TORONTO AS A GLOBAL CITY

:
Scorecard on Prosperity – 2014

Sponsored by the Chartered Professional Accountants of Ontario Created with the research support of The Conference Board of Canada

Founded in 1845, the Toronto Region Board of Trade is the chamber of commerce for Canada’s largest urban centre, connecting more than 12,000 Members and 250,000 business professionals and influencers throughout the Toronto region. The Board fuels the economic, social and cultural vitality of the entire Toronto region by fostering powerful collaborations among business, government, thought leaders, and community builders. Toronto Region Board of Trade plays a vital role in elevating the quality of life and global competitiveness of Canada’s largest urban centre. Membership with the Board offers the opportunity to be part of a network of our region’s most influential business leaders, who are working together to help shape the future of the Toronto region.

© 2014 Toronto Region Board of Trade Certified Management Accountants of Ontario continues to be a proud sponsor of the Toronto Region Board of Trade’s Annual Scorecard on Prosperity. In our sixth year as lead sponsor, CMA Ontario is indicated on the cover by the wordmark of the Chartered Professional Accountants of Ontario.

Toronto as a Global City: Scorecard on Prosperity 2014 / 1

CONTENTS

FOREWORD AND ACKNOWLEDGEMENTS

2 4 5 14 17 17 18 18

PREFACE 1 EXECUTIVE SUMMARY 2 INTRODUCTION 3 METHODOLOGY Metropolitan Area Selection Process Indicator Selection Process Ranking Method

Comparing Scorecard 2010 and 2014 20 4 THE BIG PICTURE Overall Ranking 21 22 24 24 25 35 38 39 39 40 47 49 50 56 57 63 78

5 THE ECONOMY Introduction Who’s Best? Focus on Toronto’s Economy Concluding Observations: Economy

6 LABOUR ATTRACTIVENESS Introduction Who’s Best? Focus on Toronto’s Labour Attractiveness Concluding Observations: Labour Attractiveness

7 RETROSPECTIVE 8 LOOKING AHEAD: ECONOMIC FORECASTS FOR TORONTO Toronto Base Case Outlook to 2035 Toronto Competitive Outlook to 2035

9 CONCLUSION

2 / Toronto Region Board of Trade

FOREWORD & ACKNOWLEDGEMENTS

On behalf of the 12,000 Members of the Toronto Region Board of Trade, we are pleased to present our annual global benchmarking report, Toronto as a Global City: Scorecard on Prosperity 2014. While this is the sixth annual edition of the report, the setting this year is markedly different. With a municipal vote scheduled for late October and a provincial election expected as early as this spring, 2014 is a year of decision for voters in the Toronto region and in the province at large. But it must also be a turning point. It must be a time when voters — armed with a clear picture of the region’s future economic and social outcomes — demand more from their candidates and make truly informed choices at the polls. The Toronto region accounts for nearly half of Ontario’s GDP and about 20 percent of Canada’s total GDP. Given the critical role of the Toronto region in both provincial and national economies, research contained in this year’s report will weigh prominently in both election campaigns. Global rankings must naturally be based on comparative data using known inputs, and in this sense they are a look through the rear-view mirror. However, this year’s report is also a look at the road ahead — or more precisely, at two potential routes we can choose. It features new long-term forecasts on the state of the Toronto region’s economy in 2035 based on two different scenarios. The first scenario envisions a business-as-usual approach where current trends in public investments, infrastructure development, and business planning are maintained. For brevity’s sake, we refer to this outcome as the “base case forecast” or “good enough” scenario. This scenario shows the region will enjoy a modicum of economic growth and will continue to be one of the more desirable places in the world to live and work. But under the “good enough” scenario, the Toronto region falls short of its potential, with profound implications for the municipal, provincial, and national economies. The second “competitive forecast” or “great” scenario projects a more prosperous future for the region resulting from improvements in transportation, cluster development, human capital, and other strategic capital investments. By encouraging candidates and parties in the upcoming elections to focus on the issues that matter most to our region’s economic success, we can choose “great” instead of merely “good enough”. We can choose to build on our evident strengths, enhance our global competitiveness, create quality jobs for our young people, narrow the prosperity gap, and achieve the greatness that is within our reach. Understanding the strengths and challenges facing our economy helps business and governments make better choices in guiding our region’s economic future. How is the Toronto region economy faring against other global city-regions? What economic fundamentals need improvement to increase our competitiveness?

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Scorecard 2014 once again ranks the livability and economic performance of 24 global metropolitan areas. The report analyzes 33 indicators from economic and social domains to provide a comprehensive overview of how the Toronto region and four other Canadian cities measure up against others around the world. A consistent outcome from past Scorecards has been Toronto’s middling economic and productivityrelated performance, particularly with regard to its U.S. counterparts. Our past analysis has shown that underinvestment in transportation infrastructure and weak venture capital markets have contributed to our weak productivity. The Toronto region has reached a fork in the road. One direction leads to “good enough”, the other to “great”. In fact neither route will be smooth given the region’s continuing economic uncertainty. Business, educators, and all levels of government have a role to play in addressing our underlying economic challenges. But in 2014, it is voters who have the most important role. We believe that Scorecard 2014 can have a significant impact on the upcoming elections by helping to frame the issues and the decisions that must be taken in 2014 to ensure a prosperous regional economy in 2035. The information contained in the Scorecard would not be possible without the substantial contributions of The Conference Board of Canada and the Certified Professional Accountants of Ontario. Their research and funding support have been invaluable in the creation of all six Scorecard reports. We would also like to thank the members of our Board of Directors, Policy and Advocacy Committee, and Economic Development Committee. They are business people who give their time and expertise to the Toronto Region Board of Trade in the service of creating a better and more prosperous Toronto region for all — goals which form the core mission of the Scorecard on Prosperity.

Beth Wilson, FCPA, FCA Chair Toronto Region Board of Trade

Carol Wilding, FCPA, FCA President & CEO Toronto Region Board of Trade

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PREFACE

Preparing for Our Future Together
We are constantly told we face an uncertain undefined future. To many that uncertainty is both challenging and unnerving, for it seems as though we have no touchstones or anchors to which we can attach ourselves, if only for a short time, so that we may safely pause as we chart a new future. We are also told that not only is change a certainty, but that the myriad changes facing us is ever increasing. These are facts we must accept. They are irrefutable. The challenge we face is how best to adapt, prosper and win in uncertain, undefined times. Surely the key to our future success must be a re-visioning of what we do, how we operate and how best to position ourselves professionally, so that we may prosper in today and tomorrow’s hyper-competitive global economy. Our success tools must include adaptability, flexibility, ongoing professional development, and a readiness to accept change — as well as to change. The former Institute of Chartered Accountants of Ontario and Certified Management Accountants of Ontario have seen these changes coming for some time. That is why we have worked so hard on behalf of members to create a new vision for a combined and stronger designation. Our goal is to ensure that in a new era for all accounting professionals, members will have the necessary skills, training and designation strength to meet any and all challenges. Together we believe that the true potential in realizing our vision to be the pre-eminent, internationally recognized Canadian accounting designation and business credential that best protects and serves the public interest can only be accom-

plished when both organizations are prepared to embrace the change and accept the challenge that lies ahead. Today, the momentum to adopt the Chartered Professional Accountant (CPA) designation is strong in Ontario and nationwide. CMA Ontario, CPA Ontario and the Certified General Accountants of Ontario collectively represent approximately 80,000 professional accountants in this province. Across Canada, this vision would comprise 14 accounting bodies and 185,000 professional accountants. Unification of the accounting profession did not happen overnight — it took many years — just as a new vision for the Toronto region will also take time. This year’s Scorecard on Prosperity demonstrates the possibilities and opportunities that lie ahead if we not only imagine them but put action plans in place to capitalize on these burgeoning opportunities. Dan Millman, athlete, coach and author of numerous books including The Way of the Warrior said, “Now is the time, the place is here. Stay in the present. You can do nothing to change the past, and the future will never come exactly as you plan or hope for.” We look forward to charting the future with our business community partner, the Toronto Region Board of Trade, and we encourage the business community to ready itself and embrace this vision with confidence and anticipation as we build upon our strengths and establish a community that is ready for what lies ahead. Our world is changing — that is a certainty. Will you be ready?

Merv Hillier, MBA, MSc HRM, CPA, FCMA, C.Dir., CMC President and Chief Executive Officer Certified Management Accountants of Ontario

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1

| EXECUTIVE SUMMARY

Introduction
Six years of reporting on Toronto’s prosperity have deepened our understanding of how the region has performed in the recent past. Previous editions of the Scorecard have pointed to Toronto’s strong financial sector and Canada’s well-regulated banking system as critical pieces underpinning our relative success, particularly during the most recent global recession. And beyond the financial sector, the Toronto region has successful high-value industry clusters, including food & beverage, and health sciences. Toronto’s workforce draws from a diverse and well-educated population, establishing Toronto as the fourth-best metro in North America on measures of human capital (Scorecard 2013). Yet, on key measures of economic success, such as productivity and real Gross Domestic Product (GDP) growth, Toronto lags behind innovative and highperforming metros like San Francisco, Boston and Seattle. Now, in this 2014 edition of the Scorecard on Prosperity, Toronto Region Board of Trade (the Board) looks ahead to Toronto’s potential economic future by 2035. Recognizing we are starting from a solid base, we also acknowledge that significant challenges threaten Toronto’s envied position among global metropolitan regions. Furthermore, we aspire to an economic future for the Region that is better than “solid” or “good enough”. Toronto possesses the human and capital resources to be excellent provided they are deployed smartly and efficiently. As noted in TD Economics 2013 Special Report on Toronto (“Staying on Track”), the Toronto region has weathered the recession better

than most large North American regions but a big task lies ahead if we are to sustain this momentum.1 In particular, issues such as worsening gridlock, an aging workforce, a large infrastructure deficit, and underutilization of human capital, among others, emerge as key structural issues needing attention.2 As part of our special lens this year, we use two different scenarios to generate economic forecasts for the region in 2035. First of all, a base case forecast takes a conventional look at Toronto’s future, using known investment projects and demographic and productivity projections based on current trends as a starting point. Secondly, a competitive forecast is created to analyze the effects on Toronto’s economy if actions on four key policy fronts are implemented in a coordinated way. Under this scenario, Toronto’s ranking on critical indicators like real GDP growth, productivity growth, employment growth and unemployment rate would improve. In order to achieve this result, leaders in the Toronto region must focus on integrated delivery of: 1) the next wave of projects drawn from The Big Move; 2) investments in other types of public infrastructure; 3) higher productivity in key industry clusters; and 4) a better match between employee skills and labour market needs. The citizens of Toronto would feel the impact of these four key initiatives directly — through less congestion, more efficient infrastructure, and a stronger labour market with higher wages and salaries. In contrast, relying on the base case “businessas-usual” scenario puts Toronto at risk of serious under-performance.

1 Derek Burleton and Sonya Gulati, “Staying on Track: Sustaining Toronto’s Momentum After the Global Recession”, TD Economics, April 11, 2013, p.1. 2 Ibid, p. 2.

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Report Contents
This sixth edition of the Scorecard on Prosperity, continues the Board’s examination of Toronto’s economy and labour attractiveness, benchmarking the Toronto Census Metropolitan Area (CMA) against 23 other metropolitan areas around the globe. As these urban regions find their way out of the global recession, they face mounting challenges in the competition for much-needed capital and skilled labour. In keeping with the previous five reports, we use a scorecard to measure and monitor the Toronto CMA’s performance and its potential for success, based on 33 indicators grouped into two domains: Economy (18) and Labour Attractiveness (15). We have reported on these results by ranking and grading each of the benchmarked metropolises. Over the course of the past six years, Toronto’s overall rankings have shifted only modestly, but all the while holding onto its status as one of the world most attractive metropolitan regions. Toronto remains a leader in Labour Attractiveness, and a middle-of-the road performer in the Economy. In order to further our understanding of the benchmarking results, we have included special features (“lenses”) in each of the Scorecards. Each of these “lenses” has enabled us to explore in depth critical components of the region’s economy and quality of life, including capital investment; performance during and after the North American recession; transportation infrastructure; economic clusters; and human capital, among others. While highlighting the factors supporting Toronto’s economic performance, these featured lenses point to areas for improvement in the Toronto region.

This edition of the Scorecard includes a retrospective look at Toronto’s progress over the course of five years of reporting, comparing Toronto’s 2014 results with Scorecard 2010, when the report first assumed its current form. As noted, this year’s edition of the Scorecard includes two economic forecasts for the region, looking ahead to 2035. The base case “business-as-usual” scenario forecasts current trends in productivity and demographic growth to continue to the end of the outlook period. By contrast, the competitive scenario assumes higher levels of investment coming from action on four critical policy initiatives: 1) implementing the next wave of projects from The Big Move; 2) closing 70 percent of the infrastructure gap; 3) improving productivity in key industry clusters; and 4) improving the match between skills and jobs. All of these initiatives link back to previous editions of the Scorecards, where the economic benefits accruing from such actions were discussed.

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The Big Picture: Toronto Ranks Third Overall
Ranking Metro Area

For the fourth consecutive Scorecard, Paris is the top global metro region, while Calgary holds onto second place, after moving up from fourth in Scorecard 2012. Paris holds onto its number one ranking, with a stranglehold on the top spot on Labour Attractiveness, while showing appreciable strength in certain aspects of the Economy, albeit less robustly than in Scorecards 2012 and 2013. Paris ranks among the top three metros on one-third of all Labour Attractiveness indicators, and is the world leader on air quality and cultural occupations. Although Paris gets mixed results in the Economy domain, it shines when it comes to three particular indicators: productivity (#1), market size (#1), and high-tech employment (#1). Additionally, Paris has a strong professional employment sector, ranking fifth. Calgary continues as the second-best metro overall, ranked sixth in the Economy, and fourth in Labour Attractiveness. Calgary’s solid economic performance continues, outperforming all other Canadian metros. Calgary continues to show strong income and employment growth, while maintaining a favourable Total Tax Index (TTI). In this edition of the Scorecard, Calgary became the second-best metro on real GDP per capita; only Oslo was higher. On Labour Attractiveness, Calgary improves from sixth to fourth, just behind Toronto. Calgary benefits from high population growth (#2), relatively affordable housing (#1), low commute times (#1), and a young labour force (#3 on 25-34 year olds). Oslo stays in fourth place for the second consecutive year, after climbing from eighth place in Scorecard 2012. Oslo strengthened its economic credentials with a fifth-place ranking in the Economy domain, up two spots from Scorecard 2013. Oslo’s rise is propelled by gains on several wealth indicators; most prominently, on real GDP per capita. In fifth place, London stumbled from third in Scorecards 2012 and 2013, while maintaining its number two ranking in Labour Attractiveness. London continues as a world leader in attracting international visitors, and boasts a diverse, young population. But deepening economic woes contributed to distancing London from the leaders on the Economy domain, and ultimately on the overall rankings.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Paris Calgary Toronto Oslo London Stockholm Seattle Sydney San Francisco Boston Vancouver Montréal Dallas Tokyo New York Halifax Hong Kong Berlin Chicago Los Angeles Milan Shanghai Madrid Barcelona

This year’s results lift Toronto to its highest ranking ever since the Board started benchmarking five years ago. In third place, Toronto moves up from sixth in Scorecard 2013, again drawing on a strong performance in labour attractiveness, and boosted by some improved economic rankings. For the second consecutive year, Toronto ranks higher than all other U.S. metros. Overall, Toronto placed third on Labour Attractiveness and 12th on Economy. It is worth pointing out that Toronto’s higher composite score on the Economy is the story of resilience and economic potential but not yet the story of continued growth and momentum in absolute terms.

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Focus on the Economy: Toronto Stays in the Middle
Economy
Rank Metro Area Grade

Ranked 12th, Toronto’s position has budged little since Scorecard 2010, when it ranked 11th. However, Toronto improves from a “C” grade in Scorecard 2013 to a “B”, in large measure due to deepening economic crises in parts of Europe. Toronto appears to have weathered the economic recession and its aftermath better than many others. A closer look at the indicators reveals that Toronto has its best suite of results ever on the Economy, earning six “A” grades, compared to an average of only three in previous Scorecards. While some of Toronto’s gains come at the expense of withering economies in Barcelona and Madrid, Toronto’s rankings did improve on ten indicators. However, in the North American context, Toronto was unable to gain any ground against the four top U.S. metros and Calgary, but it has nearly drawn even with New York. In summary, Toronto’s higher composite score on the Economy comes on the back of resilience and economic potential rather than a result of sustained growth and momentum in absolute terms. In relative terms, Toronto made the biggest gains among the growth indicators, as its ranking went up on measures of real GDP growth, productivity growth, employment growth and income growth, suggesting that Toronto is closing the gap with the leaders. Employment growth is a particular bright spot, as Toronto moved up four places in the rankings to 8th place. When it comes to professional employment, Toronto has always enjoyed a high ranking, although it moved up into fourth position after slipping to fifth place last year. With more than one in five workers employed in this sector, Toronto jumped ahead of Paris once again. Although not as strong a performer as Seattle, Boston and San Francisco on high-tech employment, Toronto is nonetheless the leading CMA in Canada and can lay claim to a good high-tech employment base. With the drop in renting Class “A” office space downtown, Toronto became a more affordable place to do business, especially compared to several U.S. metros where rents for comparable office space rose considerably (notably, Boston, San Francisco, New York). Furthermore, Toronto‘s corporate tax burden remains at about 56 percent of the U.S. average, enabling Toronto to stay in fourth place ranking on TTI.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

San Francisco Boston Seattle Dallas Calgary Oslo Stockholm Paris Sydney Tokyo New York Toronto Montréal Hong Kong Chicago Halifax Vancouver Los Angeles Berlin London Shanghai Milan Madrid Barcelona

A A A A A A A A A A B B B B B B B B B B B B C D

Ever since Scorecard 2011, San Francisco, Boston and Seattle have ranked first, second, and third — the best metropolitan regions in the Economy domain. This year, Dallas regains its 2011 and 2012 fourth place position from Tokyo, which dropped to 10th place. Calgary rounds out the top five, up three spots from last year. San Francisco and Boston continue to enjoy outstanding performance on key markers of innovation, ranking in the top four on patents, venture capital investment, income per capita and real GDP per capita.

Toronto as a Global City: Scorecard on Prosperity 2014 / 9

All of these strengths, when matched with Toronto’s big market size, relatively affordable business environment, and well-educated labour force point to a brighter economic picture for the region. However, as previous editions of the Scorecard have noted, Toronto needs to improve its productivity and attract more investment in order to catch up to the global economic powerhouses.

Labour Attractiveness: Toronto Keeps Getting Better
Labour Attractiveness
Rank Metro Area Grade

While the overall results on Labour Attractiveness are similar to last year’s Scorecard, Toronto has broken through the “B” barrier to earn an “A” grade and third-place ranking, up two places from Scorecard 2013. For the fourth consecutive year, Paris and London rank first and second. Furthermore, nine of the top ten performing metros stay in the top ten; along with Toronto and Montréal, Calgary and Vancouver improved in the rankings compared to last year. Again just as in Scorecards 2012 and 2013, only eight metros earn “B” grades or better. Four of these eight are Canadian metros; four are European. Paris (#1) retains its ranking for the fourth year in a row, earning “A” or “B” grades on all but two indicators. Paris ranks among the top three metros on one-third of all indicators, with a strong cultural sector, low homicide rate, favourable commuting travel modes, healthy air, and as everyone knows, it is one of the world’s premier destinations for international travelers. However, Parisians continue to struggle with long commute times — a key shortcoming when it comes to labour attractiveness. Like Paris, London (#2) earns “A” or “B” grades on all but two indicators but ranks among the top three metros on only two indicators, compared to Paris’ five. For the fifth year in a row, London is the top metro for attracting international visitors and only one of two metros to score an “A” grade on this indicator (Hong Kong is second). London’s other strengths come from a diverse population (ranked third behind Toronto and Vancouver), a young labour force, a vibrant cultural sector, and a good record on nonautomobile commuting. However, London’s attractiveness is tarnished by very poor commuting times (74 minutes), and relatively high homicide rates — the second-worst outside the U.S. Toronto claims third place, rising two spots from Scorecards 2013 and 2012, and moving from a “B” to an “A” grade. Toronto’s strong performance is capped by its number one ranking on foreign-born population, a distinction held since the first Scorecard was produced. With 47.9 percent of the population foreign-born, Toronto outranks second-place Vancouver (42.7 percent) and by a considerable margin, third-place London at 35.9 percent.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Paris London Toronto Calgary Barcelona Vancouver Madrid Montréal Stockholm Sydney Oslo Halifax Hong Kong Berlin Seattle Tokyo New York Dallas Chicago Milan Boston San Francisco Los Angeles Shanghai

A A A A B B B B C C C C C C D D D D D D D D D D

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Compared to last year’s Scorecard, Toronto‘s scores and ranking improved on six of the indicators; most notably on teachers per 1,000 school-age population, population with Bachelor’s degrees or higher, and homicides per 100,000 population. With regard to teachers, Toronto has its best result since Scorecard 2010. Toronto has shown considerable growth from last year, propelling Toronto from seventh to third place. When it comes to higher education, 33.3 percent of Torontonians have at least a Bachelor’s degree, up from 30.2 percent reported in previous Scorecards. Toronto ranks eighth, up three places from Scorecard 2013, and ahead of all other Canadian CMAs. Another highlight for Toronto this year must be its improved homicide rate — matching the lowest rate of all Scorecards, first reported in 2012. At 1.8 homicides per 100,000, Toronto ranks eighth with an “A” grade, and is considerably better off than last year. Successive Scorecards have supported Toronto’s reputation as a liveable metropolis; and this year’s edition is no exception. In fact, Toronto earned its best overall score ever, building on its strengths, and in a few instances, improving on its weaknesses. However, Toronto continues to be plagued by poor results on both transportation indicators: namely, mode of travel to work and commute times.

Toronto has been among the world leaders in the Labour Attractiveness domain, because of the region’s diversity, excellent student-teacher ratio, steady population growth, and overall solid results on water and air quality. Yet in the Economy domain, Toronto remains stubbornly in the middle of the pack, ranking twelfth in Scorecard 2014, just as in 2010.3 Despite what this stable ranking may suggest, Toronto has seen some improvements in the Economy domain; many come at the expense of deteriorating economies elsewhere, such as Madrid, Barcelona and Milan. Specifically, Toronto recorded gains on five indicators, but only one can be described as significant; namely, the growth in residential building permits. In Scorecard 2010, Toronto ranked ninth of twelve metro regions with negative growth in residential building permit activity. By Scorecard 2014, Toronto had jumped to third place based on 3.6 percent growth in residential building permits. Toronto benefitted from the relative strength of the Canadian banking system that prevented a U.S.-style housing crisis. As Toronto improved, most metros in the U.S. were struggling to regain stability in the housing market. In this year’s Scorecard, six of seven U.S. metros still posted negative growth in residential building permits. Minor gains occurred in the unemployment rate and income growth. Toronto improved from 21st on the unemployment rate in Scorecard 2010 to 17th in 2014. In this case, Toronto’s rise in the rankings occurs despite an absolute increase in the unemployment rate, as other metros experienced far deeper unemployment problems. Madrid and Barcelona have been particularly hard hit, while stagnating job growth in the U.S. enabled Toronto’s ranking on the unemployment rate to get ahead of New York, Chicago and Los Angeles. On income growth, Toronto jumped from ninth to fifth place, moving from a “C” to a “B” grade. Once again, Toronto’s gain came at the expense of faltering economies in Madrid and Barcelona, as well as Los Angeles where income growth fell from 5.5 percent to 2.5 percent.

Five-Year Retrospective: Toronto Improves but Work Still to be Done on Productivity Performance
In looking back at five years of performance, this Scorecard compares Toronto’s 2014 results with Scorecard 2010, when the report first assumed its current form. Over the past five years, Toronto improved from fifth to third place overall, boosted by higher rankings on certain indicators within the Economy domain, and consistently stellar performances on Labour Attractiveness. Still, Toronto’s higher composite score on the Economy is the story of resilience and economic potential rather than the story of sustained growth and momentum in absolute terms. From the outset,

3 2010 Economy rankings used to compare with Scorecard 2014 were recalculated to ensure apples-to-apples comparisons. Economic data initially presented in 2002 dollars in Scorecard 2010 has been recalculated to reflect 2007 dollars for six indicators.

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Yet on the “hot button” economic measures of real GDP per capita and productivity, Toronto is still dwarfed by the economic powerhouses of San Francisco, Boston, Seattle and Dallas. Exacerbated by persistently low scores on patents, Initial Public Offerings (IPOs), and venture capital investment, the gap between Toronto and the U.S. leaders remains wide. Toronto has yet to demonstrate the improvement in the determinants of productivity growth that are required if the CMA is to enjoy future prosperity. This persistent gap between Toronto and the leaders prompted a closer look at Boston’s economy in Scorecard 2011, which noted that Toronto and Boston are comparably-sized metro regions and share similar industrial profiles (e.g., strong financial and real estate; human health sciences). Boston has excelled where Toronto has not, with high levels of productivity, real GDP, patents, and venture capital. Boston has been successful in leveraging its strongest asset — a strong post-secondary education cluster — to achieve robust growth. Boston has been helped, where Toronto has not, by focused monetary support from government, efficient industry cooperation, and high levels of venture capital investment (ten times greater than Toronto).

from a diverse and well-educated population. Yet, on key measures of economic success, such as productivity and real GDP growth, Toronto lags behind innovative and highperforming metros like San Francisco, Boston and Seattle. In looking ahead to 2035, we use two different scenarios to generate economic forecasts for the region.4 First of all, as shown in Table 1, a base case forecast takes a conventional look at Toronto’s future, using known investment projects and demographic and productivity projections based on current trends as a starting point. The second scenario builds on the first to generate a competitive forecast — one that challenges Toronto to do better, within achievable but aspirational parameters. This assumes an integrated, regional approach to carry out four policy actions for higher levels of investment in Toronto for transit, other infrastructure, cluster development, and human capital. Under the base case scenario, forecasts are rooted in a “business-as-usual” approach, assuming in the case of investments, the execution of projects underway. For example, this would include: the first wave of The Big Move; revitalization of the Toronto waterfront; construction of facilities for the 2015 Pan Am Games; and construction of Toronto Hydro’s $195-million downtown transformer station; etc. Forecasts for key economic indicators depend on solid demographic projections, based on assumptions about fertility, mortality, and net migration. Under the base case, the regional population will grow by 2.2 million to 8.7 million by 2035. Demographic forecasts regarding the population age structure are the basis for generating assumptions about labour force growth. When combined with projections of the increase in labour productivity — determined by factors such as growth in investment of machinery and equipment and technology, changes in the skill level of the workforce, and the introduction of new innovative processes — the result is a forecast of the future long-term growth in real GDP for the Toronto CMA. The real GDP forecast in turn generates a projection of employment growth and the unemployment rate.

Looking Ahead: Economic Forecasts for Toronto
Looking back has helped us understand Toronto’s progress over the course of five Scorecards; looking ahead helps to chart a roadmap for the future. Recognizing we are starting from a solid base, we also acknowledge that significant challenges threaten Toronto’s envied position among global metropolitan regions. Previous editions of the Scorecard have pointed to Toronto’s resilience during and after the global recession, largely attributable to Canada’s strong banking sector and conservative lending practices that prevented a collapse in the housing market. And beyond the financial sector, the Toronto region has successful high-value industry clusters, including food & beverage, and human health sciences. Toronto’s workforce draws

4 Note that this section presents information in $CAD, unless otherwise indicated.

12 / Toronto Region Board of Trade

Overall, the base case forecasts that Toronto economy will grow at an average annual rate of 2.7 percent from 2014 to 2035, while productivity growth is forecast to be 1.1 percent annually. The unemployment rate is expected to improve to 5.7 percent by the end of the outlook period as employment growth outpaces growth in the labour force. Slower growth in the labour force is anticipated due to the aging population and accompanying wave of retirees. But is this the best that Toronto can do? The answer is no, particularly when compared to other North American metros. For instance, productivity growth in Dallas is expected to be close to 2 percent annually, about double that of Toronto. Recognizing that we need to aim higher or risk falling further behind, a competitive forecast was created, nudging the Toronto region forward with more strategic and integrated investments. The second scenario builds on the first to generate a competitive forecast that includes four new assumptions tied to higher levels of investment in Toronto. Specifically, this includes an analysis of the impact on Toronto’s economy of significant investments in transportation improvements, other strategic infrastructure, industry clusters, and human capital. For each of these four categories, a set of optimistic but achievable assumptions is created, as follows: 1. Transportation infrastructure will be improved through implementation of the next wave of The Big Move ($21.6 billion invested over the next 22 years).5 2. More than 70 percent of the municipal infrastructure gap in roads, water, and wastewater systems will be met ($22 billion invested), and $500 million per year will be invested in the region’s electricity distribution system ($11 billion invested over the next 22 years). 3. Productivity in key industry clusters will rise to one-half the level of the leading North American metro for each cluster. 4. Human capital will improve through better matching of skills with jobs to achieve a natural rate of unemployment at four percent by 2035.

