Canadians are about $4,200 poorer today than they would have been had the economy grown in line with long-term trends, according to a Statistics Canada report.
The report claims the country’s GDP per capita economic output is about seven per cent below where economists might have expected it to be.
GDP per capita growth is strongly linked to living standards and wage growth, the document’s authors explain.
The report highlights that Canada’s real GDP grew 1.1 per cent in 2023, the slowest pace – excluding the COVID-19-related shock in 2020 – since 2016.
Immigration levels, however, have been growing rapidly, with the vast majority (97.6 per cent) of Canada’s recent population expansion due to newcomers.
“While the pace of economic activity has slowed, Canada’s population continued to expand rapidly,” the StatCan report says.
“During 2023, Canada’s population grew 3.2 per cent, an increase of over 1,271,000 people, roughly equivalent to the size of Calgary (Statistics Canada, 2022). With population growth outpacing output growth, GDP per capita has trended lower and is now 2.5 per cent below pre-pandemic levels.”
Prime Minister Justin Trudeau earlier this month joined banks and other economic analysts in saying that immigration under his premiership has been too high and has caused “so much pressure” in communities.
He said “more and more businesses [are] relying on temporary foreign workers in a way that’s driving down wages in some sectors.”
The report’s authors say that, since 1981, real GDP per capita has grown at an average yearly rate of 1.1 per cent, increasing from $36,900 per person to $58,100.
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The shock of COVID-19, however, has combined with falling per capita output in recent quarters to create the $4,200 decline per person.
To return to the pre-pandemic trend over the next 10 years, the authors warn that GDP per capita would have to grow at an average annual rate of 1.7 per cent.
“Per capita growth of this magnitude is ambitious and a marked departure from recent trends,” the report says. “It would be qualitatively similar to the 1.6 per cent growth in GDP per capita that the United States has experienced since the onset of the pandemic.”
US real GDP grew by 3.3 per cent in 2023, eclipsing the country’s population growth of 0.5 per cent.
“It should be noted that Canada has experienced extended periods of strong per capita growth in the past,” the report explains. “From late 1991 to 2001, GDP per capita advanced at an average annual rate of 2.2 per cent.”
That period of expansion coincided with improvements to productivity and was bolstered by the implementation of a free trade agreement with the US.
The report points to research showing that GDP per capita can be increased in three ways: by boosting worker productivity, boosting the number of hours employees work or boosting the proportion of the population that is working.
But productivity is the “critical” method, the authors say, since it has accounted for 93 per cent of GDP per capita growth over the last four decades.
Capital spending must increase if productivity is to be improved, the report adds. The authors point to declining levels of investment per worker in Canada since 2006.
“Based on long-run projections from 2021 to 2060, the Organisation for Economic Co-operation and Development predicts Canada will have the lowest growth in GDP per capita of all member countries (Guillemette & Turner, 2021),” the report says.
“Attracting higher levels of capital investment to spur productivity growth and lowering market-related barriers that limit innovation and competition may help bolster output growth and partly offset potential declines in relative living standards.”
