WILLIAM ROBSON
OTTAWA – Trade tensions, regulation and growth-stifling taxes are depressing business investment in Canada, undercutting productivity growth and workers’ incomes, according to a new C.D. Howe Institute report. The report notes that the US is far more robust, hurting Canadian competitiveness and threatening to widen the gap between US and Canadian living standards.
In “Canada’s Investment Crisis: Shrinking Capital Undermines Competitiveness and Wages,” William B.P. Robson and Mawakina Bafale warn that a decade-long decline in capital per member of Canada’s labour force is putting Canada on a path toward a more labour-intensive, lower-wage economy. The authors urge policymakers to equip Canadian workers with the tools they need to compete and thrive.
“Canada is stuck in a vicious cycle. We need higher productivity to spur capital investment – but we need higher capital investment to spur productivity,” says Robson, President and CEO of the C.D. Howe Institute. “Canadian workers today effectively have less and older capital to work with than they did a decade ago. We need to address this crisis by fixing growth-stifling regulations and taxes.”
Looking globally, the picture is even more concerning. Many OECD peers, and most notably the United States, have increased their investment levels more strongly than Canada, widening longstanding gaps. For example, in 2024, Canadian workers received 41 cents of machinery and equipment investment for every dollar received by US workers. The pattern is similar in intellectual property, where Canadian workers received just 32 cents for every US dollar of investment. These gaps translate directly into differences in productivity and wages, and they affect Canada’s ability to attract and retain talent.
Robson and Bafale identify several factors behind Canada’s weak investment performance: a long-standing tilt toward residential construction; regulatory delays for major projects; tax structures that discourage scaling up; elevated government consumption crowding out private investment; and growing policy and trade uncertainty. Rising US protectionism and the upcoming 2026 CUSMA review add an additional layer of risk for Canadian businesses assessing long-term investments.
To reverse the decline, the authors call for streamlined regulations, more competitive tax policies, stronger innovation support, a clearer path for energy investment, and a more assertive trade strategy.
“We need a renewed focus on growth and investment,” says Bafale, Research Officer for the C.D. Howe Institute. “Without faster, clearer rules and stronger incentives for businesses and workers, Canada will continue to fall behind its international peers.”
William B.P. Robson, President and Chief Executive Officer, C.D. Howe Institute; Mawakina Bafale, Research Officer, C.D. Howe Institute
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.