Each of these four assumptions stems from work carried out by the Board, supported by previous editions of the Scorecard, where special “lenses” focused on unique economic challenges. For instance, Scorecard 2013 examined human capital, concluding that Toronto needs a better match of education, skills, and jobs to compete with top metros like San Francisco and Boston. In Scorecard 2012, Toronto’s performance was benchmarked on ten strategic industry clusters (e.g., finance, bio-pharma and bio-medical, food & beverage), and once again, Toronto’s productivity “gap” undermined some otherwise positive results. Scorecard 2012 recommended that Toronto carry out a regional cluster strategy to drive innovative growth in a focused way, leading to improved productivity. In Scorecard 2011, Toronto was a “D” performer when it comes to Transportation, ranking 19th of 23 metro regions. Apart from notoriously bad commute times, Toronto’s worst results come from indicators related to transit, including: ridership, distance travelled, rail vehicle kilometers, and expenditure on transit. In order to improve productivity and economic growth, Scorecard 2011 recommended to invest in more commuter rail infrastructure to lower commute times. Achieving the growth forecast in the competitive scenario depends on integrating all four components across the region, consistent with the Board’s policy to address priority challenges for transportation infrastructure expansion, cluster development, and regional economic cooperation. And the results are worth it. When compared to the base case scenario, the economic impact of the competitive scenario is significant, providing Toronto with a springboard to be one of the great economic metropolitan regions in the world. Highlights reveal that: • Real GDP per capita growth would average 1.4 percent per year between 2014 and 2035 in the competitive scenario, compared to just one percent per year under the base case. The result is real GDP per capita that is almost ten percent higher in the competitive scenario. • Higher economic activity and a better matching of skills with the needs of the labour market will generate 165,000 more jobs and lower unemployment to 4 percent instead of 5.7 percent by 2035.

5 Excludes Hamilton LRT.

Toronto as a Global City: Scorecard on Prosperity 2014 / 13

• Labour productivity growth would average 1.3 percent per year over the forecast horizon, 0.2 percentage points higher than in the base case. Labour productivity would stand over 7 percent higher in 2035 in the competitive scenario as compared to the base case. Under the competitive scenario, Toronto’s ranking on a set of core economic indicators for North American metros would improve markedly over the base case results, with Toronto placing ahead of San Francisco, New York and Boston for the first time. Toronto would place fourth (compared to eighth in the base case scenario), thanks to a stronger performance on employment growth, the unemployment rate, and real GDP and productivity growth. In fact, on employment growth, Toronto would be tops in North America. The significant job gains expected in the competitive scenario would also boost Toronto’s ranking on the unemployment rate. Furthermore, Toronto’s real GDP growth is forecast to be second-best, just behind Dallas.

No improvement in the rankings is expected, however, on real GDP per capita or productivity. The existing gap between Toronto and the leading U.S. metros is too wide to overcome. In conclusion, the Board forecasts a much more vibrant Toronto economy if actions on four key policy fronts were to be implemented in a coordinated way. Leaders in the Toronto region must focus on the integrated delivery of: the next wave of The Big Move; investments in other types of public infrastructure; higher productivity in key industry clusters; and a better match between employee skills and labour market needs. The citizens of Toronto would feel the impact directly, through less congestion, more efficient infrastructure, and a stronger labour market with higher wages and salaries.

Table 1: Base Case vs Competitive Economic Forecasts in 2035
Key Economic Indicators Base Case Competitive Difference Competitive-Base Percentage from Base

Population (Thousands) GDP at basic prices (Millions 2007 $CAD) Real GDP per capita (2007 $CAD) Real GDP per capita growth (%) Labour productivity (2007 $CAD) Productivity growth (%) Personal disposable income per capita (2007 $CAD) Employment (Thousands) Unemployment rate (%)

8,698 519,818 59,761 1 120,579 1.1 31,146 4,311 5.7

8,873 582,028 65,593 1.4 130,032 1.3 32,791 4,476 4.0

175 62,210 5,833 0.4 9,543 0.2 1,645 165 -1.7

2.0 12.0 9.8 n/a 7.3 n/a 5.3 3.8 n/a

14 / Toronto Region Board of Trade

2

| INTRODUCTION

In this sixth edition of the Scorecard on Prosperity, Toronto Region Board of Trade (the Board) continues its examination of Toronto’s economy and labour attractiveness, benchmarking the Toronto Census Metropolitan Area (CMA) against 23 other metropolitan areas around the globe. While each of these great urban metropolises reflects their unique national heritage, they share similar aspirations for a prosperous future, rooted in a healthy urban environment. As the global competition for skilled labour and capital investment intensifies, urban regions throughout the world strive to attract and retain talented workers. As they find their way out of the global recession, these metropolises face even greater challenges in the competition for much-needed capital and skilled labour. The Board continues to play a vital role in elevating the quality of life and global competitiveness of the Toronto region by building on its legacy of public policy advocacy. The economic development of the Toronto region is central to the mandate of the Board, and we recognize that Toronto’s success depends on continuous improvements. Despite Toronto’s well-earned reputation as one of the world’s most liveable city-regions, we cannot afford to take this for granted. A 2013 report from TD Economics makes the case for a competitive cost environment, noting that this will be “crucial to ensuring the Toronto region economy has success in attracting jobs and investment as well as expanding in foreign market. Businesses in the region will likely face increased competition over the next five years...”6

The Board understands the importance of maintaining a regional focus on Toronto’s economic prosperity. Benchmarking Toronto against other key Canadian CMAs and the world’s great metropolises is one way to deepen our knowledge of the entire Toronto region’s strengths and weaknesses. In keeping with the previous five reports, we use a scorecard to measure and monitor the Toronto CMA’s performance and its potential for success, based on 33 indicators grouped into two domains: Economy (18) and Labour Attractiveness (15). We have reported on these results by ranking and grading each of the benchmarked metropolises. Over the course of the past six years, Toronto’s overall rankings have shifted modestly, yet Toronto has consistently emerged as one of the world leaders in Labour Attractiveness, and a middle-of-the-road performer in the Economy. In order to further our understanding of the benchmarking results, we have included special features (“lenses”) in each of the Scorecards. Each of these “lenses” has enabled us to explore in depth critical components of the region’s economy and quality of life, including for example: capital investment; performance during and after the North American recession; transportation infrastructure; economic clusters; and human capital, among others.

6 TD Economics, “Staying on Track: Sustaining Toronto’s Momentum After the Global Recession”, April 11, 2013, p 13.

Toronto as a Global City: Scorecard on Prosperity 2014 / 15

While highlighting the factors underpinning Toronto’s economic performance, these featured lenses point to areas for improvement in the Toronto region; in turn, allowing the Board to propose policy initiatives for governments and the private sector. As this is the Board’s sixth Scorecard on Prosperity, we have included a Retrospective, a special section looking back at Toronto’s progress from the early Scorecards. In order to ensure an apples-to-apples comparison, Scorecard 2010 was chosen as the base year rather than the inaugural Scorecard from 2009. The pilot report of 2009 not only included fewer indicators, it also included fewer metropolitan areas, and in two instances, included metros no longer benchmarked (Québec City, Rome). This year’s edition of the Scorecard includes a long-term economic forecast for the Toronto region based on two possible scenarios: 1) a base case forecasting current trends; and 2) a competitive scenario based on the achievement of significant improvements in transportation, investments in other types of public infrastructure, cluster development and human capital. The analysis underscores the importance of these strategic investments, showing the economic benefits accruing from the competitive approach, while the ‘business-as-usual” scenario brings risks of serious under-performance.

16 / Toronto Region Board of Trade

Map of the Toronto CMA

Chippewas of Georgina Island First Nation Georgina

Bradford West New Tecumseth Gwillimbury

East Gwillimbury Newmarket

Uxbridge

Mono King

Aurora

WhitchurchStouffville Pickering Richmond Hill Ajax

Orangeville Caledon Vaughan

Markham

City of Toronto Brampton

Halton Hills Mississauga

Milton Oakville

Toronto CMA
City of Toronto Surrounding Municipalities

Source: Statistics Canada

Toronto as a Global City: Scorecard on Prosperity 2014 / 17

3

| METHODOLOGY

The Board seeks to ensure Toronto remains a competitive and vibrant city, contributing in a significant way to the prosperity of Ontario and the country as a whole. To find out just how competitive is Toronto, the Board commissioned The Conference Board of Canada (CBoC) to develop a scorecard on prosperity for the Toronto Census Metropolitan Area (CMA), benchmarking the CMA against 23 metropolises around the world. Drawing on the success of the previous five editions of the Scorecard on Prosperity, CBoC has replicated the methodology for the 2014 edition of the report. Thirty-three indicators were chosen to measure Toronto’s success in: 1) the global economy; and 2) its ability to attract and retain workers from around the world. In addition, the section discussing Toronto’s long term economic forecast selects 33 indicators to rank the performance of Toronto’s economy against other North American centres. The ranking in this section includes a business-as-usual scenario, as well as a competitive scenario measuring Toronto’s long term economic performance following several years of significant infrastructure investment. Finally, the retrospective section, which analyzes Toronto’s ranking in this Scorecard compared with the rankings from Scorecard 2010, recalculates scores for six indicators with the Economy domain based on revised and rebased historical data. For more information on how Toronto stacks up relative to other cities, see the detailed data tables in the Economy and Labour Attractiveness chapters, as well as in the sections that focus on Toronto’s long term economic forecast and the comparison with Scorecard 2010.

Metropolitan Area Selection Process
A key starting point for this benchmarking project was the decision about which metropolitan areas to include. Although the number of metro areas remained the same as the previous four Scorecards, those cities were determined using the following criteria: 1. Comparably-sized to Toronto: Barcelona, Boston, Dallas, Madrid, Berlin, San Francisco, and Seattle; 2. Toronto’s main Canadian competitors: Montréal, Calgary, and Vancouver; 3. Global cities to which Toronto is sometimes compared: Chicago, London, Los Angeles, New York, Paris, Tokyo, and Sydney; 4. Metro regions within North American to allow for a regional comparison: Halifax and Dallas; 5. Metro regions with progressive social and environmental policies: Oslo and Stockholm; and 6. Metro regions in rapidly emerging economies: Hong Kong and Shanghai. The comparator metropolitan areas used in this report will be reviewed for future editions of the annual Scorecard on Prosperity. The possibility remains that cities currently excluded will be included in future years (if better data becomes available), and/or that some cities currently included will be removed in future years (if it becomes clear that their relative value as a comparator is not high).

18 / Toronto Region Board of Trade

Indicator Selection Process
The search for indicators began with a commitment to find measures that showed the degree of economic strength and the degree of labour attractiveness. The selection of indicators for each domain evolved over a period of weeks, to allow for consultation with the CBoC and to enable a test run for data availability and reliability. The indicators that were selected provide valuable information on the performance or status of a metropolitan area within a particular domain, either as a direct output (e.g., disposable income) or a proxy measure (e.g., number of teachers per 1,000 people of school age as a proxy for access to education). In the end, a total of 33 indicators were chosen for the Economy and Labour Attractiveness domains. Unfortunately, it was impossible to collect data on all 33 indicators for every metropolitan area due mainly to data incomparability. But all 33 indicators were available for the Toronto CMA. We screened all data sources rigorously to ensure that each indicator for the international cities had the same definition as its Canadian counterpart. In other words, we wanted to avoid an “apples-to-oranges” comparison. But there were a couple of exceptions. Some vital indicators, like housing affordability, were included despite slight differences in definitions across countries. In these cases, we standardized the data by dividing each city’s indicator by its national average. Benchmarking studies use annual historical data as a means of comparison.7 Given that this study was launched in the fall of 2013, data beyond the year 2012 was unavailable for all indicators. This does not imply, however, that the results of this study are compromised. A benchmarking analysis, by definition, is a relative comparison. Therefore, it is reasonable to assume that if 2013 full-year data were included in this study, the overall rankings would remain fairly stable.

In the section discussing Toronto’s long term economic forecast, however, data is included for the years 2013 to 2035. This represents forecasted data, estimated by CBoC (for the Canadian metros) or Moody’s (for the U.S. metros).

Ranking Method
This study uses a report card-style ranking of A–B–C–D to assess the performance of metropolitan areas for each indicator. We assigned a grade level to performance using the following method: for each indicator, we calculated the difference between the top and bottom performer and divided this figure by four. A metropolitan area received a scorecard ranking of “A” on a given indicator if its score was in the top quartile, a “B” if its score was in the second quartile, a “C” if its score was in the third quartile and a “D” if its score was in the bottom quartile. A metropolitan area was assigned an N/A if the data was unavailable for that indicator. For example, on the labour attractiveness indicator “proportion of the population that is foreign-born,” the top performer (Toronto) had 47.9 percent of its population foreign-born in 2011 and the bottom performer (Shanghai) had only 1.1 percent. Applying the method for scoring yields the following ranges for each grade: “A”: 47.9 – 36.2 percent “B”: 36.1 – 24.5 percent “C”: 24.4 – 12.8 percent “D”: 12.7 – 1.1 percent (Note: In this example, a high score indicates a high level of performance. For indicators where a low score signifies a high level of performance — such as the homicide rate — the ranking levels are reversed, i.e., the highest result receives the lower grade.)

7 All international data was converted to U.S. dollars using OECD purchasing power parity exchange rate estimates for the given year.

Toronto as a Global City: Scorecard on Prosperity 2014 / 19

It must be emphasized that two cities getting an “A” grade do not necessarily perform equally according to this methodology. In the example above, a city scoring 38 percent would get an “A” grade in the same way that a city scoring 40 percent would. However, when we establish a ranking of cities, the city getting a result of 40 percent would be placed higher than the one scoring 38 percent even if they both get an “A” grade. Thus, in the tables below, when looking at cities with the same letter grade, the one with the higher score is listed first. It must also be emphasized that the rankings for each indicator are relative. A city receives an “A” grade because it outperforms all other cities in our sample, not because it is a global leader. The overall domain rankings are based on a composite index (an average of the normalized scores for each indicator in the specific domain). In other words, the top-ranking metropolitan area for a given indicator will receive a one, while the bottom-ranking metropolitan area will receive a zero.
Normalization Formula Normalized value = (indicator value – minimum value) ÷ (maximum value – minimum value)

To calculate a domain ranking, the metropolitan areas were then ranked according to their composite index scores. No attempt was made to give explicit differential weights to indicators according to importance — we are implicitly giving equal weight to each indicator. We assigned a grade level to the overall domain performance using the following method: we calculated the difference between the domain composite index of the top and bottom performer and divided this figure by four. A metropolitan area received a scorecard rating of “A” for the domain if its score was in the top quartile, a “B” if its score was in the second quartile, a “C” if its score was in the third quartile and a “D” if its score was in the bottom quartile. The Overall ranking is determined using the scores from the Economy and Labour Attractiveness domains only. The rankings created from the long term economic forecast and the retrospective do not affect the Overall ranking. Even though we generate an Overall score that ranks each metro area based on the scores from the Economy and Labour Attractiveness domains, we do not create an Overall composite letter grade. The Economy and Labour Attractiveness domains cover entirely different sets of indicators, so assigning an overall grade would falsely assume that the two domains can be aggregated.

To use the example above, a score of one would be attributed to Toronto given that it leads with 45.7 percent of its population foreign-born — (47.9-1.1) ÷ (47.9-1.1). Meanwhile, a zero would be attributed to Shanghai given that it ranks last with 1.1 percent of its population foreign-born — (1.1-1.1) ÷ (45.7-1.1). A metropolitan area with a 25 percent foreign-born population, for example, would get a score of 0.52 — (25.0-1.1) ÷ (45.7-1.1).

20 / Toronto Region Board of Trade

Comparing Scorecard 2010 and 2014
The five-year Retrospective compares Toronto’s performance in Scorecard 2014 with that of Scorecard 2010. This allows for a direct and true comparison between the most recent five-year period (2007-2012) and the five-year period (2002-2007) immediately preceding it. Ideally, the review would have been based on a comparison with the inaugural Scorecard in 2009; however, certain changes have been introduced in the aftermath of this pilot year. The Scorecard began to take its current form in 2010, with the introduction of new indicators and new metropolitan areas, including: Tokyo, Sydney, Milan, Berlin and Halifax. At the same time, Rome and Québec City were eliminated from the roster of comparator metros. In addition, five new indicators were added to the Economy domain, drawn from the special “Capital Lens”, in Scorecard 2010. These indicators shed light on a metropolitan area’s ability to attract capital investment (e.g., through venture capital, and Initial Public Offerings (IPOs). With regard to the Labour Attractiveness domain, three new indicators were added in 2010: 1) commuting time; 2) air quality; and 3) international visitors. Therefore, in order to carry out the best possible applesto-apples comparison, Scorecard 2010 is used as the base year, allowing for a five-year retrospective. Even so, some minor differences between Scorecards 2010 and 2014 are worth noting, as follows: • The cost-of-living indicator was eliminated as a standalone indicator in Scorecard 2011 and instead was used to deflate after-tax per capita income. • The market size indicator was redefined in Scorecard 2011 to measure the purchasing power of the population within 500 miles, not simply the total population. • Either new or additional data sources have allowed for a fuller dataset in Scorecard 2014, generally affecting European and Asian metros. This means that some data points missing in Scorecard 2010 are available in Scorecard 2014.

Furthermore, to allow for a truer comparison between Scorecards 2010 and 2014, adjustments were made to some key economic data. Economic data initially presented in 2002 dollars in Scorecard 2010 has been recalculated to reflect 2007 dollars, in line with the data in Scorecard 2014. This applies to: • Real GDP per capita, • Real GDP growth, • Productivity, • Productivity growth, • Employment growth, and • Unemployment rate. Further harmonization was carried out to enable truer comparisons of the economic indicators. In Scorecard 2010, different base years had been used for different data sets, sometimes varying by metropolitan area.8 With the aim of facilitating comparisons between Scorecards, we standardized the base year of comparison. For Scorecard 2014, the year 2012 is the base year of comparison for all economic data; for growth indicators, the five-year period from 2007 to 2012 is used. In recalculating economic data for Scorecard 2010, the base year of 2007 was used, enabling all of the cities in the sample to have a common year of comparison; growth indicators were based on the 2002 to 2007 time period.

8 For instance, the GDP per capita and Productivity indicators used the year 2005 as the year of comparison for all metro areas, while the Unemployment Rate ranked each cities performance using the 2007 value. Meanwhile, for GDP growth, Productivity growth and Employment growth, varying time periods were used based on the latest historical data of each metro area, though all were ranked using the five-year average growth rate. Standardizing all of the historical data to a 2007 base year allows for a more accurate comparison between the two scorecards.

Toronto as a Global City: Scorecard on Prosperity 2014 / 21

4

| THE BIG PICTURE

Population of Metro Areas 2012*
Metropolis Population

Tokyo Shanghai New York London Los Angeles Paris Chicago Milan Hong Kong Dallas Madrid Toronto Barcelona Berlin Boston Sydney San Francisco Montréal Seattle Vancouver Stockholm Calgary Oslo Halifax
*2011 for: Sydney, Shanghai

35,682,460 20,210,000 19,015,900 15,529,179 13,052,920 11,914,812 9,522,430 8,132,175 7,177,900 6,645,680 6,387,824 5,941,488 5,357,422 5,097,712 4,640,800 4,627,345 4,455,560 3,957,715 3,552,160 2,463,677 2,091,473 1,309,221 1,169,539 413,710

The “big picture” provides an overall comparison of 24 global metropolises, based on the combined results of the Economic and Labour Attractiveness indicators. The results contribute to our understanding of what makes some cities prosperous and attractive, while others struggle. The 24 metro regions represent a global picture, stretching from Australia and the Asian Pacific to Europe and North America. They range in size from less than half a million to more than 35 million — making Tokyo an urban region with more people than all of Canada. The Toronto CMA includes 5.94 million people, positioning Toronto in the middle of the group, as the 12th largest. For the fourth consecutive Scorecard on Prosperity, Paris is the top global metro region, while Calgary holds onto second place, after moving up from fourth in Scorecard 2012. Toronto, in third place, achieves its best ranking to date on the reliable strength of its labour attractiveness as well as improved economic measures. Eight of the top ten metros repeat as top ten scorers, with modest changes in individual rankings. Stockholm jumps into sixth place, and for the first time, is included among the top ten best metros. After placing 11th in Scorecard 2013, Boston returns to a top ten spot, a position it enjoyed in every other Scorecard. Two metros struggled to stay near the top; most dramatically, Madrid dropped from fifth to 22nd, and Tokyo slipped from tenth to 14th. Madrid’s collapse is attributable to the faltering Spanish economy.

22 / Toronto Region Board of Trade

Overall Ranking
Ranking Metro Area

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Paris Calgary Toronto Oslo London Stockholm Seattle Sydney San Francisco Boston Vancouver Montréal Dallas Tokyo New York Halifax Hong Kong Berlin Chicago Los Angeles Milan Shanghai Madrid Barcelona

Paris also can boast a relatively young and well-educated labour force. Compared to Scorecard 2013, Paris falters on one important indicator, revealing a rise in income inequality. The labour market in Paris is still suffering a little, as average employment growth was only -0.1 percent from 2007 to 2012, and ranked #18 on the unemployment rate. Although Paris gets mixed results in the Economy domain, it shines when it comes to three particular indicators: productivity (#1), market size (#1), and high-tech employment (#1). At the same time, Paris has a strong professional employment sector, ranking fifth. Still, Paris remains an expensive place to do business, with the highest tax burdens (last place on the Total Tax Index (TTI), and 21st on office rents). Calgary continues as the second-best metro overall, ranked fifth in the Economy, and fourth in Labour Attractiveness. Both rankings are good enough for an “A” grade. Calgary has been a consistent and solid economic performer, ranking among the top three on five indicators, and outperforming all other Canadian metros. Calgary continues to show strong income and employment growth, while maintaining a favourable tax burden (TTI). In this edition of the Scorecard, Calgary became the second-best metro on real Gross Domestic Product (GDP) per capita; only Oslo was higher. On Labour Attractiveness, Calgary improves from sixth to fourth, just behind Toronto (as it did last year). Calgary benefits from high population growth, (ranked #2), relatively affordable housing (#1), low commute times (#1), and a young labour force (#3 on 25-34 year olds). Right behind Calgary, Toronto is in third place, earning its highest ranking ever. Toronto jumped from sixth place in Scorecard 2013, switching places with London, last year’s third-ranked metro. Toronto continues to draw on its strengths in Labour Attractiveness, where it has dominated the field on foreign-born population right from the very first Scorecard. Toronto was third-best on the Labour Attractiveness domain, fortifying its position with a string of improved results on indicators such as: homicides per 100,000 population, teachers per 1,000 school age population, Gini coefficient (measuring income inequality) and

Paris holds onto its number one ranking, with a stranglehold on the top spot in the Labour Attractiveness domain, while showing appreciable strength in the Economy, albeit less robustly than in Scorecards 2012 and 2013. Paris ranks among the top three metros on one-third of all Labour Attractiveness indicators. They demonstrate: • a strong cultural occupation sector (#1) • healthy air quality (#1) • a low homicide rate (#3) • a favourable travel mode (non-auto commuting) (#3) • an attractiveness to international visitors (#3)

Toronto as a Global City: Scorecard on Prosperity 2014 / 23

population with Bachelor’s degrees or higher. On economic measures, Toronto has garnered its best suite of results ever, earning six “A” grades, compared to an average of three in previous Scorecards. Nonetheless, Toronto’s overall ranking near the middle of the pack (#12) has been fairly consistent. Toronto’s relative success in Scorecard 2014 is attributable, at least in part, to the withering fortunes of certain European metros, such as Barcelona, Madrid, and Milan. Toronto achieved its overall third place result, despite ranking only 12th on the Economy, and 3rd on Labour Attractiveness. While at first glance, this may seem counterintuitive, the Methodology section explains how combining composite scores in each domain can sometimes lead to such results. In Toronto’s case, although the ranking in the Economy domain did not change vis-à-vis 2013, the value of the composite score has increased yielding a higher overall score. This is largely attributable to the exceptionally poor performances of Madrid, Barcelona and Milan. However, Toronto’s higher composite score did not lead to a higher ranking compared to the results from Scorecard 2013. Since most cities benefitted from the poor performance of Madrid, Barcelona and Milan in the Economy domain, Toronto’s 12th place ranking remained the same as last year. In fact, Toronto region’s high composite score comes on the back of resilience and economic potential rather than a result of sustained growth and momentum in absolute terms. Oslo stays in fourth place for the second consecutive year, after climbing from eighth place in Scorecard 2012. Oslo strengthened its economic credentials with a sixthplace ranking in the Economy domain, up one place from Scorecard 2013. Oslo’s rise is propelled by gains on several wealth indicators; most prominently, on real GDP per capita. At $102,795, Oslo is about 60 percent higher than its closest competitor. In addition, Oslo ranks first or second on productivity, employment growth and unemployment rate. Although not as powerful on the Labour Attractiveness domain, Oslo ranks well on a number of key indicators, portraying a metropolitan region with good income equality, low commute times, and a young, well-educated population.

London stumbled from third to fifth place overall, while maintaining its #2 ranking in Labour Attractiveness. London continues as a world leader in attracting international visitors, and boasts a diverse, young population. But deepening economic woes contributed to distancing London from the leaders on the Economy domain, and ultimately on the overall rankings. For instance, London was one of only four metros to experience a rise in the unemployment rate, compared to Scorecard 2013 (including Shanghai, Madrid, and Barcelona). And at the same time, London’s rankings on real GDP growth, productivity growth, and employment growth all went down. Stockholm (#6) is the most improved metro, compared to Scorecard 2013, when it ranked twelfth. Stockholm gained ground in both the Economy (from #10 to #7) and the Labour Attractiveness domains (from #10 to #9). Stockholm’s economy grew impressively in the 2007-2012 period, making Stockholm the second best metro on real GDP growth just behind first place Dallas. Furthermore, Stockholm improved on four other key growth indicators: productivity, employment, and income. When it comes to Labour Attractiveness, Stockholm’s most outstanding characteristic is defined by income equality. Ranked #1 on Gini coefficient, Stockholm is metropolitan region with the fairest distribution of income. This “Big Picture” overview reflects the combined results of the 33 indicators used in the Economy and Labour Attractiveness domains. All Scorecards since 2010 have examined the same 24 metropolitan areas using the same indicators, with two minor exceptions: 1) the indicator for market size was redefined in Scorecard 2011 to measure the purchasing power of the population within 500 miles, not simply the total population; and 2) the cost-of-living indicator was eliminated as a stand-alone indicator in Scorecard 2011 and instead was used to deflate after-tax per capita income. Accordingly, in this edition, the Toronto Region Board of Trade includes a retrospective looking over five years of reporting, highlighting Toronto’s “wins” and “losses.”

24 / Toronto Region Board of Trade

5
Rank

| ECONOMY

Economy Overall
Metro Area Grade (normalization score)

Introduction
The overall picture emerging from the Economy domain shows little change from previous years at the very top of the rankings, but some important shifts within the top ten, as well as significant movement toward the bottom of the pack. For the second year in a row, Toronto is in 12th place, but improves from a “C” to a “B” grade thanks to economic upheaval in the Eurozone with particularly disastrous results for Madrid and Barcelona. Data for the key economic indicators are, for the most part, drawn from a base year of 2012 to allow for comparability among all metro regions. Where dollar values are used, they are reported in $US PPP (purchasing power parity). The more recent data is available for all metros thanks to a change in source, enabling a comparison of all areas in a current economic context. Ever since the inaugural Scorecard on Prosperity in 2009, U.S. metros occupy at least half of the top ten rankings on the Economy. Consistently strong results on measures of productivity, Gross Domestic Product (GDP), income, and patents have contributed to their dominance. For the fourth consecutive year, San Francisco, Boston and Seattle rank first, second and third. However, employment growth continues to be a vulnerable part of the economy for U.S. metros, with all experiencing lower growth than in the previous scorecard. Offsetting weak results on employment is a surge in productivity growth. All U.S. metros earn “A” grades and six (of seven) U.S. metros top the rankings; New York, the weakest, comes in tenth.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

San Francisco Boston Seattle Dallas Calgary Oslo Stockholm Paris Sydney Tokyo New York Toronto Montréal Hong Kong Chicago Halifax Vancouver Los Angeles Berlin London Shanghai Milan Madrid Barcelona

A A A A A A A A A A B B B B B B B B B B B B C D

0.65 0.64 0.61 0.58 0.57 0.57 0.56 0.55 0.55 0.54 0.53 0.53 0.49 0.49 0.48 0.48 0.48 0.47 0.46 0.46 0.45 0.45 0.31 0.20

Toronto as a Global City: Scorecard on Prosperity 2014 / 25

Overall, nine of the top ten metros are the same as last year, with slight shifts in individual rankings. For the first time since Scorecard 2010, Sydney (#9) ranks in the top ten, with solid results in GDP per capita, productivity, unemployment rate, and professional employment. Sydney gained at the expense of New York, which slipped out of the top ten for the first time in six Scorecards to rank eleventh. New York’s drop can be attributed to a number of factors, like relatively weak results in GDP and productivity growth, and a higher unemployment rate, Sydney also overtook Tokyo, which fell to tenth place. Although Tokyo performs well in high-tech employment, Initial Public Offerings (IPOs), and patents, it struggles with low GDP per capita and productivity, and the very high cost of doing business. Apart from Calgary, Canadian Census Metropolitan Areas (CMAs) are not top performers on the Economy. Montréal, Halifax, and Vancouver fall below Toronto, ranking 13th, 16th, and 17th and report similar economic weaknesses on real GDP and productivity. A few other shifts in the overall rankings from Scorecard 2013 are worthy of a closer look. Calgary, Sydney and Oslo all jumped on measures of GDP and productivity, as the updated economic data significantly benefitted these resource-based economies. Los Angeles and Chicago also moved up, thanks to a better GDP result. However, both remain in the bottom half of the overall rankings. On the other hand, Hong Kong took a significant step down, from 11th to 14th position, as the recent economic data suggests that GDP growth and productivity growth slowed considerably the past few years. Meanwhile, a dip in productivity growth contributed to declines for both Milan (#13 to #22) and Tokyo (#4 to #10). Finally, Madrid has now joined Barcelona at the bottom of the rankings. The decline of the Spanish economy becomes very apparent here, as both metros finished dead last in GDP growth, productivity growth, and employment growth. In addition, both have the highest unemployment rates. In fact, the rankings for these two metros have dropped so far that every other city receives an “A” or “B” grade on the overall economic ranking, by comparison.

