Even with AI tools, highly caffeinated beverages, and a roster of podcasts eager to tell us all how to work “smarter,” Canadians are in a bit of a productivity slump.
Driving the news: Canada’s economic output per person has fallen below its long-term trend by 7% — a loss of around $4,200 per person — according to a new report by Statistics Canada.
- From 1981 to 2020, Canada’s GDP per capita — a widely used measure of a country’s economic prosperity — grew by 1.1% every year, but it fell sharply during COVID and has yet to fully recover.
Why it matters: GDP per capita is a fancy way of describing how big the average Canadian’s slice of the country’s economic pie is, so when it starts shrinking (or not growing), it’s a sign that our quality of life is slipping.
- Countries like Norway, Switzerland, and Iceland, which boast high GDP per capita, also land near the top of quality of life rankings.
Why it’s happening: GDP per capita growth in Canada is mostly driven by productivity, and as you might’ve heard from the Bank of Canada (and almost every economist in the country) recently, Canada’s experiencing something of a productivity crisis.
- During the four decades prior to the pandemic, increases in productivity accounted for 93% of the growth in Canada’s real GDP per capita.
- Experts say a lack of competition and capital investments from businesses, a rapidly aging workforce, and an influx of newcomers working lower-paying jobs have all contributed to flagging productivity.
What’s next: With the number of Canadians over 85 expected to roughly triple over the next two decades, the Canadian economy is set to have a big hole in its workforce and, with it, a significant productivity hurdle to clear.—LA