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Historic decline in Canadian living standards continues into 2024

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Historic decline in Canadian living standards continues into 2024

Statistics Canada on Friday released its estimate of gross domestic product (GDP) for the first quarter of 2024, and once again while the Canadian economy is technically growing, the living standards of Canadians themselves are continuing to fall.

The new numbers reveal that inflation-adjusted GDP—the final value of all goods and services produced in the economy and the most widely used measure of overall economic activity—grew by 0.4 per cent in the first quarter of 2024. But at the same time, inflation-adjusted GDP per person—a broad measure of individual living standards—actually fell 0.2 per cent during the first quarter of 2024, down to $58,028.

This apparent disconnect between overall economic growth and individual living standards is the result of Canada’s changing population. The reason the economy is growing while living standards are falling is because the rate of economic growth is not fast enough to account for all the new people in Canada (whether through birth or immigration). During the first three months of 2024, the economy grew by 0.4 per cent while the population grew by 0.6 per cent.

A single quarter of declining per-person GDP is not particularly concerning in and of itself, but unfortunately for Canadians, these new data are simply the latest evidence of a prolonged decline in individual living standards.

A recent study measured inflation-adjusted per-person GDP over the last 40 years (1985 to 2023) and found that from the middle of 2019 (well before COVID) to the end of 2023, per-person GDP fell from $59,905 to $58,134. This 3.0 per cent drop over four and a half years was the second-longest and third-deepest decline in living standards over the entire period—only exceeded in both length and depth by the more than five-year decline that began mid-1989 and lasted until living standards recovered in the third quarter of 1994, and which saw inflation-adjusted GDP per person fall by 5.3 per cent.

If we factor in the new data for the beginning of 2024, we see that the current ongoing decline is worsening. Inflation-adjusted per-person GDP now sits 3.1 per cent below the level it was in mid-2019, and the decline is approaching five-years in length. In other words, Canada is approaching the milestone of experiencing the longest decline in individual living standards of the last 40 years.

Weak economic growth combined with a fast-growing population over the last several years have resulted in Canadians experiencing a marked and prolonged decrease in living standards. With new data showing no sign of improvement, Canadians and governments across the country should realize that the status quo cannot continue.

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