Who’s Best?
Ever since Scorecard 2011, San Francisco, Boston and Seattle have ranked first, second, and third — the best metropolitan regions in the Economy. This year, Dallas regains its 2011 and 2012 fourth place position from Tokyo, which dropped to 10th place. Oslo rounds out the top five, up two spots from last year. San Francisco and Boston continue to enjoy outstanding performance on key markers of innovation, ranking in the top four on patents, venture capital investment, income per capita and real GDP per capita. San Francisco continues to prove why it is a world leader in technology and innovation. With nearly 221 patents per 100,000 population, San Francisco has nearly twice the number of patents as second-place Seattle, and more than twice that of third-ranked Boston. It is the only metro with an “A” grade; thus continuing a pattern begun in Scorecard 2010. Once again, San Francisco enjoys the most success in attracting venture capital investment. At $17,447.5 (per $1-million GDP), the value of venture capital investment continues to be heads-and-shoulders above all other metro areas in the sample. On a per capita basis, San Francisco’s venture capital investments are nearly twice that of Boston (#2). By comparison, venture capital investment (per $1-million GDP) in Toronto is $1,421. Compared to Scorecard 2013, San Francisco kept its firstplace ranking on only two of five indicators (patents and venture capital investment). Its ranking slipped on the other three: real GDP per capita, income per capita, and productivity, although San Francisco still ranks in the top five on those indicators. Like previous years, high productivity levels and personal incomes (both about 45 percent higher than Toronto’s) were achieved at the expense of employment growth. Indeed, for the second year in a row, San Francisco lost employment, recording -0.6 percent average growth between 2007 and 2012; thus continuing a downward trend noted in Scorecard 2013. But San Francisco was not the worst performer on employment growth; Chicago and Los Angeles also posted negative results, as did Milan, Madrid and Barcelona.

26 / Toronto Region Board of Trade

Although still in second place, Boston has gained some ground against San Francisco, just missing out on the top spot. Like San Francisco, Boston (#2) excels on innovation and wealth indicators: patents, venture capital, per capita income, and per capita real GDP. Scorecards 2010 and 2011 examined Boston’s achievements in more detail, citing excellence in its 35 universities and colleges and resilient economic sectors, particularly health care and science. Scorecard 2011 concludes that “Boston can likely lay claim to the strongest post-secondary education sector in the world. Boston has been able to successfully leverage this advantage to achieve strong economic growth...”9 Boston also ranks fourth on high-tech employment, which accounts for 7 percent of total employment. But as we have documented with San Francisco and other U.S. metros, productivity and incomes have flourished in tandem with stagnant employment growth. Boston’s five-year average employment growth was only 0.1 percent between 2007 and 2012. Right behind San Francisco and Boston, Seattle is still third-best. Generally, the fundamentals of success are robust enough to keep Seattle near the top, ranking number one on income per capita and productivity growth. As well, Seattle ranks fifth on real GDP per capita, and second on patents, third on high-tech employment, and third once again on venture capital investment/firm. And Seattle stays at the top of all North American metros when it comes to high-tech employment (only Paris and Stockholm are higher). Like all U.S. metros, Seattle struggles with employment growth; with five-year growth of -0.4 percent, Seattle’s unemployment rate rose to 7.4 percent in 2012.

With Dallas back up in fourth place, U.S. metros claim the top four spots in the Economy. Dallas maintained its outstanding results on real GDP growth (#1) and productivity growth (#2), although values for real GDP per capita and productivity are lower. Dallas continues to be an inexpensive place to do business, and ranks at the top on the average investment per venture capital firm; outperforming San Francisco, Seattle and Boston. However, with so few venture capital deals in 2012, Dallas ranked at the bottom on venture capital investment per $1-million GDP. Dallas can also boast the strongest employment growth of any U.S. metro, with 0.5 percent growth per year from 2007-2012. Calgary claims fifth place, up three spots from Scorecard 2013. Strong oil and gas prices and continued energyrelated investment has placed Calgary as a top-performing economy. Indeed, ever since the first Scorecard, Calgary has been the top Canadian metro and the only “A” metro among the Canadian CMAs. Unlike the other Canadian CMAs, Calgary performs extremely well on measures of real GDP (#2) and real GDP growth (#3), and impresses further when it comes to income growth (#3) and employment growth (#4). Oslo, in fifth position, jumped two spots from Scorecard 2013, propelled by steady gains on several wealth indicators. What is most striking is the surge in real GDP per capita. At $102,795, Oslo is about 60 percent higher than its closest competitor. Oslo makes great strides in other indicators as well, with first or second-place rankings on productivity, employment growth and unemployment rate. But besides a top ten ranking on office rents, Oslo only places in the middle or at the bottom for most other indicators. Five other metro areas round out the top ten: Oslo (#6), Stockholm (#7), Paris (#8), Sydney (#9) and Tokyo (#10). Stockholm jumped three positions, thanks to a solid ranking on real GDP growth, as well as being the European leader in income growth. Stockholm also benefits from a strong performance on high-tech employment (#2), employment growth (#3), which overshadows middling results on real GDP per capita, income, productivity and a last place finish on IPO size.

9 Toronto Board of Trade, “Toronto as a Global City: Scorecard on Prosperity-2011”, p. 31.

Toronto as a Global City: Scorecard on Prosperity 2014 / 27

Paris dropped three places to rank eighth, its lowest ranking since Scorecard 2010 (ranked tenth). However, Paris cemented its #1 ranking on productivity, high-tech employment and market size, while at the same time having a strong base of professional employment (#5). Still, Paris is an expensive place to do business, ranking last on the Total Tax Index (TTI) and 20th on office rents. The labour market in Paris is still suffering; employment growth came in at -0.1 percent from 2007 to 2012, and the 8.7 percent unemployment rate in 2012 put Paris in 18th position rate. Sydney improved on its 14th place ranking last year, jumping all the way to ninth. A change in data source for real GDP per capita has contributed to boosting Sydney’s ranking from 16th to seventh on that indicator in this year’s Scorecard. Sydney’s real GDP per capita in 2012 is estimated at $58,836, nearly 50 percent higher than Toronto’s. In turn, this fed Sydney’s productivity ranking, which also jumped into the top ten. In addition, Sydney posted the highest growth in the value of residential building permits, and had respectable results on employment growth and unemployment, and a number two ranking on professional employment (behind Hong Kong). Finally, rounding out the top ten is Tokyo, dropping from a fourth place finish in last year’s Scorecard. Tokyo maintained its outstanding results on productivity growth (#8), unemployment rate (#3), high-tech employment (#5) and patents (#4). Tokyo also maintains its number one ranking in the value of IPOs, a move they made in Scorecard 2013. However, Tokyo is hindered by its high cost of business, with bottom-of-the-pack rankings on TTI and office rental costs.

Among others, a slightly worse showing on economic indicators like real GDP per capita, productivity and unemployment rate bumped New York (#11) out of the top ten. However, New York still performs well on value of IPOs and office rents. London continues to hover near the bottom of the rankings, as a slow recovery from the recession underpins its poor performance. This is particularly evident when looking at growth indicators like income, productivity and employment. Meanwhile, Shanghai continues to show improvement. Although finishing last on per capita indicators like GDP, income and productivity, Shanghai is moving in the right direction, improving each year and narrowing the gap with the other metro areas.

28 / Toronto Region Board of Trade

Economic Indicators
Real gross domestic product (GDP) per capita # cities ranked: 24

Definition
Overall value of goods and services produced within the metro region. Real GDP is divided by total population to get real GDP per capita. Data is from 2012, based on 2007 dollars.

Significance
Real GDP per capita is commonly used to compare relative wealth among regions.

What About Toronto?
Toronto, 17th out of 24, continues at the bottom of the pack, below all U.S. metros, but ahead of the other Canadian CMAs except Calgary. Calgary surged to second place from eleventh in Scorecard 2013. Toronto’s real GDP per capita is less than half of Oslo’s (#1). Real GDP per capita rose for all metros except London, Barcelona, Madrid, Milan and Sydney, compared with Scorecard 2013. Toronto ranks 12th among the 24 comparator regions. Just as in previous years, Toronto’s five-year average annual growth rate (0.7%) is far below that of first place Dallas (2.4%). Toronto is the weakest of all Canadian CMAs. Calgary, Halifax, and Vancouver all ranked among the top 10. However, sizable job cuts in Madrid and Barcelona means Toronto still garners an “A” grade. Toronto ranks 17th with a “C” grade. Like all previous Scorecards since 2011, Toronto ranks below all U.S. metros. Toronto’s productivity remains nearly the same as in Scorecard 2010. After three years at the top, San Francisco drops to #3, due to a surging Paris (#1) and Oslo (#2). At $158,684, Paris’ productivity is more than double that of Toronto. Among Canadian CMAs, Calgary remains the consistent leader, and this year has widened the gap considerably. Shanghai stays the weakest of all 24 metros, but is closing the gap.

The Grade
1. Oslo A 2. Calgary B 3. Boston C 4. San Francisco C 5. Seattle C 6. New York C 7. Sydney C 8. Paris C 9. London C 10. Los Angeles C 11. Stockholm C 12. Dallas C ($102,795) ($65,991) ($63,213) ($62,483) ($61,381) ($59,249) ($58,836) ($57,131) ($54,990) ($54,507) ($52,480) ($52,328) 13. Chicago 14. Milan 15. Hong Kong 16. Tokyo 17. Toronto 18. Vancouver 19. Halifax 20. Berlin 21. Montréal 22. Madrid 23. Barcelona 24. Shanghai C C D D D D D D D D D D ($50,819) ($45,306) ($42,852) ($41,137) ($39,008) ($35,747) ($34,970) ($34,553) ($32,704) ($29,064) ($26,361) ($24,194)

Real GDP growth # cities ranked: 24

The average annual increase in real GDP over a five-year period, from 2007-2012.

Stronger growth generates, among other things, more employment opportunities.

1. Dallas 2. Stockholm 3. Calgary 4. Halifax 5. Seattle 6. Boston 7. Berlin 8. Vancouver 9. Hong Kong 10. Tokyo 11. Montréal 12. Toronto

A A A A A A A A A A A A

(2.4%) (2.0%) (1.8%) (1.7%) (1.6%) (1.5%) (1.4%) (1.4%) (1.1%) (1.0%) (0.9%) (0.7%)

13. New York 14. San Francisco 15. Sydney 16. Chicago 17. Shanghai 18. Oslo 19. Los Angeles 20. Paris 21. London 22. Milan 23. Madrid 24. Barcelona

A A B B B B B B B B D D

(0.4%) (0.2%) (0.2%) (0.1%) (-0.1%) (-0.2%) (-0.3%) (-1.6%) (-1.8%) (-1.9%) (-6.2%) (-6.8%)

Productivity # cities ranked: 24

Productivity is the level of real GDP divided by employment, measuring total output per worker. Data for all metros is 2012, based on 2007 dollars.

High productivity levels generate wealth, allowing businesses to pay higher salaries and wages.

1. Paris 2. Oslo 3. San Francisco 4. Los Angeles 5. New York 6. Seattle 7. Boston 8. Sydney 9. Dallas 10. Calgary 11. London 12. Chicago

A ($158,684) A ($154,455) A ($140,856) A ($135,247) A ($132,679) A ($127,547) B ($119,315) B ($115,626) B ($115,553) B ($114,816) B ($112,193) B ($110,782)

13. Hong Kong 14. Milan 15. Stockholm 16. Tokyo 17. Toronto 18. Vancouver 19. Berlin 20. Madrid 21. Barcelona 22. Montréal 23. Halifax 24. Shanghai

B ($109,575) B ($104,101) B ($96,498) C ($79,731) C ($77,067) C ($69,101) C ($68,971) C ($68,506) C ($65,502) C ($65,408) D ($64,314) D ($33,421)

Toronto as a Global City: Scorecard on Prosperity 2014 / 29

Economic Indicators
Productivity growth # cities ranked: 24

Definition
Productivity growth shows how quickly a CMA is gaining in wealth, measured over the 2007-2012 period.

Significance
Strong productivity growth allows for economic growth without inflationary pressures, fostering greater purchasing power for households.

What About Toronto?
Toronto’s productivity growth, negligible in Scorecard 2013, has dipped into negative territory. Ranked 14th (-0.4%), Toronto nonetheless earns a “B” grade, due to the steep decline in several European metros. After weak productivity growth in the 2004-2009 period, (as reported in Scorecard 2013), Seattle and Dallas have rebounded to rank 1st and 2nd. Toronto posted its highest ranking to date (#9), as five-year annual average employment growth rose from 1% to 1.2% compared to Scorecard 2013, good enough for an “A” grade. Meanwhile, U.S. metros continue to struggle creating jobs, with Dallas being the top performing U.S. metro with an average growth rate of 0.5%. Oslo jumped to first place despite seeing a slight drop in the growth rate from last year, while Shanghai’s galloping growth finally slowed down to 1.6%. Just as in Scorecard 2013, Toronto is the weakest of all Canadian CMAs, but saw the unemployment rate drop (from 9.6% to 8.5%). Compared to last year’s Scorecard, every North American metro (except New York, which stayed the same) had lower unemployment rates. Hong Kong topped Oslo as the #1 metro, with only 3.3% unemployment. Madrid and Barcelona continued to decline, with unemployment rising to 18.7% and 21.6% respectively.

The Grade
1. Seattle 2. Dallas 3. Boston 4. Los Angeles 5. Chicago 6. San Francisco 7. Berlin 8. Tokyo 9. New York 10. Halifax 11. Montréal 12. Calgary A A A A A A A A A B B B (2.0%) (1.8%) (1.4%) (1.0%) (0.9%) (0.8%) (0.8%) (0.5%) (0.5%) (0.3%) (0.1%) (0.1%) 13. Vancouver 14. Stockholm 15. Toronto 16. Hong Kong 17. Shanghai 18. Sydney 19. Paris 20. Milan 21. London 22. Oslo 23. Barcelona 24. Madrid B B B B B C C C C C D D (0.0%) (0.0%) (-0.4%) (-0.7%) (-1.0%) (-1.4%) (-1.5%) (-1.6%) (-1.6%) (-2.1%) (-3.5%) (-4.1%)

Employment growth # cities ranked: 24

Five-year average annual percentage growth in total employment is measured for 2007-2012.

Strong employment growth means better opportunities for securing work. A high growth CMA is more attractive.

1. Oslo 2. Hong Kong 3. Stockholm 4. Calgary 5. Shanghai 6. Sydney 7. Vancouver 8. Halifax 9. Toronto 10. Montréal 11. Berlin 12. Dallas

A (1.9%) A (1.8%) A (1.8%) A (1.7%) A (1.6%) A (1.6%) A (1.4%) A (1.3%) A (1.2%) A (0.7%) A (0.6%) B (0.5%)

13. Tokyo 14. Boston 15. New York 16. Paris 17. London 18. Milan 19. Seattle 20. San Francisco 21. Chicago 22. Los Angeles 23. Madrid 24. Barcelona

B B B B B B B B C C D D

(0.5%) (0.1%) (0.0%) (-0.1%) (-0.3%) (-0.4%) (-0.4%) (-0.6%) (-0.8%) (-1.4%) (-2.2%) (-3.5%)

Unemployment rate # cities ranked: 24

The percentage of the labour force not working, based on 2012 data.

A metropolitan area with a lower unemployment rate indicates a more engaged work force. In turn, such places are more likely to attract people.

1. Hong Kong 2. Oslo 3. Tokyo 4. Shanghai 5. Calgary 6. Sydney 7. Stockholm 8. Boston 9. Halifax 10. Dallas 11. Vancouver 12. Seattle

A A A A A A A A A A A A

(3.3%) (3.5%) (4.3%) (4.7%) (4.8%) (4.9%) (5.7%) (6.1%) (6.2%) (6.7%) (6.7%) (7.4%)

13. Milan A 14. San Francisco B 15. London B 16. Montréal B 17. Toronto B 18. Paris B 19. New York B 20. Chicago B 21. Los Angeles B 22. Berlin B 23. Madrid D 24. Barcelona D

(7.6%) (8.1%) (8.1%) (8.5%) (8.5%) (8.7%) (8.8%) (8.9%) (10.1%) (11.4%) (18.7%) (21.6%)

30 / Toronto Region Board of Trade

Economic Indicators
Disposable income per capita # cities ranked: 24

Definition
Average after-tax income of the metro area* is divided by total population, adjusted for costof-living. Data is based on average after-tax income in US$ in 2010.

Significance
Metro regions with high average incomes are likely to draw in more people.

What About Toronto?
Toronto ranks #13, one spot lower than in Scorecard 2013 but still with a “C” grade. Overall, rankings have changed little since Scorecard 2010. Canadian CMAs (except Calgary) lag behind the U.S., Seattle, San Francisco, and Boston – the only metros where incomes exceed $40,000. Shanghai remains an outlier and sits in last place with incomes at $6,046 – a little more than one-third of the nextlowest metro, Barcelona. In fifth place and a “B” grade, Toronto earns its highest rank since Scorecard 2010. On the other hand, Toronto’s 4.8% income growth is lower than that reported in any other Scorecard, except 2012. Calgary (#3) continues to earn “A” grades, and lead all Canadian CMAs. The two Chinese metros set a blistering pace, with Shanghai ranked first. All U.S. metros are graded “C”. For the second year in a row, London has the weakest income growth – just 0.5%. Toronto stays in eighth place with a “B” ranking – the same relative ranking since consistent Scorecard 2010. Overall, rankings are identical to those in Scorecard 2013. For the second year in a row, Paris is #1, with over 9% of total employment in the high-tech sector. Similar to last year, four U.S. metros (Seattle, Boston, San Francisco and Dallas) are ahead of Toronto, but Toronto continues to top all Canadian CMAs.

The Grade
1. Seattle 2. San Francisco 3. Boston 4. Dallas 5. Chicago 6. New York 7. Calgary 8. Sydney 9. Los Angeles 10. Oslo 11. Tokyo 12. Stockholm A A A A A B B B B B B B ($44,687) ($44,593) ($44,517) ($38,712) ($35,114) ($33,728) ($32,881) ($31,059) ($30,890) ($28,300) ($26,123) ($25,901) 13. Toronto 14. Halifax 15. Vancouver 16. Montréal 17. Paris 18. London 19. Milan 20. Hong Kong 21. Madrid 22. Berlin 23. Barcelona 24. Shanghai C ($24,215) C ($24,161) C ($23,764) C ($21,833) C ($21,391) C ($21,156) C ($19,530) C ($18,298) C ($17,962) C ($17,583) C ($17,172) D ($6,046)

Disposable income growth # cities ranked: 24

Percentage changes in disposable income are measured over a five-year period. A higher ranking shows how quickly a CMA is improving its standard of living. This covers the period from 2005-2010.

Strong income growth boosts a metro region’s attractiveness.

1. Shanghai 2. Hong Kong 3. Calgary 4. Vancouver 5. Toronto 6. Stockholm 7. Dallas 8. Halifax 9. Seattle 10. New York 11. Sydney 12. Boston

A A A B B B C C C C C C

(8.5%) (7.3%) (6.6%) (5.3%) (4.8%) (4.7%) (4.4%) (4.2%) (4.2%) (4.1%) (4.1%) (3.9%)

13. Milan 14. Montréal 15. Barcelona 16. Madrid 17. Tokyo 18. Paris 19. Oslo 20. Berlin 21. Chicago 22. San Francisco 23. Los Angeles 24. London

C C C C C C C C C C D D

(3.8%) (3.6%) (3.6%) (3.5%) (3.4%) (3.1%) (3.0%) (2.9%) (2.7%) (2.6%) (2.5%) (0.5%)

High-Tech employment # cities ranked: 24

This indicator measures the share of total employment in the information and communications technology sector, expressed as a five-year average. Data for: Canada, U.S.: 2007-2012 Shanghai, Hong Kong: 2006-2011 Europe, Tokyo: 2005-2010, and Sydney: 2006-2011.

In line with the “creative cities” theory, high levels of employment in this sector signal an attractive metro region.

1. Paris 2. Stockholm 3. Seattle 4. Boston 5. Tokyo 6. San Francisco 7. Dallas 8. Toronto 9. London 10. Montréal 11. Madrid 12. Oslo

A A A B B B B B B B C C

(9.3%) (8.0%) (7.4%) (7.0%) (7.0%) (6.6%) (5.9%) (5.7%) (5.5%) (5.5%) (5.1%) (5.0%)

13. Vancouver 14. Calgary 15. Halifax 16. Los Angeles 17. Milan 18. New York 19. Chicago 20. Sydney 21. Berlin 22. Barcelona 23. Hong Kong 24. Shanghai

C C C C C C C D D D D D

(4.4%) (4.1%) (4.0%) (3.9%) (3.7%) (3.5%) (3.3%) (3.0%) (2.5%) (2.0%) (1.8%) (1.2%)

Toronto as a Global City: Scorecard on Prosperity 2014 / 31

Economic Indicators
Residential building permit growth # cities ranked: 13

Definition
The percentage increase in the number of residential building permits was calculated for the five year period from 2007-2012 for all metros

Significance
Residential building permits growth indicates the rate of investment activity in the residential sector. As an important sector of the economy, housing is a proxy for confidence in the growth of the metro region.

What About Toronto?
Toronto, ranked third, improved steadily over the past three Scorecards climbing from -3.7% in 2011 to 3.6% this year. Recently, Sydney’s hot market led to 5.8% growth in permits, making Sydney #1. Unlike the previous three Scorecards, not every Canadian CMA outperformed the U.S. metros. Vancouver (#7) suffered from a drop in activity, while San Francisco (#6) saw a rise in building permits for the first time in five years. The six other U.S. metros continue to show declines, albeit less severe. Toronto is in a strong position, up one spot from 5th to 4th place, and regains its “A” grade. With just under 22% of the local workforce employed in professional occupations, Toronto stays ahead of all other North American metro areas, and moved past Paris, now in fifth place. Hong Kong stays #1, after outscoring London in Scorecard 2013. London stays in 3rd place behind Sydney. Toronto is the 4th of 5 Canadian CMAs to top the rankings and earn “A” grades. Toronto’s corporate tax burden is 56% of the U.S. average; by contrast, Paris – ranked last – is 187% of the U.S. average. In the absence of new data, rankings remain the same as in Scorecard 2013

The Grade
1. Sydney A 2. Halifax A 3. Toronto A 4. Montréal A 5. Calgary A 6. San Francisco A (5.8%) (4.0%) (3.6%) (3.1%) (0.5%) (0.3%) 7. Vancouver 8. Boston 9. Dallas 10. Seattle 11. Los Angeles 12. New York 13. Chicago B B B B B C D (-1.0%) (-1.5%) (-4.2%) (-4.5%) (-6.7%) (-12.2%) (-19.2%)

Data unavailable for Barcelona, Berlin, Hong Kong, London, Madrid, Milan, Oslo, Paris, Shanghai, Stockholm, Tokyo.

Professional employment** # cities ranked: 23

Based on the Statistics Canada definition, the share of total employment in 40 occupations, including but not limited to: engineers, physicians, judges, and professors. Comparable data are based on the following years: Canada: 2012 U.S., Sydney, Hong Kong: 2011 Europe, Tokyo: 2010 The total taxes paid by similar corporations in a particular location and industry, calculated as a percentage of total taxes paid by similar corporations across the United States. Data is for 2011, unchanged from Scorecard 2013.

Again, this is included as part of the “creative cities” agenda. High levels of employment in knowledgedriven professional occupations are correlated positively with an attractive metro region.

1. Hong Kong 2. Sydney 3. London 4. Toronto 5. Paris 6. Montréal 7. Calgary 8. Stockholm 9. Boston 10. San Francisco 11. Vancouver 12. Tokyo

A (26.1%) A (25.5%) A (22.7%) A (21.9%) A (21.8%) B (20.2%) B (20.1%) B (18.8%) B (18.7%) B (18.6%) B (18.2%) B (17.9%)

13. New York 14. Halifax 15. Seattle 16. Oslo 17. Chicago 18. Madrid 19. Los Angeles 20. Dallas 21. Berlin 22. Milan 23. Barcelona

B B C C C C C C D D D

(17.8%) (17.7%) (16.5%) (15.6%) (15.6%) (15.6%) (15.5%) (13.8%) (10.6%) (10.2%) (8.6%)

Data unavailable for Shanghai.

Total Tax Index (TTI) # cities ranked: 19

The index is designed to compare the total tax burden faced by companies in each city, including: income taxes, capital taxes, sales taxes, property taxes, miscellaneous local business taxes, and statutory labour costs. Metro regions with lower tax burdens are more attractive to new business and investment.

1. Vancouver 2. Halifax 3. Calgary 4. Toronto 5. Montréal 6. Shanghai 7. London 8. Boston 9. Seattle

A A A A A B B B B

(49.2) (49.4) (50.7) (56.0) (62.1) (68.0) (79.8) (91.9) (92.6)

10. Chicago 11. Dallas 12. New York 13. Los Angeles 14. San Francisco 15. Berlin 16. Sydney 17. Milan 18. Tokyo 19. Paris

B B B B B C C C D D

(95.0) (98.6) (101.3) (105.1) (106.6) (118.2) (126.8) (150.8) (162.6) (187.1)

Data unavailable for Barcelona, Hong Kong, Madrid, Oslo, Stockholm.

32 / Toronto Region Board of Trade

Economic Indicators
Average office rents # cities ranked: 23

Definition
This is a measure of the total rental cost of downtown Class A office space, based on U.S. dollars per square foot. Data is for 2012.

Significance
This indicator is a measure of the cost of doing business. Metro regions with lower office rents are more attractive to new business and investment.

What About Toronto?
Toronto improved from 16th to 11th place, as office rents became more affordable ($68 per square foot (2012), compared to $71.13 per square foot in 2011. Nonetheless, rent for office space in Toronto is more than double that of first-place Dallas. For the first time, Hong Kong topped London as the most expensive place to rent office space. Tokyo, London and Hong Kong outdistance the field when it comes to high office rents. As a result, 15 metros earn “A” grades, including New York. With 21.4 patents per 100,000 population, Toronto ranks 10th, two places higher than last year but still a “D” performer. San Francisco dominates, with nearly twice the number of patents as second-place Seattle. Toronto lags behind all U.S. metro areas as well as Tokyo. As in past Scorecards, Toronto does poorly here, ranking 9th with a “D” grade. However, among all 12 metro, Toronto is the only one to see a rise in Venture Capital Investment since last year, however modest. San Francisco dominates as it has done since Scorecard 2010; Boston consistently follows as #2. Dallas, New York, Chicago, and Calgary experienced the biggest losses since last year.

The Grade
1. Dallas 2. Barcelona 3. Berlin 4. Seattle 5. Los Angeles 6. Montréal 7. Chicago 8. Madrid 9. Oslo 10. Vancouver 11. Toronto 12. Calgary A A A A A A A A A A A A ($30.96) ($34.65) ($36.57) ($41.89) ($46.17) ($47.30) ($49.15) ($51.89) ($64.91) ($67.20) ($68.00) ($70.59) 13. Milan 14. New York 15. Stockholm 16. Boston 17. San Francisco 18. Shanghai 19. Sydney 20. Paris 21. Tokyo 22. London 23. Hong Kong A A A B B B B B D D D ($74.21) ($74.93) ($76.35) ($87.50) ($90.00) ($116.36) ($119.04) ($119.78) ($197.27) ($219.81) ($246.30)

Data unavailable for Halifax.

Number of patents per 100,000 population # cities ranked: 24

Using utility patents from the U.S. Patents and Trademark Office, total patents are divided by population to measure the degree of new product development or product improvement. Data is for 2011.

This is a proxy for the amount of creativity taking place in a metro area.

