Industry 

In the earlier part of the nineteenth century Can¬ 
ada’s industrial development was such that the non- 
agricultural equipment required consisted essentially 
of hand tools largely manufactured in blacksmith 
shops serving small local markets. However, as the 
demand for relatively more eomplex tools and ma¬ 


chinery grew, small loeal companies in the towns 
and cities emerged as focal points for the production 
of industrial machinery and equipment in Canada. 

During this early period imports of machinery had 
to supplement domestie production to meet the 
needs of the Canadian market. It is estimated that at 
the time of Confederation, the major portion of the 
machinery sold in Canada was imported. 

Domestie production grew significantly in the 
later years of the nineteenth century and the early 
part of the twentieth century. As the Canadian 
economy expanded, more and more complex and 
sophisticated machinery was required. Companies 
producing industrial machinery tended to grow in 
size and to concentrate in larger urban centres close 
to the industries they served. As a result in this 
period southern Ontario gradually assumed a lead¬ 
ing position in the produetion of industrial 
machinery. 

The industry suffered a major setback with the fall 
of capital expenditure during the depression of the 
1930’s. Between 1928 and 1933, production de¬ 
creased by about 64 per cent. However this was not 
as severe as the decline experienced in such related 
industries as agricultural machinery, primary iron 
and steel, and motor vehicles. The industry had not 
yet completely recovered when World War H broke 
out, the 1939 value of production being approxi¬ 
mately one-third lower than the level registered in 
1929. 

During the war production increased greatly as 
Canadian industrial machinery was used to help 
meet the requirements for military equipment. Cana¬ 
dian industries had to undergo major re-tooling, thus 
ereating a heavy demand for industrial machinery 
and equipment. Between 1939 and 1949 output in¬ 
creased at an average annual rate of about 9.6 per 
cent, reaching $153.3 million by 1949. 

Domestic production increased at an even more 
rapid rate between 1949 and 1952. Output of indus¬ 
trial machinery grew at an average annual rate of 
18.2 per cent over the three-year period, reaching 
$251.6 million in 1952. In 1953 and 1954 the industry 
suffered a slight decline, but recovered in 1955. 

In spite of the large gains in production in the 
post-war period, imports increased in significance, 
satisfying between 61 per eent and 67 per cent of 
domestic demand during the period 1949 to 1853. 
About 87 per cent of the foreign supply came from 
the United States with most of the remainder origi¬ 
nating in the United Kingdom. It is not surpris ng 
that a large volume of imports has come from coun¬ 
tries whieh, mainly because of their relatively large 


7 





CANADIAN MARKET FOR INDUSTRIAL MACHINERY 

1949-1953 



Domestic 

Production 

Imports 

Exports 

Domestic 

Demand 

Imports as % 
of Domestic 
Demand 

Exports as % 
of Domestic 
Production 


($ Million) 



% 


1949 

153.3 

234.5 

20.8 

367.0 

64 

14 

1950 

165.9 

235.9 

14.2 

387.6 

61 

9 

1951 

216.8 

364.1 

25.3 

555.6 

66 

12 

1952 

251.6 

404.3 

30.9 

625.0 

65 

12 

1953 

248.5 

432.5 

32.9 

648.1 

67 

13 


domestic markets, can take advantage of the lower 
costs associated with mass production. 

In contrast to the high level of imports, exports 
accounted on average for only about 13.5 per cent 
of production in both the 1935-1939 and 1949-1954 
periods. This relatively low volume of exports can 
be explained largely by the difficulty the Canadian 
industry has had — as a high-cost producer with a 
small home market — in competing with such high- 
volume countries as the United States, the United 
Kingdom and West Cermany. 

In 1953 there were 325 firms in Canada primarily 
engaged in the production of industrial machinery 
of which 13 were producers of machine tools. 
Ontario and Quebec together accounted for 256 of 
these firms. Ontario’s 196 industrial machinery pro¬ 
ducers accounted for about 60 per cent of the indus¬ 
try’s total number of production units in Canada. In 
terms of gross value of production, three Ontario 
cities —Toronto, Hamilton and Windsor —accounted 
for over 46 per cent of total Canadian output. 

The industry in both Canada and Ontario has 
been characterized by a preponderance of small 
companies. In both cases about two tliirds of all 
firms employ less than 50 persons, and over 80 per 


cent employ less than 100. Small firms have been 
able to operate efficiently because of the custom 
nature of many of the products, the relatively small 
size of the domestic market, and their ability to pro¬ 
vide local installation and servicing. 

Much of the machinery produced in Canada has 
been custom-built to the needs of individual custom¬ 
ers. There is some tendency for the Toronto and 
southern Ontario region to specialize in the lighter 
type of machinery and equipment such as materials 
handling equipment, elevators, roller bearings, trans¬ 
mission machinery, woodworking machinery, chem¬ 
ical equipment and baking machinery. 

THE MARKET FOR MACHINERY 

Farm Machinery: the Canadian Market 

During the period 1957 to 1964 Canadian produc¬ 
tion of farm machinery increased from $118 million 
to $244 million, an average annual growth rate of 
approximately 10.9 per cent. Although any compari¬ 
sons between 1957 and 1964 must be qualified since 
these two years represent very different phases of 
the business cycle, it is probable that this very high 
rate of growth represents a significant upward secu¬ 
lar trend in domestic production of farm machinery. 


