A report by TD Economics ranks Canada’s standard of living, measured by real GDP per capita, far behind other developed nations due to low economic productivity.
The report, authored by TD Bank economist Marc Ercolao, examined the factors behind Canada’s economic performance and prosperity in recent years.
Ercolao found that while Canada’s economy has benefited from strong population growth, driven by high immigration levels, it has not translated into higher living standards for Canadians.
“There may be a tendency to pin the blame for Canada’s sagging per-capita showing on the country’s rapidly-growing population base given that it has inflated the denominator of the calculation,” Ercolao told BNN Bloomberg.
“However, at the crux of the problem is insufficient growth in the numerator, which in turn is tied to longstanding productivity issues.”
Ercolao identified several areas where Canada needs to improve its productivity, such as increasing research and development (R&D) spending, fostering innovation, enhancing human capital, and diversifying its export markets.
He argued that Canada’s R&D spending has been falling for two decades, creating an “innovation gap” that hinders its competitiveness and potential growth.
“This country’s lagging standing in per-capita GDP is not new, but it has been worsening since the pandemic,” said Ercolao.
“At the core of the issue is a sagging productivity showing that has been plaguing the Canadian economy for many years despite the well-intentioned moves of this countries’ policymakers to try and address it,” he continued.
“As of 2021, Canadian R&D spending accounted for roughly 1.7 per cent of GDP, half of the current U.S. share and lower than most other countries.”
Last year, a report by the C.D. Howe Institute warned of a similar problem. Canada was lagging behind it’s fellow Organization for Economic Co-operation and Development (OECD) nations when it came to attracting investment.
“Business investment is so weak that capital per member of the labour force is falling, and the implications for incomes and competitiveness are ominous,” wrote researchers.