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Federal government should tackle Canada’s productivity crisis in upcoming budget

Published

2 years ago

5 minute read

From the Fraser Institute

By Jock Finlayson

In late-2014, per-person gross domestic product (GDP), a common indicator of living standards, stood at $58,162 (adjusted for inflation). By the end of 2023 it was actually slightly lower. This means Canadian living standards haven’t increased in a decade.

In a recent speech, the Bank of Canada’s senior deputy governor highlighted the risk posed by chronically sluggish productivity growth to the country’s living standards. She also noted that stalled productivity makes it harder to reduce inflation and keep it at (or close to) the Bank’s 2 per cent target.

Productivity is conventionally defined as the value of economic output per hour of work. Over time, it’s the most important determinant of overall economic growth. In a mainly market-based economy such as Canada’s, particular attention should be paid to the productivity performance of the business sector.

Unfortunately, here the news isn’t good.

Business sector productivity has flatlined in Canada, with the level of output per hour worked essentially unchanged from seven years ago. This pattern of productivity stagnation, in turn, is the principal reason why the value of economic output per person has stalled in Canada. In late-2014, per-person gross domestic product (GDP), a common indicator of living standards, stood at $58,162 (adjusted for inflation). By the end of 2023 it was actually slightly lower. This means Canadian living standards haven’t increased in a decade. That’s not a picture any Canadian citizen or policymaker should be happy about.

For many people, GDP is an abstract concept that doesn’t easily map to their lived experience. But the level and rate of growth of GDP clearly matter to the wellbeing of citizens. Academic studies confirm that worker wages are based in part on the productivity level of their employers. Put simply, the most productive businesses generally pay higher wages, salaries and benefits.

Moreover, over time individual and household incomes can only grow if the economy itself generates more output per hour of work and per person. When per-person GDP increases by 2 per cent a year (after inflation), average income doubles within 35 years. With 1 per cent annual growth in per-person GDP, it takes 70 years. At 0.5 per cent growth in per-person GDP, 139 years must pass before the average income will double. In Canada, per-person GDP has been declining outright, an alarming and unusual trend.

Addressing Canada’s productivity crisis should be job one for the federal government’s 2024 budget, which the Trudeau government will table on April 16. In the early 1980s, Canada was roughly 88 per cent as productive as the United States, measured by the value of output per hour of work across the economy. By 2022, that figure had dropped to 71 per cent, and it’s continued to decline since then.

What can be done? So far, the Trudeau government has relied on population growth fuelled by high levels of immigration to drive economic growth. That strategy has manifestly failed, as the government itself recently (if sheepishly) acknowledged by dialing back the numbers of non-permanent immigrants who will be admitted to the country.

A smarter approach is to boost investment in the things that make businesses and workers more productive—machinery, equipment, digital tools and technologies, intellectual property, up-to-date transportation and communications infrastructure, and research and development focused on bringing innovative products and ideas to market, rather than keeping them in the lab or in academic institutions. Canada’s record is poor in most of these areas, as evidenced by the fact we trail far behind the U.S. and many European countries in the level of business investment per employee.

That will need to change if we hope to up our game on productivity and lay the foundations for a more prosperous Canada.

Author:

Jock Finlayson
Senior Fellow, Fraser Institute 
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Business

State of the Canadian Economy: Number of publicly listed companies in Canada down 32.7% since 2010

Published on December 19, 2025

By

From the Fraser Institute

By Ben Cherniavsky and Jock Finlayson

Initial public offerings down 94% since 2010, reflecting country’s economic stagnation

Canadian equity markets are flashing red lights reflective of the larger stagnation, lack of productivity growth and lacklustre innovation of the
country’s economy, with the number of publicly listed companies down 32.7 per cent and initial public offerings down 92.5 per cent since 2010, finds a new report published Friday by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“Even though the value of the companies trading on Canada’s stock exchanges has risen substantially over time, there has been an alarming decrease in the number of companies listed on the exchanges as well as the number of companies choosing to go public,” said Ben Cherniavsky, co-author of Canada’s Shrinking Stock Market: Causes and Implications for Future Economic Growth.

The study finds that over the past 15 years, the number of companies listed on Canada’s two stock markets (the TSX and the TSXV) has fallen from 3,141 in 2010 to 2,114 in 2024—a 32.7 per cent decline.

Similarly, the number of new public stock listings (IPOs) on the two Canadian exchanges has also plummeted from 67 in 2010 to just four in 2024, and only three the year before.

Previous research has shown that well-functioning, diverse public stock markets are significant contributors to economic growth, higher productivity and innovation by supplying financing (i.e. money) to the business sector to enable growth and ongoing investments.

At the same time, the study also finds an explosion of investment in what’s known as private equity in Canada, increasing assets under management from $21.7 billion (US) in 2010 to over $93.1 billion (US) in 2024.

“The shift to private equity has enormous implications for average investors, since it’s difficult if not impossible for average investors to access private equity funds for their savings and investments,” explained Cherniavsky.

