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Trevor Tombe: The ‘Great Canadian Slump’ is back

Commentary

Canada’s lagging economic and productivity performance is no secret. Various articles in The Hub have highlighted it, most recently one by Sean Speer and Taylor Jackson. “At the heart of Canada’s economic malaise,” they correctly noted, “is low productivity growth.”

And last week, Bank of Canada Senior Deputy Governor Carolyn Rogers echoed this sentiment. In uncharacteristically strong language for a central banker, she said Canada’s “long-standing, poor record on productivity” is “an emergency” and that “it’s time to break the glass.” (It’s a really good speech; read it, I’ll wait.)

These are not exaggerations. Labour productivity has grown by 0.2 percent annually, on average, between early 2015 and the end of 2023. That’s the slowest growth over an eight-year period ever recorded. (At least since comparable data started in 1946.The period between 1984 and 1992 came close, but still outperformed today.)

But this can be a difficult economic statistic for many to understand and, therefore, easy for political leaders to ignore. 

So I want to draw attention to something much more concrete: income. 

How much our jobs pay—and what’s left after taxes and inflation to buy the items we need—affects us daily. And, unfortunately, income growth has stalled to rates rarely seen in Canadian history. Only twice in the past century have we lived through more sluggish growth than today—both during serious recessions.

Let’s start with pay. 

University of Waterloo economist Mikal Skuterud recently estimated that earnings growth has been flat for many years. After adjusting for inflation, he finds average weekly earnings have increased only 1.6 percent between January 2015 and January 2024, or less than 0.2 percent per year.

This isn’t because Canadians are working fewer hours or taking pay in other forms (say, with improved benefits). We see this in a broader measure of total hourly labour compensation. Since the end of 2015, total compensation per hour (adjusted for inflation) has grown by only 1.9 percent. That’s 1.9 percent over the entire period from 2015 (Q1) to 2023 (Q4), which works out to 0.2 percent per year, just as Mikal found for weekly earnings. 

And, as I illustrate below, it’s a massive drop from a growth rate of more than 1.5 percent per year that Canadian workers saw over the previous two decades. It’s also clear here why productivity matters: it drives growth in our earnings.

This slow growth is not only below Canada’s own recent past but also below what U.S. workers are seeing. Their average annual growth since 2015 has been 1 percent. Had Canada kept up, we’d earn 6 percent more today—nearly enough to cover higher prices. 

Over a longer span of time, the situation is even more alarming. But to make that comparison, a broader measure is needed: real disposable income per person, which is available for nearly 100 years.

This measures the money you have left after taxes, adjusted for inflation. It’s what you can spend or save and is important because it directly reflects living standards. If real disposable income goes up, we can buy more goods or services than before. 

Since 2015, I find real disposable incomes have increased in Canada by only 0.2 percent on average per year—the same concerning story as with earnings and labour compensation. The historical context here should raise alarm bells: only during the 1990s recession and the Great Depression has growth been lower. 

The Depression is obviously in a class of its own. But the 1990s recession is noteworthy. The economy contracted significantly starting in early 1990, and sustained growth did not return until 1997. It was a massive, long-lasting recession.

At the time, Pierre Fortin (a leading Canadian economist) called it the Great Canadian Slump. In his 1996 Presidential Address to the Canadian Economics Association, he said economic loss “exceed[ed] everything we have known since the Great Depression of the 1930s” and was “second to none in the postwar period.”

By the end of 2023, we were close to repeating that experience, but for different reasons.

It’s not because of inflation. We had faster disposable income growth in the 1970s and 1980s, for example, when inflation was higher for longer. It’s also not because of significant job losses. We are not in a recession, unlike in the early 1990s. 

Today, it all comes down to our lagging productivity. Because each hour worked yields little more than it used to, real incomes have stagnated. 

There are plenty of culprits. In part, it’s a consequence of oil prices dropping in 2015 and 2016. But that’s not the only factor. Lower business investment, higher policy uncertainty, lower tax competitiveness, pandemic disruptions and aftershocks, unsustainable housing cost increases, a lack of competition and dynamism in key sectors, and more, may all contribute. 

Monetary policy may also matter. Pierre Fortin blamed the Bank of Canada for the Slump in the 1990s. Although others, including the Bank’s now-governor, Tiff Macklem, disagreed. Today, keeping interest rates higher for longer than necessary comes with risks for 2024 and beyond.

Whatever the cause of our languishing real income growth, and however difficult it may be to turn things around, governments should acknowledge the issue and try to tackle it head-on. For the most part, they are doing neither.

The “Great Canadian Slump” is back. How long it lasts is up to us.