CANADIAN MARKET FOR FARM MACHINERY 

1957-1964 


Year 

Canadian 
Production 
of Farm 
Machinery 

Imports 

Exports 

Domestic 

Demand 

Imports as % 
of Domestic 
Demand 

Exports as % 
of Canadian 
Production 


($ Million) 


% 

1957 

118.0 

202.8 

71.6 

249.2 

81.4 

60.7 

1958 

129.2 

198.0 

101.3 

225.9 

87.7 

78.4 

1959 

166.2 

273.6 

122.4 

317.4 

86.2 

73.6 

1960 

152.1 

229.2 

89.4 

291.9 

78.5 

58.8 

1961 

139.0 

231.6 

85.2 

285.4 

81.2 

61.3 

1962 

140.8 

253.2 

91.2 

302.8 

83.6 

64.8 

1963 

182.8 

324.0 

114.0 

392.8 

82.5 

62.4 

1964 

244.0 

372.0 

140.4 

475.6 

78.2 

57.5 


8 













Imports of farm machinery into Canada in every 
year of this period were much larger in value than 
domestic production of similar machinery. Although 
imports fluctuated considerably until 1961, they 
tended to increase over the period as a whole. Be¬ 
tween 1957 and 1964, the value of farm machinery 
imports grew from $203 million to $372 million, an 
average annual increase of 9.0 per cent. 

During the same period Canadian exports of farm 
machinery virtually doubled, rising from $71.6 mil¬ 
lion in 1957 to $140.4 million in 1964. By far the 
largest growth occurred in the years 1963 and 1964, 
reflecting largely the beneficial efiFects of the devalu¬ 
ation of the Canadian dollar in 1962. When viewed 
in relation to domestic production, the value of 
exports was quite significant throughout the period, 
ranging from a low of 57.5 per cent to a high of 78.4 
per cent. 

Domestic demand for farm machinery, amounting 
to $249.2 million in 1957, fluctuated around its up¬ 
ward secular trend, declining sharply in 1958 and 
again in 1960 and 1961. This cyclical pattern re¬ 
flected the trend of farm income to a considerable 
degree. However, by 1964 the value of domestic 
demand had reached a new peak of $475.6 million, 
bringing the average annual rate of growth from 
1957 to 1964 up to 9.7 per cent. 

Given the level of Canadian exports, a comparison 
of imports and domestic demand provides an indi¬ 
cation of the importance of foreign sources of sup¬ 
ply. Throughout the 1957 to 1964 period, imports on 
average accounted for about 82 per cent of domestic 
requirements, and ranged as high as 88 per cent. It 
is probable that the existence of free trade in agri¬ 
cultural machinery between Canada and the United 
States and the resultant integration of production 


facilities in the two countries have been the major 
cause of Canada’s heavy dependence on imports. 
In spite of the very large increase in domestic pro¬ 
duction which took place over this period, there is 
very little evidence of a trend toward progressive 
import replacement. 

Farm Machinery: the Ontario Market 

Ontario’s output of farm machinery constitutes an 
extremely large part of total Canadian production. 
In the years 1957 to 1964, an average of about 88 
per cent of all farm machinery produced in Canada 
was manufactured in Ontario, although this propor¬ 
tion has been declining since 1959. 

Despite a period of temporary decline between 
1959 and 1962, production of agricultural machinery 
in Ontario increased from $106.7 million in 1957 to 
$201.7 million in 1964, an average rate of growth of 
9.5 per cent each year. 

Unlike the situation prevailing in Canada as a 
whole, imports into Ontario were in each year sub¬ 
stantially less than the value of the province’s own 
production. Between 1957 and 1964 the value of 
imports generally increased, but at a rate signifi¬ 
cantly below that for the whole of Canada. 

Between 1957 and 1964 the value of exports from 
Ontario increased at an annual rate of 8.7 per cent, 
rising from $64.7 million to $116.1 million. Through¬ 
out the period exports accounted for a substantial 
proportion — an average of 64.7 per cent — of On¬ 
tario’s output. 

The available total supply of farm machinery in 
Ontario has been calculated by adding local produc¬ 
tion in Ontario and imports into the province, sub¬ 
tracting exports and net interprovincial shipments 
from Ontario. While it was not possible to determine 



ESTIMATED ONTARIO 

MARKET FOR FARM 
1957-1964 

MACHINERY 


Year 

Ontario 
Prodnction 
of Farm 
Machinery 

Imports 
into Ontario 

Exports 
from Ontario 

Available 

Supply 

Flow to (—) 
and from (-\-) 
Other Provinces 

Estimated 
Demand 
in Ontario 

Imports 
as % of 
Available 
Supply 

Exports 
as % of 
Production 




($ Million) 




% 

1957 

106.7 

50.9 

64.7 

92.9 

—30.4 

62.5 

54.8 

60.6 

1958 

118.7 

48.1 

93.1 

73.7 

-18.8 

54.9 

65.3 

78.4 

1959 

153.6 

63.7 

113.1 

104.2 

—30.2 

74.0 

61.1 

73,6 

1960 

137.4 

51.6 

80.7 

108.3 

-42.6 

65.7 

47.6 

58.7 

1961 

124.2 

57.7 

76.2 

105.7 

—34.6 

71.1 

54.6 

61.4 

1962 

119.5 

54.2 

77.4 

96.3 

-31.5 

64.8 

56.3 

64. S 

1963 

152.8 

67.4 

95.3 

124.9 

-43.2 

81.7 

54.0 

62.4 

1964 

201.7 

79.2 

116.1 

164.8 

-63.5 

101.3 

48.] 

57.8 


9 







the flow of farm machinery between Ontario and the 
rest of Canada directly from published statistics, the 
net flow was obtained by deducting effective de¬ 
mand for new farm machinery in Ontario from the 
available total supply. Demand for farm machinery 
in Ontario was estimated on the basis of adjusted 
data on sales of agricultural machinery in Ontario. 
During the period under review there was a net out¬ 
flow from Ontario which, on average, amounted 
to about 33.0 per cent of the available supply. 

