Eric Lombardi: Ontario is now the ‘sick man’ of Canada

Ontario could be the most prosperous province in Canada. It has the scale, land, natural resources, and nearly carbon-free electricity grid that should give it a decisive edge in a world of energy-hungry industry. It is home to world-class universities, a diverse, well-educated population, and an open, dynamic civic culture. These are the ingredients of a winning economy.

But for all its advantages, Ontario is underperforming—and has been for a very long time.

Ontario is no longer a natural engine of Canadian prosperity. It has become Canada’s “sick province”: stagnant, slow-moving, and structurally stuck. And while other provinces make headlines over constitutional grievances or pipeline fights, the most serious long-term economic challenge in this country is that Ontario is no longer growing the way it should.

The rusty horseshoe

And we can’t talk about Ontario without talking about the “rusty horseshoe”—the once “Golden” economic region surrounding the western bend of Lake Ontario with Toronto at its centre, where factories hummed, wages rose, and the country’s middle class was built. Today, it’s a region marked by hollowing-out industry, stagnant productivity, and soaring living costs. What was once a symbol of Canadian dynamism is now a warning sign of how quickly prosperity can decay when it’s not prioritized.

It’s worth noting these woes are not a recent development. They began around the year 2000. At that time, Ontario’s real GDP per capita was 5 percent higher than the rest of Canada. Today, it is 3 percent lower. Over that same period, Ontario’s real GDP per capita grew just 0.55 percent per year, while the rest of Canada grew at 0.91 percent. Had Ontario simply matched its own pre-2000 growth trajectory, the average Ontarian would enjoy an income $22,300 higher than now—a nearly 30 percent increase in individual living standards.

The people hurt most by this underperformance are the young. While real incomes for Canadians aged 25-34 rose by about 20 percent nationally since 2000, Ontario saw just 6 percent since the turn of the century. In Toronto—the largest and most talent-rich city in the country—real median incomes for young people fell 4.5 percent. Yes, incomes fell, while real rents doubled and real home prices tripled. The result is a stark generational divide: a province that works far better for those who bought early than for those trying to build something now.

That stagnation has been paired with unaffordability that’s nearly unparalleled globally. According to the 2025 Global Cities Index by Oxford Economics, Toronto residents now spend more of their income on housing than residents of nearly every other major city on earth. The picture this paints is bleak: a city that educates world-class talent and then prices it out of staying.

But it gets worse. Ontario’s labour market is now diverging from the rest of the country, not just in long-term outcomes, but in the short term as well. As of May 2025, Ontario’s unemployment rate has climbed to 7.9 percent, compared to 7.0 percent nationally. In Toronto, the situation is worse: the unemployment rate is now almost 9 percent, making it one of the hardest-hit major metro areas in the country. And the pain is sharpest among the young. In 2022, youth unemployment in Toronto was 10.9 percent. Today, it’s 16.3 percent. These aren’t lagging indicators from a past crisis, nor can they be blamed exclusively on Donald Trump’s tariffs. They reflect a province that has struggled more than others in the post-pandemic recovery—a province that, despite its advantages, is no longer reliably creating economic growth for its people.

Managed decline is no future

And this failure is not a mystery. It stems from the choices governments have made—and continue to make—in how the province is governed for growth.

Ontario’s defining political ideology over the last two decades, led by both Progressive Conservatives and Liberals, has been managed decline: a reluctance to confront structural issues, a habit of papering over stagnation with asset inflation, and a governing style that substitutes ribbon-cutting for reform.

Rather than focus on building competitive, rule-based systems, Ontario has increasingly relied on politicized decision-making. Permitting systems are opaque and slow. Infrastructure is delivered project-by-project, with no enduring institutional memory. Housing policy has become a convoluted and highly constrained mess. Health care is increasingly frustrating to access, and yet the momentum to change is effectively non-existent. As we see in recent Provincial Bills 5 and 17—which aim to accelerate housing and resource development by giving ministers sweeping powers to exempt projects from existing rules—when systems fail, the province’s response hasn’t been to fix them, but to override them. And when decisions hinge on personal access or ad hoc approvals by ministers, markets lose their competitiveness. The risk to all investments increases. Timelines blow out. And you end up with a system where opportunity becomes something granted by the government, rather than something available to anyone willing to invest in the province. The result is an increasingly planned economy, rather than a liberal one.

