The misleading use of per capita GDP: Numerators, denominators and living standards | Policy Options
By Jim Stanford | Part of our Special Series: Always Canada. Never 51. | This post first appeared in Policy Options.
Some political and business commentators argue Canada experienced a lost decade of subpar economic performance even before U.S. President Donald Trump’s erratic trade actions cast their shadow. The most common evidence presented for this pessimistic judgment is a comparison of Canada’s per capita GDP to the U.S. and other industrial countries.
To be sure, Canada’s economy has traversed many challenges in recent years, including a global pandemic and subsequent inflation. Many features of the economy need to be strengthened. But for several reasons, it is misleading to use per capita GDP to grade Canada’s overall economic performance or, as it often is used, as a proxy for measuring living standards.
Per capita GDP is a simple ratio of the total value of goods and services produced for money in an economy divided by that jurisdiction’s population. The math sounds easy. But the methodology is complicated. Equating average output per person with the standard of living in a country is not credible.
Per capita GDP has a numerator (GDP) and a denominator (population). Canada’s numerator has not performed badly by international standards. Real GDP growth over the past decade averaged close to two per cent per year, despite a shallow recession in 2015 and a bigger downturn during the COVID-19 pandemic. That’s the second fastest among G7 economies, behind only the U.S.
It’s the denominator, therefore, that explains Canada’s seemingly poor performance by this measure. GDP has grown but not as fast as the population. Indeed, in recent years, Canada has had its fastest population growth since the 1950s. The population grew three per cent in each of 2023 and 2024, almost entirely due to immigrants – two thirds of whom were non-permanent arrivals (on temporary work or student visas).
Economic averages diluted by immigration
There is much to debate about the appropriate pace of this and the federal government has recently curtailed non-permanent immigration. But the impact of rapid population growth on an arbitrary statistical ratio hardly proves a broader economic failure.
The link between immigration and GDP is indirect and felt with a time lag. We do not expect the arrival of new Canadians to immediately boost GDP in the same proportion as the existing population for many reasons. It takes time to find work, gain skills and develop productivity.
Any surge in immigration will normally result in lower average per capita GDP, but that doesn’t mean Canada’s previous residents suddenly became poorer.
It simply means that Canada is absorbing new people to lay the groundwork for future expansion. The resulting decline in per capita GDP cannot be interpreted as evidence of a more general malaise.
It is also worth noting that many of the business voices now bemoaning Canada’s per capita GDP performance were the same voices demanding more access to temporary foreign labour after COVID-19 (to solve purported labour shortages and reduce wage pressures). It’s contradictory for them to now complain about poor GDP per capita resulting precisely from the temporary immigration they demanded.
GDP itself – the numerator of the ratio – encounters numerous conceptual and methodological questions, casting further doubt on its validity as a measure of living standards. GDP includes many components that have no direct bearing on the quality of life, such as depreciation, real estate commissions and imputed rents on housing.
It is tricky to measure real GDP over time and even trickier to compare it across countries, different currencies and different prices.
Moreover, simple per capita averages ignore how GDP is distributed. Only about half of GDP is paid to workers. Much is captured in profits and investment income, disproportionately concentrated at the top of the income ladder. Very high incomes for a rich elite can pull up average GDP per capita figures, even when most members of a society face hardship.
International comparisons confirm the perils of evaluating economic performance by GDP per capita. The top four countries on the International Monetary Fund’s per capita GDP ranking are all tax havens: Luxembourg, Switzerland, Ireland and Singapore. A fifth, Liechtenstein, is not included due to incomplete data, but its GDP per capita (US$186,000) is the highest of all – helped by the fact its population is just 40,000.
These countries receive inflows of profits from global companies lured by low corporate taxes and lax banking rules. Those inflows boost GDP per capita (with profits credited to local subsidiaries of those global firms), but have little impact on work, production or living standards.
