Canada’s standard of living on track for worst decline in 40 years

Canadian Prime Minister Justin Trudeau greets employees on the Honda CRV assembly line
Justin Trudeau needs to enact 'fundamental policy reforms', according to the Fraser Institute - PETER POWER

Canada is experiencing one of the country’s worst declines in the standard of living in 40 years, according to a study.

The authors of the study by the non-partisan Fraser Institute said the figures should serve as a “wake-up call” for the country’s Liberal government, led by Justin Trudeau, to enact “fundamental policy reforms”.

While Canada’s gross domestic product (GDP) has grown in recent years, driven by high population growth and labour supply, its GDP per person has fallen dramatically, the study said.

It found that from mid-2019 to the end of 2023, GDP per person dropped 3 per cent when adjusted for inflation, from $59,905 (£34,625) to $58,111 (£33,588). Moreover, it warned that the decline was continuing and “may still exceed” the steep economic downturn of the late-1980s and early-1990s in its length and depth.

Measuring a country’s economic health is complex, and the tools used to calculate economic activity can be contentious. GDP is a key metric and is typically measured either in aggregate or per person.

‘Economic progress’

When Canada’s GDP is assessed by aggregate, the country had the second highest rate of growth among the G7 nations. However, the analysis by the Fraser Institute argued that assessing GDP per person “is the more useful indicator of economic progress” – and by that metric Canada had one of the lowest rates among the G7.

“Despite claims to the contrary, living standards are declining in Canada,” said Grady Munro, a co-author of the Fraser Institute’s report.

The report noted that Canada’s “historically high” population growth “[increases] aggregate GDP but does not necessarily grow per person incomes”.

It found that Canada had experienced one of the longest and deepest declines in real GDP per person since 1985, exceeded only by the 5.3 per cent decline between 1989 and 1992 and the 5.2 per cent decline between the financial crisis of 2008 and 2009.

“However, the decline in incomes since Q2 2019 is ongoing, and may still exceed the downturn of the late-1980s and early-1990s in length and depth of decline,” the report warned.