Canada’s Economy Is Growing—So Why Are Canadians Falling Behind?

Canada’s economy is bigger than it was 25 years ago. But that does not answer the question most Canadians are asking: Am I actually getting ahead?

There are more people, more workers, more government spending and more money changing hands.

Politicians point to economic growth as evidence that Canada is doing well. But a growing national economy does not necessarily mean a more prosperous population.

A new Fraser Institute study comparing Canada with the United States reveals a troubling reality.

Canada Grew—but America Grew Much Faster

In 1999, Canada produced approximately $48,076 per person, after adjusting for inflation. The United States produced approximately $58,842 per person.

By 2024, Canadian production had risen to $59,529 per person. American production had reached $83,286 per person.

Canada’s economy did grow. The problem is that the United States grew much faster.

In 1999, Canada produced about 82 cents for every dollar produced per person in the United States.

By 2024, that had fallen to approximately 71 cents.

That is the number ordinary Canadians should notice.

What Does That Mean at Your Kitchen Table?

It does not mean every American received an additional $23,757 in a bank account. Gross domestic product per person measures economic production, not personal take-home pay.

But over time, a country that produces less per person has less economic wealth available to support:

• Better wages
• Affordable public services
• Retirement savings
• Health care
• Infrastructure
• Business expansion
• Government programs

When productivity and investment are weak, governments do not necessarily stop spending. They may borrow more, raise taxes or ask fewer taxpayers to carry a larger load.

Businesses face the same basic reality.

A worker without modern equipment, better technology or sufficient investment cannot produce as much as a similarly skilled worker who has those advantages.

Canadian Workers Are Receiving Less Investment

The Fraser Institute reports that Canadian business investment per worker fell from almost 90 cents for every dollar invested per American worker in 2007 to only 54 cents in 2024.

This matters because investment provides workers with the equipment, technology and tools needed to produce more in every hour worked.

When workers become more productive, businesses can afford to pay higher wages without simply raising prices.

When productivity stagnates, wage growth becomes harder to sustain.

The result eventually appears in everyday life:

• The grocery bill rises faster than the paycheque.
• Housing takes a larger share of household income.
• Taxes and government fees continue to increase.
• Public services struggle to keep up.
• Young Canadians work harder but find financial security slipping further away.

More Jobs—but What Kind of Jobs?

Canada’s private-sector share of employment fell from 81.2% in 1999 to 78.5% in 2024.

In the United States, the private-sector share increased from 85.8% to 86.5%.

Public employees provide many necessary services. Nurses, teachers, firefighters and police officers are essential. The issue is not whether public employees perform valuable work.

The unanswered question is whether Canada is creating enough private-sector wealth to pay for the public sector Canadians expect.

Government can hire more people and increase total economic activity. But government ultimately depends on taxes, borrowing or revenues produced elsewhere in the economy.

Government expansion cannot permanently replace productive private investment.

How Economic Growth Can Mislead

Canadians are repeatedly told that the economy is growing. Technically, that can be true even while individual Canadians are losing ground.

If the economy grows by 2% while the population grows by 3%, Canada has more total economic activity—but less economic output for each person.

That helps explain the difference between a favourable government announcement and what Canadians experience at the grocery checkout, the bank and the end of the month.

We should not ask only whether Canada’s total economy is growing.

We should ask whether the economy is growing fast enough to improve the life of each Canadian.

The Words Can Be Debated—The Trend Cannot

The Fraser Institute uses strong language in saying Canada has “squandered” the first quarter of this century. Its choice of words can be debated.

The economic trend cannot be dismissed so easily.

The Organisation for Economic Co-operation and Development has also concluded that Canada suffers from weak productivity and inadequate business investment.

The Fraser Institute may lean toward free-market solutions, but it did not invent Canada’s productivity problem.

The question taxpayers should be asking is simple:

If Canada has more people, more government and a larger economy, why is the average Canadian not becoming noticeably more prosperous?

Until governments answer that question, announcements about total economic growth tell us very little about life around the kitchen table.

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Sources: Fraser Institute—Squandering the Canadian Century, Part 1; OECD—Reviving Productivity Growth in Canada; OECD—Raising Business-Sector Productivity.