The Irish example
The Irish case is instructive. Ireland has recorded the fastest growth of real GDP per capita of any OECD country over the last decade and its GDP per capita is purportedly twice Canada’s. Ireland is a wonderful, fascinating place. But any visitor can immediately confirm it is not rich. Average living standards (evidenced by wages, housing, health and poverty) are no higher and, by some measures lower, than Canada’s.
Because Ireland’s corporate tax rate is lower than other European Union countries, global multinationals have established Irish subsidiaries to receive intracorporate transfers. In 2023, more than half of all net value added in Ireland consisted of business profits – two thirds of which belonged to foreign firms.
GDP per capita has soared but living standards have not. Because the whole model is driven by corporate tax avoidance, the Irish government’s ability to capture some of that largesse for domestic use is constrained.
The vagaries of per capita thinking are equally visible in Canada. Consider Newfoundland and Labrador. After the development of offshore oil resources in the 1990s, that province’s GDP grew rapidly. Some of the new wealth trickled down to residents, but not as much as might be assumed.
By 2006, per capita GDP in Newfoundland and Labrador exceeded the Canadian average. Its new status as a “have” province was significant beyond provincial pride. It meant that Newfoundland and Labrador soon stopped receiving federal equalization payments.
However, personal incomes in the province remained below national averages. Over the latest five years, Newfoundland and Labrador’s GDP per capita was 6.1 per cent higher than the Canadian average, yet personal income per capita (including government transfer programs) was 3.4 per cent lower.
Exacerbating this anomaly, Newfoundland and Labrador’s population shrank through the 2000s. Population decline is negative for any economy, but it has the perverse effect of artificially boosting GDP per capita (by shrinking the denominator). This further eroded the province’s chances of receiving equalization.
Much of the GDP associated with offshore oil literally never touches ground in the province. It is shipped overseas by tanker, with most of the profits appropriated by petroleum firms headquartered on the mainland or in other countries. Because of this, the province’s GDP is skewed heavily toward corporate profit. That’s good for business but doesn’t enrich its residents.
Little wonder then that the province is challenging the federal equalization formula in court. Last year, shrinking oil revenues pushed the province’s GDP per capita back slightly below the Canadian average, so Newfoundland and Labrador will now receive (small) equalization payments once again. But this experience confirms per capita GDP is no way to measure the true well-being of a province or a country.
The goal of economic policy is not to maximize an abstract statistic. It should be to enhance the well-being of people. Per capita GDP is not an accurate or reliable measure of progress toward that goal.
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This is part 1 of a 2-part analysis. In part 2, Jim Stanford evaluates per capita GDP comparisons between Canada and the U.S. This article originally appeared in Policy Options. It is republished here under a Creative Commons license.
The perils of per capita GDP: No, Canada is not poorer than Alabama | Policy Options
By Jim Stanford | Part of our Special Series: Always Canada. Never 51. | This post first appeared in Policy Options.
Some business and political commentators cite a growing gap between the per capita GDP of Canada and the U.S. as evidence of Canada’s purported economic dysfunction. Some even conclude that because of stagnating per capita GDP, Canada is now poorer than Alabama – a state with widespread poverty, low incomes and short life expectancy.
This far-fetched conclusion reflects deep flaws in the use of per capita GDP as a measure of prosperity and living standards. As explained in the first part of this commentary, GDP per capita measures total output produced (for money) in a country relative to its population.
However, this simple ratio ignores important issues such as what is included in GDP, who owns it and how it is distributed. International comparisons are further complicated by necessary adjustments for exchange rates, price levels and population estimates.
Comparing GDP per capita between Canada and the U.S. is especially fraught because of other methodological problems. For example, the much larger proportion of unauthorized immigrants living in the U.S. artificially boosts its apparent per capita GDP. There are an estimated 11 million people there who contribute to the numerator (GDP) but are not counted in the denominator (population).
Similarly, per capita GDP ignores the value of time. In 2023, the average employed American worked 114 hours longer than the average employed Canadian – about three weeks more of full-time work.