Although consumption in Ontario generally fluc¬ 
tuated considerably from year to year over the 
period, there was a very substantial net increase, 
with the result that demand for farm machinery 
rose from $62.5 million in 1957 to $101.3 million in 
1964. The rapid increase in recent years has been 
indicative of the expansion of the economy and a 
steadily rising farm income, resulting in accelerated 
mechanization of farming operations in Ontario. 

Despite the fact that a very large proportion of 
Canadian production of agricultural machinery has 
originated in Ontario, consumption in Ontario 
has amounted to only one fifth to one quarter of total 
Canadian demand, a reflection of the fact that the 
industry is located mainly in southern Ontario 
and its markets primarily in western Canada. 

Industrial Machinery: the Canadian Market 

During the period 1957-1964 the volume of indus¬ 
trial machinery produced in Canada was consider¬ 
ably larger than that of agricultural machinery. In 
value terms, output in this industry was about three 
and one half times as large. 

Canadian production of industrial machinery 
experienced considerable growth during this period. 
After declining in 1958 due to reduced capital ex¬ 
penditures associated with the general business 


recession, the value of production grew steadily, 
reaching $833.7 million in 1964 — an average annual 
rate of increase of 8.2 per cent for the entire period. 
Growth accelerated appreciably after 1961 as the 
economy started on a long upswing which encour¬ 
aged investment spending. In the three years be¬ 
tween 1961 and 1964, an average rate of growth of 
17.0 per cent each year was registered. 

Canadian exports of industrial machinery in¬ 
creased an average of 13.5 per cent each year over 
the period, rising from $56.6 million in 1957 to 
$137.1 million in 1964. As a percentage of produc¬ 
tion, these exports climbed from 12 per cent in 1957 
to over 16 per cent in 1964. In comparison to exports 
of agricultural machinery, however, this export/pro¬ 
duction ratio was still relatively small. The compara¬ 
tively low volume of exports reflects the existence of 
significant tariff protection in other industrialized 
nations and, more particularly, Canada’s inability to 
compete effectively with high volume producers 
such as the United States, West Germany and Great 
Britain. 

Domestic demand for industrial machinery fluc¬ 
tuated in the first part of the period but increased 
steadily after 1960, reaching $1,742.7 million by 
1964. As a result, the average annual rate of growth 
from 1960 to 1964 was 13.2 per cent, considerably 
higher than the average annual rate of 6.3 per cent 
over the 1957-1964 period. Still, the major part of 
domestic demand — on average 60.9 per cent — was 
satisfied by imports from abroad. 

Industrial Machinery: the Ontario Market 

Ontario production of industrial machinery consti¬ 
tutes an important part of total Canadian produc¬ 
tion, accounting for about 70 per cent of the 
Canadian total. 


CANADIAN MARKET FOR INDUSTRIAL MACHINERY 

1957-1964 


Year 

Canadian 
Production 
of Industrial 
Machinery 

Imports 

Exports 

Domestic 

Demand 

Imports as % 
of Domestic 
Demand 

Exports as % 
of Canadian 
Production 


($ Million) 


% 

1957 

478.5 

719.6 

56.6 

1,141.5 

63.0 

11.8 

1958 

415.6 

602.4 

45.6 

972.4 

61.9 

11.0 

1959 

447.8 

669.7 

52.6 

1,064.9 

62.9 

11.7 

1960 

485.5 

648.4 

73.3 

1,060.7 

61.1 

15.1 

1961 

519.3 

678.6 

69.1 

1,128.8 

60.1 

13.3 

1962 

608.8 

790.8 

87.4 

1,312.2 

60.3 

14.4 

1963 

701.3 

821.8 

106.7 

1,416.4 

58.0 

15.2 

1964 

833.7 

1,046.1 

137.1 

1,742.7 

60.0 

16.4 


10 







ESTIMATED ONTARIO MARKET FOR INDUSTRIAL MACHINERY 

1957-1964 


Year 

Ontario 
Production 
of Industrial 
Machinery 

Imports 
into Ontario 

Exports 
from Ontario 

Available 

Supply 

Flotv to (—) 
and from (-\-) 
Other Provinces 

Estimated 
Demand 
in Ontario 

Imports 
as % of 
Available 
Supply 

Exports 
as % of 
Production 




($ Million) 



% 

1957 

316.3 

362.7 

37.4 

641.6 

— 66.3 

575.3 

56.5 

11.8 

1958 

294.3 

297.6 

32.3 

559.6 

- 79.3 

480.3 

53.2 

11.0 

1959 

317.1 

335.5 

37.2 

615.4 

- 81.9 

533.5 

54.5 

11.7 

1960 

339.4 

319.7 

51.2 

607.9 

- 85.0 

522.9 

52.6 

15.1 

1961 

376.9 

334.5 

50.2 

661.2 

-104.7 

556.5 

50.6 

13.3 

1962 

443.1 

396.2 

63.6 

775.7 

-118.3 

657.4 

51.1 

14.4 

1963 

494.8 

418.3 

75.3 

837.8 

-116.9 

720.9 

50.0 

15.2 

1964 

557.2 

536.6 

91.6 

1,002.2 

-108.2 

894.0 

53.5 

16.4 


Except for a temporary setback in 1958, when the 
effects of the recession were being felt, production 
of industrial machinery in Ontario grew steadily 
from 1957 to 1964. Produetion increased an average 
of 8.4 per cent eaeh year, from $316.3 million in 
1957 to $557.2 million in 1964; in the five-year period 
from 1959 to 1964 the average annual rate of growth 
was 12.0 per cent. 

