Report calls for policy overhaul to reverse productivity and living-standard decline
Canada’s GDP per person shrank by 2% between 2020 and 2024, even as the overall economy expanded, according to a new report.
This marks the steepest five-year drop in living standards since the Great Depression, and the poorest performance among all OECD countries during the same period, the Fraser Institute research reveals. The new report follows a similar recent warning from TD Economics.
The study “Canada’s ‘Ugly’ Growth Experience, 2020–2024: Why GDP per Capita Declined while the Overall Economy Grew,” co-authored by Lawrence Schembri, identifies two main issues that have led to the decline.
First, a mix of high taxes, growing regulation, and rising government deficits has stifled business investment. Second, strong employment gains from record immigration have not been matched by productivity growth, dragging down output per person.
As a result, even with more workers and a larger economy, the average Canadian is experiencing lower material prosperity and Schembri stresses that reversing this slide requires bold action.
“To raise the prospects for growth in living standards in Canada over the medium term will require sweeping and substantial policy changes out of Ottawa and the provinces to strengthen the investment environment and improve the overall economic outlook,” he says.
Weak per-capita growth may weigh on corporate profits and consumer spending but opportunities may exist in sectors less dependent on productivity gains or those positioned to benefit from regulatory and tax reforms.
The report warns that aggregate growth is no longer enough. Without meaningful reforms to encourage business investment and strengthen productivity, Canadians face the risk of continued decline in their standard of living.
“To raise the prospects for growth in living standards in Canada over the medium term will require sweeping and substantial policy changes out of Ottawa and the provinces to strengthen the investment environment and improve the overall economic outlook,” Schembri concludes.
Recent Statistics Canada data shows that labour productivity fell 1% in the second quarter, the sharpest decline since the fourth quarter of 2022.