American working hours are among the longest of any OECD country because low wages compel many of them to work extra hours or even second jobs and because there are no legal requirements for paid vacation. Those longer working hours account for much of the Canada-U.S. gap in GDP per capita.
Another issue is the failure to consider the environmental effects of economic production. Conventional GDP statistics take no account of the costs of pollution. America produces more output per person, but takes fewer measures to protect the environment, which obviously affects the quality of life of current and future generations. Like time, nature is not free.
These methodological issues cast considerable doubt on the validity of simplistic Canada-U.S. comparisons.
Attention to Canada’s per capita GDP has grown during the current federal election campaign. However, it is important to view the issue through a long-term lens. Canada’s per capita GDP has been sliding relative to the U.S. since the early 1980s. The following figure portrays the ratio, based on OECD estimates.
Thanks to rapid industrialization, Canada largely closed the long-standing disadvantage versus the U.S. from 1950 through 1980. Relative per capita GDP peaked in 1981 at 94 per cent of the U.S. level. It then fell rapidly during the 1980s and early 1990s, to just 81 per cent by 1992. It partially recovered in the late 1990s and 2000s but then fell again in the 2010s.
After fluctuating during the COVID-19 pandemic, Canada’s per capita GDP had fallen by 2023 to 78 per cent of U.S. levels.
Data and politics
There is a natural tendency to put a political spin on economic measurements. However, there is no correlation between which party is in power in Ottawa and the evolution of this ratio.
Canada’s per capita GDP relative to the U.S. rose during Pierre Elliott Trudeau’s first years in office but began to fall during his final term. It declined most steeply under Brian Mulroney, was stable during the terms of Jean Chrétien and Paul Martin, fell during the last years of Stephen Harper’s rule and then declined further under Justin Trudeau.
Canada-U.S. per capita GDP comparisons reflect a complex mix of many determinants, including economic growth, sectoral changes, population growth, immigration, inflation and exchange rates. It is far-fetched to conclude that any government deserves either credit or blame for its trajectory.
Prosperity depends not just on how much is produced, but how it is distributed. Bank of Canada research shows most of the U.S. advantage in per capita GDP is concentrated among high income earners.
Three-quarters of the gap in per capita output is captured by higher incomes for the top 10 per cent of Americans. There is little difference in incomes between the bottom 90 per cent in the two countries. The richest 10 per cent of Americans receive almost half of all pre-tax income, so their wealth significantly inflates the overall per capita average.
In fact, most Canadian workers earn higher wages than those in the U.S. It is most accurate to measure typical incomes by the median wage (the halfway point in a distribution), not the average (which can be distorted by very high incomes at the top).
The median hourly wage in Canada in 2023 was C$28.79 or US$24.61 at the OECD’s purchasing power parity exchange rate. The median hourly wage in the U.S. in 2023 was US$23.11. The typical Canadian worker thus earned 6.5 per cent more than their U.S. counterpart, despite lower per capita GDP.
Perhaps surprisingly, the Canadian worker also paid a lower marginal federal tax rate (20.5 per cent for full-time workers) than their U.S. counterpart (22 per cent).
Of course, public services, not just private incomes, are also important to living standards. Canada’s more extensive health care, public education and other services enhance the quality of life in ways not captured by per capita GDP.
For example, eight per cent of Americans have no health insurance and one-quarter are underinsured (facing out-of-pocket costs that force many to skip needed care). That takes much of the shine off a higher GDP.
For all these reasons, it is clear the typical Canadian has a higher standard of living than the typical American. We are healthier, live three years longer, face much less inequality and are happier. These outcomes are not accidents. They reflect deliberate policy choices (including regulation, taxes and public programs) that shape both production and distribution to improve well-being.
The decade is not lost
In that light, Canada has continued to make progress in recent years – contrary to claims we have suffered a lost decade.
