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Tyler Meredith: Canada is not broken, but our problem-solving mindset is

Commentary

When times are tough—and today feels a lot like that—there are many myths we tell ourselves. “People are leaving in droves. It is impossible to get ahead. We are not productive the way we once were.”

Except, in the objective reality in which facts exist, most of those statements are wrong. Not just a bit wrong, decidedly wrong. There are certainly kernels of truth on which such narratives of brokenness and despair are built, but the truth is not so stark.

Since the notion of Canada being “broken” is often attributed to Justin Trudeau, I want to assess these claims in the context of how different things are today compared to when his predecessor, Stephen Harper, was in office. 

On the economy, the current occupant of Rideau Cottage has a fairly strong record that has steered Canada through a commodities recession; an unprecedented and unprovoked trade war with our closest ally and largest export market, the United States; and the largest economic and public health emergency in a century.

Unemployment is near record lows. The share of Canadians of core working age (between 25 and 54) who are attached to the job market is up more than 3 percentage points, after stagnating for decades (figure 1).

Fig. 1. Graphic credit: Janice Nelson.

And, consequently, incomes have accelerated and poverty rates have been cut in half (figure 2).

Fig. 2. Graphic credit: Janice Nelson.

This becomes clearer when we break these statistics down at the household level (figure 3). The median total income among all households has risen at almost double the rate—in real, inflation-adjusted terms—under Trudeau compared to Harper. The following table compares compound annual growth rates, meaning we can isolate the general trend across the various business cycles and time periods in which they were each in office. 

While this data ends in 2021 (thanks to administrative tax data that is still being finalized), the micro and the macro picture reinforce each other: more people are working, leading to lower poverty, and higher incomes. This is what progressive economics ought to look like.

The impact is starkest among both single parents with kids and non-elderly single individuals (in part due to the significant impact of CERB during COVID-19), where real median income grew, respectively, at twice and nearly seven times the rate under Harper.

Fig. 3. Graphic credit: Janice Nelson.

These statistics mean something tangible and transformative in the lives of people.

Sean Speer and Livio Di Matteo have recently argued in these pages that Justin Trudeau’s economic agenda has been one of extensive economic growth (buying growth) versus intensive economic growth (higher levels of wealth). The data presented above stands in contrast to this claim—more people are working, and earning higher income. While it is true that income transfers, such as the Canada Child Benefit, and a national early learning and child-care program, have played a big role in supporting these gains—that is the point. Extensive growth can be used to support intensive growth. 

As a result of targeted and impactful investments, the effect of a 3 percentage point increase in the employment rate among working-age adults is that among a population base of 28.2 million persons in this age group, that translates to nearly 850,000 more people who otherwise have a job than would be the case if the employment rate at the start and end of Harper’s time in office prevailed today.

And child care will likely increase this number over time. It is Justin Trudeau, not a Conservative prime minister, who has created the hope, dignity, and opportunity that comes with a solid income.

But as much as these statistics are encouraging, it is also obvious that a good-paying job may not seem like something redeeming when costs are rising, our public health system is under strain and we live in a polycrisis of wars and catastrophic weather events.

Many people feel dispirited. As reported in our recent MB Policy/Abacus Data poll nearly two in three Canadians think Canada is headed on the wrong track. 

But that isn’t the question. The question is whether, in the words of Pierre Polievre, Canada is “broken”?

A country that is broken is not one where jobs pay more, more people want to and do work, and where poverty is down.

A country that is broken is not one that ranks among the top in the world as the most desirable place to live. 

Like many countries, we have our share of problems. And many of the problems plaguing us are the same ones plaguing our neighbours in the global community. 

In a world in which there are an ever-mounting number of crises, we have to be clear about what needs fixing and what does not. There are two problems I would suggest that need careful attention.

First, the rate of housing ownership is falling among younger cohorts (figure 4). Despite good-paying jobs, the rising cost of housing is a real, intergenerational problem. One that goes back decades thanks to disinvestment in affordable housing and poor urban and population planning policies on the part of multiple levels of government. We need to give young people a path to affordable home ownership—or at least have a real, societal reckoning about the sociological stigma associated with renting. Leaders at all levels are starting to act with ambition, but more is needed.

