Learn: Economic Impacts

Flooding is one of the largest expenses for provincial disaster assistance compensation programs in Alberta. Flooding is responsible for extreme damage and destruction to property, public areas, and the environment which incurs enormous costs for government. For example, Alberta’s 2005 flooding cost the Province approximately $400 million[1] while the overall cost of the 2013 flood is estimated at $6 billion[2]. In addition to damage costs, flooding results in lost productivity, reduced hours worked and losses in GDP due to the need for resources to be put towards recovery efforts and away from daily activities. 

Direct Impact

Insurable Losses 

The amount of money spent on insurable losses varies depending on the extent of flooding, property type impacted, individual insurance policy and political circumstances. After the June 2013 flood, the Insurance Bureau of Canada estimated that insured property damage exceeded $1.7 billion and is expected to rise[3]

While overland flood insurance is not offered in Canada, some homes and businesses were able to prove that sewer back-up occurred before overland flooding took place and received compensation for their losses. Additionally, Albertans were both surprised and outraged after the June 2013 flood to find out that overland flooding is not included in insurance policies. For this reason, political influence resulted in some insurers covering claims originally rejected due to the flooding.

Temporary or Permanent Loss of Business/Wages  

Throughout southern Alberta, businesses located along the Bow, Elbow, Highwood and Oldman Rivers as well as local tributaries were forced to shut down and evacuate. Southern Alberta’s largest city centre, downtown Calgary, was forced to shut down for nearly one week in order for flood waters to recede and for the area to be considered safe to re-enter. While many Albertans were able to continue working remotely or from home, many industries such as the service industry were unable to work from home resulting in lost revenue and wages. Analysis from Statistics Canada found that in the final two weeks of June, approximately 300,000 (or 13.5% of the employed population in Alberta) Albertans lost 7.5 million hours of work[4]. Total hours lost by each industry is shown below: 

 

Work Hours Lost Due To Alberta Flood 2013 
Total work hours lost (thousands) because of flooding in Alberta, top 10 affected industries, second half of June 2013[5]

Given the amount of work hours lost due to the June 2013 flooding, the Government of Alberta could determine that approximately $485.3 million in real GDP was lost in the final two weeks of June[6]. In addition to the economic losses experienced by businesses, local charities and not-for-profits also saw a decline in financial support as donations went to flood relief instead.

While wage and productivity losses were more pronounced in the final two weeks of June, some businesses have found recovery to take many months. While the impacts of flooding are devastating for any city, region or country, and the resultant economic losses prove damaging to the overall economy and well-being of citizens. In contrast to the economic losses experienced in the event of a flood, recovery and rebuild efforts that occur after a flood can recuperate lost revenue and/or business that occurred during the flood.

Indirect Impact

Increase of Business

The June 2013 flood resulted in an increase in business outside of the flood zone and, despite negative economic impacts, resulted in a GDP boost for Alberta due to reconstruction efforts[7]. Businesses located outside the flood impacted areas or evacuated zones may have experienced an increase in business as flood affected businesses were unable to provide goods and services. While the flood had direct negative impacts on Alberta’s economy, indirect impacts increased business activities both outside of the flood zone and after flood waters receded. 

 

[1] The Calgary Herald. (2005,  July 6). Alberta Flood Damage to top $400M. www. canada. com. Retrieved from http://www.canada.com/calgary/calgaryherald/news/story.html?id=02a3d73b-d089-43ec-bebf-743bb5a0dde0 

[2] Wood, James. (2013, September 24). Province boosts cost of Alberta floods to $6 billion. Calgary Herald. Retrieved from http://www.calgaryherald.com/news/Province+boosts+cost+Alberta+floods+billion/8952392/story.html

[3] The Canadian Press. (2013, September 23). Alberta Floods Costliest Natural Disaster in Canadian History. CBC News Calgary. Retrieved from http://www.cbc.ca/news/canada/calgary/alberta-floods-costliest-natural-disaster-in-canadian-history-1.1864599 

[4] Government of Alberta, Alberta Enterprise & Advanced Education. (2013). Impact of Southern Alberta Flooding on Hours Worked and GDP. Alberta Government Economic Commentary. Retrieved from http://www.albertacanada.com/files/albertacanada/SP-Commentary_09-06-13.pdf 

[5] Ibid. Pg. 2. 

[6] Ibid. Pg. 3. 

[7] Ibid. Pg. 4.