The value of imports increased over the period as 
a whole but to a somewhat smaller extent than 
domestic production. As a result imports as a 
percentage of the available supply of industrial 
maehinery in Ontario tended to decline slightly. 

Ontario exports of industrial machinery increased 
at an average rate of 13.6 per cent each year, reach¬ 
ing a value of $91.6 million in 1964. Growth in the 
value of exports was especially rapid toward the end 
of this period when an annual rate of growth of 22.1 
per cent was attained. However, it is likely that 
much of the accelerated growth was the result of the 
United States’ need to supplement its own produc¬ 
tive capacity in the face of a continuous and vigorous 
business expansion. To the extent that this was the 
ease, the large increase in the volume of exports 
could not be expected to be sustained very much 
longer. 

The supply of industrial machinery available to 
Ontario — consisting of local production plus im¬ 
ports less exports — fluctuated eonsiderably in the 
earlier part of the period. From 1960 on, however, 
the available supply increased significantly and in 
1964, its value exceeded $1 billion, $36 million above 
the 1957 value. This increase was relatively smaller 


than that in provincial production because of both 
the relatively slower growth in the value of imports 
and the very large relative increase in the value of 
industrial maehinery exports. 

During the eight-year period there was a con¬ 
sistent net outflow from Ontario to the rest of 
Canada; this reached a peak value of $118.3 million 
in 1962 and gradually deelined thereafter. This out¬ 
flow on average corresponded to about 13.5 per 
cent of the available supply, relatively much smaller 
than the net outflow of agricultural machinery from 
Ontario. 

After fluetuating irregularly in the late 1950’s, de¬ 
mand for industrial machinery in Ontario grew 
steadily in the new decade, averaging close to 17 
per cent in the last three years. During the entire 
1957-1964 period, Ontario’s demand for industrial 
machinery was a fairly constant proportion of total 
Canadian demand, ranging from about 49 per cent 
to 51 per cent. Actual sales reached $894 million by 
1964. 

Review of the Canadian Market 
for Machinery: 1957-1964 

During the years 1957 to 1964, output of both 
farm and industrial machinery increased from $596.5 
million to over $1 billion. While growth in the first 
half of this period was quite modest, the aceeleration 
between 1961 and 1964 — producing an average an¬ 
nual gain of 17.9 per cent in these years — gave rise 
to an annual growth rate of 8.8 per cent over the 
whole period. 


11 







CANADIAN MARKET FOR MACHINERY (FARM AND INDUSTRIAL) 

1957-1964 


Year 

Canadian 
Production 
of Farm and 
Industrial 
Machinery 

Imports 

Exports 

Domestic 

Demand 

Imports as % 
of Domestic 
Demand 

Exports as % 
of Canadian 
Production 


($ Million) 



% 

1957 

596.5 

922.4 

128.2 

1,390.7 

66.3 

21.5 

1958 

544.8 

800.4 

146.9 

1,198.3 

66.8 

27.0 

1959 

614.0 

943.3 

175.0 

1,382.3 

68.2 

28.5 

1960 

637.7 

877.6 

162.7 

1,352.6 

64.9 

25.5 

1961 

658.3 

910.2 

154.3 

1,414.2 

64.4 

23.4 

1962 

749.6 

1,044.0 

178.6 

1,615.0 

64.6 

23.8 

1963 

884.1 

1,145.8 

220.7 

1,809.2 

63.3 

25.0 

1964 

1,077.7 

1,418.1 

277.5 

2,218.3 

63.9 

25.8 


Wliile total imports of machinery fluctuated con¬ 
siderably between 1957 and 1961, they increased 
consistently thereafter, resulting in an average annual 
rate of growth of 6.3 per cent. During this entire 
period imports were appreciably in excess of domes¬ 
tic production, and were meeting some 65 per cent 
of the domestic demand. 

Exports of farm and industrial machinery tended 
to increase over the period, climbing from $128.2 
million in 1957 to $277.5 million in 1964. During the 
last year exports accounted for about 25.8 per cent 
of total Canadian production, higher than in 1957 
but below the 28.5 per cent peak for the period 
registered in 1959. 

Total Canadian demand for machinery increased 
from $1.4 billion in 1957 to $2.2 billion in 1964, an 
average growth rate of 6.9 per cent each year. How¬ 
ever the actual rate of growth varied considerably 
between single years: demand declined by about 
14 per cent between 1957 and 1958, then partially 
recovered in 1959, only to decline slightly again the 
next year. Thereafter domestic demand rose rapidly, 
the rate of increase each year between 1960 and 
1964 averaging about 13.2 per cent. 

Review of the Ontario Market 
for Machinery: 1957-1964 

Production of farm and industrial machinery in 
Ontario followed virtually the same pattern as total 
Canadian production, not surprising in view of the 
fact that Ontario’s output accounted for about three 


quarters of the national total. Ontario’s average in¬ 
crease was 8.7 per cent each year. 

Unlike the situation for Canada as a whole, 
Ontaiio’s imports of machinery were lower than its 
production each year. The value of imports fluc¬ 
tuated considerably up to 1960 but increased steadily 
after that. In 1964 the value of Ontario’s machinery 
imports reached $615.8 million, an annual growth 
of about 5.9 per cent. 

Ontario’s exports of machinery increased appre¬ 
ciably from 1957, reaching $207.7 million in 1964. 
As a proportion of production, export shipments 
ranged from one quarter to about one third. 

Total supply of farm and industrial machinery 
available in Ontario increased over the 1957 to 1964 
period at an annual rate of about 6.8 per cent, with 
growth accelerating appreciably after 1961. Between 
1961 and 1964, total supply grew at an average 
annual rate of about 15.0 per cent. Throughout the 
period over 50 per cent of this supply was accounted 
for by imports. 