1. San Francisco 2. Seattle 3. Boston 4. Tokyo 5. Los Angeles 6. New York 7. Dallas 8. Chicago 9. Sydney 10. Toronto 11. Vancouver 12. Calgary 1. San Francisco 2. Boston 3. Seattle 4. New York 5. Los Angeles 6. Vancouver

A B C C D D D D D D D D

(220.7) (120.4) (109.9) (58.6) (43.7) (36.0) (35.8) (33.1) (21.5) (21.4) (20.5) (18.8)

13. Stockholm 14. Montréal 15. Oslo 16. Paris 17. Berlin 18. Halifax 19. Hong Kong 20. Milan 21. London 22. Barcelona 23. Shanghai 24. Madrid 7. Montréal 8. Halifax 9. Toronto 10. Chicago 11. Calgary 12. Dallas

D D D D D D D D D D D D

(16.7) (15.0) (12.9) (9.1) (7.8) (7.8) (6.6) (5.3) (3.7) (3.2) (2.0) (1.8)

Venture Capital Investment per million $ of GDP # cities ranked: 12

This measures the average investment in new start-ups per $1-million GDP (U.S. dollars). Data is for 2012.

In line with the “creative cities” theory, high levels of Venture Capital Investment signal an attractive metro region.

A ($17,447.5) B ($10,101.1) D ($3,889.8) D ($2,067.1) D ($1,883.0) D ($1,727.3)

D ($1,542.6) D ($1,456.0) D ($1,420.9) D ($1,178.3) D ($781.1) D ($332.7)

Data unavailable for Barcelona, Berlin, Hong Kong, London, Madrid, Milan, Oslo, Paris, Shanghai, Stockholm, Sydney, Tokyo.

Toronto as a Global City: Scorecard on Prosperity 2014 / 33

Economic Indicators
Average investment per Venture Capital Firm # cities ranked: 12

Definition
This indicator is a measure of the average investment of companies involved in Venture Capital Financing. The unit of measure is thousands of U.S. dollars. Data is for 2012.

Significance
In line with the “creative cities” theory, high levels of Venture Capital Investment signal an attractive metro region.

What About Toronto?
Ranked 9th, Toronto is well below all U.S. metro areas, as it has been in every Scorecard except 2011 (when Chicago was lowest). Overall rankings are similar to Scorecard 2013, with all Canadian CMAs scoring “D” grades. Toronto’s average investment of $4.19 million per venture capital firm is less than one-quarter of first place Dallas, and less than half of the weakest U.S. metro, Los Angeles. Similar to last year, Vancouver was the best Canadian CMA, although investment levels are almost the same as Toronto’s. Toronto is consistently at the bottom of the IPO rankings; this year is Toronto’s lowest at #22. The average size of an IPO in Toronto, at $46 million (measured in millions of US$), is only 7% of the value of top-rated Tokyo, #1 for the second year in a row. IPO values fell for many metros, but Calgary and Halifax made significant gains.

The Grade
1. Dallas 2. Chicago 3. Seattle 4. San Francisco 5. Boston 6. New York A B B C C C ($17,009) ($11,293) ($10,866) ($10,305) ($9,423) ($9,303) 7. Los Angeles 8. Vancouver 9. Toronto 10. Calgary 11. Montréal 12. Halifax C D D D D D ($8,838) ($4,239) ($4,191) ($3,311) ($3,013) ($2,352)

Data unavailable for Barcelona, Berlin, Hong Kong, London, Madrid, Milan, Oslo, Paris, Shanghai, Stockholm, Sydney, Tokyo.

Average size of IPOs # cities ranked: 24

This is a measure of the monetary value of initial public offerings (IPOs). Generally, IPOs are issued by smaller companies seeking capital to expand. But large companies can also issue an IPO. Data is an average from 2005-2006 and 2009-2012.

Though it can be seen as a risky investment, the size of an IPO typically appraises the net worth of smaller companies.

1. Tokyo 2. Madrid 3. Milan 4. New York 5. Halifax 6. Chicago 7. Paris 8. Berlin 9. Calgary 10. Shanghai 11. Barcelona 12. Seattle

A A B B B C C C C C C C

($628) ($600) ($360) ($333) ($321) ($296) ($248) ($241) ($238) ($235) ($221) ($171)

13. Oslo 14. Sydney 15. Boston 16. London 17. San Francisco 18. Dallas 19. Los Angeles 20. Montréal 21. Hong Kong 22. Toronto 23. Vancouver 24. Stockholm

D D D D D D D D D D D D

($140) ($129) ($119) ($102) ($89) ($61) ($60) ($52) ($52) ($46) ($28) ($12)

34 / Toronto Region Board of Trade

Economic Indicators
Market size # cities ranked: 24

Definition
This is a measure of the total income of the population within a 500-mile radius of the metro area (measured in trillions of U.S. dollars). Data is for 2012.

Significance
The greater the purchasing power of the broad regional market, the more attractive the metro region is as a place for new business and investment.

What About Toronto?
Ever since this indicator was introduced in Scorecard 2011, Toronto has ranked 5th. With a market value of $5.52 trillion, Toronto has the wealthiest market in North America. Paris, Milan, and London continue as the top three metro markets, accessible to dense, relatively wealthy European populations. This year, Milan has surpassed London to rank second. Metros like Sydney, Calgary, Seattle and Vancouver are out of range of dense, highly populated areas and rank at the bottom.

The Grade
1. Paris 2. Milan 3. London 4. Berlin 5. Toronto 6. New York 7. Montréal 8. Boston 9. Chicago 10. Tokyo 11. Shanghai 12. Barcelona A A A B B B B C C C C C ($8,285) ($6,620) ($6,405) ($5,809) ($5,522) ($4,733) ($4,340) ($3,880) ($3,617) ($3,363) ($2,911) ($2,843) 13. Hong Kong 14. Los Angeles 15. Dallas 16. San Francisco 17. Madrid 18. Stockholm 19. Oslo 20. Halifax 21. Vancouver 22. Seattle 23. Calgary 24. Sydney D D D D D D D D D D D D ($2,269) ($2,024) ($1,818) ($1,791) ($1,589) ($1,519) ($1,228) ($991) ($710) ($694) ($508) ($280)

Sources: Conference Board of Canada; Statistics Canada; Bureau of Labor Statistics; Moody’s Economy.com; Organisation for Economic Co-operation and Development; Eurostat; International Monetary Fund; KPMG; Science-Metrix; CB Richard Ellis; Australian Bureau of Statistics; Shanghai Statistical Yearbook; Government of Hong Kong; Thomson Reuters; Euromonitor International. *Disposable income from Eurostat is only available at the regional level. The boundaries of these “regions” are not strictly defined and vary greatly across European metro areas. **Occupational data from the Bureau of Labor Statistics was partially secure for some metro areas. Data was either missing or not available for various occupational categories. Therefore, the ranking for U.S. Metropolitan Statistical Areas is under-estimated.

Toronto as a Global City: Scorecard on Prosperity 2014 / 35

Focus on Toronto’s Economy
Ranked 12th, Toronto’s position has budged little since Scorecard 2010, when it ranked 11th. However, due to the deepening economic crises in parts of Europe, Toronto improves from a “C” grade in Scorecard 2013 to a “B”. Toronto appears to have weathered the economic recession and its aftermath better than many others. A closer look at the indicators reveals that Toronto has its best suite of results ever on the Economy, earning six “A” grades, compared to an average of only three in previous Scorecards. While some of Toronto’s gains come at the expense of withering economies in Barcelona and Madrid, Toronto’s rankings did improve on ten indicators. An improvement in the rankings was not always accompanied by improvements in real values, but still reflects gains relative to other metros. Still, Toronto region’s relative success is very much the story of resilience and high economic potential rather than sustained economic growth and momentum in absolute terms. However, in the North American context, Toronto was unable to gain any ground against the four top U.S. metros, although it has nearly drawn even with New York. Furthermore, Toronto has fallen further behind Calgary, the most consistently successful Canadian metro in the Economy domain. Toronto remains ahead of Montréal, Vancouver, and Halifax. Among these CMAs, only Montréal showed significant improvement, moving from 17th to 13th place. Compared to Scorecard 2013, Toronto’s most improved rankings appear in: • Real GDP growth (from #18 to #12): In this edition of the Scorecard, Toronto earns its highest ranking ever on real GDP growth. Toronto’s rise comes during a period of weaker growth for many other metros; all metros except Dallas and Boston experienced lower real GDP growth. With an average annual increase of only 0.7 percent between 2007 and 2012, Toronto’s real GDP growth was in fact below average rates for each of the previous Scorecard periods.10

• Productivity growth (from #22 to #15): Similar to real GDP growth, productivity growth for Toronto at -0.4 percent was in fact, its lowest ever, but was better than nine other metros. By comparison, Toronto ranked 22nd in Scorecard 2013, with average annual productivity growth of 0.1 percent. Sharp drops in Paris, London, Sydney and Hong Kong lifted Toronto in the rankings. • Employment growth (from #12 to #9): Employment growth is a bright spot. Toronto’s annual employment growth in 2007-2012 averaged 1.2 percent, compared to only 1.0 percent in the 2004-2009 period. Toronto moved up three places in the rankings to 9th place, a position it enjoyed in Scorecard 2012, when employment growth averaged 2 percent (2003-2008). By contrast, Madrid, Seattle, Shanghai, and Berlin all suffered from steep drops in employment growth compared to last year. All U.S. metros fell below Toronto during this period. Meanwhile, Calgary continues to be among the leaders, ranked second with 1.7 percent average annual employment growth. Oslo tops the field with 1.9 percent. • Income growth (from #8 to #5): With a 4.8 percent increase in income between 2007 and 2012, Toronto scored its highest ranking ever on income growth (#5). Nonetheless, income growth at 5.0 percent was slightly greater in the 2004-2009 period, as reported in Scorecard 2013, but this was only eighth best among the 24 metros. Apart from Hong Kong, income growth was also lower for every other metro, compared to Scorecard 2013. Toronto, along with Calgary (#3) and Vancouver (#4) had higher income growth than all U.S. metros. Shanghai (8.5 percent) and Hong Kong (7.3 percent) ranked first and second. On measures of income per capita, Toronto fares less well, ranking 13th.

10 For example, average annual growth in the 2004 to 2009 period, as reported in Scorecard 2013, was 1.5 percent; in turn, below the 2.2 percent growth between 2003 and 2008, when Toronto ranked 16th.

36 / Toronto Region Board of Trade

• Office rents (from #16 to #11): Rents for office space in downtown Toronto dropped from $71.13 per square foot in 2011 to $68 in 2012, helping to boost Toronto five places in the rankings. At the same time, several U.S. metros experienced sizeable increases in office rents, making room for Toronto to move up; in particular, Boston, New York, and San Francisco. Tokyo, London, and Hong Kong remain the most expensive places to rent Class A office space. At $246.30 per square foot, Hong Kong is more than triple the cost of Toronto, and more than seven times greater than Dallas, the least expensive metro. Toronto’s strongest economic indicators have remained consistent throughout all Scorecards, and these include: • Residential building permit growth: The number of residential building permits in Toronto has climbed steadily ever since Scorecard 2010. Toronto, ranked third, saw permit activity grow an average of 3.6 percent annually in the 2007-2012 period, compared to 3.1 percent in the previous five-year period. This marks the turnaround of a depressed market in the 2005-2010 (only 0.4 percent) and 2004-2009 (-3.7 percent) periods. Even now, seven of 13 metros continue to have negative average growth, including Vancouver and all U.S. metros except San Francisco, which showed modest growth for the first time. • Professional employment and high-tech employment: Toronto’s solid professional employment sector is a mainstay of the economy. With 21.9 percent of the local workforce employed in professional occupations, Toronto edges past Paris to rank fourth, up one place from Scorecard 2013. Hong Kong is the top-ranked metro (26.1 percent), followed by Sydney and London. Toronto stays ahead of all other North American metro areas. Boston (18.7 percent) is the top-ranked U.S. metro.

Toronto remains the best Canadian CMA in high-tech employment and keeps its 8th place ranking. Within North America, Seattle, Boston, San Francisco, and Dallas remain as powerhouses, but Paris (#1) and Stockholm (#2) surpassed them all. 9.3 percent of Paris’ labour force is employed in the high-tech sector. Tokyo remains the fifth-best metro. • Total Tax Index (TTI): Toronto’s fourth place ranking has been consistent since Scorecard 2011, but starting in Scorecard 2013, Toronto has garnered a much more favourable TTI of 56, down from 67.6. In other words, Toronto’s corporate tax burden is only 56 percent of the U.S. average. All Canadian metros remain strong, positioned in the top five spots. Vancouver is best with a TTI of 49.2. Paris continues for the fifth straight year to be the most heavily burdened, with a TTI of 187.1. • Market Size: Toronto ranks fifth on this indicator, best of all North American metro regions. The Toronto CMA benefits greatly from a location with access to large and wealthy markets in the U.S. north-east and mid-west. Toronto draws from a catchment area of about 120 million people. Four European metros draw similar (but even stronger) advantages from their respective locations: Paris, Milan, London, and Berlin. From the earliest Scorecards, Toronto’s vulnerabilities in the Economy domain were evident, including the fundamentals of GDP per capita and productivity per capita, as well as those indicators most closely allied with innovation and entrepreneurship: venture capital investment, IPOs, and patents. On the positive side, Toronto is showing relative progress on two related economic indicators previously cited as profound weaknesses; namely, per capita real GDP growth, and productivity growth.

Toronto as a Global City: Scorecard on Prosperity 2014 / 37

• Real GDP per capita: Toronto ranks 17th, one place higher than in Scorecard 2013, but still a “D” grade metro. Toronto’s real per capita GDP ranking had been dropping steadily since Scorecard 2010, going from 10th to 16th to 18th. A year later and Toronto has edged up slightly, largely attributable to Madrid’s ill fortunes. At $39,008, Toronto’s real per capita GDP is less than half that of Oslo ($102,795), now ranked number one. San Francisco has dropped out of first place to rank fourth, while Calgary and Boston surged ahead. Calgary now ranks second-best with real GDP per capita at $65,991. Resource-based economies like Calgary and Oslo are strongest. • Productivity: Year after year, Scorecards have identified productivity as a weakness common to all Canadian CMAs, typically below all U.S. metros. This year, Calgary has broken the pattern to emerge as a “B” metro in tenth place, ahead of one U.S. metro; namely, Chicago. Results for Toronto are not as encouraging. Ranked 17th on productivity, Toronto may be up two places from Scorecard 2013, but only because Madrid and Barcelona have slipped below. At $77,067, productivity levels are just under half those of Paris, ranked first. San Francisco (#3), New York (#5), and Boston (#7) each drop two spots but still remain among the top performing metros. Paris and Oslo out-performed these three U.S. metros, accounting for the lower rankings. • Unemployment: Toronto’s unemployment rate reached 8.5 percent in 2012, improved from 9.6 percent reported in Scorecard 2013. Toronto’s ranking at 17th is one up from last year, as the employment situation in Paris worsened. Toronto continues to have the highest unemployment rate of all Canadian CMAs, but only marginally below Montréal. Calgary has rebounded from its highest rate of 6.7 percent, recorded in Scorecard 2013, to an unemployment rate of 4.8 percent, fifth best among all 24 metros. All three Asian metros do well, led by Hong Kong (#1), with an unemployment rate of 3.3 percent. Oslo ranks second, followed by Tokyo and Shanghai.

• Size of IPOs: Toronto’s 22nd place ranking is the worst to date, down two spots from Scorecard 2013, and four from the previous year. The narrative, however, is basically the same: the value of Toronto’s IPOs at $46 million is negligible compared to the leaders; Tokyo at $628 million, and Madrid at $600 million. New York (#4) is the highest-ranking metro in North America, with IPOs valued at $333 million. For the first time, Canadian metros have ranked among the top ten: Halifax bounded into fifth place, with IPOs valued at $321 million; and Calgary is seventh at $238 million. • Venture Capital Investment: Despite improving two places in the ranking on investment per million dollars of GDP, Toronto is a weak market when it comes to attracting venture capital investment. Toronto ranks ninth out of 12, with investment levels just over $1,420 per million GDP — a bleak result compared to the consistently top-ranked metro, San Francisco at $17,447, or second-place Boston at $10,101. No Canadian CMA gets close to the U.S. leaders. When it comes to average investment per venture capital firm, Toronto stays in ninth place for the fifth year in a row. Like all Canadian CMAs, Toronto is far behind the U.S. metros; even the weakest, Los Angeles ($8.4 million), has more than twice the level of investment as Toronto ($4.2). Dallas keeps its number one ranking, a position held since Scorecard 2010. With an average per firm investment of $117,009, Dallas is the only metro to earn an “A”.

38 / Toronto Region Board of Trade

• Patents: Patent activity, along with indicators for Venture Capital Investment and IPOs, tell us something about how Toronto performs as an innovative city. Toronto ranks tenth with a “D” grade, down one spot from Scorecard 2013. Although the number of patents increased (slightly) from 18.8 patents per 100,000 population to 21.4, Toronto is light-years away from San Francisco, Seattle, and Boston — three metros who have consistently out-performed all others. Each of these three metros managed to widen the gap on this indicator, securing even more patents proportionally than in Scorecards 2013 and 2012. At 220.7 patents per 100,000 population, San Francisco commanded the field to become the only “A” metro. Seattle, ranked #2, had 120.4 patents per 100,000 population; close behind was Boston (109.9). Toronto does best among all Canadian metros, but continues to fall behind all U.S. metros.

Concluding Observations on the Economy
Toronto improves to a “B” performer in the Economy domain, mostly because some European metros have fallen to the bottom of the pack. However, Toronto region’s story is very much the story of resilience and high economic potential rather than sustained economic growth and momentum in absolute terms. Toronto stays in 12th spot, the same as in Scorecard 2013, and with Calgary moving up three places to rank fifth, the gap between Toronto and Canada’s best-performing CMA has widened slightly. Furthermore, Toronto continues to lag way behind the top U.S. performers: San Francisco, Boston, Seattle and Dallas, who captured the top four spots. With poor results on key indicators such as real GDP per capita, productivity, patents, venture capital investment and IPOs, Toronto is falling behind on measures of wealth and innovation. Indeed, previous editions of the Scorecard have flagged Toronto’s weaknesses on key indicators of innovation, noting that this is a pan-Canadian problem. Toronto’s strong points include a strong share of employment in the professional occupations, a good high-tech employment base, a large market size, a relatively affordable business environment, and a well-educated labour force. However, as previous editions of the Scorecard have noted, Toronto needs to improve its productivity and attract more investment in order to catch up to the global economic powerhouses.

Toronto as a Global City: Scorecard on Prosperity 2014 / 39

6
Rank

| LABOUR ATTRACTIVENESS

Labour Attractiveness Overall
Metro Area Grade (normalization score)

Introduction
The Labour Attractiveness domain contributes to our understanding of how 24 metro areas are performing on socio-economic and environmental factors, based on 15 indicators. While the overall results are similar to last year’s Scorecard on Prosperity, Toronto has broken through the “B” barrier to earn an “A” grade and third-place ranking — its best placement since Scorecard 2010 (#2). For the fourth consecutive year, Paris and London rank first and second. Furthermore, nine of the top ten performing metros stay in the top ten; Oslo (#11) is pushed down by Montréal (#8). Along with Toronto and Montréal, Calgary and Vancouver improved in the rankings compared to last year, while Halifax stayed in 12th place. Again, just as in Scorecards 2012 and 2013, only eight metros earn “B” grades or better. Four of these eight are Canadian metros; four are European. The dominance of European metro regions in this domain is showing signs of weakening; half earn “C” or “D” grades. But Paris (#1), London (#2), Barcelona (#5) and Madrid (#7) continue their string of high scores, established in the very first Scorecard in 2009. For Barcelona and Madrid, success comes from having a young labour force, low homicide rates, decent transportation results, and the good fortune of a pleasant climate. Paris and London have individual strengths that make them attractive to labour, but they have in common good transportation alternatives, a strong cultural sector, and serve as a huge draw for international visitors. By contrast, Berlin and Milan continue to fall below all other European metros, ranking 14th and 20th

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Paris London Toronto Calgary Barcelona Vancouver Madrid Montréal Stockholm Sydney Oslo Halifax Hong Kong Berlin Seattle Tokyo New York Dallas Chicago Milan Boston San Francisco Los Angeles Shanghai

A A A A B B B B C C C C C C D D D D D D D D D D

0.66 0.64 0.63 0.61 0.59 0.57 0.55 0.54 0.54 0.54 0.53 0.52 0.49 0.48 0.48 0.48 0.48 0.45 0.44 0.44 0.43 0.43 0.42 0.42

40 / Toronto Region Board of Trade

respectively. Both metro areas struggle with weak population growth, and attracting a young labour force (population 25-34 years of age). Furthermore, only 6.5 percent of Berlin’s population is foreign-born, while Milan is further disadvantaged by its last-place ranking on universityeducated residents. The two Nordic metros, Stockholm and Oslo, stay in the top half of the rankings but earn only “C” grades; they share in common an inhospitable climate (ranked #24 and #23 respectively). All five Canadian Census Metropolitan Areas (CMAs) are in the top half of the rankings, led by Toronto (#3) and Calgary (#4). This is the first Scorecard since 2010 where two Canadian CMAs earn “A” grades in this domain. And for the third year in a row, Canadian CMAs out-perform all seven metro regions in the U.S., each with a “D” grade. Even those metros with the top Economy results stumble on Labour Attractiveness: San Francisco, Boston, Seattle, and Dallas. At #15, Seattle is the highest-ranked U.S. metro. The weak results for U.S. metros can be attributed in part to the rise of certain European metros, such as Oslo and Stockholm, after 2011 when data for key indicators, such as the Gini coefficient, became available. However, poor outcomes on indicators such as homicides, travel-to-work mode, income inequality, and teacher-student ratio continue to plague U.S. metros.

In addition, Paris has a relatively young and well-educated labour force, and ranks well on measures of domestic water usage. Compared to Scorecard 2013, Paris shows a rise in income inequality, although still ranking well at number seven. With the availability of updated Gini coefficient data, all metros in Europe except Stockholm are worse off, showing increases in income inequality. Paris’ dominance in Labour Attractiveness is marred by two key elements: 1. Paris is plagued with long commute times (over 67 minutes). 2. Paris lacks diversity; only 10 percent of Paris’ citizens are foreign-born, not half as much as Montréal and not even one-fourth as much as Toronto (47.9 percent). Looking back to Scorecard 2010, Paris has made gains in air quality (rising from #6 to #1), and in the share of its population with a Bachelor’s degree, moving from 11th to sixth. One negative trend has emerged: the decline in the share of the young labour force from 17.2 percent to 16 percent. Compared to other metros, Paris still remains a strong magnet for 25-34 year olds, but signs of weakening have appeared. London has been the second-best metro on Labour Attractiveness since Scorecard 2011, consistently trailing Paris by a few percentage points. Like Paris, London earns “A” or “B” grades on all but two indicators but ranks among the top three metros on only two indicators, compared to Paris’ five. For the fifth year in a row, London is the top metro for attracting international visitors and only one of two metros to score an “A” grade on this indicator (Hong Kong is second). London’s other strengths come from a diverse population (ranked third behind Toronto and Vancouver), a young labour force, a vibrant cultural sector, and a good record on non-automobile commuting. However, London’s attractiveness is tarnished by very poor commuting times (74 minutes), and relatively high homicide rates — the second-worst outside the U.S. The rise in London’s homicide rate to 3.8 persons per 100,000 population is the most notable change since Scorecard 2010, when it was 2.2, and

Who’s Best?
Paris retains its number one ranking for the fourth year in a row, earning “A” or “B” grades on all but two indicators. Paris ranks among the top three metros on one-third of all indicators, described as follows: • a strong cultural occupation sector (#1) • healthy air quality (#1) • a low homicide rate (#3) • a favourable travel mode (non-auto commuting) (#3) • attractiveness to international visitors (#3)

Toronto as a Global City: Scorecard on Prosperity 2014 / 41

London ranked 6th — well above its current 18th place. Income inequality in London has worsened since Scorecard 2013, making it the least equal metro among the European cities. And while London has progressed steadily with regard to its university-educated population, London ranks only 15th, with 29.9 percent having Bachelor’s degrees, still well below Paris (#6), at 35.5 percent. In Scorecard 2010, fewer than 20 percent of Londoners held Bachelor’s degrees, putting London in 21st place. Toronto claims third place, rising two spots from Scorecards 2013 and 2012, and moving from a “B” to an “A” grade. On Labour Attractiveness, Toronto outshines Calgary and every other North American metro. Toronto earns “A” or “B” grades on 12 of 15 indicators, continuing to dominate the field on measures of population diversity, now with 47.9 percent of the population foreign-born. Factoring in steady population growth (#6), a healthy environment (air quality (#8) and water consumption (#2), and impressive student-teacher ratios (#3), Toronto has a lot to attract newcomers from within Canada and abroad. However, Toronto continues to be plagued by poor results on both transportation indicators; namely, mode of travel to work and commute times. Calgary has been a consistent leader on Labour Attractiveness and re-establishes itself as the fourth-best metro, after slipping to number six in Scorecard 2013. Calgary continues to benefit from high population growth (#2), relatively affordable housing (#1), low commute times (#1), and a young labour force (#3 on 25-34 year olds). Furthermore, Calgary has made gains on a few indicators since Scorecard 2010, including: a) an increasing share of the population with Bachelor’s degrees or higher; b) lower income inequality; c) lower homicide rates; and d) reduced levels of water consumption. Calgary has also improved its teacherstudent ratio during the past five years, but remains in the bottom half of the rankings. These are strong markers of an attractive metropolitan area, but Calgary struggles to improve on increasing employment in cultural occupations; and is stuck near the bottom when it comes to attracting international visitors (#22). Perhaps most significantly,

Calgary’s share of non-automobile commuters actually went down from 23.2 percent in Scorecard 2010 to 21.9 percent in this edition. While not a dramatic decline, the trend is in the wrong direction. Furthermore, Calgary is only one of three metropolitan areas to show a decline of more than one percentage point. (Sydney’s is the most dramatic, falling from 33 percent to 26.7 percent) Last year’s third and fourth ranked metros, Madrid and Barcelona remain in the top ten, where they have been consistently placed. However, higher income inequality in both metros, along with worsening commuting times in Madrid, and dismal population growth in Barcelona contributed to their lower rankings in Scorecard 2014.

42 / Toronto Region Board of Trade

Labour Attractiveness Definition Indicators
Population 25-34 years old # cities ranked: 23 The proportion of the population between the ages of 25 and 34, as per: Canada, U.S., Hong Kong: 2012 Europe, Sydney: 2011 Tokyo, 2010

Significance
This age group represents the mobile, educated, and creative core of the talented labour pool. A metro area able to attract workers in this age cohort will be better positioned to thrive in the future.

What About Toronto?
Toronto ranks 14th, with 15.1% of its population in this age group. At 19% and 18% respectively, Madrid and Barcelona have the highest proportion of 25 to 34 year olds. Calgary (#3) is the top-ranking North American metro area with 17.9% of its population in this cohort.

The Grade
1. Madrid 2. Barcelona 3. Calgary 4. London 5. Oslo 6. Paris 7. Sydney 8. Seattle 9. Vancouver 10. San Francisco 11. Hong Kong 12. Halifax A A A B B B B C C C C C (19.0%) (18.0%) (17.9%) (17.0%) (16.0%) (16.0%) (16.0%) (15.6%) (15.5%) (15.2%) (15.2%) (15.1%) 13. Tokyo 14. Toronto 15. Stockholm 16. Los Angeles 17. Montréal 18. Dallas 19. New York 20. Chicago 21. Boston 22. Berlin 23. Milan C C C C C C D D D D D (15.1%) (15.1%) (15.0%) (14.8%) (14.8%) (14.8%) (14.5%) (14.4%) (14.2%) (14.0%) (13.0%)

Data not available for Shanghai. Immigrant population # cities ranked: 24 The proportion of the population who were foreignborn. Hong Kong: 2012 Canada, U.S., Sydney, Tokyo, Shanghai: 2011 Europe (except London): 2009 London: 2011 With lower birth rates, immigration is critical to boost the future workforce. New immigrants seek open-minded and diverse places, which is why a metro area with a high proportion of foreign-born residents scores best. With new 2011 Census data, Toronto has widened its lead over all other metros. Just under 48% of the population is foreign-born, keeping Toronto in 1st place, followed by the only other “A” metro, Vancouver (42.7%). London, Sydney, and Los Angeles are the only other regions where more than one-third of the population is foreign-born. Shanghai (1.1%), Barcelona (2.7%) and Tokyo (3.1%) have the fewest immigrants. Toronto’s 8th place is an improvement over last year’s 11th place and good enough for a “B” grade. With fully one-third of the population having at least a Bachelor’s degree, Toronto is the topranked Canadian CMA. And Toronto surpassed Los Angeles and Dallas. San Francisco (43.9%) and Boston (43.1%) remain the top two, well ahead of the rest. 1. Toronto 2. Vancouver 3. London 4. Sydney 5. Los Angeles 6. San Francisco 7. New York 8. Calgary 9. Montréal 10. Chicago 11. Dallas 12. Seattle A A B B B B B B C C C C (47.9%) (42.7%) (35.9%) (34.2%) (34.1%) (29.6%) (28.9%) (28.5%) (24.3%) (17.8%) (17.5%) (16.9%) 13. Boston 14. Milan 15. Stockholm 16. Paris 17. Halifax 18. Oslo 19. Hong Kong 20. Berlin 21. Madrid 22. Tokyo 23. Barcelona 24. Shanghai C C D D D D D D D D D D (16.7%) (13.9%) (12.4%) (10.0%) (9.8%) (7.9%) (7.4%) (6.5%) (3.3%) (3.1%) (2.7%) (1.1%)

Population with at least a Bachelor’s degree # cities ranked: 23

The percentage of the population aged 25 and over with at least a Bachelor’s degree, based on: Hong Kong: 2012 Canada, U.S., Sydney, Shanghai: 2011 Tokyo: 2010 Europe: 2009

Universityeducated population figures are commonly used as an indicator of a professional labour force. The higher the percentage, the higher the score.

