Without Accounting For Significant Population Increases, Canada’s GDP Growth Numbers Present A Skewed Picture

Canadians are becoming poorer on a per capita basis. This is the biggest economic challenge facing our nation, yet it is being obscured by a focus on overall GDP growth numbers.

According to a Bloomberg report based on IMF projections, Canada is set to lead the G7 in GDP growth next year:


On the face of it, this looks like good news – though you can see that overall growth in the G7 is quite poor.

However, a closer look reveals that what appears to be decent growth actually represents the average Canadian falling behind.

The key here is to compare GDP growth projections to population growth projections.

Population growth in Canada exceeds GDP growth

Now, Canada’s population growth last year was about 1 million people. This has brought our population to 40 million. Given that the Liberal government intends to continue rapid population growth through immigration, it’s reasonable to assume that Canada’s population will grow by about 1 million next year.

This would represent a 2.5% population increase.

Thus, if our overall GDP grows by 1.5%, but our population grows by 2.5%, the average Canadian is getting poorer. This represents our nation declining economically, rather than getting ahead.

The fact that this is rarely discussed is an indictment of the level of economic discourse in this country. This serves the interests of the government of course, because they can claim the economy is ‘growing’ even though that growth is wholly dependent on there simply being more people in the country.

Canadian productivity crisis

Canada has a productivity crisis. This is the biggest economic challenge – and arguably the biggest challenge overall – facing our country, because if we want our standard of living to rise, we must become more productive. There is no way around this.

Fundamentally, productivity refers to the amount of output produced per unit of input. When productivity increases, more goods and services are created from the same resources, which leads to more availability and more potential consumption of these goods and services.

This is important to both individuals and the national economy. For individuals, increased productivity often translates to higher wages as people are producing more valuable output within the same amount of time. Higher wages then allow for increased consumption and an improved standard of living. Consider the importance of the assembly line. It allowed each person to produce far more per hour than ever before, meaning there was both more goods and more people able to afford those goods, leading to significant increases in the standard of living.

For the country, improved productivity can lead to real, per person economic growth. As productivity increases, more goods and services are created, which boosts GDP. The key thing here is that this is real GDP growth, because more is being produced per person. Thus, growing GDP as a result of productivity growth rather than solely population growth means that the average income of the individuals in a country is going up.

Furthermore, increased productivity allows companies to achieve higher profit margins, which can be reinvested back into the economy, contributing to further economic growth.

Higher productivity also means governments can collect more tax revenue without increasing tax rates, which can then be used to fund public services that also contribute to a higher standard of living.

Higher productivity thus leads to a positive feedback loop, and it should be the goal of any even half-serious government.

As noted above, there is no way around this if we truly want to increase our standard of living. If we try to substitute population growth for productivity growth, Canadians will continue to fall further behind, life will continue to get less affordable, and the Canadian Dream will continue to recede. This is why, whenever we hear someone try to tout Canada’s raw GDP growth, we should always seek to bring the focus back to our per capita GDP, because that is the number that really matters.

Spencer Fernando


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