Young residents of all four Atlantic provinces have made clear for decades that the best economic opportunities lie outside their home province. For every year since 1985-1986, more young people in their early 20s moved out of each Atlantic province than moved into it from elsewhere in Canada. Over the past two decades, the outflow of youth from the Maritimes has been approximately steady. In Newfoundland and Labrador, previously very high levels of youth out-migration have fallen in the past decade.

It is no surprise that youth have been leaving Atlantic Canada to seek economic opportunity elsewhere. A recent study showed that of 60 jurisdictions (10 Canadian provinces and 50 American states), the four Atlantic provinces ranked among the five weakest labour markets. Business investment per capita is lower in the Maritimes than anywhere else in Canada. Resource-rich Newfoundland and Labrador has seen an investment boom in recent years and a reduction in the outflow of youth, but its unemployment rate remains the highest in Canada.

The root of the problem faced by workers in the Atlantic Provinces is a lack of demand for labour. One of the major reasons for this lack of demand for labour is that the major consumers of labour—private businesses—are more heavily taxed by provincial governments in Atlantic Canada than in other provinces. According to the economic research, since capital is mobile, the burden of high corporate taxes falls primarily on workers in the form of less employment and lower wages.

As long as Atlantic Provinces maintain uncompetitive corporate tax rates and overall tax burdens that are heavier than in other provinces, the outflow of youth seeking better economic opportunity elsewhere should be of no surprise. Indeed, the Canadian evidence and analyses from the United States point strongly toward low taxes as a driver of both economic growth and domestic migration into a jurisdiction.

Dearth of Opportunity: Tax Burden and Youth Out-Migration in Atlantic Canada by AIMS author Matthew Lau and AIMS President Marco Navarro-Génie examines how the decades-long outflow of youth out of Atlantic Provinces hurts the region economically. Substantial tax reductions, especially to the corporate tax rate, are key to increasing demand for labour in Atlantic Canada and creating the economic opportunities that attract youth and workers of all ages.

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Matthew Lau

Marco Navarro-Génie