1. San Francisco 2. Boston 3. Seattle 4. New York 5. Oslo 6. Paris 7. Toronto 8. Calgary 9. Chicago 10. Stockholm 11. Dallas 12. Vancouver

A A A A B B B B B B B B

(43.9%) (43.1%) (37.1%) (36.2%) (35.6%) (35.3%) (33.3%) (32.6%) (32.2%) (32.2%) (31.4%) (31.1%)

13. Los Angeles 14. Halifax 15. London 16. Berlin 17. Hong Kong 18. Montréal 19. Tokyo 20. Sydney 21. Madrid 22. Shanghai 23. Milan

B B B C C C C C C C D

(31.0%) (30.0%) (29.9%) (28.1%) (27.5%) (26.5%) (26.2%) (24.1%) (22.9%) (22.7%) (13.7%)

Data unavailable for Barcelona.

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Labour Attractiveness Definition Indicators
Cultural occupations # cities ranked: 23 The proportion of the employed workforce employed in cultural occupations, based on: Canada: 2012 U.S., Hong Kong, Shanghai: 2011 Europe: 2009 Sydney: 2006

Significance
The prevalence of artists, writers, performers, musicians, etc., indicates community that nourishes creativity and promotes culture. A metro area with a higher share of cultural workers will be more attractive.

What About Toronto?
Toronto ranks 15th among 23 metro areas – good enough for a “B” grade, but in the bottom half of the pack. 4.1% of Toronto’s workforce is employed in cultural occupations. In first-ranked Paris, more than 7% are employed in cultural occupations. Among the 5 Canadian CMAs, Montréal ranks highest (#10). Shanghai is the only “D” metro, with fewer than 1% of the population employed in cultural occupations. Toronto returns to 3rd place after slipping to 7th in Scorecard 2013. Halifax continues to dominate the field, with more than double the number of teachers per student as the bottom three metros: San Francisco, Seattle, and Los Angeles. Montréal continues to rank among the best (#2) and the only other “A” metro. Toronto ranks 18th among the 24 metro areas. All Canadian CMAs and Nordic metros rank in the bottom seven on this indicator. With the inclusion of more recent data from 2000-2010, Toronto has “warmed up”, allowing for the shift from 20th to 18th place. The top 2 metro areas remain Barcelona and San Francisco.

The Grade
1. Paris 2. Los Angeles 3. Stockholm 4. Seattle 5. New York 6. London 7. Chicago 8. San Francisco 9. Oslo 10. Montréal A A A A A A A B B B (7.1%) (6.8%) (5.9%) (5.8%) (5.8%) (5.6%) (5.5%) (5.4%) (5.3%) (5.2%) 11. Sydney B (4.9%) 12. Dallas B (4.8%) 13. Boston B (4.3%) 14. Madrid B (4.3%) 15. Toronto B (4.1%) 16. Hong Kong B (4.0%) 17. Vancouver B (3.9%) 18. Halifax C (3.8%) 19. Berlin C (3.7%) 20. Milan C (3.7%) 21. Barcelona C (3.5%) 22. Calgary C (2.7%) 23. Shanghai D (0.7%) Data unavailable for Tokyo.

Number of teachers per 1,000 schoolaged children # cities ranked: 16

The number of elementary and secondary school teachers per 1,000 students aged 5-19 averaged, as per: Canada, Hong Kong: 2012 Data for all other metros is 2011.

This is used as proxy for the education system, and assumes the greater the number of teachers per student population, the better the education.

1. Halifax 2. Montréal 3. Toronto 4. Vancouver 5. Shanghai 6. Dallas 7. Sydney 8. Chicago

A A B B C C C C

(103.0) (92.9) (87.7) (80.6) (73.3) (71.3) (67.8) (67.2)

9. Hong Kong 10. Calgary 11. Tokyo 12. New York 13. Boston 14. San Francisco 15. Seattle 16. Los Angeles

C C C C D D D D

(67.0) (66.3) (60.9) (59.8) (52.9) (49.6) (45.7) (44.1)

Data unavailable for Barcelona, Berlin, London, Madrid, Milan, Oslo, Paris, Stockholm.

Comfortable climate index # cities ranked: 24

The comfortable climate index is a measure of how far the average maximum temperature strays from 15°C in the winter months and from 25°C in the summer, adjusted for hours of sunshine. Data is averaged from 1971-2010.

This is meant to capture the notion of an “ideal climate”. The lower the index, the better. Very hot or very cold places score poorly and have high index values.

1. Barcelona 2. San Francisco 3. Los Angeles 4. Madrid 5. Tokyo 6. Dallas 7. Shanghai 8. New York 9. Boston 10. Sydney 11. Hong Kong 12. Seattle

A A A A A A A A A A A A

(3.4) (4.6) (5.9) (6.3) (7.3) (7.5) (9.1) (9.9) (11.5) (13.7) (14.6) (14.9)

13. Chicago 14. Paris 15. London 16. Milan 17. Calgary 18. Toronto 19. Vancouver 20. Halifax 21. Montréal 22. Berlin 23. Stockholm 24. Oslo

B B B B B B B C C C D D

(15.3) (18.1) (18.3) (18.4) (21.9) (23.7) (24.2) (24.5) (29.2) (33.7) (49.5) (49.8)

44 / Toronto Region Board of Trade

Labour Attractiveness Definition Indicators
Crime: homicide rate # cities ranked: 24 The number of homicides per 100,000 people, based on a 5-year average, as per: Canada, U.S., Hong Kong, Sydney: 2007-2012: Tokyo (2010 single year only); and Europe: 2004-2009

Significance
The lower the homicide rate, the more attractive the city or metro area.

What About Toronto?
Toronto’s homicide rate is improved, returning to the levels reported in Scorecard 2012. Toronto moves from 10th to 8th place with an “A” grade. Once again, San Francisco, Chicago, and Los Angeles have the worst homicide rates, more than twelve times higher than Hong Kong (#1). San Francisco’s rate of 7.2 homicides per 100,000 people is four times that of Toronto. Toronto stays in 14th place with a “C” grade, just behind Montréal. With the availability of new Census data (2011), slight shifts appear in Canadian metros; namely, Halifax, Calgary, and Montréal show less transit and walking; Vancouver (more significantly) and Toronto (marginally) are improved. The basic story remains the same: except New York (at 41%), all North American metro areas lag behind Europe and Asia. Where 29% of Toronto’s commuters choose transit, walking, or cycling, nearly 90% do so in Hong Kong. All three Asian metros earn “A” grades, ranking #1, #2 and #4. Paris comes in 3rd, at 73.7%. Toronto is in 15th place with a 66-minute commute time; unchanged from last year. (Except for Madrid, Barcelona, and Sydney, data is the same as in Scorecard 2013). After New York, Toronto has the longest commute time in North America. Calgary is best, with a 52-minute commute time, a fraction ahead of Oslo.

The Grade
1. Hong Kong 2. Tokyo 3. Paris 4. Madrid 5. Shanghai 6. Calgary 7. Vancouver 8. Toronto 9. Barcelona 10. Montréal 11. Oslo 12. Milan A A A A A A A A A A B B (0.5) (0.9) (1.0) (1.3) (1.3) (1.4) (1.4) (1.8) (2.0) (2.1) (2.1) (2.2) 13. Halifax 14. Stockholm 15. Seattle 16. Boston 17. Sydney 18. London 19. Berlin 20. New York 21. Dallas 22. Los Angeles 23. Chicago 24. San Francisco B B B B B C C C C D D D (2.3) (2.5) (2.5) (2.8) (3.6) (3.8) (4.1) (4.5) (5.2) (6.1) (6.7) (7.2)

Travel to work: transit, walking, and other non-auto # cities ranked: 24

The proportion of the employed labour force that does not drive to work, as per: Canada, U.S., Hong Kong, Shanghai, Sydney: 2011 Europe, Tokyo: 2009

A metro area with a high proportion of non-car commuters is more sustainable. These cities tend to have better access to public transit, better bike paths, and/or better walking paths, making them more attractive.

1. Hong Kong 2. Shanghai 3. Paris 4. Tokyo 5. Madrid 6. London 7. Stockholm 8. Barcelona 9. Berlin 10. Oslo 11. New York 12. Milan

A A A A B B B B B C C C

(88.5%) (74.8%) (73.7%) (68.0%) (60.0%) (59.3%) (51.0%) (49.7%) (49.7%) (43.0%) (41.0%) (33.1%)

13. Montréal 14. Toronto 15. Vancouver 16 Sydney 17. San Francisco 18. Halifax 19. Calgary 20. Boston 21. Chicago 22. Seattle 23. Los Angeles 24. Dallas

C C C C D D D D D D D D

(29.3%) (29.0%) (27.8%) (26.7%) (23.7%) (22.1%) (21.9%) (19.6%) (17.2%) (14.6%) (11.5%) (4.0%)

Commuting time # cities ranked: 22

Calculated as the average time (in minutes) of a trip to and from work, as per: Sydney: 2012 U.S., Tokyo: 2011 Canada, Shanghai: 2010 Europe: 2009

Metro areas associated with low commute times are considered to be more attractive places to live.

1. Calgary 2. Oslo 3. Dallas 4. Milan 5. Seattle 6. Barcelona 7. Los Angeles 8. San Francisco 9. Boston 10. Vancouver 11. Berlin

A A A A A A A A A A A

(52.0) (52.0) (53.1) (53.4) (55.2) (56.0) (57.2) (58.3) (58.5) (60.0) (60.8)

12. Chicago 13. Montréal 14. Sydney 15. Toronto 16. Paris 17. Tokyo 18. New York 19. Stockholm 20. London 21. Madrid 22. Shanghai

A B B B B B B B B B D

(61.9) (62.0) (66.0) (66.0) (67.4) (69.6) (69.8) (70.0) (74.0) (80.0) (100.8)

Data unavailable for Hong Kong, Halifax.

Toronto as a Global City: Scorecard on Prosperity 2014 / 45

Labour Attractiveness Definition Indicators
Housing affordability # cities ranked: 12 The relative spread of the ratio of housing prices to income to the national average in a specific metro area/city. Metro areas where house prices are higher can perform well if the level of income in that metro area is relatively high. Data for U.S. metros is from 2011; Canada: 2012. Gini coefficient # cities ranked: 24 The Gini coefficient measures income inequality by calculating the extent to which the distribution of income among individuals within a country deviates from a perfectly equal distribution. Data is based on 2012, except for Canada, U.S.: 2011.

Significance
Housing affordability is a key factor deciding where to locate. Although bigger, fast-growing cities may have expensive housing, higher incomes may compensate. Cities and metro areas with better housing affordability are more attractive.

What About Toronto?
Toronto stays in the middle of the pack, ranked 6th with a “B” grade, better than most U.S. metros, except Dallas and Chicago, but behind Calgary, Halifax, and Montréal. Vancouver remains Canada’s least affordable metro, but improves from Scorecard 2013. San Francisco slips back to last place, below Vancouver.

The Grade
1. Calgary 2. Halifax 3. Dallas 4. Chicago 5. Montréal 6. Toronto A A A A A B (0.7) (0.7) (0.8) (0.9) (1.0) (1.1) 7. Seattle 8. Boston 9. Los Angeles 10. New York 11. Vancouver 12. San Francisco C C C D D D (1.3) (1.5) (1.6) (1.7) (1.8) (2.0)

Data unavailable for Barcelona, Berlin, Hong Kong, London, Madrid, Milan, Oslo, Paris, Shanghai, Stockholm, Sydney, Tokyo.

The Gini coefficient measures income distribution. A Gini index of 0 represents perfect income equality (that is, every person in the society has the same amount of income). A Gini coefficient of 1 represents perfect inequality (that is, one person has all the income and the rest of the society has none). Thus, the higher the index, the lower the ranking. Population growth is a proxy for labour attractiveness. The higher the growth rate, the more attractive and vibrant an urban area.

Toronto ranks 11th, three spots up from Scorecard 2013, staying ahead of Calgary and Vancouver. Toronto made gains relative to Shanghai, Madrid, and London. With lower levels of income inequality, all the Canadian CMAs rank above the U.S. metro areas. And for the first year, two Canadian CMAs are in the ten: Halifax (#6) and Montréal (#9). All “A” metros are in Europe, topped by Stockholm (#1). All U.S. metros, along with Hong Kong are at the bottom, with New York in last place.

1. Stockholm 2. Milan 3. Barcelona 4. Berlin 5. Oslo 6. Halifax 7. Paris 8. Tokyo 9. Montréal 10. Sydney 11. Toronto 12. Vancouver

A A A A A B B B B B B B

(0.33) (0.35) (0.35) (0.35) (0.36) (0.38) (0.38) (0.38) (0.39) (0.39) (0.40) (0.42)

13. Calgary 14. Madrid 15. London 16. Shanghai 17. Seattle 18. Dallas 19. Chicago 20. Boston 21. San Francisco 22. Los Angeles 23. Hong Kong 24. New York

C C C C C C D D D D D D

(0.43) (0.44) (0.44) (0.45) (0.45) (0.46) (0.48) (0.48) (0.49) (0.49) (0.50) (0.51)

Average population growth # cities ranked: 24

Average population growth is measured as the annual growth rate, compounded over five years from 2007-2012.

Toronto’s average annual population growth of 1.8% has been fairly consistent. Toronto has occupied 6th place since Scorecard 2011. Growth in Shanghai, Calgary, and Oslo picked up during the most recent period, putting them in the top three spots. Except for Dallas, Toronto grew faster than any other metro in the U.S., but not as fast as Calgary or Vancouver.

1. Shanghai 2. Calgary 3. Oslo 4. Vancouver 5. Dallas 6. Toronto 7. Stockholm 8. Seattle 9. Sydney 10. Halifax 11. London 12. San Francisco

A A B B A B B C C C C C

(2.9%) (2.5%) (2.0%) (2.0%) (2.0%) (1.8%) (1.7%) (1.5%) (1.3%) (1.3%) (1.3%) (1.3%)

13. Montréal 14. Madrid 15. Milan 16. Boston 17. Los Angeles 18. Hong Kong 19. New York 20. Paris 21. Tokyo 22. Berlin 23. Chicago 24. Barcelona

C C D D D D D D D D D D

(1.2%) (1.1%) (0.9%) (0.9%) (0.7%) (0.6%) (0.6%) (0.5%) (0.5%) (0.4%) (0.4%) (0.4%)

46 / Toronto Region Board of Trade

Labour Attractiveness Definition Indicators
International visitors # cities ranked: 24 This indicator measures the average number of international visitors to the metro area in 2011 (in millions).

Significance
Cities or metro areas with a high number of international visitors are considered to be more attractive.

What About Toronto?
Toronto, ranked #8, remains the only Canadian CMA to place in the top ten. Toronto fell one place in the rankings, and for the second year in a row, experienced a drop in the number of international visitors. New York and Los Angeles are the only two North American metros with more visitors. Top-ranked London attracts more than 4 times as many visitors (14.9 million) as Toronto. Hong Kong, ranked #2, earns the only other “A” grade. Each of the five Canadian CMAs experienced a drop in the number of international visitors, while certain U.S. metros saw increases (notably, New York, Los Angeles). Toronto is in 8th place, with an “A” grade. Rankings remain unchanged from Scorecard 2013, with nearly all metros recording better air quality. (Hong Kong is an exception, with air quality continuing to deteriorate). High pollution levels in Hong Kong and Shanghai mean that the top 11 metro areas earn “A” grades. Toronto stays in 2nd place, remaining as Canada’s best CMA. In Toronto, residents use about 45% more water than Berliners (ranked #1), but less than half the amount consumed by residents in Dallas. All Canadian CMAs except Montréal rank in the top ten; Montréal is in 18th place. Overall, rankings are similar to those in Scorecard 2013; Tokyo is the notable exception dropping from #9 to #16.

The Grade
1. London 2. Hong Kong 3. Paris 4. New York 5. Shanghai 6. Barcelona 7. Los Angeles 8. Toronto 9. Madrid 10. Berlin 11. Tokyo 12. San Francisco A A B B C C C D D D D D (14.9 m) (12.7 m) (8.5 m) (8.5 m) (5.0 m) (4.9 m) (4.0 m) (3.7 m) (3.5 m) (2.9 m) (2.9 m) (2.7 m) 3. Vancouver 1 14. Sydney 15. Milan 16. Stockholm 17. Montréal 18. Seattle 19. Chicago 20. Oslo 21. Boston 22. Calgary 23. Dallas 24. Halifax D D D D D D D D D D D D (2.2 m) (2.2 m) (1.9 m) (1.8 m) (1.4 m) (1.3 m) (1.2 m) (1.2 m) (1.0 m) (0.6 m) (0.4 m) (0.2 m)

Air quality # cities ranked: 18

Air quality is measured as the average accumulation of particulate matter in mg per cubic metre (mg/m3), averaged for the years from 1999, 2002, 2004, 2006, 2008, 2009, and 2010.

The less the level of air pollution, the more attractive the metro area is as a place to live

1. Paris 2. Stockholm 3. Vancouver 4. Montréal 5. Oslo 6. Sydney 7. London 8. Toronto 9. Berlin 10. New York

A A A A A A A A A A

(11.1) (11.1) (12.1) (17.4) (19.0) (19.1) (19.4) (20.6) (21.0) (21.5)

11. Chicago 12. Madrid 13. Milan 14. Los Angeles 15. Barcelona 16. Tokyo 17. Hong Kong 18. Shanghai

A B B B B B C D

(23.1) (29.0) (29.3) (32.1) (33.6) (37.3) (57.3) (71.3)

Data unavailable for Boston, Dallas, San Francisco, Seattle, Calgary, and Halifax. 12. Seattle 13. Chicago 14. Hong Kong 15. Stockholm 16. Tokyo 17. Los Angeles 18. Montréal 19. Milan 20. Oslo 21. Dallas C C C C C C C C D D (351) (355) (360) (361) (398) (424) (428) (431) (490) (542)

Domestic water usage # cities ranked: 21

Domestic water usage only, based on the per capita average daily water flow in litres. Data is based on: Hong Kong: 2012 Tokyo: 2011 Canada, Europe: 2009 U.S.: 2005

Low water usage indicates more efficient and sustainable use of this natural resource. City/ metro areas scored highest when domestic water usage was low.

1. Berlin 2. Toronto 3. Calgary 4. Madrid 5. Paris 6. Barcelona 7. Halifax 8. Vancouver 9. Boston 10. San Francisco 11. New York

A A A B B B B B B B B

(148) (215) (229) (249) (267) (273) (290) (321) (338) (341) (343)

Data unavailable for: London, Sydney, Shanghai.

Sources: Statistics Canada; Census 2006; Environment Canada; Canadian Real Estate Association; Bureau of Labor Statistics; Moody’s Economy.com; United States Geographical Survey; American Community Survey; Eurostat; United Nations; Euromonitor International; Organisation for Economic and Co-operation Development; UK Census; Transport for London; Statistics Australia; Australia Census 2006; Shanghai Statistical Yearbook; Government of Hong Kong; Hong Kong Census; Mercer Consulting; World Bank; Society for the Study of Economic Inequality; University of Canberra; Jonkoping University; Weather Network. *For the indicator Teachers per 1,000 School Aged Children, Shanghai’s population below 18 was used as the school age, instead of the 5 to 19 age cohort. **Occupational data from the Bureau of Labor Statistics was partially secure for some metro areas. Data was either missing or not available for various occupational categories. Therefore, the ranking for U.S. Metropolitan Statistical Areas is under-estimated.

Toronto as a Global City: Scorecard on Prosperity 2014 / 47

Focus on Toronto’s Labour Attractiveness
From the very first Scorecard on Prosperity, Toronto has been among the leading metros in Labour Attractiveness, maintaining its high ranking on the strength of its diversity and population growth. Toronto ranks third, just missing out on matching its best placement achieved in Scorecard 2010 (#2). Toronto advances from fifth place in Scorecards 2012 and 2013, earning “A” or “B” grades on 12 of 15 indicators. Compared to last year, Toronto’s scores and ranking improved on six of the indicators: 1. Population 25-34 years old (#14 compared to #16) 2. Population with Bachelor’s degree or higher (#8 compared to #11) 3. Climate (#18 compared to #20) 4. Homicides per 100,000 population (#8 compared to #10) 5. Teachers per 1,000 school age population (#3 compared to #7) 6. Gini coefficient (#11 compared to #14) In addition, Toronto performed better on three indicators where the ranking remained the same: foreign-born population; non-automobile commuter travel; and air quality. Toronto fared worse on only two indicators: cultural occupations; and international visitors. Above all, Toronto is dominant, when it comes to diversity. With 47.9 percent of the population foreign-born, Toronto outranks second-place Vancouver (42.7 percent) and by a considerable margin, third-place London at 35.9 percent. As in every Scorecard, Toronto and Vancouver are the only two metros to earn an “A” grade. Population growth in Toronto, fuelled by immigration, continues to be strong, although slightly off the pace recorded in Scorecard 2010 (1.9 percent average annual in 2010 compared to 1.8 percent). Five metro areas grew faster than Toronto, including Calgary and Vancouver (Shanghai is #1).

As noted previously, Scorecard 2014 includes a number of highlights for Toronto, including improvements on nine indicators in this domain (on rankings or absolute values, or both). No doubt, Toronto’s improvements in education contributed to its overall rise in the standings, with regard to both teachers per school-aged population and adult population with Bachelor’s degrees. With regard to teachers, Toronto has its best result since Scorecard 2010. At 87.7 teachers per 1,000 school-aged children, Toronto has shown considerable growth from last year (at 67.8), propelling Toronto from seventh to third place. Last year’s low ranking was perhaps an anomaly, as Toronto had consistently strong results on previous Scorecards. For the second year in a row, Halifax leads all other metros with a teacher pupil ratio of 103 per 1,000 school age population. Montréal also continues to be a leader in this field, staying in 2nd place. When it comes to higher education, 33.3 percent of Torontonians have at least a Bachelor’s degree, up from 30.2 percent reported in all previous Scorecards. Toronto ranks eighth, up three places from Scorecard 2013. Toronto stays ahead of all other Canadian CMAs, although Calgary, with 32.6 percent of the population possessing BAs, experienced the largest increase, and has nudged closer to Toronto. Even with such improvements, Toronto is a “B” metro, failing to gain much ground against the perennial leaders: San Francisco (43.9 percent) and Boston (43.1 percent). Another highlight for Toronto this year must be its improved homicide rate — matching the lowest rate of all Scorecards, first reported in 2012. At 1.8 homicides per 100,000, Toronto ranks eighth with an “A” grade, and is considerably better off than last year. In Scorecard 2013, the homicide rate was 2.1, the highest ever for Toronto. Among Canadian CMAs, Vancouver saw the most dramatic change since last year, with a drop in the homicide rate from 2.0 to 1.4. All Canadian CMAs are “A” or “B” metros. Hong Kong, Tokyo, and Paris continue to be the best metros with the lowest homicide rates (at 1.0 or lower) — a position they have occupied since Scorecard 2011 (the first year data was available for all these metros). At the other end, three U.S. metros remain the only “D” metros: San Francisco (7.2), Chicago (6.7), and Los Angeles (6.1).

48 / Toronto Region Board of Trade

For the second year in a row, Toronto ranks second among 21 metros on domestic water consumption, remaining one of only three metros with an “A” grade. Toronto residents consume less than half the amount of water as residents of last-place Dallas. Ranked first, Berliners consume only 60 percent as much water as Torontonians. On measures of air quality, Toronto (#8) is also an “A” metro. Perhaps more importantly, Toronto has seen a steady rise in air quality since the first Scorecard. In fact, every metro region except Shanghai has seen improvements in air quality over this time period. Paris (#1) and Stockholm (#2) have the cleanest air; nearly twice as good as Toronto’s, measured by the levels of particulate matter. At the bottom, Shanghai and Hong Kong have such poor air quality that all other metros earn “A” or “B” grades. Ever since the first Scorecard, Toronto has been an “A” or “B” metro on housing affordability — a surprising outcome given the consistently strong regional market. However, when viewed in the context of more challenging markets, Toronto’s affordability problems are less severe. Nonetheless, housing affordability in Toronto has gotten steadily worse since Scorecard 2010. Toronto ranks sixth, same as last year, when it dropped from an “A” to a “B” grade for the first time. New York and San Francisco have been at the bottom since Scorecard 2010; Vancouver joined them in 2011. Just as in Scorecard 2010, residents — or prospective residents — of San Francisco face nearly double the housing costs as Torontonians affordability, in relative terms. All Canadian CMAs except Vancouver rank higher than Toronto, with Calgary the best of all twelve benchmarked metros. Vancouver climbed out of last place (now, secondlast) with some real improvements in affordability, but still well off the mark set by Calgary. Another encouraging sign for Toronto is the modest improvement we see in income equality. This year’s Scorecard gives Toronto its best result yet. Ranked 11th with a “B” grade, Toronto is up three places compared to Scorecard 2013, and up five places from 2012, the first year data was available for all 24 metros. With a Gini coefficient of 0.40, Toronto has narrowed the gap with the top metros, led by Stockholm (0.33). By contrast, in Scorecard 2013, Toronto’s Gini coefficient was 0.41, considerably below Barcelona’s 0.28. New data for European metros in this Scorecard shows deterioration in income equality for seven

of the eight cities. Stockholm is the only metro to have improved, albeit slightly; however, this improvement was good enough to put Stockholm in first place. Toronto and all Canadian CMAs benefitted from this downward shift in the scores of European metros. For the first time, Toronto is better than a European metro, and in this case, better than two metros — Madrid and London. And as in every other Scorecard, Toronto has higher income equality than all U.S. metros. Successive Scorecards have supported Toronto’s reputation as a livable metropolis; and this year’s edition is no exception. In fact, Toronto earned its best overall score ever, building on its strengths, and in a few instances, improving on its weaknesses. However, Toronto continues to be plagued by poor results on both transportation indicators; namely, mode of travel to work and commute times. Toronto also suffers from a relatively hostile climate, but this is something no policy-maker can influence. Transportation issues were analyzed in depth in Scorecard 2011, using eleven transportation-related indicators applied to all metro areas. In addition to long commute times Toronto performed poorly on indicators related to public transit, especially rail. This year’s results, like those in Scorecard 2013 and others before it, illustrate Toronto’s weaknesses: ranked #14 on mode of travel to work; and #15 on commute times. Toronto has been stuck in the same place on both indicators; although recent Census data shows a slight increase in the share of non-automobile commuters (from 28.8 percent to 29 percent). Toronto, like all other North American metros except New York, ranks behind all European metros, and well behind the leaders. In Hong Kong (#1), 88.5 percent of commuters get to work on public transit, cycling, or walking; in Shanghai (#2), just under 75 percent do so. Paris (#3) owns the best record in Europe, with 73.7 percent choosing non-automobile modes of transit. Among Canadian CMAs, only Toronto and Vancouver saw improvements in modal share since Scorecard 2011, although Montréal remains just slightly ahead of Toronto. Nonetheless, Torontonians continue to show that they are less car-dependent than all other U.S. metro residents, (apart from New Yorkers). Dallas stays in last place, with ever-diminishing results. Only 4 percent of residents in Dallas chose transit, walking, or cycling to get to work, compared to 4.6 percent in Scorecard 2010.

Toronto as a Global City: Scorecard on Prosperity 2014 / 49

With respect to commute times, Toronto’s 15th-place finish highlights one of the region’s most talked about detractions. Toronto’s 66-minute commute time is the worst among Canadian CMAs, and second-worst in North America after New York (where the commute is 3.8 minutes longer). Commuters in Calgary (#1) are among the luckiest; at 52 minutes, their journey to work takes about half the time as commuters in Shanghai, ranked last. Finally, Toronto has seen a steep drop in the number of international visitors since Scorecard 2010, falling from 6.6 million to 3.7 million. Ranked fifth in 2010, Toronto now ranks eighth with a “D” grade. Shanghai, Barcelona, and Los Angeles have outperformed Toronto on international visitors since Scorecard 2010. London remains the number one destination, attracting 14.9 million visitors, slightly off the pace set in Scorecard 2010. Every other Canadian CMA has suffered the same fate as Toronto, with a decrease in the number of international visitors. This has not been the case with U.S. metros.

