Ride-sharing companies and municipalities: Partners in public transit?

By Ainslie Pierrynowski (AIMS on Campus Student Fellow) 

Earlier this year, the town of Innisfil, Ontario took an unusual step to address its lack of public transit. Rather than invest in conventional modes of public transportation, Innisfil has become the first municipality in Canada to partner with Uber, a popular ride-sharing company. Innisfil residents can book trips to any location via the Uber app, paying a reduced rate. Several frequent destinations, such as the Innisfil Recreation Centre, have set fares of $3 to $5. The remainder of the typical fee for a ride with Uber is subsidized by the municipality. This new partnership has seemingly been met with a warm reception. Could similar partnerships between municipalities and ride-sharing companies benefit in Atlantic Canada? Several key advantages of ride-sharing services suggest that this option is worth investigating.

In particular, the on-demand nature of ride-sharing services as well as their lack of reliance on fixed routes makes them well-suited to the region’s many small, spread-out, and largely rural communities. For locations unable to sustain large-scale transit systems—or any transit systems—ride-sharing can provide residents with a vital link to essential services and economic opportunities. Likewise, given the Atlantic provinces’ struggle to provide healthcare to an aging—and often geographically scattered—population, such a partnership could enable seniors in outlying areas to access centrally located health facilities.

In fact, this unorthodox approach to public transit may save local governments money. In Innisfil, Uber’s services cost the municipality an average $5 per passenger, compared to a projected $17 per passenger in a bussing system. Indeed, implementing the partnership with Uber was expected to cost the local government $175 000, as opposed to the estimated $ 1 million that a bus service would cost. In practice, more Innisfil residents have opted to share Uber vehicles with other customers than originally anticipated. As a result, the municipality has paid a mere $ $26,462.41 during the partnership’s two month pilot stage—in contrast to the $100 000 budget slated for this period of the partnership. Innisfil’s experience, coupled with the importance of municipal financial policy as a factor in combating Atlantic Canada’s economic decline, make a similar transit partnership an enticing option for the Atlantic region.

Speaking of Atlantic Canada’s economic challenges, partnerships between ride-sharing companies and local government offer employment opportunities to residents. For instance, unemployed or underemployed individuals can serve as drivers. Residents can also take advantage of ride-sharing services to access job interviews, training and education facilities, and workplaces located farther afield. This advantage holds special significance for towns with little economic diversification—especially those reliant on declining, seasonal, or vulnerable industries, like many locales in Atlantic Canada.

Despite these substantial benefits, communities considering a partnership with a ride-share company must bear numerous concerns in mind. Specifically, municipalities must ensure that their commercial partners’ vehicles meet the accessibility requirements set out by law and by transit regulations. Moreover, the development of automated or driver-less vehicles could put the long-term job security of local ride-share employees into jeopardy. Nonetheless, the other economic advantages of ride-sharing—that is, access to distant economic opportunities—would persist. Meanwhile, the job security of taxi drivers and their employers may prompt resistance to municipal partnerships with ride-sharing companies. Consequently, local governments considering such partnerships must address these worries.

As well, ride-sharing companies rely on apps and technology to deliver their services. Therefore, local governments need to find a way to extend ride-sharing to individuals without Internet and those without personal electronics. This issue, however, could be mitigated by installing tablets and computers in public areas, like libraries and community centres.

An additional concern arises because a partnership based on the Innisfil model would shield a single, handpicked ride-sharing company from competition through the use of subsidies. In essence, by keeping transit fares artificially low through municipal government subsidies, the chosen ride-share partner is protected from potentially more cost-effective competitors. This situation thus shuts competing ride-sharing companies out of communities that ascribe to Innisfil-style partnerships, leaving customers with limited choice and, in some cases, a greater financial cost. Admittedly, a similar problem of inefficiency exists with traditional public transit, given its subsidized monopoly on inexpensive, large-scale transportation. Further, communities faced with this concern must weigh these downsides, the aforementioned economic benefits of a partnership with a ride-sharing company, and the feasibility of alternatives—like changes to laws and regulations in order to make one’s town friendlier to ride-sharing companies.

Overall, this new mode of public transit offers several benefits that correspond to the specific demographic and financial challenges of Atlantic Canada. While not immune from practical concerns, the gains produced by partnerships between ride-sharing companies and local governments are numerous and significant. From enhancing labour mobility to connecting residents to key services and beyond, these partnerships offer the region’s municipalities an intriguing and advantageous approach to public transit.

Will new mortgage regulations hurt the Canadian Economy?

By Patrick O’Brien (AIMS on Campus Student Fellow) 

The purpose of this article is to highlight some of the recent changes to mortgage regulations/qualifications, and their effects on the economy.

First, we will distinguish between insured and uninsured mortgages. Insured mortgages required a down payment less than 20 percent and the homeowner must pay insurance premiums to the Canadian Housing Mortgage Corporation. This insurance is costly, has no benefit to the homeowner, and only benefits the lending institution. In the case that the borrower defaults, the lending institution will be covered in full by the insurance premiums. Uninsured mortgages have down payments higher than 20 percent, and therefore do not qualify for the insurance because they are deemed less risky.

