Canada’s standard of living is falling behind and it's only going to get worse

Canada’s standard of living is falling far behind those of other advanced economies and things might only get worse according to a new report from a leading economist at TD.

Despite headlines touting the meteoric rise of economic growth in Canada after several difficult years following the global pandemic, the country’s people aren’t doing that well.

At least that’s what a new report from economist Marc Ercolao revealed when he showed the Canadian standard of living was falling behind that of other advanced economies.

“Economic growth does not necessarily equate to economic prosperity,” Ercolao’s report read, and when adjusted for the country’s growing population, things looked quite bad. 

Ercolao explained that Canada’s standard of living was doing relatively well when it was compared to that of the United States in the decade prior to the Covid-19 Pandemic.  

Canada was growing at roughly two percent every year which was close to not only the U.S. but also in line with the 1.4% average growth seen across all of the G7 countries. 

The country managed to recover from the pandemic quite quickly and better than most other advanced economies and had the fastest growth of rates of any other G7 nation. 

Unfortunately, this growth was primarily driven by Canada’s increase in population and it was here that Ercolao revealed the real problem with the Canadian standard of living. 

Real GDP per capita has been deteriorating for decades, Ercolao noted, showing that in the 1980s Canada had an average edge of $4000 over other advanced economies. 

However, this GDP per capita edge disappeared by 2000 and the U.S. was far ahead of Canada by roughly $8000, a situation only made worse by the 2014-2015 oil shock. 

Canada’s performance has only gone from “bad to worse” since 2014-2015 according to Ercolao with real GDP per capita only growing at a 0.4% against the 1.4% G7 average. 

“It is becoming increasingly difficult to ignore Canada’s widening real GDP per capita gap versus other major economies,” Ercolao concluded. 

“The issue has largely flown under the radar as the Canadian economy seemingly masked ongoing productivity issues with what appears to be unsustainable growth via adding more workers,” the TD economist continued. 

Unfortunately, Ercolao wasn’t very positive about the country’s future. Canada was one of the few nations that hasn't recovered to its pre-pandemic real GDP per capita levels. 

Moreover, Ercolao expects the country to enter a slowdown in the coming quarters as federal immigration targets continue to maintain Canada’s population growth. 

“This underscores that without fundamental changes to our approach to productivity and growth, Canada’s standard-of-living challenges will persist well into the future,” Ercolao wrote, which is certainly a worrying sign for all those building a life in Canada today.