Alberta separation could cost Calgary up to 69,000 jobs, new report warns

CALGARY — Calgary could lose between 44,000 and 69,000 jobs if Alberta separates from Canada and trade costs rise, according to a new report commissioned by the Calgary Chamber of Commerce.

The analysis, prepared by University of Calgary economist Trevor Tombe, examines how leaving Canada could affect trade, investment, workers and public finances.

"This report puts real data to the concerns we've been hearing in the business community for months," Deborah Yedlin, the chamber's president and CEO, said in a news release.

READ MORE: Deutsche Bank analysis warns UK Machine Gaming Duty hike could disproportionately impact Rank Group

READ MORE: Opposition sees political opening in Liberal bill on labour and environment

The Calgary employment estimates assume trade costs rise by five to eight per cent and the city experiences a proportional share of the province's employment decline.

They are scenarios, rather than predictions of a specific outcome.

Yedlin added that businesses are already factoring uncertainty over Alberta's future into their decisions.

"Over the last several months, we've heard directly from businesses, investors and economic partners that the uncertainty surrounding Alberta's future has influenced decision making," she said.

"Companies are pausing hiring and expansion plans, delaying investment decisions and reallocating capital to jurisdictions viewed as more stable and predictable."

The report estimates more than 360,000 Calgary jobs, over 36 per cent of employment, depend on exports to other provinces or countries.

Those connections extend beyond oil and gas into professional services, manufacturing, transportation, wholesale and retail trade, and tourism.

Across Alberta, nearly one in three workers, roughly 900,000 people, works in a sector with significant exposure to trade.

Separation would turn Alberta's provincial boundary into an international border, potentially introducing additional customs procedures, regulatory differences and other costs.

"Turning a provincial boundary into an international border would introduce new costs, customs procedures, new regulations and standards, and there would be no guarantee that Canada's existing trade agreements would simply carry over," Yedlin said.

Drawing on research into the United Kingdom's experience with Brexit, Tombe models higher costs of trading with both the rest of Canada and international partners.

A five per cent increase would translate into roughly 44,000 fewer Calgary jobs if the city's employment decline matched the provincial rate.

Under the eight per cent scenario, that figure rises to about 69,000.

The chamber warns that greater uncertainty could affect where businesses invest and whether workers choose Alberta.

"People are mobile and I think that's the one thing we learned, during COVID, is that labour is mobile and there could be consequences to that," Yedlin said in an interview Tuesday.

"But there are other businesses that we've heard and said to us, we have offices across the country, in other provinces, and we will instead of expanding here, go somewhere else."

The report estimates foreign multinationals invested $152 billion in Alberta over the past decade, while Canadian multinationals invested another $314 billion.

Together, those firms accounted for roughly 650,000 jobs per year on average.

Tombe estimates uncertainty comparable to the experience following Brexit could result in between $10 billion and $15 billion in foregone investment in Alberta in a single year.

"So, uncertainty lowering investment, lowering hiring and then investment in Alberta falls by a similar, 12 to 18 per cent which might be optimistic," Tombe said.

"That's $10 to $15 billion a year in foregone investment in the province. That means lower productivity, because a lot of our productivity comes from having machinery, equipment, technology that our workers can use. That's going to drop wages, GDP growth, and labour demand."

Fiscal fallout and new costs

The report finds Alberta's financial position after separation would depend on the economic fallout and the cost of taking over federal responsibilities.

Its main illustrative scenario produces an annual shortfall of approximately $9 billion.

Under a combination of more favourable assumptions, however, an independent Alberta could have a $1.6-billion surplus.

That surplus scenario assumes the economy shrinks by five per cent, borrowing costs do not increase and non-defence federal operations can be replaced at Canada's current national per-capita spending level.

"Different assumptions would produce different numbers," Tombe writes in the report.

Both outcomes would leave Alberta with substantially less than the roughly $19-billion difference between federal revenue collected in the province and federal spending there in 2024.

That year, Ottawa collected approximately $73 billion in Alberta and spent about $54 billion, according to the report.

Tombe said the $19-billion difference should not be viewed as money that would simply become available to an independent Alberta.

"But what the analysis in the report shows, I think quite clearly, is when you account for the fact that the economy would be smaller, so revenues from income taxes would be smaller and costs would be higher, because we'd have to increase spending in order just to execute the core functions of a now separate country," he said.

"You more than eat up all of the available fiscal room, switching from a $19 billion surplus to a $9 billion deficit gives you the right sense of scale."

An independent Alberta would have to take on responsibilities currently handled federally, including defence, border services and other national institutions.

The report estimates that meeting the NATO defence standard would cost a separate Alberta nearly $10 billion a year, while replacing federal operations would cost approximately another $8 billion.

To demonstrate the scale of the $9-billion shortfall scenario, Tombe estimates that closing the gap entirely through a sales tax could require an additional eight percentage points on top of existing taxes.

The report notes that 49 per cent of Albertans were born outside the province, highlighting its reliance on attracting people from elsewhere in Canada and abroad.

It estimates Alberta has gained nearly $120 billion in taxpayer-funded education embodied in workers educated elsewhere, equivalent to roughly one-quarter of provincial GDP.

Yadude Books reported in September that emotion, fear and division marked the final month of Alberta's separation referendum campaign.

With files from BNN Bloomberg and CP24