Population growth in Canada largely outpacing growth in real GDP has led to Canada being one of only eight advanced countries where real GDP per capita is lower than before the pandemic, according to a report from a business advocacy organization that represents over 250 enterprises across all major sectors of British Columbia’s economy.
In a detailed analysis released in early November 2023 by the Business Council of British Columbia (BCBB), Canada’s economic recovery from the pandemic is shown to be one of the weakest among Organisation for Economic Co-operation and Development (OECD) countries — an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate economic progress and world trade.
The report, authored by David Williams, Vice President of Policy at BCBB, critically examines Canada’s post-pandemic economic health.
This finding challenges the narrative of a robust economic recovery often portrayed in governmental circles.
The report points out that while Canada’s real GDP grew by approximately 1%, the population increased by 3%, leading to a per capita economic decline of about 2%. This divergence between overall GDP growth and per capita metrics raises questions about the actual improvement in living standards for the average Canadian.
“GDP growth is being juiced by the government’s pursuit of the fastest population growth since 1957-58. The 1957-58 episode followed two major global events, the Hungarian Revolution and Suez Crisis, whereas the current period entirely reflects domestic policy choices,” said Williams.
In the global context, Canada’s performance was weaker. For instance, the report compares Canada’s economic growth to other countries like Australia, the United States, and the OECD average, underscoring Canada’s lagging position.
“In the five years to 2019, Canada’s real GDP per capita grew by 3% (0.5% per annum). It was the 4th weakest performance out of 38 advanced countries.
Canada’s growth was lower than the United States (9%), the OECD average (8%), and the G7 average (7%).
While Canada’s real per capita growth was the 4th weakest, its post-pandemic recovery was the 5th weakest out of 38 OECD countries. Only the United Kingdom, Iceland, Spain, and Mexico had weaker recoveries, according to the report.
Canada’s real GDP per capita was 0.4% lower in 2022 than in 2019. It was 7% higher in Australia, 4% higher in the United States, 3% higher for the OECD average, and 2% higher for the G7 average. The highest country measured was Ireland, a near 30% increase.
The report also delves into the implications of immigration on economic growth. It suggests that academic literature overwhelmingly finds that immigration levels have a neutral or negligible overall impact on a country’s living standards when measured by key indicators such as labour productivity, real wages, and GDP per capita.
“Immigration, not productivity, is the centrepiece of the federal government’s economic growth plan,” said Williams — who himself immigrated to Canada after living in Australia.
Unfortunately, the federal government’s economic statements have focused on GDP growth, an unhelpful metric given the turbocharged population growth, said Willaims.
“Young and aspirational Canadians face 40 years of stagnation in real incomes. The principal reason is that Canada is expected to rank dead last among OECD countries for growth in labour productivity over most of 2020-2060.”
In the 2022 Federal Budget, the federal government was so alarmed by Canada being ranked dead last among 38 advanced countries for projected growth in real GDP per capita during 2020-2060 that it erased any mention of this issue from its 2023 Federal Budget, said Williams.
“Ignoring a problem does not make it go away. Canada’s structural problems need to be acknowledged, and our economic policy mix needs rethinking,” said Williams.
Having authored the research in November, prior to the federal government’s Fall Economic Statement, Williams called for the federal government to address improving conditions for non-residential business investment, innovation, technology adoption and exports in the statement.
True North reached out to Williams for comment, but he was unavailable.