Source: National Household Survey (2011) and Census of Population (2016 and 2021)
Fig. 4. Graphic credit Janice Nelson.

Second, Canada’s capital investment base is hurting. It experienced a major trauma during the 2014 commodities recession and has not fully adjusted for the structural changes that period brought about. While much has been said about real GDP per capita, this statistic is meaningless in terms of future growth since it simply tells us about how a mythical pie is shared in ways that are not actually real. 

Our overall capital stock—the collective value of the physical and intangible things we build as assets—is what drives our ability to create higher rates of growth over time. That growth is what eventually goes to pay for higher wages and bring down inflation with greater capacity and supply.

Since 2014 investment in non-residential capital has decreased in real dollar terms by $26 billion (figure 5). All of that—and then some—can be attributed to the significant decline in investment in Canada’s resource sector. In the year before Harper left office, just as commodity prices peaked and then began to drop, miners and oil and gas producers invested over $100 billion in capital projects. Today, that number is half what it was. 

Source: Statistics Canada table 36-10-0096-01, calculations by author
Fig 5. Graphic credit: Janice Nelson.

Contrary to popular belief in some circles of discourse online, this is not a problem brought on by neglect by our leaders. In fact, our leaders have been wracking their collective brains for the last decade about how to respond.

Over that time, governments at all levels and led by all major parties, instituted a buffet of investment incentives to help spur new activity across all industries, including enabling businesses to fully write off the cost of building a new production facility. Government itself has also stepped in and significantly increased its own investment in infrastructure, offsetting about 20 percent of the drop in the resource sector.

And yet this problem persists. 

This is fundamentally a business problem, but that is not how it is often framed by our policy elites who like to lay the blame for all problems at government. And to a certain extent, it is a global problem, induced in part by long-term changes in how and where we get and develop our energy. 

The breakdown of the capital investment cycle puts at risk future jobs and opportunities, particularly for the middle class and those for whom a university education is not of interest.  

Yet none of that is what we hear from the nattering nabobs who constantly say Canada is broken.

If we have a problem it is that we are not focused on the right problems, with the right mindset. Canada is a place of hope and ingenuity. If we are to deploy the creativity and talent we need in the future to tackle the big problems we face, we need leadership that will bring us together. Not reflect back to us a distorted image of what ails us in order to foment populist angst for its own sake. 

‘Pay attention to the basic needs of Canadians’: The best comments from Hub readers this week

Commentary

Dynamic discussions were had in Hub Forum this week as January ended and February began. Readers spent their time discussing pressing economic issues in Canada, how Pierre Poilievre might govern, Canada Pension Plan funding, as well as debating the big question: is Canada broken?

The goal of Hub Forum is to bring the impressive knowledge and experience of The Hub community to the fore and to foster open dialogue and the competition of differing ideas in a respectful and productive manner. Here are some of the most interesting comments from this past week.

Sign up for our daily Hub Forum email newsletter today.

Six charts that set the stage for Parliament’s return

Monday, January 29, 2024

“The charts highlighting our nation’s declining economic output are depressing enough. In the waning days of their coalition, though, the only chart catching the attention of the two parties that put us in this pickle is their sagging polling numbers.”

— RJKWells

Canada really is broken right now

Tuesday, January 30, 2024

“As I write in the article, obviously judgements about whether Canada ‘is broken’ are inherently subjective. But one does get the sense that there’s a broad-based view that something seems off. That the country’s economic and social conditions aren’t quite what we’ve come to expect. There are various factors behind this and it would be wrong to lay the blame solely at the feet of the Trudeau government. But it’s axiomatic in politics that governments claim credit for good outcomes and then try to absolve themselves of responsibility for bad ones. Polling suggests that Canadians believe that Ottawa is disproportionately responsible for today’s economic challenges. If one believes that we’re in the midst of a ‘lost decade,’ we need to be focused on how we get out of it.”

Sean Speer (editor-at-large at The Hub)

“I want a politics that has big and bold policy prescriptions because, at some point in time, we forgot that effective politics, and governing, means you’re going to annoy some part of the population to govern effectively for the vast majority. We need both incentives and penalties to get there.

