Why is Canada Growing Without Progressing?
At first glance, Canada seems to hold significant economic power. A G7 nation rich in natural resources, Canada currently benefits from the highest employment and population growth rates among the G7 and is expected to maintain this position in 2025 and 2026 (Global Affairs Canada, 2025). Yet, beneath the surface, the cracks are widening. According to Trading Economics (2025), Canada’s GDP growth slowed sharply from about 5.3% in 2021 to roughly 1.6% by 2024. Furthermore, since 2019, business sector productivity has ceased to expand, setting Canada apart as one of the worst-performing advanced economies. In fact, TD Economics also notes that Canada’s standard of living, measured by real GDP per person, is now lower than it was in 2014 (Caranci & Marple, 2024). Thus, Canada’s economy presents a striking paradox. Despite boasting record population growth, low unemployment, and global recognition as a stable, high-income nation, its real prosperity is stagnating. This contradiction, growth without real progress, exposes the fragile foundations of Canada’s economic model.
On one hand, Canada’s GDP has grown consistently from 2021 to 2024, increasing from CAD$2.85 trillion to CAD$3.16 trillion (Trading Economics, 2025). Yet, on the other hand, GDP per capita has fallen: from CAD$62.86K to CAD$62.58K (Trading Economics, 2025). In other words, despite perceived growth, Canadians are not actually getting richer. With the surge in immigration and population, Canada’s growth reflects a boost in consumer demand, instead of greater productivity. Productivity, or labour productivity, measures the amount of output per worker. Contrary to what some may think, improving productivity doesn't mean working harder or longer. It's about increasing output per hour of work. To put into perspective, it takes a Canadian worker 1.4 times more effort than their U.S. counterpart to add the same value to the economy (BDO Canada, 2024). Why is it a problem? A more productive economy grows faster, with an increase in income per person and thus a higher standard of living. Yet, Canada is currently experiencing a productivity crisis.
Boosting productivity requires investing in better tools, technology, and worker training. In Canada, however, the government and businesses have fallen behind in investing in R&D, causing productivity to stagnate even as the economy grows. Indeed, Canada has had a decade-long decline in government R&D spending, but so have other comparative countries. However, to make up for the gap, peer nations have seen an increase in business R&D investments. That is not the case for Canada, which has experienced a sharp decline in business R&D over the past 20 years. Without proper investments, innovations cannot arise. Consequently, Canada scores a C on The Conference Board of Canada’s Innovation Report Card, ranking 15th among 20 countries. Of the 21 innovation indicators, Canada scores below average on 14 of the indicators. (Conference Board of Canada, 2024). Moreover, low innovation activity often leads to low technology adoption. In other words, Canada is behind in the adoption of advanced technologies, including information and communication technology (ICT), robotics, and artificial intelligence (AI). For example, Canada has the second-lowest AI adoption rate among G7 countries at 22% (Billy-Ochieng, Arif, & Garcia, 2024). This significantly limits Canada’s ability to compete on a global scale, especially in an increasingly technological-driven economy. Finally, a real cultural barrier is preventing Canada from reaching its full potential. Indeed, Canada is plagued by a fear of failure, with startups often hesitating to take bold steps due to the high costs associated with entrepreneurship. All in all, these factors help explain in part Canada’s lack of productivity.
Consequently, income per worker can only grow so much while, in parallel, rising population and consumer demand is pushing up prices. This leads to higher costs for everything from groceries to housing. Thus, a growing share of household budgets goes to necessities, leaving less for savings, and notably investments. The same goes for businesses. As a result, income and wealth inequality surged to record highs in 2025. The income gap between the wealthiest and poorest households widened to nearly 49 percentage points (Rabinovitch, 2025). This situation is also worsened by Canada’s heavy reliance on imports, especially for high-value and complex goods from the U.S. and abroad. And with recent U.S. measures imposing high tariffs, import costs rose sharply, and so did the cost of living.
In conclusion, Canada's economy looks strong on the surface, but deeper issues such as slow productivity growth, low innovation and rising inequalities are holding back real progress. Without greater investment in technology and research, economic gains will not follow. To build lasting prosperity, Canada needs to focus less on population growth and more on helping workers and businesses become truly more productive.
Sources:
Global Affairs Canada. (2025, January). Key facts about Canada’s competitiveness for foreign direct investment. Government of Canada. https://international.canada.ca/en/global-affairs/corporate/reports/chief-economist/international-investment/2025-01-key-facts
Trading Economics. (2025). Canada full year GDP growth. https://tradingeconomics.com/canada/full-year-gdp-growth
Caranci, B., & Marple, J. (2024, September). From bad to worse: Canada’s productivity slowdown is cause for concern. TD Economics. https://economics.td.com/ca-productivity-bad-to-worse?
BDO Canada. (2024). Canada’s productivity paradox: Why it matters and how to solve it. https://www.bdo.ca/insights/canada-s-productivity-paradox
Conference Board of Canada. (2024). Innovation report card 2024. https://www.conferenceboard.ca/wp-content/uploads/2022/10/innovation-report-card_2024.pdf
Billy-Ochieng’, R., Arif, A., & Garcia, D. (2024, May 28). Artificial intelligence technologies can help address Canada’s productivity slump. TD Economics. https://economics.td.com/domains/economics.td.com/documents/reports/rb/Generative_AI_and_Productivity.pdf
Rabinovitch, A. (2025, October). Income gap is at 'record high' amid weakening economy, StatCan says. Global News. https://globalnews.ca/news/11471463/income-gap-canada-record-high/