Scorecard, Toronto has been unchallenged on measures of population diversity, now with 47.9 percent of the population foreign-born. Factoring in steady population growth, a healthy environment (air quality and water consumption), and solid education credentials, Toronto has a lot to offer to attract newcomers from within Canada and abroad. Toronto’s mediocre results on income inequality, nevertheless, have improved, allowing Toronto to narrow the gap with the top-ranked metros. Ranked 11th, Toronto is up three places from Scorecard 2013 and five places from Scorecard 2012. The Gini coefficient dropped slightly for Toronto, from 0.42 to 0.40, while during the same period, it was on the rise for many European metros. After three years of looking up to top-ranked Paris and second-place London, Toronto is getting closer. But both Paris and London have strong advantages when it comes to attracting international visitors, supporting non-automobile modes of commuter travel, and enjoying a strong cultural sector. However, if Toronto could improve on transportation through supporting non-automobile modes of travel and reducing commute times, it could challenge the dominance of Paris and London. Toronto’s 66-minute round trip commute time is the second-worst in North America but better than Paris (marginally) or London (significantly). Toronto has also been in competition with Calgary, jockeying for one of the top six places since Scorecard 2010. In two of the past five Scorecards (2011 and 2012), Calgary has outranked Toronto on Labour Attractiveness (and dominated on the Economy). In this edition, Calgary ranks fourth, right behind Toronto. Calgary’s rapid population growth, young labour force, low commute times and affordable housing are hard to match, but Calgary has failed to improve on its high automobile dependency, or its attraction to international visitors.

Concluding Observations on Labour Attractiveness
Looking back at Scorecard 2010, it is clear that Toronto’s strengths and weaknesses were defined from the earliest Scorecards. Overall, Toronto’s assets have been strong enough to keep it near the top of the leader board, in the top five of 24 metros. These include: share of foreign-born population, teacher-student ratios, low homicide rates, population with Bachelor’s degrees, population growth, air quality, water consumption, and even housing affordability. Toronto’s vulnerabilities, evident since Scorecard 2010, relate to transportation (travel to work mode, commuting), and poor climate. More recently, a sharp decline in international visitors since Scorecard 2010 has also disadvantaged Toronto. After five years of strong results on Labour Attractiveness, Toronto has earned the right to call itself one of the world’s most liveable metropolitan regions. In this year’s Scorecard, Toronto has gotten even better, adding strength to strength and improving on a few of its weaker assets (but notably, not on transportation). Ever since the first

50 / Toronto Region Board of Trade

7

| RETROSPECTIVE

Toronto Region Board of Trade has been reporting on the prosperity of metro regions for the past six years. Scorecard on Prosperity 2014 provides the ideal opportunity to reflect on Toronto’s progress over time, based on a systematic review of the core set of Economic and Labour Attractiveness indicators. So how did Toronto fare? Over the past five years, as shown in Table 2, Toronto improved from fifth to third place overall, boosted by higher rankings on certain indicators within the Economy domain, and consistently stellar performances on Labour Attractiveness. Toronto’s overall ranking improved, despite a drop of one position in the Labour Attractiveness domain and no change in the Economy domain. Toronto’s overall ranking is determined by combining the composite scores in each domain (see Methodology section). Toronto’s composite score in the Economy domain increased because of the poor performance of Madrid, Barcelona and Milan, even though Toronto remained in 12th place in the rankings. Interestingly, higher composite score on the Economy is the story of resilience and economic potential rather than the story of sustained growth and momentum in absolute terms.

From the outset, Toronto has been among the world leaders in the Labour Attractiveness domain, because of the region’s diversity, excellent student-teacher ratio, steady population growth, and overall solid results on water and air quality. When it comes to foreign-born population, Toronto remains dominant as newcomers continue to flock to the region. Yet in the Economy domain, Toronto remains in the middle of the pack, ranking 12th in Scorecard 2014, just as in 2010.11 Despite what this stable ranking may suggest, Toronto has seen some improvements in the Economy domain; however, many of these relative improvements simply reflect the poor performance of deteriorating economies in other metros, such as Madrid, Barcelona and Milan. Specifically, as shown in Table 3, Toronto recorded gains on five indicators, but only one can be described as significant; namely, the growth in residential building permits. Scorecard 2010 shows Toronto ranked ninth of 12 metro regions with negative growth in residential building permit activity (-0.9 percent) between 2003 and 2008. Four years later (the period covered by Scorecard 2014), Toronto had jumped up to third place based on 3.6 percent growth in residential building permits. Toronto benefitted from the relative strength of the Canadian banking system that prevented a U.S.-style housing crisis. As Toronto improved, most metros in the U.S. were struggling to regain stability in the housing market. In this year’s Scorecard, six of seven U.S. metros still posted negative growth.

11 To ensure comparability between the two Scorecards, base year data was standardized, leading to a revised set of rankings for 2010. This is explained in Section 3, Methodology.

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Table 2: Comparison of 2014 and 2010 Rankings
2014 Overall Ranking 2010 Overall Ranking 2014 Economy Ranking 2010 Economy Ranking 2014 Labour Attractiveness Ranking 2010 Labour Attractiveness Ranking

Paris (A) Calgary (A) Toronto (A) Oslo (B) London (B) Stockholm (B) Seattle (B) Sydney (B) San Francisco (B) Boston (B) Vancouver (B) Montréal (B) Dallas (B) Tokyo (B) New York (B) Halifax (B) Hong Kong (C) Berlin (C) Chicago (C) Los Angeles (D) Milan (D) Shanghai (D) Madrid (D) Barcelona (D)

Boston (A) Calgary (A) Dallas (A) Barcelona (A) Toronto (A) Paris (A) Seattle (A) San Francisco (A) Madrid (A) Hong Kong (B) Vancouver (B) Sydney (B) New York (B) Montréal (B) Los Angeles (B) London (B) Chicago (B) Shanghai (C) Oslo (C) Halifax (C) Stockholm (C) Tokyo (C) Milan (D) Berlin (D)

San Francisco (A) Boston (A) Seattle (A) Dallas (A) Calgary (A) Oslo (A) Stockholm (A) Paris (A) Sydney (A) Tokyo (A) New York (B) Toronto (B) Montréal (B) Hong Kong (B) Chicago (B) Halifax (B) Vancouver (B) Los Angeles (B) Berlin (B) London (B) Shanghai (B) Milan (B) Madrid (C) Barcelona (D)

Boston (A) San Francisco (A) Seattle (A) Hong Kong (B) Calgary (B) Oslo (B) Dallas (B) New York (B) Los Angeles (B) Sydney (B) Paris (B) Toronto (C) Madrid (C) Barcelona (C) Milan (C) Vancouver (C) Chicago (C) Shanghai (C) Montréal (C) Halifax (C) Stockholm (C) London (D) Tokyo (D) Berlin (D)

Paris (A) London (A) Toronto (A) Calgary (A) Barcelona (B) Vancouver (B) Madrid (B) Montréal (B) Stockholm (C) Sydney (C) Oslo (C) Halifax (C) Hong Kong (C) Berlin (C) Seattle (D) Tokyo (D) New York (D) Dallas (D) Chicago (D) Milan (D) Boston (D) San Francisco (D) Los Angeles (D) Shanghai (D)

Barcelona (A) Toronto (A) Paris (A) Madrid (A) Calgary (A) Dallas (A) Vancouver (A) London (A) Montréal (B) Sydney (B) Halifax (B) Chicago (B) Shanghai (B) Boston (B) Seattle (B) Hong Kong (C) New York (C) San Francisco (C) Los Angeles (C) Tokyo (C) Stockholm (C) Berlin (C) Oslo (D) Milan (D)

Note: 2010 Rankings for the Economy and Overall reflect adjustments made to rebase economic data, as noted in the text.

Minor gains in other areas of the Economy domain may be attributed in large measure to deteriorating conditions in other metros, allowing Toronto to climb up the rankings at the expense of others. This applies to: the unemployment rate, income growth, patents, and venture capital investment. For example, Toronto’s rise from 21st to 17th on the unemployment rate comes as a result of a precipitous rise in unemployment elsewhere, particularly Madrid and Barcelona. At the same time, stagnating job growth in the U.S. enabled Toronto’s ranking on the unemployment rate to drift higher than New York, Chicago and Los Angeles.

But in real terms, Toronto’s unemployment rate actually rose from 6.8 percent in 2007 (Scorecard 2010) to 8.5 percent in 2012 (Scorecard 2014). On income growth, Toronto jumped from ninth to fifth place, moving from a “C” to a “B” grade. Per capita after-tax income growth in the 2000-2005 period averaged 4.4 percent; in the subsequent five-year period, per capita income grew by 4.8 percent. In addition, Toronto’s gain came at the expense of faltering economies in Madrid and Barcelona, as well as Los Angeles where income growth fell from 5.5 percent to 2.5 percent.

52 / Toronto Region Board of Trade

But on the “hot button” economic measures of real Gross Domestic Product (GDP) per capita, productivity, and markers of innovation, Toronto is still dwarfed by the economic powerhouses of San Francisco, Boston, Seattle and Dallas. Exacerbated by persistently low scores on patents, Initial Public Offerings (IPOs), and venture capital investment, the gap between Toronto and the U.S. leaders remains wide. Within the Canadian context, Calgary continues to out-perform Toronto by a wide margin, thanks to strong economic growth during the past decade. Toronto still ranks (modestly) above all other Canadian metros in the Economy domain. On productivity and real GDP per capita, Toronto remains in 17th place, in the bottom third of the rankings. On patents, Toronto moved up slightly in the rankings, yet still only generates about one-tenth the number of top-ranked San Francisco. Similarly, Toronto has gained some ground on the venture capital indicator measured against GDP, but the rise in rankings does not come with a substantive increase in investment. The gulf between Toronto and the top performers like San Francisco and Boston remains wide. At the same time, Toronto has stumbled when it comes to the average size of IPOs, falling deeper towards the bottom of the rankings from 18th to 22nd place. Typically measuring the net worth of smaller companies, the average size (in millions) of an IPO in Toronto has declined, while first place Tokyo has increased. Although IPO values fell for many metros the past five years, Toronto’s drop appears to be larger than most. In fact, Canadian metros like Calgary, Vancouver and Halifax all made gains. This could further prove that access to capital is difficult to come by in Toronto, a theme that has been emphasized in each Scorecard. This persistent gap between Toronto and the leaders prompted a closer look at Boston’s economy in Scorecard 2011, which noted that Toronto and Boston are comparably-sized metro regions and share similar industrial profiles (e.g., strong financial and real estate; human health sciences). Boston has excelled where Toronto has not, with high levels of productivity, real GDP, patents, and venture capital. Boston has been successful in leveraging its strongest asset — a strong post-secondary education

cluster to achieve robust growth. Boston has been helped, where Toronto has not, by focused monetary support from government, efficient industry cooperation, and high levels of venture capital investment (ten times greater than Toronto as of 2014). For more than twenty years, Boston has consistently out-performed Toronto on these key economic measures. Furthermore, Scorecard 2012’s cluster analysis tells us more about the underpinnings of the strong U.S. metros. Just as in the current edition of the Scorecard, San Francisco, Boston, Seattle, and Dallas were the four best metros on the Economy. They also were the four top-rated metros on the Information, Communication & Technology (ICT) cluster — a cluster that is considered an incubator of innovation and one which is embedded in almost every sector of the modern economy. Toronto, ranked seventh (out of twelve), had particularly weak results on real GDP growth and productivity growth in this cluster. Scorecard 2012 concluded that such results highlighted two critical challenges for the Toronto ICT sector; namely the need for more access to venture capital, and better commercialization of research. During the past decade, this cluster has been a clear winner, with average annual growth among the North American leaders exceeding 6.5 percent, compared to only 2.6 percent in Toronto. As a final note on the Economy domain, Toronto’s drop in the rankings on high-tech employment and professional employment should not be viewed as a significant decline, but rather stems from a change in data. Data for certain metros became available only after 2010; as a result, rankings changed. Paris emerged as the top metro on high-tech employment, with Stockholm and Tokyo also better than Toronto. For professional employment, Hong Kong, Sydney, and London topped Toronto, notwithstanding the fact that Toronto’s share of professional employment increased between the two Scorecards (from 19.4 to 21.9 percent). Employment in the high-tech sector in Toronto fell modestly from 5.9 to 5.7 percent, but this had little effect on the rankings per se.

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Table 3: Comparison of 2014 and 2010 Rankings on the Economy
2014 # Metros Benchmarked 2010 # Metros Benchmarked

Economy Indicator

2014 Ranking

2010 Ranking

Real GDP per capita Real GDP Growth (Five-Year Average) Productivity Productivity Growth (Five-Year Average) Employment Growth (Five-Year Average) Unemployment Rate Disposable income per capita Disposable income growth High-Tech Employment (Share of Total Employment) Residential building permit growth Professional employment Total Tax Index Office Rents (US$ per square foot) Number of Patents (at USPTO) per 100,000 Population Venture Capital Investment per $1-million GDP Average Investment per Venture Capital Firm ($ 000s) Average size of IPO ($ Millions) Market size*

#17 #12 #17 #15 #9 #17 #13 #5 #8 #3 #4 #4 #11 #10 #9 #9 #22 #5

24 24 24 24 24 24 24 24 24 13 23 19 24 24 12 12 24 24

#17 #13 #17 #16 #7 #21 #13 #9 #5 #9 #1 #5 #11 #12 #11 #9 #18 #8

23 23 22 22 24 23 23 22 14 12 13 15 24 24 12 12 24 24

*Market size was subsequently redefined so this is not a real “gain” in the rankings.

In the Labour Attractiveness domain, Toronto’s position near the very top of the rankings has gone unchallenged. Toronto’s drop from second to third place does not reflect any substantive changes on individual indicators. Toronto still remains one of the most attractive metro regions in the world, and certainly the place to be from a North American perspective. Notwithstanding the changes in rankings identified in the Table 4, Toronto experienced no seismic shifts within the Labour Attractiveness domain. As noted, the universe of

benchmarked cities was smaller in 2010 for a handful of indicators, undermining the value of comparing rankings alone. For instance, when it comes to homicide rates and Gini coefficient, Toronto’s rate has actually improved since Scorecard 2010, from 1.9 to 1.8 and from 0.41 to 0.40, respectively, although Toronto’s ranking appears to have declined. Also, Toronto’s improved ranking on commuting time is attributable primarily to a change in methodology rather than reduced congestion levels.12

12 In 2010, Statistics Canada changed the methodology for calculating commute times to be more consistent with U.S. data; as a result, all Canadian CMAs moved up in the rankings beginning in Scorecard 2011.

54 / Toronto Region Board of Trade

The most significant improvement was in education, with a 30 percent increase in the number of teachers. In 2008 (as reported in Scorecard 2010), Toronto had 68.1 teachers per 1,000 students; by 2012, that number had risen to 87.7 teachers. Toronto now ranks third on this indicator, below only Halifax and Calgary. And of course, Toronto’s reputation as one of the most diverse cities in the world is backed up by a consistently held top ranking on foreign-born population. By 2011, 47.9 percent of Toronto’s population was foreign-born, up from 45.7 percent in 2006. Second-place Vancouver is edging closer to Toronto (42.7 percent), but no other metros come close.

Two blemishes appear on Toronto’s strong record on Labour Attractiveness, indicated by a drop in the rankings on: 1) the transportation mode indicator; and 2) international visitors. Toronto slipped from 12th to 14th place on the indicator measuring non-automobile travel mode. The percentage of Toronto commuters taking transit, bicycling, or walking is virtually unchanged compared to Scorecard 2010 (28.8 percent in 2010 vs 29.0 percent in 2014), while non-automobile travel to work has become more popular in some other metro areas. As well, Toronto’s ranking on international visitors fell from fifth to eighth, reflecting a downward trend in international tourism over the past five years. No doubt Toronto is feeling the effects of fewer Americans travelling to Canada.

Table 4: Comparison of 2014 and 2010 Rankings in Labour Attractiveness
Labour Attractiveness Indicator 2014 Ranking 2014 # Metros Benchmarked 2010 Ranking 2010 # Metros Benchmarked

Population 25-34 years old Immigrant population Population with at least a BA (%) Population in cultural occupations (%) Teachers per 1,000 school-age children (#) Comfortable climate index Crime: homicide rate Travel to work: transit, walking, other non-auto (%) Commuting time Housing affordability Gini coefficient Average population growth International visitors (#) Air pollution Domestic water usage

14 1 8 15 3 18 8 14 15 6 11 6 8 8 2

23 24 23 23 16 24 24 24 22 12 24 24 24 18 21

13 1 7 12 6 20 4 12 19 5 7 3 5 7 4

24 24 23 17 16 24 15 21 19 12 15 24 23 16 11

Toronto as a Global City: Scorecard on Prosperity 2014 / 55

Still, in the areas where Toronto fell in the rankings, they did not stumble badly, allowing them to hold on to their lofty third place ranking in the Labour Attractiveness domain. The retrospective look at the change in Toronto’s performance over the past five Scorecards indicates that Toronto has seen a slight improvement in its overall ranking when compared to a large sample of world-class cities. However, this improvement is mainly the result of the terrible economic performance of some European cities that were hit hard by the most recent global recession. On the key measures of productivity performance and its determinants, Toronto remains basically unchanged in terms of rankings and grades from its results in the 2010 Scorecard. The following key results emerge from comparing Toronto’s current performance against its performance five Scorecards ago: 1. There has been some improvement in the overall rankings, with Toronto rising from fifth to third place in the rankings. 2. Toronto’s better overall ranking is the result of an increase in its score on the economy domain. In 2010 Toronto ranked 12th, with a “C” grade and a score of 0.41. Now Toronto still ranks 12th, but with a “B” grade and a score of 0.53. This higher score on the economy domain lifts Toronto’s overall ranking. 3. On the Labour Attractiveness domain, overall little has changed. Toronto now places third with an “A” grade and a score of 0.63, compared to ranking second in 2010, also with an “A” grade and an almost identical score of 0.62. Within the domain itself there has been little movement in the individual performance indicators between the two Scorecards.

4. On the Economy domain, the following are the key results: • All cities were hit hard by the 2008-2009 recession; real GDP per capita is lower and unemployment rates are higher for almost every city in the current Scorecard compared with the 2010 Scorecard. • However, European cities (especially Madrid, Barcelona and London) and some U.S. cities (especially Los Angeles) were hit much harder by the recession than Toronto. As a result, Toronto’s grade on many indicators rises without much of a change in the rankings. For example, on real GDP growth Toronto now ranks 12th, identical to its ranking in the 2010 Scorecard, but its grade improves from a “C” to an “A” given the terrible performance of Madrid and Barcelona and similarly for employment growth. • With respect to productivity growth, although only improving from 16th to 15th in the rankings, Toronto’s grade rises from a “D” to a “B”, again given very bad performance from European cities. Note that Toronto’s five year average productivity growth was actually negative in the current Scorecard. • On the main determinants of capital performance (number of patents, venture capital investment as a share of GDP, average size of venture capital investment and IPOs) very little has changed between the two Scorecards. Toronto remains near the bottom of the pack with “D” scores.

56 / Toronto Region Board of Trade

8

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LOOKING AHEAD: ECONOMIC FORECASTS FOR TORONTO

As discussed in earlier chapters, the Toronto region finds itself in a solid and globally competitive position, but with some serious notes of caution. On the one-hand, Toronto achieves its best results ever by receiving the third score overall and on Labour Attractiveness. On the Economy however, despite improvement in the composite score and grade vis-à-vis last year, Toronto’s results are much more a story of resilience post great recession than of sustained economic growth and momentum. Indeed, Toronto still maintains a middle of the pack ranking on the Economy as a result of relatively weak performance on real Gross Domestic Product (GDP) per capita, productivity, productivity growth as well as innovation and venture capital related indicators. A unique highlight of past Scorecards on Prosperity is our special lens on critical issues impacting the Toronto region’s economy including access to capital (2010); transportation (2011); clusters (2012); and human capital (2013). In 2014, our special lens will take a trip into the future, with long-term forecasts on the state of the Toronto region’s economy by 2035. Our forecasts are what can be thought of as two distinct future states.13 The first is a base case forecast. It takes a conventional look at Toronto’s future, using known investment projects and demographic

and productivity projections based on current trends as a starting point; in effect a “steady as you go” scenario. Our second future state takes us in a much more proactive direction. Using this base case as a starting point, we create a competitive and highly dynamic scenario that analyzes the effects on Toronto’s economy of several strategic initiatives, including investment projects that would improve the region’s public transportation network (next wave of The Big Move) and other key infrastructure, and the implementation of active public/private cluster development and human capital improvement initiatives. The two scenario assumptions are rooted in evidence coming from previous editions of the Scorecard and other relevant research. Ultimately, the key question we pose, is how do we move our region from “good enough” to “great”?

13 Note that this section presents information in $CAD, unless otherwise indicated.

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Toronto Base Case Outlook to 2035 Overview
Economic forecasts point to improvements across the globe, and importantly for Toronto, a more robust economy in the United States beginning in 2014. This bodes well for Toronto, with its solid platform for export-oriented industries; manufacturing accounts for nearly 13 percent of the region’s GDP. Other industries, such as transportation and warehousing and wholesale trade, will also benefit from improving manufacturing output and rising trade activity. Population growth is a key driver of economic growth. Toronto is expected to remain the number one destination for immigrants to Canada, spurring activity in several industries, including retail trade, personal services, health care, education, and construction. Indeed, residential investment will increase at a steady pace as the number of new households rises in step with increasing net international migration and an aging population in need of more multiple-unit housing. At the same time, public spending commitments to upgrade transportation and other infrastructure will boost investment. All in all, Toronto’s economy is forecast to expand at an average annual rate of 2.7 percent between 2014 and 2035. In comparison, the national economy is forecast to grow at a 2 percent average annual rate over the same time frame. In terms of GDP per capita — a common measure of wealth — Toronto is expected to see 1 percent average annual gains over the outlook. Very similar rates of expansion are expected in other Canadian cities in the Scorecard, namely: Halifax, Montréal, Calgary, and Vancouver. On the other hand, GDP per capita growth is expected to be stronger in all the American cities in the Scorecard. In particular, average annual GDP per capita growth in the Dallas metropolitan region is projected to reach 2 percent, double that of Toronto. Likewise, Boston’s real GDP per capita is expected to grow by 1.5 percent per year.

Assumptions: Demographics, Labour Force, and Labour Productivity
Assumption #1: Demographics

Demographic change is the critical variable underlying any long-term economic forecast. Population growth and the age structure of the population are key drivers of economic behaviour, and major determinants of long-run potential output; i.e., the highest level of economic activity an economy can attain without surpassing its capacity limits and igniting inflation. The two principal features of Toronto’s demographic outlook are the aging of the population and rising net migration. The age structure of Toronto’s population will shift considerably by 2035, primarily due to the aging of the baby-boom generation. Although improvements in health care services continue to prolong life expectancy, the rapid aging of the population will lead to a steady decline in growth by natural increase. However, rising net migration will more than make up for the aging population effect, attributable primarily to international immigration to Toronto. Accordingly, population growth is expected to be solid in Toronto, although it will start to tail off in the latter part of the forecast. Over the past five years (2008 to 2012), Toronto added over 100,000 people per year to its population; average increases of 120,000 people per year are forecast between 2013 and 2035. In other words, the Toronto Census Metropolitan Area (CMA) adds the equivalent of a mid-sized Canadian city to its population every single year. While such population gains support a refreshed and younger labour force and other economic benefits, demands on infrastructure, transit, education, and other public services will increase substantially. At the same time, increasing numbers of international immigrants will continue to fortify Toronto’s standing as one of the most multi-cultural metropolitan areas in the world.

58 / Toronto Region Board of Trade

Assumption #2: Labour Force

Employment, Income and Spending Outlook
Job growth is expected to be stronger in the first half of the outlook than in the second half. Employment growth is forecast to average 1.8 percent per year between 2013 and 2020, before slowing to 1.5 percent per year between 2021 and 2035. As a result of the mass exodus of baby boomers from the labour force, even this decelerating pace of job growth will outpace growth in the labour force. When job growth is higher than labour force growth, the unemployment rate falls. Accordingly, Toronto’s unemployment rate is forecast to fall from 8.2 percent in 2013 to 5.7 percent by 2035. Labour market tightness will help fuel healthy average wage growth throughout the forecast, boding well for consumer spending. Specifically, wages and salaries per employee are forecast to increase by 2.7 percent per year from 2014 to 2035. On a negative note, consumption will be somewhat held back early in the outlook by record-high debt loads and rising interest rates and in the outer years by mildly decelerating population growth. Nevertheless, retail trade growth is expected to average a solid 3.9 percent per year over the forecast horizon.

The demographic outlook will have profound consequences on the shape and size of Toronto’s future labour force. As is widely known, the aging of the population means slower growth in the working-age population — those people aged 15 years and over. At the same time, the overall participation rate is expected to decline steadily over the forecast as a significant share of baby boomers move into their retirement years. The result is a steady slowing in the growth of the labour force, which limits the potential future growth of the Toronto CMA.
Assumption #3: Labour Productivity

Another key assumption underpinning any long-term forecast relates to labour productivity growth, an essential input into higher living standards. In the base case forecast, labour productivity growth will be driven by heavy investment in machinery equipment and through firms utilizing more highly-skilled workers and more innovative production processes. In the base case forecast, we assume that labour productivity growth in the Toronto region will average 1.1 percent per year based on recent historical trends. This rate of growth is similar to that expected across the other four Canadian CMAs in the Scorecard. But, like real GDP per capita, several U.S. metros are expected to enjoy stronger labour productivity growth between 2014 and 2035. Metro Dallas is expected to lead the way with average annual compound labour productivity growth of 2 percent. Similarly, metro Seattle is projected to post average labour productivity growth of 1.5 percent per year.

Industry Overview
The Toronto region is blessed with a diverse economy, anchored by a strong financial sector (known in industry terms as FIRE: finance, insurance and real estate). Of the 11 industry groupings comprising the Toronto economy, finance, insurance and real estate comprises the single largest sector, accounting for 27 percent of total economic activity in 2013. (See Figure 1). Given Toronto’s stature as a global financial centre, the strength of this sector should come as no surprise. It also helps explain why the region is home to so many of Canada’s corporate headquarters; e.g., eight of Canada’s nine top law firms; nine of Canada’s top ten accounting firms, Canada’s top five banks.

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The manufacturing sector is the second largest industry in the Toronto region, accounting for nearly 13 percent of total economic output. Close behind is wholesale and retail trade with a 12 percent share and business services and non-commercial services (includes education and health) each with 11 percent shares. The total output shares for five of the six remaining industries are roughly 5 percent each. The region’s smallest industry — primary and utilities — accounted for just 2 percent of total economic activity in 2013. Looked at another way, Toronto is largely a service sectororiented economy. In fact, the services sector accounted for 80 percent of total economic activity in 2013, with the goods sector accounting for the remaining 20 percent. The following sections will describe the economic outlook for the following industry groupings: the Private Services Sector14, the Manufacturing Sector, the Construction Sector, and the Public Sector.

Private Services Sector Outlook (Accounts for 66 percent of Toronto’s 2013 Industry Output)
Solid growth is anticipated in Toronto’s financial sector, as it will continue to benefit from Toronto’s brand as a global financial centre. In addition, the real estate sector will thrive due to steady population growth fuelling demand for housing all the way through the outlook period. From 2014 to 2035, FIRE output is expected to climb by an average of 2.8 percent per year. FIRE output for the country as a whole is expected to expand by 2 percent per year over the same period. Steady population growth also bodes well for other services-producing industries, including information and cultural industries, wholesale and retail trade, and personal services. The wholesale and retail trade sector, along with transportation and warehousing, will also receive a lift from improving manufacturing output and rising trade activity. The business services sector, which includes many professional services, is also expected to grow solidly over the forecast horizon. Output growth in the private services sector, which excludes public administration and non-commercial services (i.e., health care and education), is projected to average 2.8 percent per year from 2014 to 2035. The majority of jobs that will be created in Toronto over the long term are expected in the private services-producing industries. In fact, it is anticipated that firms in these industries will add over 800,000 people to their payrolls over the next 22 years. This represents about 65 percent of the total number of jobs expected to be created in the Toronto region over the 2014 to 2035 period.

Figure 1: Industry Output Shares (2013)
2.1 4.6 4.9 5.0 5.1 10.9 4.7 27.0

12.7

11.0

12.0

Finance Insurance and Real Estate Manufacturing
30

Construction 27.0% 12.7% 12.0% 11.0% 10.9% Public Administration Transportation and Warehousing Personal Services Primary and Utilities

5.1% 4.9% 4.7% 4.6% 2.1%

Information and Culture 5.0%

Wholesale and Retail Trade Business Services Non-commercial

14 Groupings of industrial activity into four broad categories facilitate the analysis. Industries in the private sector are grouped together because their outlooks are all largely driven by the same factor, domestic demand, (with some trade-oriented industries also shaped by foreign demand). Construction is separated out because of the dynamic nature of investment activity in this sector which makes it cyclical. The manufacturing sector is heavily tilted towards exports so its outlook is largely determined by foreign demand (with domestic demand playing a smaller role). Finally, government spending largely drives the outlook for the public sector, which includes both public administration and the non-commercial services sector (education and health).

