A note on economic prosperity in the Pacific Northwest region

British Columbia is a jurisdiction in which the bulk of the population has a relatively high income by global standards and where most people enjoy an enviable quality of life. But judged against neighboring jurisdictions, our province is not as successful as many assume.In this post, we compare B.C. to other provinces and states in the broader Pacific Northwest region of North America based on a metric that’s often used to assess overall prosperity: real (inflation-adjusted) GDP per person. This measures the value of economic production over the course of a year in per person terms. We use GDP per person instead of total GDP because of differences in population size across jurisdictions. A larger population usually results in more economic activity in an absolute sense, but this need not translate into greater economic output per person. Indeed, it is striking that some of the world’s richest economies have relatively small populations.[1] Adding more people is not a reliable pathway to increased prosperity, contrary to the view that seems to hold sway among many people in the current federal government in Ottawa.In addition to B.C., the other Pacific Northwest jurisdictions considered here are Washington state, Oregon, Idaho, Montana and Alaska, along with Alberta. We also include California, which is an important commercial partner for B.C. and has by far the biggest economy of the states and provinces along the west coast of North America.The Pacific Northwest spans two countries and two national currencies, so we rely on an estimate of the purchasing power parity (PPP) exchange rate to equate per capita GDP in Canadian dollars across the binational region. The PPP methodology allows us to compare GDP in each jurisdiction based on adjustments to the value of currencies that reflect the cost of purchasing a standardized basket of goods and services (both traded and non-traded) in each of the two countries. For 2019, the PPP U.S./Canadian dollar exchange rate was 1.213, according to the Organization for Economic Cooperation and Development – that is, one U.S. dollar represented the same “purchasing power” as 1.213 Canadian dollars.The data for the Pacific Northwest jurisdictions are provided in the table below. For each state and province, we report 2019 GDP per person in real 2012 chained dollars. The per capita GDP figures for the American states are converted to Canadian dollars using the aforementioned PPP exchange rate.

Based on this widely used measure of prosperity, B.C. ends up near the bottom of the Pacific Northwest pecking order. Oil-rich Alaska ranks first, followed by Washington state and California – the two leading U.S. technology powerhouse states. Alberta is fourth, a fair distance behind the richest American states. Oil producing jurisdictions tend to score well in comparisons of GDP per capita, a reflection of the very high value-added of the oil and gas sector. The unusually high value of output per worker in oil and gas lifts per capita GDP and thus boosts aggregate prosperity.We recognize that GDP per person is in an imperfect measure of economic success and citizen well-being. Among other things, it does not consider the distribution of income across the population, the availability and quality of public services, environmental factors, or other indicators of living standards. So, the story told in this post is not the final word on the subject of prosperity among the provinces and states that comprise the Pacific Northwest.Even so, it is sobering to observe that B.C. is the second least affluent Pacific Northwest jurisdiction and trails the top performers by very substantial margins. To us, this finding confirms that B.C. policymakers have no grounds for complacency as they ponder the underlying foundations of the province’s prosperity and examine the competitiveness of the local investment and business climate.[1] Examples include Singapore, Switzerland, Norway, Denmark and Sweden.