Alberta NDP leader Rachel Notley at a campaign rally.
Alberta NDP leader Rachel Notley at a campaign rally. Credit: Rachel Notley / Twitter Credit: Rachel Notley / Twitter

Since its election in 2019, the UCP government in Alberta has emphasized a classic “trickle-down” economic strategy. By boosting profits of private business, the theory goes, investment will expand, and the benefits of job-creation, rising incomes, and economic growth will then flow down to the rest of the population.

Key ingredients in this business-focused recipe (which government calls the ‘Renewed Alberta Advantage’) include relaxed business regulation, a four-year freeze in the provincial minimum wage, privatization of public services, and a one-third cut in the provincial corporate income tax rate (from 12 per cent to 8 per cent).

Those policies are now up for debate in the provincial election campaign. For example, the NDP proposes partly reversing the corporate tax cut: lifting it to 11 per cent, still the lowest in Canada. This has elicited dire warnings that corporations will flee Alberta, taking investment and jobs with them.

Before putting much stock in these dark predictions, let’s examine whether the trickle-down strategy delivered any of its promised benefits in the first place. I have compiled official Statistics Canada data for 10 different economic indicators, comparing Alberta to other provinces since these policies were implemented after the last election.

Contrary to promises, business capital spending did not increase under the lower tax rate. When the tax cut began in 2019, business non-residential capital spending weakened. It then plunged further in 2020, when the lower rate was fully phased in. 

Of course, the COVID pandemic hurt business investment in 2020 – as was true in other provinces, too. But once the world economy re-opened, and global oil and gas prices surged, conditions for investment in Alberta improved dramatically. Yet capital spending remained weak, well below levels before the tax was cut.

Statistics confirm the sustained weakness of capital spending in Alberta, despite lower taxes. Non-residential fixed capital spending totaled just $45 billion in 2021, almost 20 per cent lower than 2018. That equaled 12 per ent of provincial GDP in 2021 – the lowest since Statistics Canada began publishing provincial GDP data in 1981. Preliminary data suggests the investment share declined further in 2022, to just 11 per cent of GDP.

Alberta’s share of Canada-wide business spending has also declined to historic lows since taxes were cut: falling to 21 per cent in 2022, from 24 per cent in 2018. Perversely, Alberta has seen its share of Canada-wide business investment fall more since 2018 than any other province. Meanwhile, B.C., Quebec, and Ontario have all increased their share of Canada-wide business investment – despite higher provincial corporate tax rates (12 per cent in B.C., and 11.5 per cent in Quebec and Ontario).

In short, cutting the tax rate led to less investment, not more. So we shouldn’t believe doomsday predictions that investment will somehow disappear if the tax cut is partially reversed.

It’s not just business investment that performed poorly over the last four years. By several other economic metrics, Alberta has badly underperformed other provinces.

For example, employment grew significantly slower in Alberta in the last four years than the Canadian average. And that was despite Alberta’s relatively faster population growth. Relative to the working age population, Alberta’s job-creation (measured by the employment rate) performed worse since 2018 than any other province.

Meanwhile, average wages in Alberta increased slower than any province, growing at barely half the Canada-wide average. Provincial wages have lagged well behind inflation, with real earnings (after inflation) declining by close to one per cent per year – eroding purchasing power and living standards.

Economic growth was also slower in Alberta under trickle-down strategy: ranking eighth among provinces since 2018, and 10th in per capita terms.

By one criteria, Alberta stands head and shoulders above the rest of Canada: the growth of corporate profits. Net corporate operating profits in Alberta grew 145 per cent between 2018 and 2022. And as a share of provincial GDP, the expansion of profits since 2018 dwarfs any other province.

So it seems that trickle-down economics is not really about growing the economic pie. Instead, the whole strategy is designed to redistribute the pie: away from average workers, and towards corporations. By that standard, the ‘Renewed Alberta Advantage’ has been an unparalleled success.

Unfortunately, the flip side of that unprecedented corporate success has been the erosion of real living standards for most people. Albertans know full well they have not been showered with benefits trickling down from above; their lives have become harder, not better. The province’s economic underperformance since 2019 is more evidence that trickle-down economics doesn’t work.Jim Stanford is Economist and Director of the Centre for Future Work, and author of a new report, The Failures of Trickle-Down Economics in Alberta.

Jim Stanford

Jim Stanford is economist and director of the Centre for Future Work, and divides his time between Vancouver and Sydney. He has a PhD in economics from the New School for Social Research in New York,...