The latest data from Statistics Canada show the country’s per capital income declining to roughly CAD$4,200 per person.

Real output per capita has fallen to seven per cent below its long-term trend since the pandemic, resulting in the decline to CAD $4,200 per person. The main force behind this decline is a slower economy, which has been influenced by the Bank of Canada’s aggressive campaign to control inflation with higher interest rates.

The report done by Carter McCormack and Weimin Wang indicates that to reverse the trend, gross domestic product (GDP) per capita, a metric used by economists, together with other economic indicators to evaluate a country’s standard of living, would need to grow at an average yearly rate of 1.7 per cent.

This figure is close to the expansion in GDP per capita seen in the U.S., which swiftly recovered from pandemic economic lags and currently ranks as the most productive country in the G7. In the meantime, GDP per capita in Canada has plummeted to levels observed in 2017, based on historical data from 1981 to 2023.

“Per capita growth of this magnitude is ambitious and a marked departure from recent trends,” McCormack and Wang wrote.

Economic output has also not kept up with the pace of population growth.

In 2023, the number of residents in Canada grew 3.2 per cent, which is equivalent to 1,271,000 people or the size of Calgary, explained Statistics Canada. This is fuelling concerns around a crisis plaguing Canada’s labour productivity, which is responsible for a large chunk of GDP per capita growth.

Last month, Bank of Canada’s Senior Deputy Governor Carolyn Rogers warned that low productivity in Canada has reached emergency levels.

Many economists have been saying for some time that Canada’s productivity crisis is the main factor explaining low affordability in Canada.

Improving productivity requires greater capital spending. But weak competition among businesses in industries such as telecommunications, the authors say, has hindered investment. The logic is that more competition incentivises spending in innovation, which, in turn, improves productivity as well as prices and range of offerings for Canadians.

A February report by North Economics found that the lack of competition in Canadian retail banking services is costing customers CAD$8.5 billion annually in fees, which is equivalent to CAD$250 per adult Canadian per year, for example.

McCormack and Wang contend that the ability of Canadian companies to adapt to artificial intelligence, robotics and digitalisation “will be critical to the link between investment and productivity in the coming years and potentially important contributors to changes in living standards”.