The Trudeau government’s economic catechism goes something like this. In the years before Canadians came to their senses and returned the Liberals to power, the nation suffered under the Conservatives’ obsession with balancing the federal budget. The economy stalled, prosperity was eroded and working Canadians suffered. The Liberals rescued the country from that economic purgatory by focusing their efforts on the middle class, and those working hard to join it. Amen.
Last week, Prime Minister Justin Trudeau was back at it, reciting that catechism in a speech that was nominally about Australia-Canada relations. “We saw what happened in 2008 and its aftermath,” he said, “ … when GDP started to rise again, wages stayed stagnant. Inequality rose and a lot of hard-working people were being left behind. The middle class was being hollowed out, and people were growing disillusioned.” A compelling catechism indeed – if true. Mr. Trudeau made three claims: wages did not rise; inequality increased; and the middle class was shrinking in the wake of the 2008 financial crisis. But the numbers do not back up those claims.
Let’s start with the claim of stagnant wages. The average hourly wage, adjusted for inflation, rose by 1.04 per cent a year, after 2007 through to 2015, the last year of the Harper government, according to Statistics Canada data. That doesn’t sound terribly impressive, but the pace of wage gains during that period was higher than in the preceding nine years (an average annual increase of 0.56 per cent) or during the first term of the Trudeau government (the average hourly wage rose by 0.68 per cent after 2015 through to 2019).
Only if the pandemic years of 2020 and 2021 are included does the Trudeau government’s record on wages best that of the Harper government, barely, with a 1.09-per-cent annual increase over six years. But that is a distorted picture. Wages rose in 2020 and remained high in 2021, largely because huge numbers of lower-paid workers lost their jobs and so were not counted in the average.
Mr. Trudeau’s first claim is not only incorrect, it is a reverse of the truth: wage growth slowed under the Liberals’ supposed growth-boosting policies. Strike one.
What about inequality, supposedly rising during the Harper years? The gold standard of measuring inequality is the Gini coefficient (a society with perfect income equality would have a Gini coefficient of zero.) During the Harper years, Canada’s Gini coefficient barely budged, and actually declined slightly once government programs and taxes are taken into account, Statscan data say. So, inequality dropped marginally – again, a stark contrast with Mr. Trudeau’s claim. So far, the Prime Minister is 0 for 2.
Last, Mr. Trudeau claims the middle class shrank after the financial crisis. Again, the statistics say the opposite. From 2008 through to 2015, the share of income for middle-income deciles, including the effects of government transfers and taxes, rose marginally. The highest-income decile saw its share of income decline modestly. Mr. Trudeau is 0 for 3.
If Mr. Trudeau were merely reciting his catechism as an ego-bolstering exercise, none of the above would much matter. The problem is such misinformation remains the basis for the Liberals’ economic approach of higher spending, high taxes, more regulations and more government intervention.
Inflation-adjusted gross domestic product per capita (a reasonable stand-in for living standards) doesn’t make an appearance in the Liberal economic catechism, and for good reason – the Trudeau government’s performance on that measure is breathtakingly bad, and getting worse.
A TD Economics report this month had two sobering statistics. The first was to point out that Canada enjoyed an edge in GDP per capita over most advanced economies, and was about even with the United States, as recently as the early 1980s. By 2000, the U.S. had pulled ahead and other advanced countries had closed the gap with Canada. By 2022, the U.S. and other advanced economies had pulled further ahead.
Recent history is bad; the future looks worse. Real GDP per capita has contracted for the past three quarters, and is projected to decline through to the end of 2024, TD says. All told, that is two years of a shrinking standard of living.
Mr. Trudeau, understandably one supposes, would rather dwell on the largely mythical shortcomings of the Harper government than face the fact that his economic program has been in fact a formula for declining prosperity – the very sin for which he wrongly excoriates his predecessor.