This is an important insight and explains the occasional detachment between what certain aggregate economic data may indicate versus the individual experiences of people. Consider a simple hypothetical example of two jurisdictions, both with the same level of total economic activity (i.e. GDP), the same starting population and the same rate of economic growth. But assume one jurisdiction records growth in its population that’s lower than growth in the economy, while the other experiences population growth in excess of that in the economy.
Both jurisdictions are enjoying positive economic growth in an overall economic sense, but the former is also recording growth in per-person GDP, the principal measure of living standards, because GDP is expanding faster than the population. The latter jurisdiction, despite the same level of economic growth as the former, is suffering a decline in per-person GDP because its population is growing faster than the overall economy. In other words, the latter jurisdiction is producing fewer goods and services on a per-person basis, indicating a decline in living standards.
Unfortunately for Canadians, this is not a hypothetical discussion. Canadian per-person GDP (adjusted for inflation) reached $56,369 in the second quarter of 2019 but by the end of 2021, despite economic recovery from the COVID shock, stood at $55,730, roughly 1.1 per cent lower than in 2019. According to data up to the third quarter of 2022, per-person GDP remains below 2019 levels, even though the overall economy has been growing since late-2020.
Put simply, if recessions were measured by per-person statistics rather than in aggregate, Canada would be in its third year of recession compared to 2019—with at least two more years of declining living standards ahead of us, mainly because overall growth in the economy has not been sufficient to offset the country’s rapidly expanding population.
And it’s actually worse than this. Ottawa’s explicit economic policies seek to grow the country’s overall economy by boosting the population, largely through high rates of immigration, rather than by addressing shortfalls in business investment, productivity, entrepreneurship, and innovation. So, while Canada’s aggregate economy may avoid an “official” recession this year, individual Canadians will continue to suffer from a recession in the form of lower average per-person GDP (i.e. living standards).
Reversing this pattern of stagnating or declining living standards should be the primary goal of Canadian governments. But judging from the federal budget, most policymakers are content to ignore the issue.