In every single year there was a net outflow of 
machinery from Ontario to the rest of Canada. This 
outflow increased considerably over the period, but 
was nevertheless still relatively small in relation to 
available supply. 

Demand for machinery in Ontario remained at a 
high level each year, representing on average about 
83.9 per cent of the total supply and reflecting an 
average yearly growth rate of about 6.6 per cent. 


12 







ESTIMATED ONTARIO MARKET FOR MACHINERY (FARM AND INDUSTRIAL) 

1957-1964 


Year 

Ontario 

Froduction 

of 

Machinery 

Imports 
into Ontario 

Exports 
from Ontario 

Available 

Supply 

Flow to (—) 
and from (-\-) 
Other Provinces 

Estimated 
Demand 
in Ontario 

Imports 
as % of 
Available 
Supply 

Exports 
as % of 
Production 




($ Million) 




% 

1957 

423.0 

413.6 

102.1 

734.5 

— 96.7 

637.8 

56.3 

24.1 

1958 

413.0 

345.7 

125.4 

633.3 

— 98.1 

535.2 

54.6 

30.4 

1959 

470.7 

399.2 

150.3 

719.6 

-112.1 

607.5 

55.5 

31.9 

1960 

476.8 

371.3 

131.9 

716.2 

—127.6 

588.6 

51.8 

27.7 

1961 

501.1 

392.2 

126.4 

766.9 

—139.3 

627.6 

51.1 

25.2 

1962 

562.6 

450.4 

141.0 

872.0 

—149.8 

722.2 

51.7 

25.1 

1963 

647.6 

485.7 

170.6 

962.7 

—160.1 

802.6 

50.5 

26.3 

1964 

758.9 

615.8 

207.7 

1,167.0 

—171.7 

995.3 

52.9 

27.4 


LONG-TERM FORECASTS OF 
MARKET DEMAND 

Projection of Canadian Market Demand 
for Machinery to 1976 

To project demand for farm and industrial 
machinery, some conclusion must be reached con¬ 
cerning the determinants of investment spending. 
Since a very large proportion of purchases of 
machinery is financed out of internal funds and 
capital consumption allowances, it is likely that, in 
the period to 1976, the level of interest rates and the 
availability of credit will in general have little res¬ 
trictive influence on capital expenditure decisions. 
Indications are that the forecast period will be 
characterized by conditions of relatively full em¬ 
ployment and fairly rapid economic growth. Under 
these circumstances, it is likely that a large part of 
business investment will be primarily in direct res¬ 
ponse to expanding demand. However, the need for 
capital replacement will continue to be an important 
determinant. Although a number of other factors 
such as changes in technology and government 
policies will undoubtedly affect business investment 
decisions, growing market opportunities and re¬ 
placement needs will have a preponderant influence 
during the forecast period. 

Projections of total Canadian output in terms of 
Gross National Expenditure valued in constant 1957 
dollars were made. The forecast to 1970 is in line 
with that of the Economic Council of Canada which 
suggested that, in order to reach its potential level 
by 1970, actual Canadian output would have to 
grow at a rate of 5.5 per cent per annum over its 
1963 value. The projection to 1976 assumes that 
between 1970 and 1976 output would grow five per 
cent per year. On this basis, it is estimated that total 


output will be in the vicinity of $57 billion in 1970 
(in constant 1957 dollars) and approach $77 billion 
by 1976. 

An attempt was made at forecasting the market 
demand for farm and industrial machinery using 
historical capital-output ratios. This method, 
although theoretically sound, proved unworkable 
because of the unreliability and deficiencies of esti¬ 
mates of the stock of machinery and equipment in 
existence and the problems associated with the 
determination of the rate of depreciation. Conse¬ 
quently, two other methods, based on a more prag¬ 
matic approach, have been used to by-pass existing 
statistical data deficiencies. 

The first of these involves the application of 
incremental ratios of annual investment in new 
machinery and equipment to total output. This 
method obviates the need for estimates of the size 
of the capital stock and for any explicit assumptions 
regarding the rates of depreciation applicable to the 
various components of the stock. The magnitude of 
the ratio can be influenced by a number of factors 
whose effects are difficult to quantify; for example, 
the age of the capital stock, changes in technology, 
the extent to which the economy’s productive capa¬ 
city is effectively used, and the relative prices of 
labour and capital. However, adjusting available 
time series for anticipated structural changes, it has 
been estimated that during the forecast period the 
ratio will be about 1.6, a value slightly larger than 
has been the case in recent years but lower than the 
post-war average. 

In order to arrive at a more detailed sectoral fore¬ 
cast, it has been necessary to estimate the proportion 
of expenditure on new machinery and equipment in 
the forecast period attributable to purchases of farm 
and industrial machinery. In the years 1957 to 1964, 


13 







market demand for farm and industrial machinery 
averaged about 56 per cent of total business expen¬ 
diture on new machinery and equipment with the 
percentage rising each year except for 1960. On the 
basis of this upward trend, it is concluded that 
between 1964 and 1976 the percentage will likely 
be somewhat higher than the average level between 
1957 and 1964 and might perhaps be about 60 per 
cent. 

The second method used is based on a detailed 
analysis of the statistical relationship between the 
rates of growth of GNE and the market demand for 
machinery. This indicates that, subject to trend 
adjustment, only a moderate structural change is to 
be anticipated. 

