Despite what Chrystia Freeland wants Canadians to believe about the economy, Canada’s living standards have declined since 2019.
According to a study by the Fraser Institute, if per-capita GDP does not recover this year, it will mark the longest and largest decline in per-person GDP over the last four decades.
Inflation-adjusted per-person GDP, a broad measure of living standards, declined from $59,905 to $58,111, or by 3% from April 2019 to the end of 2023, the study found.
“This is a wake-up call for governments across Canada that we can’t continue as we have. This is not a milestone that Canadians want to reach. We don’t want to see our living standards enter into the longest decline in the last 40 years,” Grady Munro, one of the study’s co-authors, told True North. “We definitely need a policy shift resulting soon.”
Munro holds a bachelor’s degree in economics and a master’s in public policy and acts as a policy analyst at the institute.
“Our study tracks Canadian living standards from 1985 to 2023…by measuring changes in per-person GDP,” he said.
Per-capita GDP is determined by dividing the value of all final goods and services produced within an economy in a given year by the average population for the same year.
“What we find is that living standards have been declining from 2019 through to the end of 2023, and that, in fact, this ongoing decline is the second worst in nearly 40 years,” Munro said.
He said the worst, in terms of the length and depth of the decline occurred in 1989 and 1994, which saw a 5.3% drop in per-person GDP and lasted over five years.
“During that time, Canada was at the tail end of many years of government, running large deficits, accumulating large amounts of debt, seeing hikes and seeing little to no tax relief,” Munro said. “so, it mirrors our situation today quite a bit.”
The study said the period following 2019 is “unlike any decline and recovery since 1985.”
They said there was a slight recovery in per-person GDP in the second business quarter of 2022, but it “immediately began declining again.”
By the fourth quarter of 2023, per-person GDP remained below the level of the second quarter of 2019 when the decline began, marking the period as the second longest and deepest decline in real GDP per person since 1985.
In terms of pure depth, the period since 2019 has been the third deepest decline in 40 years, exceeded only by the periods from 1989 to 1994 and 2008 to 2009, which saw a 5.2% decline.
Munro said it’s possible that population growth affected the 2008-2009 period.
“If we look at 2023, we’re seeing historic population growth in Canada, where Canada’s population grew by 3.2%, the highest annual growth since 1957. And so we can see instances where the economy is growing, but GDP per person and living standards are actually declining,” Munro said.
If the population grows but the value of goods and services produced doesn’t increase, the per capita GDP will be affected.
Munro was concerned about the parallels between these economic periods, but just like the periods after those historic declines, he believed the economy could be corrected with the right government policies.
“In the early 90s…governments across Canada, of all political stripes, spearheaded by the federal Chrétien government, introduced a large set of policy reforms that focused on balanced budgets through spending reductions and spending restraint, meaningful tax relief that aimed at incentivizing business investment and entrepreneurship, and a move away from, actively picking winners and losers in the market through corporate welfare,” Munro said.
He said these are the policies governments need to implement in the future to avoid this potentially devastating milestone.
“If things don’t turn around in 2024, we might be in the middle of what is the longest and deepest decline in living standards in the last four decades. And that’s not a milestone that Canadians want to reach.”
