The Trudeau government has been crowing about how Canada has had “the strongest economic growth in the G7” coming out of the pandemic, which is true. But it neglected to mention that this growth was the result of Canada’s population getting bigger rather than richer. Per person income has stopped growing in this country.
The data on per capita GDP couldn’t be clearer. Adjusting for inflation, we currently have the same level of output per person as we had in 2018. Our neighbours to the south, meanwhile, have seen continued growth in recent years. Output per person in the U.S. is up by 5.4 per cent since 2018.
The stagnation of Canadian output and income per person is the result of a long-standing problem: Canada’s productivity struggles to keep up with other advanced economies. What this means is that the value the average Canadian worker creates in an hour lags behind what workers in other G7 countries produce. According to OECD data, each hour worked by a Canadian creates an average of US$53.30 of value, on a purchasing power parity basis (i.e., currencies are translated into U.S. dollars, not at the actual market rate of exchange, but at a rate that adjusts for differences in countries’ domestic prices, so that the loonies a U.S. dollar will buy purchase the same goods and services in Canada that the U.S. dollar did in the U.S.)
Fifty bucks an hour might not seem so bad, but it places us next-to-last among G7 members, just ahead of Japan. The average productivity of G7 countries is US$63.90 per hour worked. As for our friends south of the border, they create US$72.10 of value per hour worked.
We can say that this is no big deal, that we’re just a few dollars per hour behind, but we need to understand that the gap has a direct impact on our personal finances. The less value we produce per hour worked, the less we can be remunerated by our employers. If we’re not literally “delivering the goods” (and services), how can they pay us more? Lower hourly productivity means less income for workers.
If for the sake of argument we assume Canadians work 35 hours a week, 48 weeks a year, our US$10.60 per hour gap in value produced compared to the G7 average per hour translates into a US$17,808 gap per year, which most Canadians almost certainly will regard as being real money. If we were able to close the gap with Americans, that would raise our living standards by $31,584 per year.
Closing this admittedly large gap is not impossible. The economic literature is very clear on how to increase productivity: more investment. When companies invest in new, more efficient production processes, workers are able to do more, and do better, with each hour spent working. This produces more value, which ultimately increases potential remuneration.
Canada has been lagging behind for years when it comes to investment, the lifeblood of productivity. In 2018, for instance, non-residential private investment amounted to $17,389 per job in Canada. In the United States, still on a purchasing power parity basis, the level of non-residential private investment was $27,307 per job. In Sweden, it was $33,214 per job.
Our governments, both federal and provincial, are trying to make up for the lack of private investment with subsidies, but the subsidies required to close the private-investment gap with the United States are simply not sustainable. We would need $200 billion a year in taxpayer money to catch up. And that’s assuming subsidies are just as efficient as private investment, which seems unlikely.
The good news for taxpayers is that closing the productivity gap does not require diverting our taxes toward the private sector in order to close our productivity gap. If other countries succeed in attracting more investment, it’s because their business environment is sufficiently attractive for the private sector to be willing to risk its money there.
The longer it takes to get a project through approval stages and then ultimately built, or the higher the taxes levied on its eventual output, the less attractive we are to domestic and foreign investors. The opposite also holds true.
Becoming attractive again therefore requires that we reduce the cost of doing business in Canada, especially the fiscal and regulatory cost. Eventually our self-improvement policy could lead to companies seeing investment in Canada as equally or even more profitable than investing in the United States, France, or Sweden, to name just a few of our competitors for investment.
As long as we do not address this problem of our uncompetitive fiscal and regulatory environment, we will risk seeing our living standards stagnate, both relative to the rest of the world and maybe even in absolute terms.
Renaud Brossard is senior director of communications at the Montreal Economic Institute.
NEW DELHI: The tense diplomatic relations between India and Canada are unlikely to impact trade and investments between the two countries as economic ties are driven by commercial considerations, according to experts. Both India and Canada trade in complementary products and do not compete on similar products.
“Hence, the trade relationship will continue to grow and not be affected by day-to-day events,” Global Trade Research Initiative (GTRI) Co-Founder Ajay Srivastava said.