Crucially, the study makes several recommendations to revitalize Canada’s stagnant capital markets, including reforming Canada’s complicated regulatory regime for listed companies, scaling back corporate disclosure requirements, and pursuing policy changes geared to improving Canada’s lacklustre performance on business investment, productivity growth, and new business formation.

“Public equity markets play a vital role in raising capital for the business sector to expand, and they also provide an accessible and low-cost way for Canadians to invest in the commercial success of domestic businesses,” said Jock Finlayson, a senior fellow with the Fraser Institute and study co-author.

“Policymakers and all Canadians should be concerned by the alarming decline in the number of publicly traded companies in Canada, which risks economic stagnation and lower living standards ahead.”

Canada’s Shrinking Stock Market: Causes and Implications for Future Economic Growth

  • Public equity markets are an important part of the wider financial system.
  • Since the early 2000s, the number of public companies has fallen in many countries, including Canada. In 2008, for instance, Canada had 3,520 publicly traded companies on its two exchanges, compared to 2,114 in 2024.
  • This trend reflects [1] the impact of mergers and acquisitions, [2] greater access to private capital, [3] increasing regulatory and governance costs facing publicly traded businesses, and [4] the growth of index investing.
  • Canada’s poor business climate, including many years of lacklustre business investment and little or no productivity growth, has also contributed to the decline in stock exchange listings.
  • The number of new public stock listings (IPOs) on Canadian exchanges has plummeted: between 2008 and 2013, the average was 47 per year, but this dropped to 16 between 2014 and 2024, with only 5 new listings recorded in 2024.
  • At the same time, the value of private equity in Canada has skyrocketed from $12.8 billion in 2008 to $93.2 billion in 2024. These trends are concerning, as most Canadians cannot easily access private equity investment vehicles, so their domestic investment options are shrinking.
  • The growth of index investing is contributing to the decline in public listings, particularly among smaller companies. In 2008, there were 1,232 listed companies on the TSX Composite and 84 exchange-traded funds; in 2024, there were only 709 listed companies on the TSX and 1,052 exchange-traded funds.
  • The trends discussed in this study are also important because Canada has relied more heavily than other jurisdictions on public equity markets to finance domestic businesses.
  • Revitalizing Canada’s stagnant stock markets requires policy reforms, particularly regulatory changes to reduce costs to issuers and policies to improve the conditions for private-sector investment and business growth.

 

Ben Cherniavsky

Jock Finlayson

Senior Fellow, Fraser Institute
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Business

Trump signs order reclassifying marijuana as Schedule III drug

Published on December 18, 2025

By

From The Center Square

By Thérèse Boudreaux 

President Donald Trump signed an executive order moving marijuana from a Schedule I to a Schedule III controlled substance, despite many Republican lawmakers urging him not to.

“I want to emphasize that the order I am about to sign is not the legalization [of] marijuana in any way, shape, or form – and in no way sanctions its use as a recreational drug,” Trump said. “It’s never safe to use powerful controlled substances in recreational manners, especially in this case.”

“Young Americans are especially at risk, so unless a drug is recommended by a doctor for medical reasons, just don’t do it,” he added. “At the same time, the facts compel the federal government to recognize that marijuana can be legitimate in terms of medical applications when carefully administered.”

Under the Controlled Substances Act, Schedule I drugs are defined as having a high potential for abuse and no accepted medical use. Schedule III drugs – such as anabolic steroids, ketamine, and testosterone – are defined as having a moderate potential for abuse and accepted medical uses.

Although marijuana is still illegal at the federal level, 24 states and the District of Columbia have fully legalized marijuana within their borders, while 13 other states allow for medical marijuana.

Advocates for easing marijuana restrictions argue it will accelerate scientific research on the drug and allow the commercial marijuana industry to boom. Now that marijuana is no longer a Schedule I drug, businesses will claim an estimated $2.3 billion in tax breaks.

Chair of The Marijuana Policy Project Betty Aldworth said the reclassification “marks a symbolic victory and a recalibration of decades of federal misclassification.”

“Cannabis regulation is not a fringe experiment – it is a $38 billion economic engine operating under state-legal frameworks in nearly half of the country that has delivered overall positive social, educational, medical, and economic benefits, including correlation with reductions in youth use in states where it’s legal,” Aldworth said.

Opponents of the reclassification, including 22 Republican senators who sent Trump a warning letter Wednesday, point out the negative health impact of marijuana use and its effects on occupational and road safety.

“The only winners from rescheduling will be bad actors such as Communist China, while Americans will be left paying the bill. Marijuana continues to fit the definition of a Schedule I drug due to its high potential for abuse and its lack of an FDA-approved use,” the lawmakers wrote. “We cannot reindustrialize America if we encourage marijuana use.”

Marijuana usage is linked to mental disorders like depression, suicidal ideation, and psychotic episodes; impairs driving and athletic performance; and can cause permanent IQ loss when used at a young age, according to the Substance Abuse and Mental Health Administration.

Additionally, research shows that “people who use marijuana are more likely to have relationship problems, worse educational outcomes, lower career achievement, and reduced life satisfaction,” SAMHA says.

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