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While other countries ramp up defence spending for a dangerous world, Canada and its allies stall

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Over the past two decades, countries close to historic and emerging areas of conflict have rapidly increased their military spending much faster than Canada and other Western countries in anticipation of a more dangerous world.

According to information gathered by The Hub from the World Bank, over the twenty-year period between 2002 and 2022, the world saw significant growth in defence spending by Western adversaries like China, Russia, and Iran. These three countries saw average annual increases in military spending of 12, 11, and 8 percent respectively. Russia and China today have Europe and Asia’s largest militaries.

The most significant increases in military spending during this twenty-year period were in countries threatened by the military growth of China, Russia and India. 

In 2022, France, Germany, and the U.K. individually spent between $53 billion and $68 billion on defence compared to Russia’s $86 billion. In the two decades previous, the military spending of these traditional Western allies only grew an average of 3, 4 and 2.5 percent per year respectively, compared to Russia’s 11 percent growth. If the U.K., for instance, had increased its defence spending by an average of 3.6 percent annually from 2002, rather than 2.6 percent, its military expenditure would be $86 billion in 2022 or equal to that of Russia.

Canada and the United States' spending rates were a little higher, but not by much. Since 2002, if Canada had grown its defence spending by an average of 9 percent annually rather than 6 percent, its total military in 2022 would have been $53 billion and on par with France. 

North Atlantic Treaty Organization (NATO) members in Eastern Europe like Estonia, Latvia, and Lithuania saw double-digit annual growth in military spending over those two decades. NATO asks its members to spend a minimum of 2 percent of their GDP on defence.

In March, Poland’s President Andrzej Duda reiterated a request to increase NATO’s military-to-GDP spending target to 3 percent. His country, invaded twice during the Second World War, raised its military spending by 8 percent between 2002 and 2022. 

Meanwhile, British Defence Secretary Grant Shapps told U.K. media he would like to see NATO countries contribute 2.5 percent of their GDP to national defence, thus ensuring NATO-mutual defence. 

Countries with South China Sea claims like the Philippines, Vietnam, and Malaysia ramped up their military spending to try and catch up to 12 percent annual growth in China. Since 2015, China has had the largest navy in the world.

Countries close to zones of conflict seem to be preparing for more dangerous, competitive, and even expansionary statecraft. 

“The world is becoming increasingly dangerous,” said Canada’s Minister of National Defence Bill Blair in a speech last week at the Economic Club of Canada before a one-on-one interview with The Hub. He was pitching Canada’s new defence policy to a crowd of industry representatives.

The plan, entitled “Our North, Strong and Free” contains several overarching goals. The main one is raising Canada’s defence spending from its current 1.3 percent of GDP ($37.8 billion) to 1.8 percent by 2029, an additional $8.1 billion. Currently, Canada has the fourth lowest spending by share of GDP in NATO, directly behind Italy, Portugal and Czechia. The second goal is to assert Canadian sovereignty over the Arctic. 

Blair has admitted previously that he has struggled to convince the Liberal cabinet and Canadians that meeting the NATO target is a worthy goal, “because nobody knows what it means.”

He was mindful, he said, of Canada’s obligations in NATO, the Indo-Pacific, and, “most importantly,” the North American Aerospace Defense Command (NORAD), given Russia’s ambitions in the Arctic. 

Minister Blair told The Hub he’s been asked if the intent of the new defence policy is to win the next war.

“It’s not. My intent is to prevent the next war,” Blair said. “We’re not looking to impose our will or force on anyone else. But we will defend those rules that have kept the world safe. We need to be able to show strength and resolve to matter in that defence.”

For a historical analysis of Canada’s military spending, read The Hub’s latest DeepDive: “Just how bad is Canada’s defence spending problem? Downright disastrous—with little hope in sight.”

A major loss of income for mothers is driving Canada’s record-low fertility

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The dire earnings impact from Canadian women having children is one of the major factors influencing their fertility decisions and Canada’s now lowest-ever fertility rate.

Canadian women are now experiencing on average a nearly 40 percent drop in earnings in the first five years after giving birth, which experts say is a leading factor in the record-low birthrate of 1.33 children per woman. 

“It really boils down to what is the cost that mom is taking on being a parent? It’s not dads taking on that cost,” says Tammy Schirle, a professor of economics at Wilfrid Laurier University.

The female-male disparity in income loss is demonstrated in the two maps of Canada below, both using an identical colour scale.

This data demonstrates that Canadian women who have children can experience significant income loss over time. 