Heather Exner-Pirot and Jesse McCormick: How Indigenous participation can help drive the new nuclear age

Commentary

The need to decarbonize energy generation while maintaining reliability and dispatchability has positioned the nuclear sector for significant growth in Canada. The size and modularity of small modular reactors (SMRs, or nuclear reactors of between 5-300MW), promise to expand nuclear energy’s applicability and siting potential, while addressing the risk of cost overruns.

Canada stands to benefit from its over 70 years of technological leadership, well-developed regulatory system, robust domestic supply chains, and globally significant uranium production. Despite these advantages, the potential for deployment of SMRs in regions of Canada where nuclear energy has not previously been generated poses new challenges for industry, government, and regulators.

The majority, if not all, of the existing nuclear generation facilitates in Canada were developed without adequate consideration of the rights and interests of First Nations. The introduction of new nuclear energy and nuclear waste management facilities in territories where relationships with First Nations have not yet been established presents a significant risk to project costs and timelines. A legacy of exclusion from decision making in relation to major projects combined with a high degree of culturally grounded concern about the potentially negative long-term effects of spent nuclear fuel on the environment, leave some First Nations wary of new deployments in their territories.   

Deputy grand chief Glen Hare of the Anishinabek Nation speaks as representatives for First Nations and environmental groups hold a press conference on Parliament Hill in Ottawa on Monday, April 23, 2018., asking the International Atomic Energy Agency to investigate radioactive waste management in Canada. Sean Kilpatrick/The Canadian Press.

Those concerns will be expressed through active participation in regulatory processes, public dialogues, and added scrutiny of the actions of proponents and government, particularly for first-of-a-kind technologies that are new and poorly understood. First Nations have demonstrated the power to exert significance influence over projects through regulatory participation, litigation, and by harnessing the power of public opinion. That influence can be used to speed up project development or bring a project to its knees. Developers will have to decide how to build the confidence of the nations and communities that will host their projects. Those that choose consent over imposition will be best positioned to accelerate their projects and ensure economic viability.   

Rather than being a deal breaker for new nuclear, consent provides lots of reason for optimism. The same elements of nuclear that appeal to industry and government are attracting leaders and businesses from Indigenous communities: the ability to produce clean, baseload, electricity and heat in rural, remote and industrial settings. Small modular reactors and their little cousin, the microreactor, not only offer tremendous opportunity for decarbonization, but for energy security in rural and remote areas of Canada that today rely on diesel. 

We are already seeing new kinds of business partnerships and relationships being advanced across the country. In New Brunswick, the North Shore Mi’kmaq Tribal Council and its seven First Nations announced significant equity agreements with SMR developers Moltex and ARC Resources, who are advancing the ARC-100s in New Brunswick, in September 2023. 

In Ontario, the Saugeen Ojibway Nation announced a partnership with Bruce Power in June 2023 to jointly produce, advance, and market new medical isotopes, which will be essential to support the global fight against cancer.

In Saskatchewan Kitsaki Management, Athabasca Basin Development, and Des Nedhe Group—all Indigenous-owned businesses with experience in the uranium supply chain—signed an MOU in May 2021 to jointly pursue SMR investments. 

The First Nations Power Authority (FNPA) received funding last Fall to establish a National Indigenous Nuclear Supplier Database to track Indigenous suppliers who are working towards or have already achieved nuclear certification across the country.

Natural Resource Canada has provided funding for an Indigenous Advisory Council to Canada’s SMR Action Plan, and both the Canadian Nuclear Association and the Canadian Nuclear Safety Commission have Indigenous advisory mechanisms. 

And later this year the Nuclear Waste Management Organization, a consortium of nuclear energy producers in Canada, is expected to announce the site of its deep geological repository, for long term management of spent nuclear fuel, in Ontario. They have narrowed the list down to two areas in Ontario—Wabigoon Lake Ojibway Nation-Ignace and Saugeen Ojibway Nation-South Bruce—and have adopted a consent-based approach to site selection.

In many ways, the nuclear sector has been able to learn from the mistakes, but also the successes, of other resource and energy industries over the past two decades. Industry isn’t the only actor to have gotten more sophisticated; Indigenous nations and businesses have too. Many are now proactively seeking partnerships, developing capacity in the supply chain, and proposing opportunities for nuclear development.    

The recipe is clear: if you can provide meaningful economic benefits and consider Indigenous perspectives in project design, consent can be earned. By embracing this philosophy, industry is learning that Indigenous partnerships are not hurdles to moving projects forward, but an asset. 

There are many paths to partnerships with First Nations, Métis, and Inuit, but they are all built on a foundation of rights, respect and recognition. Effective relationship building and efficient regulatory processes needs to start from a position of rights implementation. A new nuclear age is providing the opportunity to get this right from the beginning and our ability to meet the energy needs of a decarbonized future depends on it.