The Golden State Warriors are known for their towering height, but if I were to walk into a party full of players, the average height in the room would definitely take a dip. This scenario is similar to the analysis conducted by Philip Smith on Canada’s decline in real GDP per capita since 2022. While Smith highlights various factors contributing to this decline, he overlooks Canada’s equivalent of the towering basketball players in the room.
One significant factor identified by Smith is the influx of non-permanent residents (NPR) in Canada in recent years. Many of these NPRs are students who are either not working, working part-time, or employed in low-productivity jobs. When these factors are combined, it’s evident why per capita GDP might see a decline. However, it’s essential to consider that Canadian citizens and permanent residents (PR) who have been in the country for an extended period are likely to be higher productivity individuals. Despite the NPR segment dragging down the average, it’s possible that the citizens and PRs have actually seen an increase in GDP per capita, although data breakdowns are currently insufficient to confirm this.
Taking a rough estimate approach, the increase in NPRs from 3.5% to 6.5% of the population between 2022 and 2024 could have potentially raised GDP by 1.0%. However, with a 3.0% increase in the total population, this would result in a 2.0% drop in GDP per capita. While NPRs may be impacting the average, it doesn’t necessarily mean that the rest of Canada is experiencing a decline in GDP per person.
Smith emphasizes the need for solutions to address the decline in GDP per capita, particularly due to factors like the aging workforce, decreasing labor productivity, and the growing NPR population. However, it’s important to question why NPRs are seen as a problem that requires fixing. Much like my analogy of entering the Warriors party, where the average height falls but no player loses height, NPRs might be playing a different role in the economy that needs to be understood better.
In conclusion, while Canada’s economy faces challenges, it’s crucial to delve deeper into the impact of NPRs and consider alternative perspectives on how they contribute to the overall economic landscape. By reevaluating assumptions and exploring potential benefits of diverse population segments, a more nuanced understanding of Canada’s GDP per capita decline can be achieved.
