The Struggle of Canada’s Economy

Alarm bells are ringing from Berlin to Canberra as developed countries face stagnating growth rates in per capita incomes compared to the United States. Former European Central Bank President Mario Draghi labels this challenge as existential for Europe, prompting leaders like U.K. Prime Minister Keir Starmer and German Chancellor Friedrich Merz to prioritize economic growth.

Canada: Stuck in Economic Limbo

Canada is caught in a similar predicament, but the underlying issues run deeper. While Canadians earn similar wages as their European counterparts, they work just as long as Americans. This troubling combination means Canadians face the worst of both worlds—neither high incomes nor the leisure time that could make up for it.

A Historical Perspective

Since the 1970s, Canada’s real GDP per capita, adjusted for purchasing power parity, has plummeted relative to the United States. After the 2008 financial crisis, U.S. per capita growth has surged to about double that of Canada, and significantly higher than both Germany and France.

From being nearly on par with the U.S. in 1975, Canadian output per person has now dropped to 25% less. While developed countries face a unified stagnation, the reasons vary widely, with countries like France and Germany experiencing different rates of productivity decline.

Comparative Work Hours: A Key Difference

A striking difference is the work hours. While Americans and Canadians are clocking in long hours, Europeans have cut back significantly. For instance, in 1975, French workers logged more hours than Americans, but by 2020, they were working only three-quarters as much as their North American counterparts. This lower average workload explains much of Europe’s modest productivity.

However, Canada does not share this luxury. Despite stagnating incomes, Canadians have been working more hours than Americans for years, leading only to frustration rather than reward. The core issue lies not in the quantity of hours worked but in the disappointing outcomes of those hours.

The Complexity of the Issue

Unlike Europe, the solution to Canada’s productivity woes is not straightforward. While reducing work hours is a simple fix for European nations, Canada’s challenges involve more intricate factors, including technological advancement, institutional integrity, and resource allocation efficiency. Removing trade barriers and simplifying regulations may help, but they are unlikely to fully rectify the issue.

Misplaced Hope in Global Narratives

This ongoing global conversation about economic stagnation often assumes a sense of solidarity among developed nations, with a focus on U.S. exceptionalism. However, this perspective glosses over crucial differences between countries and could mislead Canada into a false sense of hope.

Final Thoughts: A Call to Action

In conclusion, Canadians find themselves in a unique bind: working hard, yet reaping insufficient rewards in terms of income or free time. While Americans can take pride in their earnings and Europeans enjoy leisure time, Canada is left grappling with a growth challenge that reflects the worst of both worlds.