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Manufacturing Outlook (Accounts for nearly 13 percent of Toronto’s 2013 Industry Output)
Toronto’s manufacturing sector — the region’s second largest industry — struggled mightily through the 2000s. Between 2001 and 2009, output fell by nearly a third and over 100,000 jobs disappeared. The sector was bombarded with shocks, including two U.S. recessions, a rapidly rising Canadian dollar, a big jump in oil and gas prices, and increasing offshore competition. The sector recovery which began in 2010, hit another rough patch in 2013. After expanding at an average annual rate of 4.3 percent, the region’s manufacturing output dipped by an estimated 0.7 percent last year, as U.S. demand cooled. The U.S. unemployment rate remains high and the job market there is rebounding only slowly, contributing to the muted pace of economic recovery. Looking ahead, however, the forecast is brighter. U.S. consumer and business confidence are expected to improve, which will boost consumption and produce a significant ripple effect through Toronto’s manufacturing sector. For instance, Toronto’s automotive sector will continue to benefit from rising vehicle sales south of the border. U.S. vehicle sales growth will be driven by pent-up demand accumulated during the recession, still-affordable credit, and consumers’ desire for more fuel-efficient models. Nonetheless, the local manufacturing sector still faces uncertainty. Firstly, the Canadian dollar is expected to remain elevated, although firms have made strides in adapting to a higher dollar. Secondly, competition from other countries will continue to intensify. In particular, North American automotive investment continues to shift to the U.S. South and Mexico. These regions have two key advantages over Canada — lower production costs and closer access to booming Latin American markets. All in all, output growth in Toronto’s manufacturing sector is projected to average 2.3 percent per year from 2014 to 2035. In contrast, manufacturing output in Canada as a whole is forecast to grow by 1.5 percent per year. With employment expected to climb only modestly over the forecast period, the level of employment will still remain well below its 2004 peak even by 2035.

Construction Outlook (Accounts for 5 percent of Toronto’s 2013 Industry Output)
Output growth in Toronto’s construction industry is expected to slightly trail that of the overall economy. Housing starts in the region hit a record high of 48,100 units in 2012, as ultra-low mortgage rates and decent income gains boosted demand for new homes, particularly condominiums. However, stricter mortgage insurance rules that took effect in July 2012 have cooled new home demand. In fact, housing starts fell by an estimated 29 percent to 34,300 units in 2013. But solid population growth will continue to stimulate the residential sector, helping to offset higher mortgage rates. Accordingly, housing starts are expected to remain relatively strong, averaging 47,700 units per year from 2014 to 2020, before increasing slightly to an annual average of 48,500 units over the rest of the forecast period. The effects of an aging population will help shape the future housing market, as multiple-unit homes will increasingly supplant single-family dwellings. As boomers become empty nesters or retire, many will choose smaller, lower-maintenance homes. Toronto’s housing market is already heavily weighted toward multiple-unit construction, stemming from more than a decade of escalating house prices putting single-family homes out of reach for many households. At the same time, greater traffic congestion and longer commute times have driven up demand for transit-accessible high-rise condominiums. Still, it is estimated that multiple-unit dwellings will account for 75 percent of all new home construction by 2035, up from 70 percent in 2013 and 55 percent in 2004. Non-residential investment spending is expected to grow solidly over the forecast horizon, fuelled by robust domestic demand and infrastructure upgrade requirements. Assumptions on infrastructure investment are based on the execution of current projects, which include among others: upgrades to Union Station and the Spadina streetcar line; construction of the Eglington-Scarborough Crosstown Light Rail Transit (LRT); the revitalization of the Toronto waterfront, including the Queen’s Quay area; erection of an athlete’s village for the 2015 Pan Am Games; and construction of Toronto Hydro’s $195-million downtown

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transformer station, the first new one since 1955. Several office towers are also under construction, including BayAdelaide East, the Ernst & Young Tower and One York Street. The recently approved $2.5-billion Scarborough subway extension, as well as LRT lines on Sheppard East and Finch West, will provide a lift to non-residential investment over the medium term. Finally, the forecast assumes that machinery and equipment investment will be brisk. A strong Canadian dollar and falling capital equipment prices will make buying imported machinery and equipment more affordable, while tight labour markets will promote the implementation of increasingly capital-intensive production methods. Put together, construction output in the Toronto CMA is forecast to grow at an average annual rate of 2.5 percent from 2014 to 2035. For the country as a whole, construction output is only expected to increase by 1.3 percent per year.

In the longer term, however, government spending is expected to accelerate to keep up with population growth in general, and the aging of the population in particular. As is well documented, the bulging senior population will place tremendous strains on Toronto’s health care system, triggering increased spending in health care and related services. Growth in younger age cohorts will require expenditure increases in education and in public administration. From 2018 to 2035, non-commercial services output is forecast to increase by 3.2 percent per year, while public administration output is expected to expand by 2.8 percent per year. For the country as a whole, output growth in non-commercial services is expected to average 2.5 percent per year; in public administration, output is forecast to grow by an average of 2.3 percent per year.

Summary: Base Case Forecast
The base case forecast predicts that Toronto’s economy would grow at an average annual rate of 2.7 percent from 2014 to 2035. Figure 2 illustrates how other key economic indicators will grow during this period, summarized as follows: • GDP per capita would climb from $47,800 to $59,800, an average annual increase of 1 percent.15 • Output per worker would grow from $87,000 to $111,200, an increase of 1.1 percent per year. • Real disposable income per capita would climb, from $28,100 to $31,100, an annual increase of 0.5 percent. • Unemployment rate would fall from 8.2 percent in 2013 to 5.7 percent.

Public Sector Outlook (Accounts for 16 percent of Toronto’s 2013 Industry Output)
The public sector, including public administration and non-commercial services, (health care and education) comprises the region’s fifth largest industry. The strength of the public administration sector is attributed, of course, to the fact that Toronto is Ontario’s capital city. And like most governments in Canada and North America, Ontario’s fiscal situation remains critical, requiring a careful balancing of spending restraints and revenue measures that will not dampen economic progress. A period of restrained spending in non-commercial services and public administration is expected while the Ontario government aims to eliminate the deficit by fiscal year 2017-2018. In the short term, we forecast that average annual output growth in non-commercial services and in public administration will be limited to 1.7 percent and 1.2 percent, respectively, from 2014 to 2017. In Canada, annual output growth in these sectors is expected to average 1.9 percent and 1.3 percent, respectively, over the same time frame.

Figure 2: Key Indicators: Base Case Scenario
(In thousands) Real Disposable Income per capita Labour Productivity 2013 2035

GDP per capita
0 20 40 60 80 100 120 140

15 All figures cited in this chapter are in Canadian dollars.

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These results raise an important question: is this the best that Toronto could do? Can we rely on productivity growth of only 1.1 percent per year to keep Toronto competitive? Knowing that Dallas is forecast to have double that rate of growth, and New York about 30 percent higher, we need to aim higher or risk falling further behind.

In the following competitive scenario, we imagine a future in which Toronto is more competitive and higher economic growth is achieved. Table 5, following, provides a snapshot of the inputs and outputs associated with each of the two scenarios.

Table 5: Summary of Base Case vs Competitive Scenarios: Inputs and Outputs
Strategic Priority Base Case Forecast Competitive Case Forecast

Inputs

Outputs

The Big Move

Assume next wave of The Big Move projects not implemented Looming infrastructure gap estimated at $30 billion for the Toronto region is not closed Assume no substantial improvement to productivity level relative to North American cluster leaders

Assume next wave of The Big Move projects implemented between 2017-2031 Accelerate closing infrastructure gap with a goal of meeting more than 70% of requirements; and invest in region’s electricity distribution system Productivity gap (in levels) is closed 50% relative to North American cluster leaders in 2035

$21.6 billion in capital expenditures and $3.91 billion in maintenance costs See Table 6: The Next Wave of The Big Move $33 billion

See Table 8: Base Case vs Competitive Economic Forecasts in 2035 See Table 8: Base Case vs Competitive Economic Forecasts in 2035

Infrastructure Program

Clusters

Cluster based strategic initiatives have addressed specific types of competitive challenges facing each cluster. These challenges include workforce development, branding and promotion, commercialization of R&D and investment in machinery & equipment. These initiatives successfully brought together public and private stakeholders to work together. Match between skills and jobs is improved substantially. More business and academia collaboration successfully addresses workforce skills shortages. More internships / co-op positions have been created and international and intra-provincial credential recognition issues have been resolved.

See Table 7: Productivity Gap by Industry Cluster

Human Capital

Challenges matching skills and jobs; not as successful at integrating foreign professionals into the economy; 5.7% unemployment rate is achieved by 2035

4% unemployment rate is achieved by 2035

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Toronto Competitive Outlook to 2035 Overview
The base case scenario is enhanced with the addition of four new strategic assumptions in order to create this alternative, competitive scenario. We draw from previous work undertaken by the Board, particularly earlier editions of the Scorecard, in order to develop these new assumptions as the basis for the competitive scenario. Assumptions are rooted in the evidence demonstrating the economic benefits of: 1) better transportation, 2) infrastructure investments, 3) strategic cluster development, and 4) better matching of skills with jobs. For instance, Scorecard 2013 examined human capital, concluding that Toronto needs a better match of education, skills, and jobs to compete with top metros like San Francisco and Boston. In Scorecard 2012, Toronto’s performance was benchmarked on ten strategic industry clusters (e.g., finance, bio-pharma and bio-medical, food & beverage), and once again, Toronto’s productivity “gap” undermined some otherwise positive results. The key to a more competitive future is implementing actions in all four areas in an integrated way across the Toronto region.16 In Scorecard 2011, Toronto’s performance was benchmarked on transportation infrastructure where Toronto was ranked 19 out of 23 metro regions. Scorecard 2011 determined that Toronto’s major regional transportation challenges (e.g., congestion) negatively impact productivity and economic growth, prompting a recommendation for investment in more commuter rail infrastructure to lower commute times.

More specifically, the four broad policy actions are based on the following assumptions: 1. Transportation infrastructure will be improved through implementation of the next wave of The Big Move ($21.6 billion invested).17 2. More than 70 percent of the municipal infrastructure gap in roads, water, and wastewater systems will be met ($22 billion invested), and $500 million per year will be invested in the region’s electricity distribution system ($11 billion invested). 3. Productivity in key industry clusters will rise to one-half the level of the leading North American metro for each cluster. 4. Human capital will improve through better matching of skills with jobs to achieve a natural rate of unemployment at 4 percent by 2035. Targets established for each of the assumptions are designed to be aspirational but achievable. Although each policy action is described individually, the economic impact results are aggregated as a whole, reflecting the need for an integrated regional strategy. In other words, the competitive scenario envisions implementing all the policies together to benefit from the synergies that exist between them. For example, implementing the next wave of The Big Move would allow for greater population and employment density. In turn, this would increase the chances of boosting productivity in the region’s key economic clusters, as successful clusters thrive in areas where firms locate near each other. TD Economics, noting that traffic gridlock carries a heavy price tag in terms of lost productivity, has called for nothing less than the transformation of Toronto’s transit and road system.18

16 By applying The Conference Board of Canada’s CMA econometric model for Toronto, the economic impact of such integrated policy actions can be measured to create the alternative competitive scenario. 17 Excludes Hamilton LRT. 18 Derek Burleton and Sonya Gulati, “Staying on Track”, TD Economics, April 11, 2013, p 4.

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The Next Wave of The Big Move
Over many years, the Board has put a spotlight on the economic implications of underinvestment in transportation infrastructure and the costs of gridlock. In 2011, the Scorecard along with the Board’s background paper, Reaching Top Speed, brought to the fore the now highly quoted figures on the costs of congestion. Specifically, congestion in the Toronto region alone cost the regional economy $6 billion a year, rising to an estimated $15 billion in 2031 should no action be taken. More recent research by the CD Howe Institute, pegs this figure at up to $11 billion. Not to be ignored as well are the many negative social and environmental impacts of congestion that threaten our highly valued quality of life. The cause of this is clear. The region’s transportation infrastructure is not keeping pace with population growth. From 1950 to 1980, the regional population grew by nearly two million people and Toronto added nearly 400 kilometres of commuter rail track. Yet, from 1980 to 2010, when the population nearly doubled to 6 million, only 43 kilometres of track were added. Not surprisingly, this underinvestment is making the region’s commute times amongst the longest of any major urban region in the world. It is quite clear that overstretched transport networks are a major threat to the future prosperity of the Toronto region. Study after study, report after report, by such organizations as PricewaterhouseCoopers and the Organization for Cooperation and Development (OECD), consistently convey this same message. The Big Move was developed and adopted by the Province’s regional transportation agency, Metrolinx, in 2008. The plan envisages over 1,200 kilometres of rapid transit — more than triple what exists now — so that over 80 percent of residents in the region will live within two kilometres of rapid transit. Another key component of The Big Move is about improving the efficiency of the road and highway network for drivers, through improvements in traffic management systems and the identification and removal of intra-regional bottlenecks. To date, just $16 billion from

all three levels of government has already been allocated to a first wave of projects under the Plan. These are now in various stages of planning, development and construction. A further $34 billion is still needed for the second wave of projects. Phase 1: First Wave Projects (Over $16 billion in funding commitments) • Mississauga Transitway • UP Express • Finch West LRT • Toronto-York Spadina Subway Extension • Eglinton Crosstown LRT • Scarborough RT Replacement and Extension • Sheppard East LRT • York Region VivaNext Rapidways • GO Transit Rail service expansion Phase 2: Next Wave Projects (Approximately $34 Billion funding required) • Hamilton LRT • Dundas Street BRT • Hurontario-Main LRT • Brampton Queen Street Rapid Transit • Downtown Toronto Relief Line • Yonge North Subway Extension • Durham-Scarborough BRT • GO Rail Expansion • Express Rail on GO Lakeshore • Electrification of GO Kitchener line and UP Express

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According to Metrolinx Investment Strategy report, the $34 billion package will fund: • Next Wave regional transit project capital costs ($22.6 billion); • Supplementary funding for highways, local roads and transit, and other complementary projects and programs ($8.5 billion); and • Contingency costs to account for factors such as increased cost of land, labour cost variability, and increased material costs ($2.9 billion). As pointed out in Metrolinx Investment Strategy report, project funding needs to continue once the projects are built to include the ongoing operating, maintenance and rehabilitation costs. The highest standards of safety and service excellence for the entire life-cycle of these projects must be maintained. As a result, the competitive scenario presented here not only includes capital expenditures but also operating and maintenance costs.

In keeping with the rest of this Scorecard, only activities taking place within the Toronto CMA are addressed; accordingly, the competitive scenario excludes the Hamilton LRT project. The projects that encompass the next wave of The Big Move are displayed in Table 6 along with operating and maintenance costs. Construction on these projects is expected to run from 2017 to 2031, while operations and maintenance expenditures will continue until the end of the outlook through to 2035. All in all, as shown in Table 6, capital expenditures in the competitive scenario would total $21.6 billion while maintenance costs would add up to $3.9 billion19 over the forecast period. Implementing the Next Wave Projects would go some distance in reducing the chronic congestion that plagues Toronto’s transportation infrastructure today. Given that robust population growth is expected to continue, congestion will certainly worsen if nothing is done. The impacts of both the investment phase of the Next Wave Projects and its operating and maintenance phases are addressed in the analysis.

Table 6: The Next Wave of the Big Move (Billions $CAD)
Estimated Capital Cost Estimated Maintenance Cost

Project Name

Relief Line Yonge North Subway Extension Brampton Queen Street RT Dundas Street BRT Durham-Scarborough BRT Hurontario-Main LRT Go Two-Way All-Day Service Go Lakeshore Express Rail Service - Phase 1 (includes Electrification) Electrification of GO Kitchener Line & Union Pearson Express Total Amount
Sources: Metrolinx; The Conference Board of Canada. Please note that this table excludes Hamilton LRT. Maintenance costs do not include operating and rehabilitation costs.

7.40 3.40 0.60 0.60 0.50 1.60 4.90 1.70 0.90 21.60

0.90 0.89 0.16 0.14 0.15 0.45 0.87 0.35 3.91

19 Based on The Conference Board of Canada’s calculations that assume a 2 percent per year depreciation of the existing fixed assets and a 50-year service life for each project.

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The Next Wave of Projects, along with its operations and maintenance phases, will have a significant economic impact on the Toronto region. Increased economic activity will come from the initial investment and ongoing operations and maintenance, with additional benefits accruing from heightened labour productivity triggered by these investments. More specifically, the reduced congestion expected as Torontonians shift from auto to public transportation use will lead to increased productivity. This happens for three reasons. First, reducing congestion results in a reduction in wage premiums paid to attract workers with higher travel times and costs, assuming businesses absorb some of the excess costs of worker commuting.20 Secondly, productivity is boosted when economies of scale are increased; in other words, as public transportation supports higher levels of employment and population density, firms are able to increase their economies of scale.21 Finally, productivity will be lifted by lower business costs associated with faster shipment times. A 2009 study, by the American Public Transportation Association, estimated that making a $13 billion annual capital investment in public transportation in the U.S. yielded an $8.4 billion per year increase in productivity, coming from labour market enhancement and from auto/truck operating cost reductions.22 Applying the same ratio, the Next Wave of Projects, which when adjusted for inflation23 includes $14.3 billion in capital expenditures, would yield labour productivity gains of $9.2 billion over the forecast period. It should also be noted that other studies that have measured the economic impact of The Big Move have failed to include its impact on labour productivity growth.

Infrastructure Program
A prolonged period of underinvestment has led to a large infrastructure gap for Canadian municipalities.24 For Ontario alone, a June 2008 working paper estimated that to close the estimated gap between actual infrastructure spending and what is needed would require at least $5.9 billion a year over the next ten years.25 This spending estimate includes transportation; water systems, wastewater systems, and storm water systems; solid waste facilities; parks; and municipal buildings. Given that the infrastructure gap has yet to be addressed in any significant way, the 2008 paper surely underestimates the magnitude of the current gap. Toronto’s infrastructure gap is estimated to be around $30 billion, roughly equivalent to half of the Ontario total.26 Under the competitive scenario, we assume that annual investments in infrastructure would be $1 billion higher than in the base case scenario, for a total investment of $22 billion over the full outlook period. In other words, more than 70 percent of the estimated infrastructure gap would be closed by 2035.

20 Weisbrod, Glen and Reno, Arlee, Economic Impact of Public Transportation Investment, Economic Development Research Group and Cambridge Systematics Inc., October 2009. 21 Ibid. 22 bid, p. 58/ 23 To adjust for inflation, a non-residential investment deflator in 2007 dollars was used. While both operating and maintenance expenditures were included in the competitive scenario, to calculate the productivity bump, only capital expenditures were used to stay consistent with 2009 study. 24 Gill, Vijay, Efficiency Options for Closing the Municipal Infrastructure Gap, The Conference Board of Canada, March 2011. 25 Association of Municipalities Ontario, Working Paper of the Infrastructure Table: Provincial-Municipal Fiscal and Service Delivery Review, June 2008. 26 Many estimates exist for Toronto’s infrastructure gap; each in turn includes different types of infrastructure (e.g., some are all-inclusive taking into account transit, hospital, social housing etc.). The $30 billion estimate used in this Study is in keeping with others, as extrapolated.

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At the same time, we assume an annual investment of $500 million in the region’s electricity distribution system throughout the forecast period. As The Conference Board has argued previously, “the electricity sector faces major investments in new infrastructure, as many facilities are about to be retired or refurbished.”27 A large amount of spending will also be required to add renewable energy capacity.28 The infrastructure program and electricity distribution system upgrade and expansion would add up to a $33 billion investment. Like the next wave of The Big Move, investing in public infrastructure, including the energy distribution system, is expected to boost labour productivity growth.29 Indeed, the Organization of Economic Co-operation and Development has argued that “Toronto’s productivity is...constrained by the region’s infrastructure, which has suffered from decades of under-investment and has not kept pace with the region’s rapid population growth.”30

• Finance • Food & Beverage Manufacturing • Bio-pharma & Bio-medical • Information and Communication Technology (ICT) • Professional Services • Transportation & Logistics Scorecard 2012 put a spotlight on our leading business clusters, including human health sciences and food & beverage, showcasing how they contribute to the economic vitality of the region. (See Text Boxes for examples on how these clusters can drive innovation). Building on this evidence base, the 2012 Toronto Region Economic Summit was a pivotal moment which brought together senior business leaders to forge a common consensus on the need to build strong cluster based networks of collaboration between firms and supporting organizations like government, academia and trade associations. A very clear message emerging from the Summit’s keynote speaker, the renowned Harvard business theorist Dr. Michael Porter, was how strong clusters drive not only regional economic competitiveness, but the growth and profitability of small, medium and large sized firms. With this mandate in place, the Board has launched an ongoing cluster initiative built on the theme of Porter’s message collaborate to compete. The Board is fostering a spirit of collaboration by helping Greater Toronto region cluster participants come together to accelerate innovation and the growth of their industries. ‘Cluster’ approaches to economic development have proven internationally to be one of the strongest avenues to the creation of new, higher paying jobs through increased regional business growth and productivity. It is a common-sense approach, based

Clusters
For more than ten years, economic development consultants have advised that the competitiveness of the Toronto metropolitan area is determined in large measure by the success of the region’s industry clusters.31 The Board has long argued that Toronto should be taking greater advantage of its existing, innovative clusters to create stronger economic growth. Scorecard 2012 examined the relative performance of ten clusters determined to be critical to the regional economy. These clusters accounted for 40 percent of Toronto region’s economy. They include: • Aerospace • Autos & Parts • Creative & Entertainment • Energy

27 Baker, Sklokin, Coad, and Crawford, Canada’s Electricity Infrastructure: Building a Case for Investment, The Conference Board of Canada, April 2011. 28 Ibid. 29 See Gu, Wulong and MacDonald, Ryan, The Impact of Public Infrastructure on Canadian Multifactor Productivity Estimates, Statistics Canada, 2009. 30 Organisation for Economic Development and Cooperation, OECD Territorial Reviews: Toronto, Ontario, Canada, OECD, 2009, p. 32. 31 ICF Consulting, “Toronto Competes: An Assessment of Toronto’s Global Competitiveness” City of Toronto Economic Development, February 2000.

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on standard business strategic and tactical planning best practices. Focus first on areas of strength, work to make them stronger and more connected to other assets and the needs of customers, then identify and address strategic gaps or weaknesses to make the whole “ecosystem” stronger. For example, cluster-based initiatives can help address workforce development challenges by emphasizing more on the job-training and co-op placement opportunities. These initiatives can also help drive investment in productivity enhancing technologies and such critical elements of regional infrastructure such as transportation. In Scorecard 2012, one of the six indicators selected for benchmarking the competitiveness of Toronto’s clusters was labour productivity growth, where Toronto often lagged behind their counterparts. But if Toronto were to

carry out a regional cluster strategy, as suggested in Scorecard 2012, it would drive innovative growth in a focused way, leading to improved productivity. Accordingly, the competitive scenario assumes that strategic cluster development would generate productivity gains up to 50 percent of the level of the leading North American city for each cluster by 2035. The stronger labour productivity growth needed to reach this higher level is phased in over the 2014-2035 period. Table 7 indicates the extent of the productivity gap between Toronto and the leading metropolitan regions. Toronto’s productivity level is expressed as a percentage of the industry’s productivity leader for each of the ten clusters.

Table 7: Productivity Gap by Industry Cluster
Gap: Toronto’s Productivity as % of the Leader

Cluster

Productivity Leader

Aerospace Autos & Parts Culture Energy Food & Beverage Finance Bio-Pharma & Bio-Medical ICT Professional Services Transportation & Logistics
Source: Scorecard 2012

Chicago Seattle New York San Francisco San Francisco New York Boston Los Angeles San Francisco San Francisco

43.9% 52.6% 6.0% 18.1% 15.5% 26.4% 28.5% 20.0% 41.9% 48.9%

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In Focus: Toronto Region Board of Trade’s Food & Beverage Cluster Initiative
As the Board reported in Scorecard 2012, the Toronto region’s Food & Beverage cluster is the third largest in North America; a fact which surprised many. Certainly, at a time when manufacturing is often viewed as a 20th century endeavour, manufacturing in the Food & Beverage cluster continues to challenge this perception by both continuing to grow and innovate. Today the cluster employs more than 59,000 people in the Toronto region and had sales of about $17 billion in 2010. No doubt this industry is an economic driver, vital to the success of our region and province. Nearly 75 percent of what is grown in the rural area surrounding Toronto is processed locally. In short, it’s a cluster with enormous potential for growth and an increasingly global presence. It is precisely for this reason that the Board has been facilitating a GTA-focused Food & Beverage cluster development process in collaboration with Food & Consumer Products of Canada (FCPC), the largest industry association in Canada representing the food and consumer products industry. The key objective of the Food & Beverage cluster initiative is to identify tangible projects which can drive measureable improvements in the cluster’s productivity and pace of innovation. Since 2012, the Board has worked closely with the cluster’s leaders to develop an agreed upon business strategy and work plan. This includes organizing several cluster forums to prioritize key strategic priorities for the cluster. Most recently, the Board brought together a small group of CEOs and Ontario Premier and Minister of Agriculture, Kathleen Wynne and Ontario Minister of Economic Development Trade and Employment, Dr. Eric Hoskins to discuss impediments and challenges that need to be tackled

immediately to better support the growth of the food and beverage manufacturing cluster in the Toronto Region. These efforts have generated a significant amount of grassroots energy in the cluster. Indeed, this is reflected in the leadership role FCPC will be taking, with the support of the Board, in the development and implementation of a robust business strategy for the cluster. Some of the critical issues the cluster strategy will need to address include: 1. Workforce Development The cluster will need to address a variety of workforce challenges; such as, an aging workforce with increasing numbers of workers retiring and the growing unmet need for more skilled workers. This was highlighted by a University of Guelph study which showed that for every five jobs in this cluster only one student is available. 2. Investment in productivity enhancing technologies Finally, Toronto’s Food & Beverage cluster needs to do a better job of investing in productivity-enhancing machinery and equipment. According to the Institute for Competitiveness and Prosperity, for every dollar invested per worker in this cluster in the U.S., Canadian facilities invest only 62 cents; a figure which must improve if we are to crack international markets. 3. Transportation Infrastructure As with other industries in the Toronto region, transportation was identified as a critical strategic barrier to development of the cluster in the region. The highly congested state of public transit and road/highway systems in the region was adversely affecting the ability of firms to get employees to their places of work and products to market.

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In Focus: Toronto Region Board of Trade’s Human Health Sciences Cluster Initiative
The Toronto region is the largest Canadian cluster of human health-related companies and other organizations with core concentrations in the City of Toronto, the City of Mississauga and the City of Markham. Nearly 700 companies are located in the region: 300 pharmaceutical, medicine and device manufacturers, 167 R&D and testing laboratories, and over 250 medical equipment and supplies related companies. These companies employ more than 87,000 people in the Toronto region. The core of the cluster is represented by the Discovery District in the City of Toronto, a 2.5 square kilometer research park, where more than $1 billion is directed annually to research activities. The district is anchored by the University of Toronto and its affiliated teaching and research hospitals. U of T is ranked in the top three North American institutions for medical publications and citations. Outside of the Discovery District, many pharmaceutical, device and service companies cluster around an area in the City of Mississauga known locally as “pill hill”. A smaller, but still significant, group of companies are located in Markham. Leaders in the Toronto region Human Health Sciences cluster are currently working collaboratively to enhance the rate of commercialization and company formation in the cluster. Excellent research assets plus established innovation and incubation institutions give the Toronto region an excellent foundation to develop a thriving commercial cluster serving a large, fast growing global market.

A wide and deep pool of researchers consistently attract significant research funding and produce outstanding human health science discoveries and patents. The cluster has particular global expertise in cancer, regenerative medicine, genetics, neuroscience, and telemedicine. Furthermore, the region’s large and diverse population is an asset for clinical trials and accessing global markets. Excellent facilities, doctors, and nurses suggest an opportunity to significantly expand the treatment of foreign patients. Cluster stakeholders are working to address a key challenge for the sector; namely, how to ensure an increased flow of early stage financing. This will be done by a renewed focus on branding and promoting the human health science assets of the region and developing the business management talent required to turn excellent discoveries into market relevant products and companies that will grow as they serve strong global markets. The achievable vision of the cluster is to rank in the top five of global city-region health sciences cluster by 2025. The result will be more companies and significantly greater sales in and outside the region of new therapeutics, medical devices, and health-related information technology.

