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Economic Viewpoint

Working Hard or Hardly Working? Why Canada Lags Other Countries in Real GDP per Capita

June 5, 2023
Randall Bartlett, Senior Director of Canadian Economics, and Farjad Khan, Economics Intern

  • Real GDP per capita has become a much-talked-about economic indicator in Canada recently. As one of the broadest measures of economic wellbeing, it lends itself to cross-country comparisons.
  • Canadians should be concerned. Canada’s real GDP per capita is below the advanced economy average—a gap that has been gradually but consistently widening since 2014.
  • But the blame for this phenomenon has at times been misdirected. Our analysis shows that population growth is only part of the story. Indeed, immigration is not the primary driver of lacklustre growth in real GDP per capita that some have made it out to be.
  • Instead, it is the age-old story of Canada’s moribund growth in labour productivity, measured as real GDP per hour worked. However, it’s not a one-sector-fits-all story. Rather, the shift toward low-productivity-growth and less-capital-intensive sectors since 2014 has weighed on both overall labour productivity and real GDP per capita growth. Lower oil prices played a key role.
  • While we identify what drove the weakness in Canada’s real GDP per capita since 2014 in this note, we do not address what can be done about it. That will be the subject of future research.