Woe, Canada

I n a recent article, Dominic Pino highlighted that Canada is “poor,” citing among other evidence a new Fraser Institute report that shows as of 2022, earnings per person in each of the ten Canadian provinces is lower than in each of the 50 U.S. states. And Canada is steadily falling even further behind — a fact that becomes more evident with every economic data release.

Since Justin Trudeau of the Liberal Party became prime minister in November 2015, Canada’s economy has stagnated. Real GDP per capita has declined in seven of the past eight quarters as population increases largely due to immigration but economic production does not keep up. Canada has seen declining business investment, anti-business tax policy, haphazard regulatory initiatives, and a massive expansion of government that crowds out and slows private-sector activity.

Real-GDP-per-capita growth between the third quarter of 2015, right before Trudeau took office, and the second quarter of 2024, the most recent data available, is 0.6 percent in Canada versus 16.4 percent in the United States.

Business investment is the component of GDP that drives the productivity growth on which the standard of living relies, but real business investment per capita is down more than 15 percent over that time period. And the Liberals’ capital-gains-tax hike, which took effect at the end of June this year, will only make things worse.

The C. D. Howe Institute reports in a recent study that while the investment gap between Canada and the U.S. narrowed from the late 1990s to the early 2010s, it has widened during Trudeau’s tenure. “In 2024, Canadian workers will likely receive only 66 cents of new capital for every dollar received by their counterparts in the OECD as a whole, and 55 cents for every dollar received by their US counterparts,” the study says.

The C. D. Howe authors note that capital per available worker is down across all categories. Between the fourth quarter of 2015 and the second quarter of this year, investment in engineering construction has declined by 4 percent, investment in intellectual-property products is down 9 percent, investment in non-residential buildings is down 13 percent, and investment in machinery and equipment is down 21 percent.

These dismal numbers are in large part driven by reckless fiscal policy. In addition to the aforementioned capital-gains-tax hike, the Liberals added a new income-tax bracket on top earners in 2016, passed a carbon tax in 2019 that has increased every year since then, made five consecutive Canada Pension Plan tax hikes from 2020 to 2024 with future hikes planned, imposed special taxation of financial-institution profits in 2022, and have announced plans for a tax on share buybacks.

Federal regulatory initiatives such as an announced ban on gas-powered cars and an effective government takeover of the child-care sector have not helped. Nor have plastic bans, labor-relations laws that give special privileges to unions at the expense of non-unionized workers and businesses, or interventions that are downright zany — such as a mandate that female hygiene products be made available for free in both men’s and women’s washrooms in all federally regulated workplaces.

As GDP stagnates and business investment and private-sector activity decline, the one sector that has seen noteworthy growth is the government sector. From 2015 to 2024, public-sector employment is up 25 percent. Over the same timespan, private-sector employment growth, including self-employment, is only up 12 percent. And for federal public administration specifically, employment is up 43 percent — nearly four times the rate of private-sector growth.

Employment and Social Development Canada now has 39,089 bureaucrats regulating and centrally planning employment, up 80 percent from 2015. That’s 80 percent growth in employment bureaucrats versus 12 percent growth in private-sector employment. Similarly, the federal agriculture department has an 11 percent higher headcount in 2024 than in 2015 even though total employment in agriculture across Canada has declined by 18 percent. And Natural Resources Canada now employs 5,751 people, 39 percent more than in 2015, but employment in Canada’s natural-resources sector is down 1 percent from 2015 to 2024.

Finally, given all of the Trudeau government’s tax increases, it should be no surprise that employment at the Canada Revenue Agency is up 48 percent since 2015, to nearly 60,000 employees.

No wonder Canada is falling so far behind.