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Human Capital
The Board has issued a number of calls to action pressing for improvements in Toronto’s human capital policies and programs. In particular, Scorecard 2013 introduced the “Human Capital Lens”, addressing the relationship between the quality of human capital and productivity growth. Toronto’s fourth place result emphasizes Toronto’s strengths in areas of health and safety and post-secondary education, among others. Toronto boasts a strong postsecondary education system, including both colleges and universities. Yet a troubling weakness emerges in the mismatch between immigrants’ education and employment. The Board has been consistent in calling for a better match between the skills of Toronto’s labour force and the skills demanded by the market place. Scorecard 2013 pointed to Toronto’s failure to capitalize on the skills and talents of newcomers, noting that over 55 percent of new immigrants have a university degree, yet many are under-employed. Toronto also needs to find ways to attract and retain more university and college graduates. The Organization for Economic Cooperation and Development (OECD) has found that post-secondary attainment among Canada’s younger adults is falling behind, concluding that “rates of participation will need to grow if Canada is to remain competitive in a globalized local market.”32 The competitive scenario hones in on improving the match between skills and jobs, with an improved outcome for the unemployment rate; namely, the Toronto region could lower its natural rate of unemployment to 4 percent by 2035, bringing with it a host of economic benefits.

Competitive Scenario Results: Sizeable Improvements
Achieving the growth forecast in the competitive scenario depends on integrating all four components across the region, consistent with the Board’s policy to address priority challenges for transportation infrastructure expansion, cluster development, and regional economic cooperation. As described, the competitive scenario means: 1. Improving transportation infrastructure by putting the next wave of The Big Move into action ($21.6 billion invested over the next 22 years); 2. Closing more than 70 percent of the municipal infrastructure gap in roads, water, and wastewater systems ($22 billion invested over the next 22 years) and upgrading the region’s electricity distribution system with a $500 million annual investment (total $11 billion invested over the next 22 years); 3. Raising productivity levels in Toronto’s key industry clusters to one-half the level of the leading North American metro for each cluster; and 4. Improving human capital through better matching of skills with jobs to achieve a natural rate of unemployment at four percent by 2035. The bulk of these investments would be completed by 2035, the final year of the forecast. When compared to the base case scenario, the economic impact of the competitive scenario is significant, providing Toronto with a springboard to be one of the great economic metropolitan regions in the world. Table 8 compares the economic results for the Base Case scenario and the Competitive scenario, according to nine critical indicators.

32 Organization for Economic Development and Cooperation, OECD Territorial Reviews: Toronto, Ontario, Canada, OECD, 2009, p.32.

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Table 8: Base Case vs Competitive Economic Forecasts in 2035
Difference Competitive-Base Percent from Base

Base Case

Competitive

Population (Thousands) GDP at basic prices (Millions 2007 $CAD) Real GDP per capita (2007 $CAD) Real GDP per capita growth (%) Labour productivity (2007 $CAD) Productivity growth (%) Personal disposable income per capita (2007 $CAD) Employment (Thousands) Unemployment Rate (%)
Source: The Conference Board of Canada.

8,698 519,818 59,761 1 120,579 1.1 31,146 4,311 5.7

8,873 582,028 65,593 1.4 130,032 1.3 32,791 4,476 4.0

175 62,210 5,833 0.3 9,453 0.2 1,645 165 -1.7

2.0 12.0 9.8 n/a 7.3 n/a 5.3 3.8 n/a

The economic impact of these four policy actions include the direct, indirect and induced impacts, based on the following definitions: • Direct effects are the changes in economic activity occurring as a direct consequence of each of the policy actions. • Indirect impacts measure the value to the economy of changes in sales for suppliers to the directly affected businesses. • Induced impacts measure the value of household expenditures from the income earned in a directly or indirectly affected industry. Adding up the direct, indirect and induced impacts for all four policy actions combined, real GDP would be $62 billion higher than the “business as usual” scenario by 2035. In other words, the level of GDP would be 12 percent higher in the competitive scenario compared to the baseline scenario. Under the competitive scenario, GDP growth would average 3.2 percent per year from 2014 to 2035, 0.5 percentage points per year higher than in the base case. (See Figure 3).

Figure 3: GDP per capita ($2007)
Optimistic Scenario 70,000 65,000 60,000 55,000 50,000 45,000 40,000
13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Baseline

Figure 1

Source: The Conference Board of Canada

At the same time, the increased economic activity would lure more people to the Toronto region. By the end of the forecast, 175,000 additional people would be expected to call Toronto home, compared to the base case scenario. Optimistic Scenario Baseline In other words, total population would be 2 percent higher 34,000 by 2035 compared to the base case, thanks to higher 33,000 immigration, higher interprovincial in-migration, and 32,000 lower 31,000 intercity-out migration. The integrated action plan would have a bigger impact on 29,000 GDP than on population, meaning GDP per capita would 28,000 be higher in the competitive scenario than in the “business 27,000 as usual” case. This is important because GDP per capita is 26,000 a key measure of an economy’s standard of living. For the
30,000 Figure 2

Boston

Chicago

Optimistic

Baseline

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Toronto region, GDP per person would reach $65,593 by 2035 if the four policy actions are implemented. This works out to be 5,833 or 9.8 percent higher than in the base case scenario. In growth terms, GDP per capita would average 1.4 percent per year between 2014 and 2035 in the competitive scenario, compared to just 1 percent per year under the base case. Likewise, the higher economic activity would result in greater job creation. Indeed, by 2035, an additional 165,000 jobs would be created above and beyond what is already created in the base case scenario. Most of the job gains would occur in the services sector, in particular in wholesale and retail trade, in business services, and in finance insurance and real estate. The gains in employment, partly the result of better skills matching, would drive the unemployment rate down to 4 percent by 2035, compared to 5.7 percent in the “business as usual” scenario.
Optimistic Scenario Baseline 70,000 Better yet, the gains in output would outpace the gains in 65,000 employment, primarily because three of the four policy 60,000 actions would provide a lift to labour productivity levels (i.e., 55,000 implementation of the next wave of The Big Move, infrastructure improvement, and cluster development). 50,000 Indeed, by 2035, output per worker would be $9,453 or 45,000 7.3 percent higher in the competitive scenario than in the 40,000 13 14 approach. 15 16 17 18 19 20 21 22 23 competitive 24 25 26 27 28 scenario, 29 30 31 32 labour 33 34 35 base case Under the productivity growth would average 1.5 percent per year over the forecast horizon, 0.2 percentage points per year higher than in the baseline scenario.

The higher labour productivity would be good news for the region’s workers, as there is a strong correlation between productivity and income. A person that produces more per hour will generally earn more per hour. Indeed, in a perfectly competitive environment, the wage of a worker is equal to the value of what that worker can produce.33 The higher wages and salaries would be reflected in higher real after-tax incomes. By 2035, real personal disposable income per capita would be $1,645 or 5.3 percent higher in the competitive scenario compared to the base case. (See Figure 4). In other words, if these four policy actions are implemented, every person living in the Toronto region would have an extra $1,645 dollars to spend or invest by 2035, after adjusting for inflation. In growth terms, real personal disposable income per capita would be 0.2 percentage points per year higher in the competitive scenario than in the base case.

Real GDP per capita and Income: Catching Up is Hard to Do
Despite Figure 1 the gains in real GDP per capita that would result from implementing the four policy actions, Toronto would still lag behind its U.S. competitors. Table 9 shows the real per capita GDP projections for Toronto, Boston, Dallas, and Chicago. Even under the competitive scenario, Toronto fails to catch up with these U.S. metros. In purchasing power parity terms, real GDP per capita in 2035 is expected to equal $109,066 in Boston, $99,849 in Dallas, and $85,169 in Chicago, compared to just $65,593 in Toronto. Toronto faces a Herculean task in trying to catch Boston, Dallas, or Chicago, largely because the current gap is so wide. Toronto’s real GDP per capita would have to grow much faster than any of these metros just to prevent the gap from widening further. Yet, in the competitive scenario, Toronto’s real GDP per capita growth is expected to Figure 2 remain slightly slower than Boston’s, while keeping pace with Chicago’s. Dallas, with projected 3.5 percent annual growth, is the runaway leader among all metros. Therefore, in all cases the gaps will continue to widen.

Figure 4: Disposable Income per capita ($2007)
Optimistic Scenario 34,000 33,000 32,000 31,000 30,000 29,000 28,000 27,000 26,000 Baseline

Source: The Conference Board of Canada

33 Mankiw, Greg, How are wages and productivity related?, http://gregmankiw.blogspot.ca/2006/08/how-are-wages-andBoston Chicago Optimistic Baseline productivity-related.html (accessed November 26, 2013).
120,000 110,000

74 / Toronto Region Board of Trade

Table 9: Real GDP per capita ($CDN 2007)
Metro 2013 2035 Compound Annual Growth Rate (%)

Boston Dallas Chicago Toronto (Base) Toronto (Comp.)

79,375 65,137 63,339 47,841 47,841

109,066 99,849 85,169 59,761 65,593

1.5 2.0 1.4 1.0 1.4

on employment growth, unemployment rate, real GDP and productivity growth. In fact, on employment growth, Toronto would be tops in North America. The significant job gains expected in the competitive scenario would also boost Toronto’s ranking on the unemployment rate. Indeed, Toronto would catapult to third place in this category, ahead of all U.S. metros and behind only Halifax and Calgary. Toronto‘s much-improved ranking in real GDP growth would position it in second place, just behind Dallas. Even with the strong employment gains and low unemployment rate, Toronto’s productivity would not suffer. The competitive scenario estimates that Toronto’s ranking on productivity growth would improve to fifth, up from ninth in the base case scenario. However, no improvement in ranking is projected for the level of real GDP per capita and productivity. Despite sizeable improvements on these latter two indicators, Toronto’s ranking remains the same in the base case and competitive scenarios. As discussed above, the gap with U.S. metros (and Calgary) is too wide for Toronto to overtake the leaders.

Sources: Moody’s Economy.com; The Conference Board of Canada.

Scorecard Ranking: Toronto Jumps Up
Looking at 2035 in the competitive scenario, Toronto’s overall economic ranking on a set of six key economic indicators moves us into the top five of North American urban performers (See Table 10).34 Toronto’s ranking in the competitive scenario, would thus see us move ahead, ahead of San Francisco, Boston, and New York for the first time. Toronto would place fourth (compared to eighth in the base case scenario), thanks to a stronger performance

Table 10: Future Scenarios: Ranking of North American Metros in 2035 Using Key Economic Indicators
Base Case Scenario Rank Metro Area Grade (normalization score) Competitive Scenario Metro Area Grade (normalization score)

1 2 3 4 5 6 7 8 9 10 11 12

Dallas Seattle Calgary San Francisco New York Los Angeles Boston Toronto Halifax Chicago Vancouver Montréal

A B B B B C C D D D D D

0.88 0.68 0.63 0.56 0.51 0.46 0.43 0.39 0.29 0.29 0.26 0.12

Dallas Seattle Calgary Toronto San Francisco New York Los Angeles Boston Halifax Chicago Vancouver Montréal

A B B B B B C C D D D D

0.88 0.68 0.63 0.57 0.56 0.51 0.46 0.43 0.29 0.29 0.26 0.12

34 Please note that rankings are calculated for a set of core economic indicators forecast as of 2035, namely real GDP per capita, real GDP growth, labour productivity, labour productivity growth, employment growth, and the unemployment rate. These rankings should not be confused with the overall ranking on the Economy that ranks Toronto in the twelfth position vis-à-vis 23 other regions on a wider set of 18 indicators using historical data.

Toronto as a Global City: Scorecard on Prosperity 2014 / 75

Economic Forecast
Real gross domestic product (GDP) per capita ($USD) # cities ranked: 12

What About Toronto?
Toronto remains in 9th out of 12, below all U.S. metros and Calgary. At $53,470 by 2035, Toronto’s real GDP per capita makes a big jump in the optimistic scenario, but is still almost half of first place Boston. The base year is in 2007 dollars.

Base Case Scenario
1. Boston 2. New York 3. Seattle 4. San Francisco 5. Calgary 6. Dallas 7. Los Angeles 8. Chicago 9. Toronto 10. Halifax 11. Vancouver 12. Montréal 1. Dallas 2. Seattle 3. Toronto 4. Calgary 5. Vancouver 6. San Francisco 7. Los Angeles 8. Montréal 9. Halifax 10. New York 11. Boston 12. Chicago 1. San Francisco 2. Los Angeles 3. New York 4. Dallas 5. Seattle 6. Boston 7. Chicago 8. Calgary 9. Toronto 10. Vancouver 11. Halifax 12. Montréal A A A A A A B B D D D D ($88,907) ($86,236) ($85,433) ($84,101) ($82,404) ($81,394) ($73,066) ($69,942) ($48,715) ($44,646) ($42,881) ($40,601) (3.5%) (2.7%) (2.6%) (2.5%) (2.0%) (1.9%) (1.8%) (1.7%) (1.6%) (1.6%) (1.5%) (1.4%) ($186,343) ($182,023) ($179,567) ($177,556) ($169,375) ($154,539) ($149,139) ($147,575) ($98,293) ($88,873) ($84,626) ($84,327)

Competitive Scenario
1. Boston 2. New York 3. Seattle 4. San Francisco 5. Calgary 6. Dallas 7. Los Angeles 8. Chicago 9. Toronto 10. Halifax 11. Vancouver 12. Montréal 1. Dallas 2. Toronto 3. Seattle 4. Calgary 5. Vancouver 6. San Francisco 7. Los Angeles 8. Montréal 9. Halifax 10. New York 11. Boston 12. Chicago 1. San Francisco 2. Los Angeles 3. New York 4. Dallas 5. Seattle 6. Boston 7. Chicago 8. Calgary 9. Toronto 10. Vancouver 11. Halifax 12. Montréal A A A A A A B B D D D D A B B B C D D D D D D D ($88,907) ($86,236) ($85,433) ($84,101) ($82,404) ($81,394) ($73,066) ($69,942) ($53,470) ($44,646) ($42,881) ($40,601) (3.5%) (2.9%) (2.7%) (2.5%) (2.0%) (1.9%) (1.8%) (1.7%) (1.6%) (1.6%) (1.5%) (1.4%)

Real GDP growth # cities ranked: 12

Toronto improves to 2nd position in the optimistic scenario, with ten-year average annual growth of 2.9% between 2025-2035, easily the strongest in Canada.

A B B B C D D D D D D D A A A A A B B B D D D D

Productivity ($USD) # cities ranked: 12

Similar to real GDP per capita, Toronto stays in 9th position, well behind all U.S. metros and Calgary. Even with significant capital investment and improved education, Toronto’s productivity continues to lag other areas in 2035. The base year is in 2007 dollars.

A ($186,343) A ($182,023) A ($179,567) A ($177,556) A ($169,375) B ($154,539) B ($149,139) B ($147,575) D ($105,988) D ($88,873) D ($84,626) D ($84,327)

76 / Toronto Region Board of Trade

Economic Forecast
Productivity growth # cities ranked: 12

What About Toronto?
Toronto moves into the top 5 areas in productivity growth between 2025-2035, the best performing metro in Canada in the optimistic scenario. However, with U.S. metros occupying the first 4 positions, the productivity gap is widening

Base Case Scenario
1. Dallas 2. Seattle 3. New York 4. Los Angeles 5. Chicago 6. San Francisco 7. Boston 8. Halifax 9. Toronto 10. Montréal 11. Vancouver 12. Calgary 1. Calgary 2. Dallas 3. Toronto 4. Seattle 5. Vancouver 6. Montréal 7. San Francisco 8. Los Angeles 9. Halifax 10. New York 11. Boston 12. Chicago 1. Halifax 2. Calgary 3. Dallas 4. San Francisco 5. New York 6. Vancouver 7. Boston 8. Seattle 9. Toronto 10. Los Angeles 11. Chicago 12. Montréal A B C C C C C C C D D D A A A A B C D D D D D D A A B C C C C C D D D D (1.9%) (1.5%) (1.4%) (1.4%) (1.3%) (1.3%) (1.2%) (1.2%) (1.1%) (1.0%) (0.9%) (0.9%) (1.6%) (1.6%) (1.5%) (1.2%) (1.1%) (0.7%) (0.6%) (0.4%) (0.4%) (0.2%) (0.2%) (0.1%) (3.2%) (3.8%) (4.7%) (4.8%) (4.9%) (5.0%) (5.2%) (5.5%) (5.7%) (5.8%) (6.0%) (6.5%)

Competitive Scenario
1. Dallas 2. Seattle 3. New York 4. Los Angeles 5. Toronto 6. Chicago 7. San Francisco 8. Boston 9. Halifax 10. Montréal 11. Vancouver 12. Calgary 1. Toronto 2. Calgary 3. Dallas 4. Seattle 5. Vancouver 6. Montréal 7. San Francisco 8. Los Angeles 9. Halifax 10. New York 11. Boston 12. Chicago 1. Halifax 2. Calgary 3. Toronto 4. Dallas 5. San Francisco 6. New York 7. Vancouver 8. Boston 9. Seattle 10. Los Angeles 11. Chicago 12. Montréal A B C C C C C C C D D D A A A A B C C D D D D D A A B B C C C C C D D D (1.9%) (1.5%) (1.4%) (1.4%) (1.3%) (1.3%) (1.3%) (1.2%) (1.2%) (1.0%) (0.9%) (0.9%) (1.6%) (1.6%) (1.6%) (1.2%) (1.1%) (0.7%) (0.6%) (0.4%) (0.4%) (0.2%) (0.2%) (0.1%) (3.2%) (3.8%) (4.0%) (4.7%) (4.8%) (4.9%) (5.0%) (5.2%) (5.5%) (5.8%) (6.0%) (6.5%)

Employment growth # cities ranked: 12

In the optimistic scenario, Toronto moves into first place among all other North American metros. At 1.6% average annual growth from 2025-2035, Toronto squeezes ahead of Calgary and Dallas.

Unemployment rate # cities ranked: 12

Toronto makes its most impressive improvement on this indicator, as a better educated and more skilled workforce lowers the unemployment rate to 4.0% in 2035.

Note: Comparable data for U.S. metros for personal disposable income projections was unavailable; therefore no rankings are presented.

Toronto as a Global City: Scorecard on Prosperity 2014 / 77

Conclusion
Our 2014 special lens allows us to peer into the future, with long-term forecasts on the state of the Toronto region’s economy by 2035. These forecasts present two distinct future states.35 First forecast is considered a base case forecast, taking a conventional look at Toronto’s future. It uses known investment projects and demographic and productivity projections based on current trends as a starting point; in effect a “steady as you go” scenario. It’s a scenario that not only puts Toronto at risk of serious underperformance relative to our competitors, but diminishes the opportunities for our residents to achieve their full potential. However, our second future state takes us in a much more proactive direction. Using this base case as a starting point, we create a competitive and highly dynamic scenario that analyzes the effects on Toronto’s economy of several strategic initiatives, including investment projects that would improve the region’s public transportation network (next wave of The Big Move) and other key infrastructure, and the implementation of active public/private sector cluster development and human capital improvement initiatives. What is clear is that under the competitive scenario, Toronto would make the step needed to catapult the region into upper echelons of international economic performance. Toronto’s ranking on critical indicators like real GDP growth, productivity growth, employment growth and unemployment rate would all see marked improvements. For the region’s residents, it would mean access to more and better paying jobs and greater disposable income.

Nevertheless, this high-growth scenario won’t happen by itself. It needs the active participation and collaboration of our region’s business leaders, elected officials, government representatives and academia to succeed. The Toronto region must focus on developing a strategic and integrated approach to delivery of: • The next wave of projects drawn from The Big Move and investments in other types of critical public infrastructure. • Developing strategies to increase productivity in key industry clusters. • Getting business, academia, labour and government to formulate better approaches to match employee skills and labour market needs. The citizens of Toronto would feel the impact of these four key initiatives directly, through less congestion, more efficient infrastructure, and a stronger labour market with higher wages and salaries.

35 Note that this section presents information in $CAD, unless otherwise indicated.

78 / Toronto Region Board of Trade

9

| CONCLUSION

In this sixth Scorecard on Prosperity, Toronto’s ranking among the world’s best global metropolises is confirmed. Ranked third, Toronto achieves its best ranking to date on the reliable strength of its labour attractiveness as well as improved economic measures. For the second consecutive year, Toronto ranks higher than all other U.S. metros. Year after year, Toronto’s success comes from a strong performance in Labour Attractiveness. Central to Toronto’s success is diversity, marked by the numbers of foreign-born residents. By 2011, more than 47 percent of Toronto’s residents were foreign-born; only Vancouver had more than a 40 percent share. Toronto ranked third on Labour Attractiveness, two spots higher than in Scorecards 2012 and 2013 and moved up from a “B” to an “A” grade. Population growth in Toronto, fuelled by immigration, continues to be strong, although five metro areas grew faster, including Calgary and Vancouver. Toronto’s reputation as a livable region is well-earned, but poor results on a handful of indicators keep it from being number one. Transportation weaknesses continue to plague the region. Two years ago, Scorecard on Prosperity 2011 examined transportation issues in depth. Apart from bad commute times, we learned that Toronto performs poorly on indicators related to public transit, especially rail. Toronto’s commute time is the worst among Canadian Census Metropolitan Areas (CMAs), and second-worst in North America after New York (3.9 minutes longer).

In the Economy domain, Toronto stays a middle-of-theroad performer in 12th place, same as in Scorecard 2013. The gap between Toronto and the leading metros (San Francisco, Boston, Seattle) remains stubbornly wide. Nonetheless, Toronto improves from a “C” to a “B” grade, making relative gains on several of the growth indicators, including: real Gross Domestic Product (GDP) growth, productivity growth, employment growth, and income growth. Faltering economies in parts of the Eurozone (Spain, Italy) contributed to steep declines on several indicators for Barcelona, Madrid, and Milan; in turn, lifting Toronto to relatively higher positions. Toronto continues to prove its world-class standing when it comes to high-tech and professional employment, and still holds the North American advantage in market size. And with the drop in renting Class “A” office space downtown, Toronto became a more affordable place to do business. With a concomitant rise in office space in several U.S. metros (notably; Boston, San Francisco, New York), Toronto moved up five places in the rankings when compared to Scorecard 2013. Furthermore, Toronto’s corporate tax burden remains at about 56 percent of the U.S. average, enabling Toronto to stay in fourth place ranking on Total Tax Index. All of these strengths suggest a brighter economic future for the Toronto region, but they are not enough to propel Toronto to the top tier of the world’s metropolitan economies. Toronto is a good place to do business, but can be better. As every Scorecard has noted, weak productivity and the failure to attract significant investment are barriers to a major uplift in Toronto’s economy.

Toronto as a Global City: Scorecard on Prosperity 2014 / 79

As the sixth edition of the Board’s Scorecard on Prosperity, Scorecard 2014 reflects on Toronto’s progress over time, based on a systematic review of the core set of Economic and Labour Attractiveness indicators. Over the past five Scorecards, Toronto has improved its overall ranking from fifth to third place, boosted by higher rankings on certain indicators within both the Economy and Labour Attractiveness domains. Toronto has never stumbled far from the top on Labour Attractiveness, but has remained stubbornly in the middle of the pack on Economy, ranked twelfth in both 2010 and 2014. Unfortunately, the handful of higher scores on individual indicators weren’t enough to pull Toronto up in the rankings on the Economy. Interestingly, Toronto’s higher composite score on the Economy comes on the back of resilience and economic potential but not a result of continued growth and momentum in absolute terms. Despite what the stable Economy ranking may suggest, Toronto has seen improvements in this domain — however, many were only achieved at the expense of other metros where effects from the economic recession of 20082009 persist. This is particularly true for Barcelona and Madrid; but London and Los Angeles were also hard hit. Minor gains for Toronto were achieved on income growth, productivity growth, and unemployment. For Toronto, one economic indicator stands out as a significant gain; the growth in residential building permits. In Scorecard 2010, residential building permit activity had declined during the reported five-year period; thus recording negative growth (-0.9 percent). By Scorecard 2014, this was completely reversed, with Toronto reporting 3.6 percent growth in residential building permit activity. Toronto benefitted from the relative strength of the Canadian banking system that prevented a U.S.-style housing crisis. As Toronto improved, most metros in the U.S. were struggling to regain stability in the housing market. In this year’s Scorecard, five of six U.S. metros still posted negative growth.

When it comes to the main determinants of capital performance, Toronto’s record remains virtually unchanged from Scorecard 2010. This includes: number of patents, venture capital investment as a share of real GDP, average size of venture capital investment per firm, and average size of Initial Public Offerings (IPOs). Toronto is stuck near the bottom of the pack, with a string of “D” grades. Toronto has yet to demonstrate the improvement in the determinants of productivity growth that are required if the CMA is to enjoy future prosperity. While looking back has helped us understand Toronto’s progress over the course of five Scorecards; looking ahead helps to chart a roadmap for the future. Reflecting on Toronto’s record over the past five years prompted us to acknowledge the significant challenges threatening Toronto’s envied position among global metropolitan regions. Recognizing we start from a solid position, we aspire to an economic future for the region that is better than “good enough.” Toronto possesses the human and capital resources to be excellent provided they are deployed smartly and efficiently. The long-term economic forecast for the Toronto region introduced in this year’s Scorecard highlights the improvements that can be achieved through the strategic implementation of four policy actions. Comparing the base case “business-as-usual” scenario with the “competitive scenario” clearly underscores the need for integrated regional action to achieve: 1. Improved transportation through the next wave of The Big Move ($21.6 billion invested);36 2. Closing more than 70 percent of the municipal infrastructure gap for roads, water and wastewater systems ($22 billion invested), and greater investment in the region’s electricity distribution system ($11 billion invested); 3. Improved productivity in key industry clusters, rising to one-half the level of the leading North American metros for each cluster; and 4. A better match of skills and jobs to achieve a natural rate of unemployment at 4 percent by 2035.

36 Excludes Hamilton LRT.

80 / Toronto Region Board of Trade

Significant increases in real GDP, employment, and productivity growth, alongside lower unemployment, anchor the improvements forecast under the competitive scenario.
Competitive 2035 Competitive vs Base 2035

Key Economic Indicators

Population (Thousands) GDP at basic prices (Millions $2007) GDP per capita ($2007) Real GDP growth (%) Labour productivity ($2007) Productivity growth (%) Personal disposable income per capita ($2007) Employment (Thousands) Unemployment Rate (%)

8,873 582,028 65,593 2.9 120,788 1.3 32,791 4,476 4.0

+175 +62,210 +5,833 +0.3 +9,548 +0.2 +1,645 +165 -1.7

A much more vibrant Toronto is forecast under the competitive scenario, which requires the region’s leadership to take an integrated approach to the four defined policy arenas: transit, closing the infrastructure gap, cluster development, and human capital. The citizens of Toronto would feel the impact directly, through less congestion and a stronger labour market with higher wages and salaries. Over the course of six years of reporting on Toronto’s prosperity, the Board has responded to the region’s weak economic performance, advocating for improvements on: 1. Productivity performance, partly through attracting more investment capital, fostering innovation and lifting its generation of venture capital; 2. Industrial growth, through a focus on identified industry clusters with a strong growth potential; 3. Transportation infrastructure, especially the mass transit system, so as to lower congestion costs and increase productivity; 4. Human capital, by increasing the education levels of its immigrants, attracting more university and college graduates and ensuring that the skills of its labour force match the skills demanded by the market place. Clearly, the results of the competitive scenario in Scorecard 2014 demonstrate that such actions would generate a much brighter future for the Toronto CMA. Toronto has the opportunity to push through the comfortable “solid performer” threshold to the next level: a region of excellence.

As the above table shows, real GDP in the competitive scenario would be $62 billion higher in 2035, compared to the base case — an increase of 12 percent. Higher economic activity will generate more jobs, estimated to be 165,000 more than in the base case “business-as-usual” scenario. All of these improved economic outcomes add up to higher rankings for Toronto when compared to the other North American metros. Using this core set of economic indicators, Toronto would rank fourth, jumping ahead of San Francisco, New York and Boston for the first time. By contrast, Toronto’s ranking under the base case scenario would be eighth. This higher ranking comes from stronger performances on employment growth, real GDP growth, and unemployment. On employment, Toronto would lead all other metros. Perhaps even more impressive is Toronto’s result on real GDP growth: ranked second-best just behind Dallas.

TORONTO REGION BOARD OF TRADE VOLUNTEER LEADERSHIP
Board of Directors Policy & Advocacy Committee Economic Development Committee

Beth Wilson, Chair John Doig, Vice Chair Anne Sado, Vice Chair Eric Berke John Boynton Diane Brisebois Peter Cleyn Johnnie-Mike Irving Raj Kothari Royson Ng Darren Nippard

Anne Sado, Chair John Doig, Vice Chair Eric Berke Rick Blickstead Mike Cautillo Ungad Chadda Peter Donolo Bill MacKinnon James B. Musgrove Meg Sintzel

Eric Berke, Chair Ungad Chadda, Vice Chair John Chafin Barbara Dickson Anita Ferrari Eric Gagnon Paul H. Harricks Merv Hillier Janet Howard Patrick Kelly Sean Kelly Brian Kriter

Toby Lennox Stephen G. Martin Ash Mathur Earl Miller Suzanne Morel Ashleigh Ryan Gerry Skipwith Doug Smith Benjamin Tal Michael Tweedie David Yundt

Toronto Region Board of Trade 1 First Canadian Place, P.O. Box 60 Toronto, Ontario, Canada M5X 1C1 Phone: 416.366.6811 Fax: 416.366.2444 www.bot.com