Sluggish business productivity is a growing risk to the quality of life in Canada, according to a recently released TD report.
Driving the news: Economists say flagging productivity and high population growth have left Canadians with smaller slices of the economic pie. GDP per person, which is one way economists measure how well-off people are, fell 7% below its long-term trend this year, or ~$4,200 per Canadian.
- Construction and goods-producing sectors have dragged down productivity, but one bright spot is the oil and gas sector, which is still highly productive.
Why it matters: By this measure, Canadians’ standard of living was lower last year than in 2014. According to the report, declining productivity affects wages, while governments can find themselves raising taxes or cutting services to keep up with spending commitments.
- Countries that have high per-person GDP, including Norway, Switzerland, and Iceland, aren’t just productive, they also consistently top quality of life rankings.
Yes, but: With interest rates coming down and Ottawa taking steps to slow population growth, the Bank of Canada does expect GDP per capita to pick up in 2025 and 2026
Bottom line: Solutions to boost productivity are often sector-specific, but TD claims a good place to start would be policies that boost competition, keep skilled workers in the country, reduce barriers to trade and investment, and improve incentives for innovation.