A new study by TD Economics confirms the obvious: working class living standards are declining in Canada.

For years, GDP and productivity growth have stagnated and, as the report observes, Canada’s bosses have sought to make up for it, in part, by extending our working hours.

‘Insufficient growth in the numerator’

Despite years of “headline growth,” the report finds, Canada’s economic output per person (real GDP growth per capita) has actually continued to fall from 1.4 percent per year to 0.4 percent every year since 2014-15. That means, while the Bank of Canada claims the Canadian economy is “overheating,” in fact, its GDP has been largely stagnant. Indeed, as the report notes, Canada is also one of the few G7 countries that has not recovered its pre-pandemic level of per capita GDP.

The problem is not population growth. “There may be a tendency to pin the blame for Canada’s sagging per-capita showing on the country’s rapidly-growing population base given that it has inflated the denominator of the calculation,” economist Marc Ercolao told Bloomberg. “However, at the crux of the problem is insufficient growth in the numerator, which in turn is tied to longstanding productivity issues.”

Ercolao further notes that Canada’s bosses spend 1.7 percent of GDP on research and development—lower than in most other OECD countries. As the TD report observes: “Over the last 20 years, Canadian R&D investment has been in perpetual decline, while all other G7 countries have seen increases to varying degrees As of 2021, Canadian R&D spending accounted for roughly 1.7 percent of GDP, half of the current US share and lower than most other countries.”

The OECD’s June 2023 Economic Snapshot also anticipated that Canada’s GDP growth will remain below the economy’s long-run average rate at 1.4 percent for this year. That’s owing to lower commodity prices and higher borrowing costs. But those combine with slow real private nonresidential investment and a gross fixed capital formation rate which (the acquisition of produced assets) remains near the bottom of the OECD in both dollars and growth rates.

More interestingly, TD observes, while productivity growth has been slow, bosses have covered some of that by increasing working hours and the intensity of labour. “When measured on a real GDP per hour worked basis, Canadian labour productivity has been trailing behind its peers, notably the US. Even in the face of the productivity woes, Canada has been able to sustain a higher level of output in recent years through both an unsustainable pace of job creation and in total hours worked.”

All profits are the unpaid labour of the working class, at all times. But, under current conditions, that unpaid portion must be increased.

It is not a coincidence that this same period has also seen a massive expansion in informal employment and precarious work across the workforce. Officially, nonpermanent employment has nearly doubled from seven percent in the 1980s to 12 percent today. But, looking closer, in 2021 Statistics Canada estimated that “non-standard employment” and “informal employment” accounted for up to 36 percent of Canada’s workforce. Meanwhile, Canada’s labour force participation rate stands at just 59.7 percent and its “working poverty” rate stands at 6.4 percent, marking an escalation of capitalism’s usual combination: senseless overwork and enforced idleness.

These workers are poorly paid but not because they, as right-wing commentators might claim, do not work enough. Rather, their overwork has helped the country’s capitalists to remain profitable—even as they starve the industry they own of investment.

Instead, money has flowed into real estate, speculation and non-productive assets. It is why, for example, Statistics Canada found that $8.752 trillion (or 76 percent) of Canada’s $11 trillion national wealth and one-fifth of its GDP is caught up in real estate, prior to the pandemic. Since then, Canada’s housing bubble, like others, has seen a “melt up”—a speculative frenzy typically seen at the end of a bubble—and grown steadily from there.

“Economic growth does not necessarily equate to economic prosperity,” Ercolao says of this. It is good for keeping wages low and increasing workplace hazards but it is a lousy way to produce sustainable output in a debt-fuelled economy.

Over one-third of Canadian workers hold precarious jobs, facing eroded worker protections and suppressed wages. These outcomes are not accidental but stem from deliberate policy decisions aimed at satisfying bosses’ drive to maximize profitability.https://t.co/iriSWJcHgI

— Jacobin (@jacobin) July 25, 2023

‘No improvements for the foreseeable future’

Canada’s economy has already contracted over the last three quarters—but a bigger downswing is on the horizon. “Our most recent forecast points to persistent contractions until the end of 2024,” the report says, amid a likely “cyclical slowdown.” Going forward, however, the OECD projects that Canada will rank dead last amongst OECD members in real GDP per capita growth for decades—potentially even until 2060.

While workers are not responsible for the government’s debt crisis, we know once again who will be asked to pay for it, before and after the next bailout. As the Toronto Star put it, the future is one of “Low productivity growth and stagnant real wages.”

This is by no means the first time the press has raised concern over Canada’s so-called “productivity” puzzle.

As the Star observed: “While productivity growth reduces unit labour costs and raises profits, it requires a costly and risky investment decision.” Development subsidies may make spending on machinery more affordable but, so long as the market is weak and marked by an “output gap,” the spending will not be profitable.

There is little reason to invest in new capacity when the existing capacity cannot be used profitably. In the first quarter of January 2023, Canada’s total industrial capacity utilization stood at 80.9 percent and, in the first quarter of 2023, it stood at 81.9 percent. Beyond this general statistic, however, there is substantial variation. Forestry and logging capacity utilization has declined in the same period from 86.8 to 76.1 percent. Mining and oil and gas extraction has risen from 75.6 percent to 79.5 percent but manufacturing has fallen from 80.1 to 78.1 percent.

Worse, as the Financial Post observed, the Bank of Canada’s rate hikes have slowed the flow of credit throughout the Canadian economy. Accordingly, a number of key economic sectors have already retracted. Year-over-year growth rates in manufacturing, residential construction, real estate, financial services, retail and wholesale sectors have reversed course from one percent positive growth last year to minus 1.5 percent this year. Depending on the intensity of the next recession, this could contract further.

One business lobbyist appeared almost sanguine about the prospect of a deep recession destroying rival businesses—facilitating a process of so-called “creative destruction.” “During recessions, companies that are barely viable exit, and then that labour, that capital, that entrepreneurial talent, is freed up to move to other places,” David Williams, Vice President of Policy at the Business Council of British Columbia, told the Globe and Mail. “That’s the wonderful thing about a market economy, is that it rewards successes and it punishes failures.”

For workers, however, that will mean more unemployment, slower wage growth and, in all likelihood, further overwork. During the post-war boom, despite fluctuating central bank interest rates, Canada’s economy saw steady profits, increased exports, increased productive capacity and comparatively low unemployment. That sustained upswing has long since passed. This is the era of capitalism’s decline.

Mitchell Thompson is a writer, editor and occasional radio producer based in Toronto.