Canada can become richer than the United States

Posted on February 19, 2026 by Ryan Dahlman

Economic growth and a rising standard of living used to be a given. Canadian parents could assume, with good reason, that their children and grandchildren would be richer than they were. That assumption is now wrong.

Canada’s economic growth has been weak for more than a decade, and it shows up in everyday life. From 2014 to 2024, the economy grew at an average annual rate of 1.94 per cent in real terms, according to Statistics Canada data. Over the same period, population growth averaged 1.37 per cent. Once population growth is taken into account, economic growth per person was just 0.57 per cent a year. At that pace, it would take more than 120 years for Canadians’ standard of living to double.

The comparison with the United States makes the problem clearer. Over the same period, the U.S. economy grew by 2.46 per cent a year in real terms, according to St. Louis Federal Reserve figures. Population growth averaged 0.71 per cent, leaving per capita growth of 1.75 per cent a year, more than three times the Canadian rate. Canada is falling behind the neighbour it relies on most for export markets.

The main reason is productivity. Productivity growth is what allows an economy to produce more value from each hour worked, and it is the foundation of rising wages and living standards. In Canada, productivity growth has been weak for years. The C.D. Howe Institute, the Fraser Institute and the Royal Bank of Canada have all pointed to the same underlying causes.

One of them is where investment is going. The Royal Bank has highlighted the heavy flow of capital into real estate and construction, sectors that have shown negative productivity growth in recent years. Rapid population growth in major cities, artificial land scarcity and high development charges have helped push investment toward housing rather than toward businesses that expand output and productivity.

Those development charges remain a major cost even as migration pressure eases. The Canada Mortgage and Housing Corporation estimates charges of about $180,000 for a detached home in Toronto and $109,000 in Burnaby, next to Vancouver. Charges per apartment unit are close to $100,000. These fees are set by municipalities under provincial legislation. Lower charges would reduce costs and allow more housing to be built.

Weak productivity is also tied to falling business investment. Net foreign investment in Canada has turned negative, meaning capital is leaving the country. Domestic firms have not filled the gap. Capital per worker, adjusted for inflation, has been flat for decades and now sits at roughly three-quarters of the U.S. level, according to a C.D. Howe Institute study.

Policy choices are part of what makes Canada a less attractive place to invest. Regulations and costs tied to housing, energy development, pipelines, carbon pricing and taxes all weigh on investment decisions. Canada’s industrial carbon pricing system raises costs for large emitters, making the energy sector less competitive and reducing returns on new projects. Pipeline barriers add further costs and delays, as shown by the Trans Mountain expansion, which saw costs rise to about $34 billion and pushed back export opportunities that could have boosted growth.

Taxes matter as well. While KPMG shows Canada with slightly lower combined corporate tax rates than the United States, Washington now allows full and immediate expensing of capital investments. That change sharply reduces effective tax rates on new investment south of the border.

Other countries show how different choices can produce very different results. Ireland taxes corporate income at 12.5 per cent. From 2014 to 2024, its economy grew at an average annual rate of 7.7 per cent in real terms, and GDP per capita rose by 9.2 per cent, using World Bank data. On that measure, Irish citizens are now wealthier than Americans.

Canada lacks neither resources nor capability. It has abundant natural wealth, globally competitive firms in energy, mining, engineering and technology, and deep capital markets. Becoming a lower-tax, more investor-friendly country would not make Canada richer overnight, but it would move the country back toward the kind of growth Canadians once took for granted.

Ian Madsen is a senior policy analyst at the Frontier Centre for Public Policy.

© Troy Media