This January, Statistics Canada reported that this country’s 2022 fertility rate fell to an average of 1.33 children per woman, representing a year-over-year decline of 7.4 percent, the greatest since the 7.6 percent decline in 1972, during the tail end of the baby boom.

Transitory economic trends such as inflation and recessions have had a low historical impact on national fertility rates. What really mattered, says Schirle, is the 1960s shift in social norms and new choices presented to women regarding family planning in the form of the birth control pill. Both came with women gaining control over their own fertility and economic prospects.

“I tend to focus on that choice: what are (women’s) opportunities and what are their constraints?" she describes.

The maps above define those constraints. It uses the “Child Atlas of Child Penalties,” a dataset published this March by University of Calgary economic professors Stefan Staubli and Jean-William Laliberté and PhD student Sencer Karademir. 

According to their research, the national average change in earnings in the first five years of parenthood are decreasing for both women and men, but by stark degrees: a decrease of nearly 40 percent (39.1 percent) for women and just 0.5 percent for men.

Given that the average Canadian earns $300,000 over five years, women would thus earn $120,000 less in the first five years of parenthood (before taxes). Men would only earn $1,500 less. 

New mothers' greatest earning declines and new fathers' greatest earning increases in the first five years of parenthood are seen most starkly in Western Canada. Southern Manitoba is experiencing the greatest average earnings decrease for new Canadian mothers, by nearly 60 percent. Sudbury has both Ontario’s greatest average earnings decline for mothers (-42 percent) and increase for fathers (+8.6 percent). Saskatchewan is home to Canada’s greatest average increase in earnings for new fathers (+11.5 percent). 

Most cases of income loss, says Schirle, can be attributed to instances where social norms and childcare institutions aren’t strong enough to support women’s decision to work after having a child. Even mothers who immediately return to work are still compelled to decline competitive yet time-consuming positions to instead make time for childcare in a manner that men are not. 

“If you have a job where you have to stick around until the boss leaves…it may have been higher paying, but you can’t take that job,” she says. The same is true for shift or weekend work Schirle adds.

Last year, Harvard professor Claudia Goldin won a Nobel economics prize for her work studying the trends above: that even if an American man and a woman are on an identical education and career trajectory, the introduction of children will permanently reduce the income of the woman significantly more than man.

The greatest long-run cost, Schirle says, is to women’s pensions and saving ambitions. A 2012 University of California study showed that an expensive housing market can delay women having their first child by three to four years. 

“The main cost of children is really the forgone earnings,” corroborates Jean-William Laliberté, one of the academics behind the “Child Atlas of Child Penalties” study.

“It’s not what you pay out of pocket, but the money that you would have realised but now you don’t because you don’t have the ability to work as much as before,” he says, describing the “child penalty” of his study. 

Giada Gambino uses her smartphone as her mother Aggie and twin sister Giuliana look on while they work on math worksheets at the dining room table in their home Wednesday, Aug. 23, 2023, in Spring, Texas. Michael Wyke/AP Photo.

Mothers that perform the best when it comes to retaining their earnings can be found in Quebec. Laliberté points to Quebec’s childcare policies including its universal model introduced in 1997. These policies, he says, make it significantly easier for mothers to work in higher-paid positions. Particularly mandatory 3-5 p.m. after-school care in elementary schools. 

The “Quebec Model” of childcare and family benefits inspired the federal Liberal government’s $10-a-day childcare program, says Laliberté, which was pitched following the COVID-19 pandemic to see mothers remain in work. The program however has faced major rollout issues.

However, while certain government policies may allow mothers to retain greater earnings, other studies suggest that these early childhood support programs actually have negative effects on kids, which persist into adolescence.

“The Long-Run Impacts of a Universal Child Care Program,” published by Michael Baker, Jonathan Gruber, and Kevin Milligan in a 2019 edition of the American Economic Journal concluded that Quebec’s policy contributed somewhat to a negative impact on children's non-cognitive skills. 

Effects included anxiety, aggression, poor behaviour and attention, or later-in-life criminality. Although the causes of the program’s poor outcomes weren’t the subject of their study, Milligan says they could include the stress of having two parents entirely engaged in work and their reduced ability to coordinate doctor visits or other means of external care. 

“The evidence is pretty strong that the Quebec childcare program had a really large impact on women being able to work. From that, you can draw a direct line to an impact on women’s role in the family, and also in their life path in having a stronger attachment to the labour force. That’s an important thing I would like to view as positive,” says Milligan. 

“On the other hand, we and other authors have found some negative impacts on the non-cognitive outcomes [of children],” he adds. “I think there are ways to think about the design of the actual program itself to account for the fact that there might be risks of [poor behaviours].”