It’s time for a politics that is bold and optimistic because lord knows, you don’t beat malaise by sitting around in a circle and complaining about how broken everything is. We have a culture problem as much as we have a policy and government problem.”

— A Gen Z Subscriber

“I still think we are pretty lucky to live in such a great country—plenty to fix but doomsday thinking is not that useful. Polarizing one another is like poison. We should have different opinions and there should be more space for debate (not just yelling & spitting out one-liners). Canada still ranks high in many waysone of the best countries in the world, very safe, stable economy, plenty of resources, reasonable inflation compared to many countries, longer life expectancy, and yes lower cost of living than many countries.

So much more we could be doing and maybe we need more grassroots think tanks. Maybe we all need to hold our politicians (regardless of party) to account when they lie and twist facts.
So much more to be done if we could start off by listening to one another with robust discussions.”

— Cathy

“The question is not whether Canada is broken. The question is, can it still be fixed?”

— Jim R

“I agree with your assessment. Pay attention to the basic needs of Canadians and give us the opportunity to do meaningful work.”

Anne Phillips

How would Poilievre govern?

Wednesday, January 31, 2024

“Canada hasn’t had an effective opposition party for many years…so someone actually performing the role of presenting a cogent alternative is startling to many people and very threatening to a lot of interests that are benefiting from crony politics. Canada by all measures is suffering and they alone call for a new set of ideas and approaches.”

— John Williamson

“Converting slogans into effective policy is rarely as straightforward as Mr. Poilievre tends to suggest, and he needs to be perhaps a bit more circumspect in this regard.

As one example, I’d look at his housing policy suggestions: ‘build homes, not bureaucracy’. Great slogan. But most of the bureaucracy involved is at the municipal level, while some are at the provincial levelnot within the federal wheelhouse.

Mr. Poilievre lays out an approach that would ‘reward’ cities that met specific housing start numbers, and punish those that fell short. Yet he is also on record as wanting to be more respectful of jurisdictional boundaries than the current government. With regard to his housing policy, it seems hard to square one policy position with the other.

The sad reality is that our current housing situation results from decades of government fumbling and myopia. The disparity between house prices and income began in the early 2000’s and has continued, unabated, through four federal administrations, including under P.M. Harper. While the Trudeau government has managed to turbo-charge things with increased immigration during a period of (now reversed) extremely low-interest rates may be the icing on the cake, the problem long predates this specific policy fumble. Unfortunately, it is not a problem that will see a quick reversal. So Mr. Poilievre might want to be just a bit more cautious about positioning around this issue.”

— David Foster

“It is totally reasonable that the opposition party does not put out a platform until part of an election process. Conservatives that are being pushed by the press on what cuts they will make, or where is your climate policy should be aggressive in their response that no opposition party puts out their platform until election time. Also, their response to (you did this or didn’t do that) needs also to be simplethat was then, this is now and things have changed significantly.”

— Al Raftis

Should we spend some of Canada’s CPP funds?

Thursday, February 1, 2024

“With all the taxes this current government collects, there shouldn’t be any need for them to touch any funds within the CPP. Furthermore, legislation should be put in place to keep any opportunity from government to utilize any money within CPP.”

— Arthur

“If there is such a surplus, I would look first at how many middle to low-income Canadians need more future retirement and look to benefits before the other suggestions.”

— Lloyd Posno

Prime Minister Justin Trudeau address his national caucus during a winter caucus retreat on Parliament Hill in Ottawa on Thursday, Jan. 25, 2024. Sean Kilpatrick/The Canadian Press.
All hail Canada’s aristocratic overlords

Friday, February 2, 2024

“The current immigration policy, or lack thereof, has put an unrealistic strain on the availability of housing, health care, and infrastructure.”

— Kim Morton

“‘Neofeudalistic’ is really just good old-fashioned inequality. It is a guaranteed outcome in political systems that allow wealth to garner political power, even democratic ones. It snowballs as more wealth begets ever more disproportional political power.

This is just an ongoing extension of those with wealth incrementally and steadily and legally rigging the game ever in their favor, despite tragically being against their own long-term self-interest.”

Paul Attics