FUSS, HILL: Alberta’s economic decline is ahead of Trump’s tariffs

Article content

As Canada and the United States engage in a tense trade standoff sparked by President Trump’s initial tariffs, economists are noting the damage to the Canadian economy. But these same economists often overlook that the economic downturn in many provinces, especially Alberta, began long before Trump’s trade war.

Article content

Economists use many metrics to measure economic performance, but GDP per person is one of the best because it is a key indicator of income and living standards. And on this measure, Alberta fell hard. Specifically, according to our new study, in 1999 Alberta’s GDP per person was an impressive $68,165, seventh place among all 10 provinces and 50 US states (all figures in Canadian dollars, adjusted for inflation). Fast-forward to 2024 (the latest year of available data), Alberta’s GDP per person stands at $74,907, which is 25th among the 60 jurisdictions, dropping Alberta 18 places in the rankings.

Article content

Recommended videos

Article content

Growth slowed

For what? Because during the 25-year period, Alberta’s GDP per person grew at the second slowest rate ($6,741) of any province or US state – only Delaware had a slower growth rate – and much slower than in American energy-producing states such as North Dakota ($51,533), California ($41,934) and Texas.

Labor earnings in Alberta have also fallen behind, with workers paying the price. Since 2010 (the earliest year of comparable data), Alberta was the only province or US state to experience a decline in median employment earnings. While Alberta remains the top Canadian province in 2024, it now trails all US states at $39,345, down from $40,564 in 2010. For context, workers in the poorest states such as Mississippi ($44,090) and South Carolina ($44,206) enjoy work0000000 higher than $5.0 typical income.

Article content

Article content

Why did this happen? What explains Alberta’s decline?

There are many factors at play over 25 years, but crucially Alberta has struggled to improve productivity — essentially, how much workers in the economy produce per hour — one of the main drivers of income growth. According to the data, from 1999 to 2024, 45 US states experienced stronger productivity growth than Alberta. With productivity declining, it’s no surprise that Alberta’s income and standard of living have fallen and are now among the lowest in Canada and the United States

Time for a policy change

Of course, many Albertans will blame Ottawa and it’s disruptive politics that have squeezed the oil and gas sector in recent years. But there is a lot of blame to go around. And politicians in both Edmonton and Ottawa can pull some levers to improve Alberta’s economy. For example, the Smith government should reduce personal income tax rates to improve the province’s ability to attract highly skilled workers while increasing incentives for savings, investment and entrepreneurship. At the same time, the government should control spending and balance its budget – regardless of which way oil prices go – to increase investor confidence and reduce the specter of future tax increases.

Article content

In Ottawa, the Carney government should play its part and reduce the federal personal income tax and the federal business tax rate. It should also remove regulatory barriers and restore federal finances by reducing government spending and balancing the books.

Living standards and incomes in many US states are now higher than in Alberta. At a time when everything seems to cost more, this is bad news for Albertans and their families. To turn the province’s fortunes around, politicians must enact bold policy reforms, regardless of who occupies the White House.

Jake Fuss is Director of Fiscal Studies and Tegan Hill is Director of Alberta Policy Studies at the Fraser Institute.

Article content