The cost explosion in transit infrastructure demonstrates the consequence of Ontario’s institutional decay. The Yonge North subway extension, completed in 2017, came in at over $400 million per kilometre. The Ontario Line, expected in the 2030s, is now budgeted at over $1 billion per kilometre, with recent estimates that it could climb up to $1.7 billion. Ontario builds one project at a time, largely outsources each one, loses the lessons from the last, and then adds risk premiums to every contract because nobody trusts the timeline to stick—or the leadership at Metrolinx (Toronto region’s transit agency) to be a good partner, make decisions, or manage scope.

The electricity sector tells the same story. Ontario is rightly proud to be home to the Western world’s first grid-scale Small Modular Reactor (SMR), slated to come online in 2029. But to industry, this looks like a one-off, not the start of a long-term, scaled-up build-out. There’s no reliable roadmap for making the system more responsive as demand accelerates.

In a world where AI, electrification, and advanced manufacturing are driving exponential power demand, Ontario should be leading. But we’re not. There’s no plan to multiply capacity, or even show that supply can scale quickly if needed. Investors don’t just want electricity; they want confidence that the system can respond to their demand with more supply, without price volatility, subsidies, or bailouts.

Instead, Ontario is spending nearly $7 billion a year subsidizing electricity prices—a signal that policy failure in the electricity sector is already being socialized. That may buy short-term relief, but it tells investors: don’t trust the system, trust the cheque. It comes as no surprise, then, that many are making their bets elsewhere.

Ontario’s illness cannot be ignored

This is emblematic of how Ontario governs. We try to fix the short-term outcome instead of solving the long-term problem. We manage symptoms instead of building good systems. And in doing so, we send exactly the wrong signals to the capital and talent we claim to want here.

The province’s political elite did not stumble into this. They chose it. They chose to prioritize existing asset holders over opportunity creators, to rely on workarounds instead of changing rules, and to build a state that talks about growth while governing for stagnation. The result is an economy increasingly shaped not by competition or innovation, but by access and incumbency. It is drifting toward neofeudalism—a system where wealth flows from inheritance, not merit, and opportunity is hoarded, not widespread.

Ontario is too important to ignore. Its underperformance drags down national productivity, complicates federal budgets, and undermines Canada’s ability to compete globally. Ontario buys goods and services from every other province. Its industries drive demand for inputs from British Columbia to Newfoundland. Its urban centres, especially Toronto, produce the scale, capital, and professional ecosystems that create opportunities for Canadians across the country—not just for those who live there, but for those who sell into it, move through it, or build careers because of it. Every province is poorer than it otherwise would be due to Ontario’s failures.

A Fordian slip 

Premier Doug Ford didn’t invent Ontario’s problems, but his government has entrenched them. His style of leadership has emphasized control without reform, centralizing power in the premier’s office while doing little with it to modernize the systems that matter. His government has fought populist battles over bike lanes and highway tunnels while deferring real fixes needed around permitting, transit, housing, and health care. Ontario has become more centralized, less capable, and more reliant on arbitrary, ad hoc governance. It’s been government by announcement, with a folksy accent. At a moment when Ontario’s economy badly needs structural reform, Doug Ford has given the provincial legislature a staggering 137 days off this summer, and invited the premiers to his Muskoka cottage to talk about fixing Canada.

Ford has often let Ottawa take the blame for crises that he should be accountable for—most clearly in the international student fiasco, where his government uncapped enrolments, froze funding, and deregulated private colleges, then stood back as the federal government took the heat. Prime Minister Mark Carney has made economic growth and productivity central to his leadership, but he won’t succeed if Ontario continues to stagnate—and he shouldn’t be left to absorb the fallout for a province that refuses to fix itself. If Canada is serious about restoring growth, it needs to start by demanding better from its largest province—and that will require more than carrots and conventional “cooperation.”

Ontario doesn’t need to be rescued. But it does need to be challenged. And the rest of the country needs to start paying attention—before another 25 years are lost.