Both approaches yield very much the same results 
for 1970. Each suggests that in 1970 the combined 
market demand for farm and industrial machinery 
will amount to about $2.9 billion in constant 1957 
dollars, equivalent to an average annual rate of 
growth of 6.5 to 6.8 per cent in the 1964 to 1970 
period.^ 

For 1976, however, the two approaches used pro¬ 
duce quite different results. The incremental capital- 
output ratio method suggests a significant decline in 
the rate of growth of expenditure on farm and in¬ 
dustrial machinery after 1970. The other approach 


implies a rate of growth of about 6.4 per cent each 
year, just slightly lower than that between 1964 and 
1970. The two estimates of the value of expenditure 
in 1976 range from about $3.3 billion to $4.2 billion. 

Historically, the rate of growth of expenditure on 
farm and industrial machinery has fluctuated much 
more widely than the rate of growth of total output. 
Consequently, it is expected that in the years 1970 
to 1976, as the rate of growth of GNE declines from 
5.5 per cent to 5.0 per cent, the rate of growth of 
expenditure on farm and industrial machinery will 
fall to a greater extent. Thus the estimates derived 
by our second method, implicitly assuming fluctua¬ 
tions of equal degree in both rates, will probably 
prove too large. The growth path of market demand 
for farm and industrial machinery between 1970 and 
1976 derived from our first estimating procedure 
would therefore seem to be more realistic and reli¬ 
able. 

In the years 1957 to 1964, market demand for farm 
machinery as a percentage of total demand for ma- 

^It should be noted that tliese estimates are consistent with 
the projection of the Economic Cormcil of Canada. These 
forecasts imply a growth rate for total business expenditure 
on new machinery and equipment of approximately 9.1 per 
cent between 1963 and 1970, whereas tire Economic Council 
projects the rate of growth at about 9.6 per cent for the same 
period. 


MARKET DEMAND IN GANADA FOR MAGHINERY (FARM AND INDUSTRIAL) TO 1976 

EXPRESSED IN GONSTANT 1957 DOLLARS 



Total Canadian 
Output 
(G.N.E.) 


Canadian Market Demand for Machinery 


Year 

Farm Machinery 

Industrial Machinery 

Total 

Value 


Value 

Value 

% of Total 

Value 

% of Total 


$ Million 

$ Million 

% 

$ Million 

% 

$ Million 

Actual: 

1957 

31,909 

249.2 

17.9 

1,141.5 

82.1 

1,390.7 

1958 

32,284 

216.8 

18.4 

959.2 

81.6 

1,176.0 

1959 

33,398 

299.2 

22.6 

1,023.6 

77.4 

1,322.8 

1960 

34,200 

272.5 

21.4 

1,002.3 

78.6 

1,274.8 

1961 

35,081 

261.4 

19.7 

1,062.8 

80.3 

1,324.2 

1962 

37,429 

272.8 

18.3 

1,217.1 

81.7 

1,489.9 

1963 

39,352 

348.2 

21.2 

1,292.1 

78.8 

1,640.3 

1964 

41,886 

422.8 

21.6 

1,538.6 

78.4 

1,961.4 

Projections: 

Method I 
1970 

57,244 

500.8 

17.5 

2,361.2 

82.5 

2,862.0 

1976 

76,712 

626.9 

19.0 

2,672.7 

81.0 

3,299.6 

Method 11 

1970 

57,244 

509.4 

17.5 

2,401.3 

82.5 

2,910.7 

1976 

76,712 

802.4 

19.0 

3,420.9 

81.0 

4,223.3 


14 













chinery on the whole exhibited a steady upward 
trend, rising from 17.9 per cent to 22.6 per cent. 

It must be noted, however, that the 1957 to 1964 
period was one of generally good crop years, es¬ 
pecially in western Canada. For this reason, pur¬ 
chases of farm machinery during the period were 
probably relatively high. Furthermore, consideration 
of the life expectancy of farm machinery suggests 
that, following this period of relatively high levels 
of purchases, demand for farm machinery will not 
be supported by replacement needs to the same 
extent after 1964 as was the case before. 

At present, farms in western Canada — especially 
grain farms — are very highly mechanized. Although 
increases in the average size of farms are likely to 
continue and so permit the more efficient use of 
larger machinery, it is assumed that this trend will 
not raise the rate of mechanization in western Can¬ 
ada significantly above current levels. 

While farms in eastern Canada are less mech¬ 
anized than their counterparts in western Canada, 
it is likely that during the forecast period eastern 
Canadian farms will experience a relatively greater 
increase in mechanization than farms in western 
Canada. 

Recent agricultural studies and forecasts suggest 
that between 1964 and 1976 there will be a relative 
shift in agricultural production toward such pro¬ 
ducts as livestock and feed grains in response to 
changes in the pattern of domestic demand. It is 
also likely that, in the forecast period, the agricul¬ 
tural labour force will continue to decline. How¬ 
ever, it is fair to assume that these two trends will 
not affect the pace of mechanization in any essen¬ 
tially different way than they did before 1964. 

These factors and recent forecasts of agricultural 
output have led to the conclusion that demand for 
farm machinery is likely to account for 17-18 per cent 
of the total Canadian demand for new machinery 
between 1964 and 1970, and will probably again 
rise to about 19-20 per cent in the years 1970 to 1976. 

Assuming that demand for agricultural machinery 
in 1970 will comprise 17.5 per cent of the total 
demand for machinery, the value of demand for 
farm machinery will amount to some $500 million 
and expected sales of industrial machinery will 
reach about $2.4 billion (both in constant 1957 
dollars). In 1976 approximately 19 per cent of the 
total demand for machinery, equivalent to some 
$800 million, will be accounted for by agricultural 
machinery and equipment; demand for industrial 
machinery will range between about $2.7 billion 
and $3.4 billion. 


In view of the long-standing existence of free 
trade in farm machinery between Canada and the 
United States and the highly integrated nature of 
the industry in the two countries, the relative share 
of imports in total demand for farm equipment is 
not expected to change significantly during the fore¬ 
cast period. 

