Canada Has Third-Worst GDP Growth per Capita Among 30 Top Economies

The flags of the United Kingdom, United States, Canada, and the European Union fly over Sword Beach in Colleville-Montgomery, on June 5, 2018 near Caen, France. (Matt Cardy/Getty Images)

Canada is one of the worst performing advanced economies when it comes to GDP growth per person, a new study suggests.

Canada had the third-lowest growth in gross domestic product (GDP) per person from 2014 to 2022, coming 28th out of 30 other countries, according to a report published by the Fraser Institute.

“In terms of GDP per person, a broad measure of living standards, Canada’s performance has weakened substantially in recent years,” Fraser Institute director Alex Whalen said in a July 23 press release.

While per capita GDP may not seem very important to most Canadians, it should be, the study’s authors said.

“Measuring changes in real income over time and against peers can help Canadians gain a perspective on whether they are better or worse off relative to their past way of life or to residents of other countries,” they said.

The study also looks at the change in Canadian real incomes over time, compared with the incomes of residents in other Organisation for Economic Co-operation and Development (OECD) countries.

The OECD provides a “good basis of comparison” for Canadian incomes because its member countries offer a healthy cross-section of advanced economies, including many that are similar to Canada, the study said.

Income Growth Stagnates

Canadian income growth measured by GDP per capita matched up with the rest of the OECD countries between 2002 and 2014, the study found. From 2014 on, Canada’s growth rate has stagnated.

Canada’s GDP per person in 2002 was higher than the OECD average by US$3,141. By 2022, however, it had fallen US$231 below the OECD average, well behind key allies and trading partners such as the United States, the United Kingdom, New Zealand, and Australia.

Canadian GDP per capita in 2014 was $44,710—80.4 percent of the U.S. total of $55,605, the report found. By 2022, Canada was at $46,035 compared to $63,685 in the United States. That means the gap had increased from $10,895 to $17,649 by 2022, with inflation.

By 2060, Canada’s projected average annual growth rate for GDP per capita will be 0.78 percent, the lowest among 30 OECD countries.

The report attributed Canada’s decreasing long-term GDP per capita growth to the low or negative growth in labour productivity, reflecting insufficient investment in physical and human capital per worker.

“Canada has been experiencing a collapse in investment, low productivity growth, and a large and growing government sector, all of which contribute to reduced growth in living standards compared to our peer countries in the OECD,” Fraser Institute senior fellow Lawrence Schembri said.

Bank of Canada governor Tiff Macklem said in a speech last month that Canada must address its ongoing struggle with low business investment in order to thrive.

Canadian businesses invest significantly less per worker than U.S. businesses, Mr. Macklem said. That means workers have fewer new innovations to help them increase speed and efficiency.

“Why have we had systematically less investment in Canada than in the United States? Or, to put this question in the positive: How do we make Canada more investable?” he said. “Finding answers to these questions is critical if we want to increase the non-inflationary growth rate of the economy and raise the standard of living of Canadians.”

Average Growth

Among OECD countries, Ireland is at the top of the heap for GDP per capita growth from 2014 to 2022 with a rate of 8.4 percent. Poland sat at 4.3 percent, followed by Hungary at 3.8 percent, and Turkey at 3.6 percent.

New Zealand came in at 1.8 percent followed by the U.S. at 1.7 percent while the U.K. and Australia were at 1.1 percent. Canada, by comparison, had a rate of only 0.6 percent.

The study’s authors recommend the federal government change several policies to help encourage growth.

“Boosting productivity through reduced regulation and barriers to international and interprovincial trade (including improved labour mobility), encouraging innovation and entrepreneurship, tax reform aimed at improved tax competitiveness and a stronger investment climate, as well as a reduced size of government are a few of the actions that should be undertaken,” they wrote.

“Governments across the country should begin to immediately enact these bold reforms that will help tackle Canada’s ongoing growth crisis.”