This article originally appeared in the Financial Post. Below is an excerpt from the article.
By Philip Cross, April 4, 2024
A consensus is emerging that Canada’s chronically slow economic growth and weak productivity constitute a national crisis. Bank of Canada senior deputy governor Carolyn Rogers last week called lagging productivity “an emergency,” saying “it’s time to break the glass.” With real GDP growth in the past decade the weakest since the 1930s and with real per capita GDP languishing at 2014 levels, it’s hard to avoid that conclusion.
Concern about Canada’s flagging growth is not new. The Standing Senate Committee on Banking, Trade and Commerce warned in 2018 that Canada was “falling behind” as the U.S. climbed from seventh most competitive economy in the world to second in just five years, while Canada remained mired in 14th place. In 2021, former cabinet ministers Lisa Raitt (a Conservative) and Anne McLellan (a Liberal) formed the bipartisan Coalition for a Better Future to support the need for stronger economic growth. Without action to reverse the current trend, the OECD secretariat predicts Canada’s growth over the next quarter century will be the slowest among its member countries.
While a consensus is forming that Canada’s lack of economic growth represents a crisis, the diagnosis of its causes often is off-base. Economists know growth is determined by three variables: the supply of labour, the stock of capital, and the efficiency with which labour and capital are combined and deployed — which they call, not very descriptively, “total” or “multi-factor productivity.”
The Trudeau government has focused on raising the supply of labour by boosting immigration and introducing a national child-care program. More immigration increases the population and labour force, hence the Dominic Barton-led Advisory Council on Economic Growth’s proposal to raise Canada’s target intake by 50 per cent to 450,000, which we did each of the last two years. National child care was introduced in the 2021 budget with the explicit goal of raising the labour force participation rate of young mothers.
***TO READ THE FULL ARTICLE, VISIT THE FINANCIAL POST HERE***