While the relative share of imports in total 
domestic demand for industrial machinery experi¬ 
enced a moderate but steady decline during the 
period 1957 to 1964, the recent tariff reductions 
under the Kennedy Round Agreement — which will 
reduce the average tariff rate from 22.5 per cent to 
15 per cent — are likely to reverse this trend. How¬ 
ever, lower Canadian tariffs on raw materials and 
components used by the industry will to some extent 
offset the increased disadvantage of domestic pro¬ 
ducers. 

Projection of Ontario Market Demand 
for Machinery to 1976 

From 1957 to 1964, total expenditures on farm 
and industrial machinery in Ontario accounted for 
a fairly stable proportion of the equivalent national 
aggregate, ranging from about 44 per cent to 46 per 
cent. In order to arrive at a preliminary estimate of 
total demand for machinery to 1976, it has been 
assumed that the following structural relationship 
will continue (with only minor fiuctuations through¬ 
out the forecast period): 

O = 0.446 C+u (r^ = 0.98) 

where: 

O = expenditures on new machinery in Ontario 

C expenditures on new machinery in Canada 

u = random fluctuations 

Under this assumption, the rates of growth of ex¬ 
penditure on total machinery will be virtually identi¬ 
cal for both Canada and Ontario. The Ontario 
market demand for farm and industrial machinery 
(in constant 1957 dollars) is expected to reach 
about $1.3 billion in 1970, ranging from $1.5 billion 
to $1.9 billion by 1976. 

Over the 1957 to 1964 period, demand for farm 
machinery represented an average of about 10 per 
cent of the total demand for machinery. At present, 
agricultural production in Ontario is not very highly 
mechanized in comparison with farm units in 
western Canada. Also, the scope for mechanization 
of farms in Ontario can be expected to broaden 
considerably as the trend to a larger average size of 
farm continues. For these and other reasons, it is 
anticipated that the rate of mechanization on farms 


15 


MARKET DEMAND IN ONTARIO FOR MACHINERY (FARM AND INDUSTRIAL) TO 1976 

EXPRESSED IN CONSTANT 1957 DOLLARS 




Ontario Market Demand for Machinery 


Total 


Farm Machinery 

Industrial Machinery 


Ontario 

Demand 

Year 

Value 

%of 

Ontario Demand 
for All Machinery 

Value 

%of 

Ontario Demand 
for All Machinery 

Total 

Value 

as % 

of Canadian 
Demand 


$ Million 

% 

$ Million 

% 

$ Million 

% 

Actual: 

1957 

62.5 

9.8 

575.3 

90.2 

637.8 

45.9 

1958 

52.7 

10.0 

472.5 

90.0 

525.2 

44.7 

1959 

69.7 

12.0 

511.6 

88.0 

581.3 

43.9 

1960 

61.3 

11.0 

493.5 

89.0 

554.8 

43.5 

1961 

65.1 

11.1 

522.5 

88.9 

587.6 

44.4 

1962 

58.4 

8.8 

607.8 

91.2 

666.2 

44.7 

1963 

72.4 

9.9 

655.3 

90.1 

727.7 

44.4 

1964 

90.0 

10.2 

790.0 

89.8 

880.0 

44.9 

Projections: 

M ethod I 

1970 

140.4 

11.0 

1,136.0 

89.0 

1,276.4 

44.6 

1976 

161.9 

11.0 

1,309.7 

89.0 

1,471.6 

44.6 

Method 11 

1970 

142.8 

11.0 

1,155.4 

89.0 

1,298.2 

44.6 

1976 

207.2 

11.0 

1,676.4 

89.0 

1,883.6 

44.6 


in Ontario will be somewhat more rapid during the 
forecast period than was the case during the years 
1957 to 1964. On the basis of this trend configura¬ 
tion, it is estimated that market demand for farm 
machinery will account for about 11 per cent of the 
total composite demand for machinery during the 
forecast period. 

On this basis Ontario’s market demand for farm 
machinery in constant 1957 dollars wiU be approxi¬ 
mately $140 million by 1970 and demand for indus¬ 
trial machinery will reach between $1.1 and $1.2 
billion. It is estimated that by 1976, market demand 
for agricultural machinery will range between $160 
million and $210 million and demand for industrial 


machinery will be between $1.3 billion and $1.7 
billion. 

Ontario’s demand for farm machinery in 1970 is 
likely to amount to about 28 per cent of the Canadian 
demand for farm machinery, reflecting largely 
accelerated mechanization of farm operations in 
Ontario. By 1976, Ontario demand will represent 
about 25.8 per cent, still above the average which 
held between 1957 and 1964. 

On the basis of these projections, Ontario’s market 
demand for industrial machinery will account for 
about 48.1 per cent and 49.0 per cent of the cor¬ 
responding Canadian demand in 1970 and 1976 
respectively. 


16 














APPENDIX 

Table A-1 


ANNUAL PRODUCTION OF MACHINERY IN ONTARIO AND CANADA, 1957-1964 




Ontario 



Canada 


Ontario as % of Canada 



Farm 

Industrial 


Farm 

Industrial 


Farm 

Industrial 


Year 

Machinery 

Machinery 

Total 

Machinery 

Machinery 

Total 

Machinery 

Machinery 

Total 



($000’s) 



($000’s) 



