November 15, 2023


OTTAWA – Weak business investment in Canada poses a profound threat to Canadian living standards and competitiveness, says a new report from the C.D. Howe Institute. In “Working Harder for Less: More People but Less Capital Is No Recipe for Prosperity,” authors William B.P. Robson and Mawakina Bafale show that gaps between investment per available worker in Canada compared to the United States and other OECD countries, which narrowed until the mid-2010s, has since widened to a chasm.

The report notes that in 2023, Canadian workers will likely receive only 65 cents of new capital for every dollar received by their counterparts in the OECD as a whole, and 58 cents for every dollar received by their counterparts in the United States. Canada’s stock of fixed capital per member of the labour force has been falling for eight years, something that has not happened since World War 2.

“Rapid population growth and declining capital per worker risk putting our country on a path to a labour-intensive, low-productivity and low-pay economy,” write the authors.

Higher productivity and business investment are mutually reinforcing, they explain. Productivity growth creates opportunities and competitive threats that spur businesses to invest, and investment increases productivity by equipping workers with better tools. “Investment per worker that is lower in Canada than abroad tells us that businesses see less opportunity in Canada, and prefigures weaker growth in Canadian earnings and living standards than elsewhere,” says Robson.

The authors warn that, without more robust business investment, higher immigration will make Canada a more labour-intensive economy, with problematic implications for productivity and wages. When they adjust the number of available workers in Canada to take account of the explosion in temporary residents that has accompanied higher targets for permanent residents, they note that capital per potential worker may be no higher now than it was a decade ago.

“The coincidence of another immigration-boosted rise in the labour force and anemic growth in Canada’s capital stock raises the concern that labour productivity and wages will not accompany population increases this time,” the authors state. They urge Canadian governments, particularly the federal government, to prioritize policies that promote investment and productivity growth.

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.


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