Young Canadians will not have the same chances as previous generations: OECD forecasts
Canada should be the next Greece, and not because of the good things. The Organization for Economic Co-operation and Development (OECD) has predicted that the Canadian economy will fall behind. The group sees Canada’s per capita real gross domestic product (GDP) growth fall to last place. An expert warns that young Canadians will not have the same opportunities as previous generations. They are also likely to fall behind their peers in other advanced economies.
Canadian GDP growth has surpassed that of the G7
Let us first take a look at where Canadians have been in recent years. From 2000 to 2007, Canada’s real GDP per capita grew 1.6% per year, on par with the OECD average. This is the highest growth of any G7 country, even surpassing the United States by 0.1 percentage point per year. Canadians were the winners when it came to improving their quality of life.
After the Great Recession hit, Canada started to slow down dramatically. Real GDP per capita grew by 0.8% per year from 2007 to 2020, not exceeding that of the OECD. It’s in the middle of the G7’s performance, with only the United States and Germany beating Canada. In general, the G7 had a terrible performance during this period.
For more than a decade, the G7 countries pursued what they saw as stronger monetary policy. Research from the central bank shows that some critical parts of this lawsuit were wrong. Well, just a generation of fucked up people. Better than paying 4% interest on a mortgage, amirite?
Canada set to become OECD’s next Greece
Canada is set to become the next OECD country in Greece, as long-term projections show weak growth and high debt. Canada’s potential real GDP per capita is only 0.7% per year, tied with Italy at last in the OECD. This figure is significantly lower than that of the United States (42% less) and the OECD average (46% less). In the previous period ending in 2020, Greece had occupied the last place.
OECD real GDP per capita forecast by year (2020 to 2030)
The OECD projects annual growth in real gross domestic product (GDP) per capita.
Source: OECD; Better accommodation.
Based on all the information we know, it does not appear that Canada is learning any lessons. The projected potential real GDP per capita from 2030 to 2060 is only 0.8% per year. Canada’s forecast is 20% lower than that of the United States and 27% lower than the OECD average for the period, respectively. It’s tied with South Korea, which places Canada last for the next 40 years.
Canada will not offer the same favorable winds for improving quality of life as it once did
An analysis by the Business Council of British Columbia (BCBC) expresses serious concerns. “Previous generations of young Canadians entering the workforce might expect favorable winds that increase real incomes over their working lives. This is no longer the case, ”explains David Williams, BCBC’s vice president of policy.
“If the OECD’s long-term projections turn out to be correct, the young people entering the workforce today will not feel a tailwind at all. On the contrary, they face a long period of stagnation in average real incomes which will last most of their working life, ”he adds.
When looking at a country, most people see how life has improved over the past decade. They then use it to project what the future will look like, and that’s a bad plan. Some of the policies used for growth in countries like Canada have borrowed future growth.
The value proposition will diminish as other countries outpace Canada’s growth for decades. The first advanced economies will bridge the gap between opportunity and quality of life. As they continue to outperform, Canada will fall to the other side of this gap. As Canada falls behind global standards, the quality of life will decline.
The data shows that it has already started. Canadian millennials have seen their G7 peers grow faster over the past decade. As young Canadians face greater barriers, it will weigh on their standard of living. “On average, the standard of living in Canada and our quality of life relative to other countries are expected to decline as other countries make their economies more productive,” said Williams.
Forecasts are based on the current environment, and things are subject to change. However, they tend to demand dramatic purges of economic inefficiencies first. Greece has gone through a painful adjustment that will ultimately create a healthier environment for future growth. He is not recovering because he has doubled down by loading the country with debt.
“Long-term projections are not certain. But by giving a glimpse of a possible future, they give us the opportunity to reflect and correct the situation lest they become a reality, ”he adds.
Canada has adopted cheap growth thanks to residential investment and debt. It works in the short term, but residential investment is unproductive and contributes little to future growth. Debt is the value of future productivity borrowed and used today, leaving less for the future. The more the country relies on these pilots, the more painful it will be to try to put things right.