The cost of a mass exodus from Alberta if it goes independent

Published by The Globe and Mail 

Much has been said about the negative implications for investment in Alberta if a majority vote on Oct. 19 to hold a binding secession referendum.

Proponents for an independent Alberta may discount this concern given the strong international demand for oil, coupled with an expectation of easier resource extraction without Canadian environmental policy.

But regardless of the merits of that argument, its significance may pale when compared with another issue: The economic implications for migration patterns, which have received much less attention and could be just as important.

Companies can diversify political risk by spreading their investments into different projects in different countries. Owners of companies can similarly diversify their investments across many businesses.

It is much more difficult for an individual to diversify career risk, however, as we typically have one job at a time. This means that, when it comes to even a small increase in secession risk, a person’s thoughts on migration may be much more responsive than a company’s investment decisions.

How large could the migration changes be after a vote to secede? An Angus Reid poll earlier this year found that roughly three-quarters of Albertans who plan to vote in favour of the province remaining in Canada would leave Alberta if it separated.

Historical evidence suggests that out-migration, even in advance of a binding referendum, can be substantial.

My recent research with Matt Webb, presented at this year’s Canadian Economics Association conference, documents how Quebec lost more than 5 per cent of its population in the decade leading up to the 1980 referendum. This was a large loss for the Quebec economy in the sheer number of people, but it was amplified by the fact that the people who left were more highly educated and more likely to work in managerial occupations than those who stayed.

Some of the exodus was in response to political turmoil after the 1970 October Crisis, but it is still interesting that such strong change took place in advance of the vote. A large out-migration of educated Albertans is plausible, especially after a second referendum in support of secession.

And there is another type of migration that could prove particularly costly if a minority votes to remain in Canada: A drop in international students wanting to study at postsecondary institutions in Alberta.

International students make large contributions to the economy through their high tuition fees, as well as their spending on housing and other goods. In Alberta it represents around 0.7 per cent of gross domestic product, which is comparable to the percentage contribution of the auto sector to Canadian GDP.

But international students may not want to gamble on a four-year program if there’s a risk their university might not be part of Canada by the time they graduate. Rather than go to University of Alberta for a four-year degree, an international applicant could choose to attend University of British Columbia, which is similarly ranked according to MacLean’s. The issue could be especially important to students who see education in Canada as a stepping-stone to permanent residency.

Albertans should weigh all these significant migration consequences carefully before voting on Question 10 next week. A majority vote to start the secession process, even without a widespread desire to see it go all the way, will have significant negative consequences for the Alberta economy.

Christopher Worswick is a professor of economics at Carleton University and a research fellow of the C.D. Howe Institute.