Looking for some good news? In the five years to 2017, B.C. grew more prosperous, especially relative to other jurisdictions

March 9, 2020
Ken Peacock

This is a bold claim. What is its basis?

In the fall of 2019, the Business Council published the first edition of the B.C. Prosperity Index. It is intended to inform policy makers and others interested in British Columbia’s comparative performance. The Index provides insight into living standards and how B.C. measures up vis-à-vis other advanced economy jurisdictions.

The B.C. Prosperity Index comprises 12 indicators, each capturing different facets of prosperity and citizen well-being. The indicators are grouped into three domains: Business Environment, Economic Well-Being and Societal Well-Being. Individual performance indicators are grouped and tabulated for each of the domains. The B.C. Prosperity Index then rolls the three domain sub-indexes up into a single Index, providing an overall prosperity score for 21 advanced economy national and sub-national jurisdictions. This single summary metric ranking and comparison with other jurisdictions is one of the most useful features of the Index.

As it happens, B.C. is a classic middling performer, ranking 11th out of 21 national and sub-national jurisdictions in overall prosperity. This puts us squarely in the middle of the pack -- an average and uninspiring showing. Within Canada, however, B.C. scores reasonably well, ranking third among the ten provinces in the Index. On the other hand, B.C. places sixth among the eight advanced economy jurisdictions (including Canada) that are captured in the Index.

Another important feature of the Index is it enables us to shine a light on B.C.’s relative performance over time. In the forthcoming fall 2020 release of the Index, any changes in B.C.’s ranking will be closely scrutinized.

In the meantime, looking back it is clear that B.C.’s prosperity (as measured by the Index) improved in the years leading up to 2017.

The Prosperity Index database is complete for all variables and jurisdictions going back five years. As depicted in the figure below, in 2013 B.C. ranked 17th
among the 21 jurisdictions in overall prosperity. This is a poor showing. But, as noted above, by 2017, B.C. had jumped six spots, to 11th.

That marks an impressive climb. Eight of the other jurisdictions maintained the same ranking, another five dropped – most just a spot or two, although Saskatchewan and Alberta both fell five places. Of the seven jurisdictions that improved between 2013 and 2017, B.C.’s upward move was the largest. The U.S. state of Oregon was second, climbing five spots in the list. The other jurisdictions that did better generally advanced one place.

Figure 1: B.C.'s ranking improved significantly between 2013 and 2017

Source: Business Council of B.C.

What is behind B.C.’s improvement? Another benefit of the Prosperity Index is that because it is constructed from three sub-indexes it is possible to see which domains are behind the improvement.

Business Environment. This domain includes four indicators that touch on the nature of the economic and competitive environment for businesses and employees: labour productivity; business investment; innovation (R&D spending); and educational attainment:

  • In this domain, B.C.’s ranked 15th in 2013 and 2017;
  • B.C.’s ranking did slip to 16th spot in 2016, but then regained 15th place in 2017.

Economic Well-Being. This domain is made up of four indicators that address aspects of personal economic well-being: gross domestic product (GDP) per person; household disposable income; unemployment rate; and housing affordability:

  • B.C. ascended the ranking in this domain, going from 13th in 2013 to 10th in 2017;
  • The improvement is significant, and largely flows from strong economic growth. This boosted GDP per capita. Robust economic and job growth led to higher disposable incomes. And the buoyant job market helped drive the unemployment rate lower.

Societal Well-Being. This domain consists of indicators that speak to other dimensions of well-being that affect the quality of life enjoyed by citizens: life expectancy; the incidence of poverty; the degree of income inequality; and the state of the natural environment:

  • B.C. climbed from 12th place in 2013 to 7th place in 2017. Over the period, this was B.C.’s biggest improvement of the three domain sub-indexes;
  • The poverty rate fell significantly over the 5-year period and the distribution of income became more equitable;
  • The state of the natural environment (as proxied by the selected indicators) also improved in B.C. But most other jurisdictions also did better in absolute terms.

Getting back to the overall Prosperity Index, B.C.’s middle ranking in 2017 may warrant only one cheer. But the improvement in B.C.’s performance deserves three. It is not surprising that prosperity in the province improved. Through the middle part of the previous decade, B.C. enjoyed above average economic growth. Household income advanced, bolstered by solid job creation. The province also enjoyed better outcomes in a number of socio-economic metrics. But what is perhaps more surprising is the extent of B.C.’s relative improvement. This is a key benefit of the Index – it tracks B.C.’s relative performance in a dynamic world where other jurisdictions are also working to bolster their prosperity and overall citizen well-being.

As a final word, it is important to recognize that the Prosperity Index is backward-looking. This is unavoidable. Most economic data are produced by national statistical agencies with a lag, sometimes even two years. This challenge is compounded by the complexity of obtaining and compiling data across international jurisdictions for 12 quite diverse measures of socio-economic well-being. B.C. likely enjoyed further “prosperity” gains in 2018, as much of the mid-decade momentum carried into that year. But whether we continued to inch ahead in the Index is more uncertain. That year also saw housing affordability start to weigh more heavily on B.C.’s prosperity along with a slower rate of progress on some of the other component indicators.

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