Starting in 2018, the Office of Superintendent of Financial Institutions (OSFI) has put in place new rules for first-time home buyers looking to purchase a house now need to qualify at an interest rate 2 percent higher than the banks current posted rate. This will result in a 20 percent decrease in house affordability.

How does this affect our economy?

  • Fewer housing starts
  • Less access to cheap credit
  • Decreased consumption in economy.


Majority of new Mortgages come from house resales, compared to new houses being built. Canadian Housing and Mortgage Corporation (CMHC) reports in its 2017 housing market outlook that total home sales will decrease on average by 2% from current levels. Of the total housing sales forecasted in 2018, 39% will come from new housing starts. This could affect the Canadian labor market in many ways:


  • Less employment in the construction industry
  • Loss of retail jobs, in the construction supply industry (Kent, Home Hardware, etc.)
  • Lower growth in sales of heavy machinery/automotive sales required for construction.


How will the changes affect credit markets and consumers? Increasing mortgage application requirements decreases the availability of credit in the economy. After making consistent mortgage payments and building equity in their home, many homeowners borrow against their house to finance current expenditures. They also use the proceeds to invest in real and financial assets, such as: small businesses, additional real estate, and stock market investments. Because borrowing against your house is much cheaper than conventional credit products such as credit cards and bank loans, many people will choose to pay down their existing debts from their mortgage. This is considered a mortgage refinance, or “blending debt” where the debts are added to the mortgage at a lower rate, and therefore increasing the life of the mortgage. In an article by CBC, findings showed that non-mortgage debt (credit card, loans, line of credits, and installment loans) was up to an average of $21,696 in June 2017 for all Canadians, representing an increase of 1.9% from 2016.

When summarizing the overall affect of the change in mortgage regulations, we need to also take into consideration the benefits of the change. Although this standard will affect growth in the economy, it will also stabilize/normalize the Canadian GDP. This is because there will be an increase of goods and services purchases in the economy coming from savings, instead of credit which is considered artificial growth. Also, the new requirements will help decrease the risk of default on mortgage payments, should the housing/labor market conditions worsen.


Overall, I believe the new policy implementation’s benefits of reducing the risk of financial default will offset the decrease in cheap credit for consumers, and the temporary decrease in construction related employment, therefore creating a stronger Canadian economy.

Rational actors, irrational policy: Employment Insurance and Atlantic Canada

By Henry Gray (AIMS on Campus Student Fellow)

In 1971, Prime Minister Pierre Trudeau’s government passed the Unemployment Insurance Act, overhauling Canada’s Employment Insurance (EI) system (then known as “Unemployment Insurance” or “UI”) by dramatically expanding the scope of the program that had been created in 1935 in the midst of the Great Depression. Trudeau’s reforms shortened the length of time required to qualify by 73%, boosted benefits by 65%, and lengthened the benefit period by 40%.


This had the unfortunate but entirely predictable effect of raising unemployment levels in those regions further still by making joblessness, in many cases, more attractive than work. Why would someone do extra work when they could earn as much or more by collecting a pogey cheque? If someone is offering you money, why not take it? Indeed, the amount of UI claimants instantly swelled. Provincial governments devised short-term employment schemes that shifted their residents from provincially funded welfare to federally funded UI. The Canadian unemployment rate rose by 2% in Canada, but it rose by 4% in Atlantic Canada.


It makes no sense to criticize the Atlantic Canadians who elected to accept unemployment benefits in this scenario. This is exactly what rational choice theory would predict. If one assumes that individual choice is fundamentally ‘rational’ in the sense that an individual will try to gain as much as possible while expending as little as possible, then why would one assume that an individual would do more work to earn a given amount of money than is necessary? Rather than the rational choices of individual Atlantic Canadians, what deserves to be criticized are the irrational federal government policies that engineer a state of affairs in which not working is more advantageous than working.


Trudeau’s major reform of EI had a particularly deleterious effect on Atlantic Canada. As Justin Hatherly noted in his recent policy paper published by AIMS, Canada is the only industrialized state that adjusts unemployment benefits by region, i.e. EI beneficiaries in regions with chronically high unemployment such as Atlantic Canada receive longer-lasting benefits and do not have to work as long in order to qualify for benefits. EI is divided into 58 ‘Economic Regions,’ each with its own unique set of rules. This induces both confusion and unfairness.


In an earlier AIMS-on-Campus op-ed, I pointed out that Atlantic Canada holds the dubious distinction of having the most people per capita at or near the minimum wage in Canada, and one of the factors to which I attributed this is the fact that minimum wage rates across the Atlantic Provinces are high relative to the median wages in those provinces. However, it is also possible that the same disincentives to employment that EI generates play a part in wage stagnation in Atlantic Canada.


President Ronald Reagan is alleged to have noted that, “If you want more of something, subsidize it”. Whatever its compassionate intentions, EI, as presently constituted, effectively subsidizes unemployment, thus hurting the very people that the program is meant to help. For 46 years – two generations – bad government policy has afflicted Atlantic Canada, and a corrupting flood of federal money has severely impeded economic prosperity. Atlantic Canadians should put more pressure on the federal government to reform EI in a way that provides assistance to those who need it while avoiding the distortions that have plagued the region for almost half a century.