Certain political developments have led to a pause in negotiations for a free trade agreement between the two countries.
On September 10, Prime Minister Narendra Modi conveyed to his Canadian counterpart Justin Trudeau India’s strong concerns about the continuing anti-India activities of extremist elements in Canada that were promoting secessionism, inciting violence against its diplomats and threatening the Indian community there.
India on Tuesday announced the expulsion of a Canadian diplomat hours after Canada asked an Indian official to leave that country, citing a “potential” Indian link to the killing of a Khalistani separatist leader in June.
Srivastava said these recent events are unlikely to affect the deep-rooted people-to-people connections, trade, and economic ties between the two nations.
Bilateral trade between India and Canada has grown significantly in recent years, reaching USD 8.16 billion in 2022-23.
India’s exports (USD 4.1 billion) to Canada include pharmaceuticals, gems and jewellery, textiles, and machinery, while Canada’s exports to India (USD 4.06 billion) include pulses, timber, pulp and paper, and mining products.
On investments, he said that Canadian pension funds will continue investing in India on grounds of India’s large market and good return on money invested.
Canadian pension funds, by the end of 2022, had invested over USD 45 billion in India, making it the fourth-largest recipient of Canadian FDI in the world.
The top sectors for Canadian pension fund investment in India include infrastructure, renewable energy, technology, and financial services.
Mumbai-based exporter and Chairman of Technocraft Industries Sharad Kumar Saraf said the present frosty relations between India and Canada are certainly a cause for concern.
“However, the bilateral trade is entirely driven by commercial considerations. Political turmoil is of a temporary nature and should not be a reason to affect trade relations,” Saraf said.
He added that even with China, India has acrimonious relations but bilateral trade continues to remain healthy.
“In fact, bilateral trade is an effective tool to improve political relations. India must make special efforts to increase our bilateral trade with Canada,” Saraf said.
India and Canada have a strong education partnership. There are over 200 educational partnerships between Indian and Canadian institutions.
In addition, over 3,19,000 Indian students are enrolled in Canadian institutions, making them the largest international student cohort in Canada, according to GTRI.
According to the Canadian Bureau for International Education (CBIE), Indian students contributed USD 4.9 billion to the Canadian economy in 2021.
Indian students are the largest international student group in Canada, accounting for 20 per cent of all international students in 2021.
Benefits of educational partnerships are mutual and hence the current situation may have no impact on the relationship, Srivastava said.
Apple supplier Foxconn aims to double its workforce and investment in India by next year, a company executive said on Sunday.
Taiwan-based Foxconn, the world’s largest contract manufacturer of electronics, has rapidly expanded its presence in India by investing in manufacturing facilities in the south of the country as the company seeks to move away from China.
V Lee, Foxconn’s representative in India, in a LinkedIn post to mark Indian Prime Minister Narendra Modi’s 73rd birthday, said the company was “aiming for another doubling of employment, FDI (foreign direct investment), and business size in India” by this time next year.
He did not give more details.
Foxconn already has an iPhone factory employing 40,000 people in the state of Tamil Nadu.
Foxconn dangles incentives for workers as iPhone shortages plague holiday season
Foxconn dangles incentives for workers as iPhone shortages plague holiday season
In August, the state of Karnataka said the firm will invest US$600 million for two projects to make casing components for iPhones and chip-making equipment.
The company’s Chairman Liu Young-way said in an earnings briefing last month that he sees a lot of potential in India, adding: “several billion dollars in investment is only a beginning”.
Taiwan election: Foxconn’s Terry Gou taps star-powered running mate
Last month, Foxconn’s billionaire founder Terry Gou said he would run for the Taiwanese presidency in next year’s election, as an independent candidate.
He said the ruling and independence-leaning Democratic Progressive Party (DPP) was unable to offer a bright future for the island and left Foxconn’s board following his decision to run.
The firm operates the world’s largest iPhone plant, in the city of Zhengzhou in Henan province.
Foxconn, Taiwan-based Apple supplier, has said that they are planning to double their investment and workforce in India within the next twelve months, according to V Lee’s LinkedIn post on the occasion of Prime Minister Narendra Modi’s 73rd birthday.