% 


1957 

106,650 

316,347 

422,997 

118,044 

478,508 

596,552 

90.3 

66.1 

70.9 

1958 

118,725 

294,315 

413,040 

129,175 

415,572 

544,747 

91.9 

70.8 

75.8 

1959 

153,632 

317,070 

470,702 

166,191 

447,844 

614,035 

92.4 

70.8 

76.7 

1960 

137,429 

339,385 

476,814 

152,123 

485,550 

637,673 

90.3 

69.9 

74.8 

1961 

124,191 

376,918 

501,109 

138,981 

519,338 

658,319 

89.4 

72.6 

76.1 

1962 

119,539 

443,055 

562,594 

140,820 

608,829 

749,649 

84.9 

72.8 

75.0 

1963 

152,792 

494,844 

647,636 

182,767 

701,286 

884,053 

83.6 

70.6 

73.3 

1964 

201,715 

557,224 

758,939 

243,963 

833,699 

1,077,662 

82.7 

66.8 

70.4 


Table A-2 

FARM IMPLEMENT AND EQUIPMENT SALES 
IN CANADA AND ONTARIO 


1957-1965 


Farm Implement 


Year 

and Equipment Salesi 

Coefficient a: 


Canada 

Ontario 

B/A 


A 

B 



($000’s) 



1957 

183,722 

46,152 

.251 

1958 

205,993 

50,060 

.243 

1959 

251,119 

58,612 

.233 

1960 

258,778 

58,175 

.225 

1961 

241,420 

60,131 

.249 

1962 

282,677 

60,517 

.214 

1963 

337,562 

70,304 

.208 

1964 

380,133 

81,125 

.213 

1965 

426,967 

86,452 

.202 

ifncluding repair parts. 



Note: Coefficient 

a as determined above is used to derive Ontario’s de- 

mand for farm machinery (do) from total Canadian demand (dc): 

i.e. a(dc) 

= do. 




Table A-3 


VALUE OF TOTAL MANUFACTURING 

OUTPUT 


IN CANADA AND ONTARIO 



1957-1964 



Value of Total 


Year 

Manufacturing Output 

Coefficient b; 


Canada 

Ontario 

n 

D/C 


($000's) 



1957 

21,452,343 

10,811,118 

.504 

1958 

21,434,815 

10,579,486 

.494 

1959 

22,830,827 

11,438,355 

.501 

1960 

23,279,804 

11,479,327 

.493 

1961 

23,438,956 

11,563,734 

.493 

1962 

25,790,087 

12,919,454 

.501 

1963 

28,014,888 

14,262,208 

.509 

1964 

30,856,103 

15,842,949 

.513 


Note; 1957-1960 data are not comparable directly with 1961-1964 data 
due to changes in the method of valuing shipments in the smelt¬ 
ing and refining industry. 


Correlating Equations: 

(1) Ifo = a(Ifc)+Ui 

( 2 ) lio = b (lie) + U 2 

(3) E,. = ^(E„)+U 3 

(4) E,„=^(E,e)+U4 

^ ic 

Coefficients: 

a = B/A (see Table A-2) 
b = D/C (see Table A-3) 

Notation: 

Ifo — Ontario imports of farm machinery 
ife = Canadian imports of farm machinery 
lio = Ontario imports of industrial machinery 
lio = Canadian imports of industrial machinery 
Efo = Ontario exports of farm machinery 
Efc = Canadian exports of farm machinery 
Eio = Ontario exports of industrial machinery 
Eic = Canadian exports of industrial machinery 
Pfo = Ontario production of farm machinery 
Pfo = Canadian production of farm machinery 
Pio =: Ontario production of industrial machinery 
Pic = Canadian production of industrial machinery 
Ui, uo, U 3 , U 4 = stochastic disturbance terms 


Table A-4 

ESTIMATED DEMAND EOR INDUSTRIAL MACHINERY, 1957-1964 

($ Million) 


In Ontario 

Year 

Available 

Supply 

(q) 

Shipments 
from Ontario 
to 

Other Provinces 
(s) 

Shipments 
to Ontario 
from 

Rest of Canada 
(t) 

Estimated 
Demand 
for Industrial 
Machinery 
(v) 

1957 

641.6 

318.2 

251.9 

575.3 

1958 

559.6 

283.2 

203.9 

480.3 

1959 

615.4 

307.1 

225.2 

533.5 

1960 

607.9 

308.2 

223.2 

522.9 

1961 

661.2 

335.2 

230.5 

556.5 

1962 

775.7 

387.1 

268.8 

657.4 

1963 

837.8 

411.4 

294.5 

720.9 

1964 

1,002.2 

488.1 

379.9 

894.0 


s = q (1 - D/C) X = t 

t = w (D/C) y — s 

v = q —s-t-t z = w —x-l-y 


In Canada Excluding Ontario 

Available Shipments 

Year Supply to Ontario 

(W) (X) 

Shipments 
from Ontario 
(y) 

Estimated 

Demand for 
Industrial 
Machinery 
(z) 

1957 

499.9 

251.9 

318.2 

566.2 

1958 

412.8 

203.9 

283.2 

492.1 

1959 

449.5 

225.2 

307.1 

531.4 

1960 

452.8 

223.2 

308.2 

537.8 

1961 

467.6 

230.5 

335.2 

572.3 

1962 

536.5 

268.8 

387.1 

654.8 

1963 

578.6 

294.5 

411.4 

695.5 

1964 

740.5 

379.9 

488.1 

848.7 

























ONTARIO ECONOMIC INDICATORS - SEASONALLY ADJUSTED 



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The Ontario Economic Review is prepared and edited 
bimonthly in the Economic Analysis Branch of the 
Department of Economics and Development and is 
available free of charge. The review is intended to 
provide current information on economic activity 
in Ontario and to act as a forum for the results of 
research in the public service on matters affecting 
the Ontario economy. The signed articles reflect the 
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resent the views of the Economic Analysis Branch. 
All correspondence should be directed to the Editor, 
Ontario Economic Review, Office of the Chief Econ¬ 
omist, Parliament Buildings, Toronto 5. 










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