FUSS, HILL: Alberta’s economic decline predates Trump’s tariffs

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As Canada and the U.S. engage in a tense trade standoff, sparked by President Trump’s initial tariffs, economists are noting the damage to the Canadian economy. But those same economists often overlook that the economic decline in many provinces, particularly Alberta, began long before Trump’s trade war.

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Economists use many metrics to measure economic performance but per-person GDP is one of the best because it’s a key indicator of incomes and living standards. And on this measure, Alberta has fallen hard. Specifically, according to our new study, in 1999 Alberta’s per-person GDP was an impressive $68,165, seventh place among all 10 provinces and 50 U.S. states (all figures in Canadian dollars, adjusted for inflation). Fast-forward to 2024 (the latest year of available data), Alberta’s per-person GDP sits at $74,907, which is 25th among the 60 jurisdictions, so Alberta dropped 18 spots in the ranking.

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Slowing growth

Why? Because during the 25-year period, Alberta’s per-person GDP grew at the second-slowest rate ($6,741) of any province or U.S. state — only Delaware had a slower growth rate — and much slower than in American energy-producing states such as North Dakota ($51,533), California ($41,934) and Texas ($29,561).

Employment incomes in Alberta have also fallen behind, with workers paying the price. Since 2010 (the earliest year of comparable data), Alberta was the only province or U.S. state to experience a decline in median employment income. While Alberta remains the top Canadian province in 2024, it now trails every U.S. state at $39,345, down from $40,564 in 2010. For context, workers in the poorest states such as Mississippi ($44,090) and South Carolina ($44,206) enjoy incomes almost $5,000 higher than the typical worker in Alberta.

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Why did this happen? What explains Alberta’s decline?

There are many factors at play over 25 years, but crucially Alberta has struggled to improve productivity — essentially, how much workers produce in the economy per hour — one of the main drivers of income growth. According to the data, from 1999 to 2024, 45 U.S. states experienced stronger productivity growth than Alberta. With waning productivity, it’s no surprise Alberta incomes and living standards have fallen and are now among the lowest in Canada and the U.S.

Time for a policy change

Of course, many Albertans will blame Ottawa and it’s stifling policies that in recent years have squeezed the oil and gas sector. But there’s plenty of blame to go around. And policymakers in both Edmonton and Ottawa can pull some levers to help improve the Alberta economy. For example, the Smith government should reduce personal income tax rates to improve the province’s ability to attract high-skilled workers while boosting incentives for saving, investing and entrepreneurship. At the same time, the government should rein in spending and balance its budget — regardless of which direction oil prices go — to help increase investor confidence and reduce the spectre of future tax hikes.

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In Ottawa, the Carney government should play its part and reduce federal personal income tax rates and the federal business tax rate. It should also remove regulatory barriers and restore federal finances by reducing government spending and balancing the books.

Living standards and incomes in many U.S. states are now higher than in Alberta. At a time when everything seems to cost more, this is bad news for Albertans and their families. To flip the province’s fortunes, policymakers must enact bold policy reforms, regardless of who occupies the White House.

Jake Fuss is director of fiscal studies and Tegan Hill is director of Alberta policy studies at the Fraser Institute.

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