For example, the poverty rate (as defined by Statistics Canada’s market basket measure) fell by one-third between 2015 and 2022. Average real hourly wages (after inflation) are nine per cent higher than a decade ago, despite post-COVID inflation. The average unemployment rate was lower over the last decade than the previous decade.
The United Nations human development index (HDI) confirms Canada’s success in converting economic activity into well-being. It attempts to directly measure living standards, rather than relying on per capita GDP to evaluate well-being. The HDI considers three components: per capita gross national income (GNI), life expectancy (a proxy for health) and education.
Canada ranked 18th on the latest HDI scorecard, three places ahead of the U.S. Our human development has improved more than twice as fast since 2010 as the U.S. We rank eight places higher on HDI than we do on GNI per capita – confirming we efficiently improve human welfare with our economic resources. In contrast, the U.S. ranks 11 places lower on HDI than GNI, a bigger negative gap than any other developed country.
In sum, per capita GDP is a deeply flawed measure that says little about real-world living standards. To be sure, Canada has much to improve in its economy: not only to produce more but also to produce it more sustainably and use it more effectively to improve human and social conditions.
Nevertheless, the typical Canadian lives better than the typical American across a wide range of tangible indicators. Living standards for most Canadians have improved over the last decade, not cratered. We should not be misled by one flawed, abstract measure into believing that Canada is somehow an economic basket case.
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This is part 2 of a 2-part analysis of Canada’s GDP per capita. Part 1 can be found here. This article originally appeared in Policy Options. It is republished here under a Creative Commons license.
Workforce shocks are coming. Are we going to retreat—or reinvent?
By Lisa Taylor, CEO of Challenge Factory | Part of our Special Series: Always Canada. Never 51.
Many Canadian industries and businesses hardest hit by trade uncertainty are considering furloughs and layoffs. Workers and business owners are understandably anxious.
All levels of government, to their credit, have signaled a readiness to step in and help, elbows up. While approaches may differ on how support is distributed and to whom, the shared message is clear: no one should face this alone.
We can learn a lot from earlier crises so we don’t repeat some of our past mistakes.
During the early days of the pandemic in 2020, Challenge Factory noticed a pattern – there was an almost obsessive focus on when things would “go back to normal.” Back then, we spent a lot of time discussing when lockdowns would lift and businesses could reopen. Perhaps it was easier to focus on what we were waiting to return to, rather than accepting what we were living through.
This time, there may be no “normal” to go back to. This time, we are probably not just waiting it out. We probably need to prepare for a different world. That means leaning into this opportunity to undertake real change.
Government support programs, like Employment Insurance (EI), need to do more than allow everyone to hunker down. They need to do more than provide income while people wait to get called back to work.
If we see our current workforce disruption as a window of opportunity, the most urgent questions should be: How can Canada use this time to the advantage of workers and businesses? Which actions taken today will best position us for recovery tomorrow, in a different economy?
Many businesses are grappling with their strategy in a world of American tariffs and unpredictability. Government programs should incentivize businesses to train and upskill workers to meet new market demands and execute on new strategies, rather than lay those employees off.
Recovery will come from reinvention and transformation. It will come from workers and employers using our time wisely, supported by government policy.
This should be a moment to invest in our workers, in our businesses and industries, in the future we want for our families and communities.
Time away from regular work should be used to reskill and upskill, to experiment and explore, to test new partnerships and uncover hidden potential. Furloughed time should become a time for growth and career exploration. It is better for employees, employers and the economy if we can find useful ways to keep employees attached to their current firm, rather than experiencing permanent separation.
“How can Canada use this time to the advantage of workers and businesses? Which actions taken today will best position us for recovery tomorrow, in a different economy?”
Here are some creative ways we could ensure our workforce has the skills to contribute to new directions for their employers:
- Early-career professionals could be paired with late-career professionals either within the same company, or within supply chain partnerships, to share knowledge with each other, facilitate knowledge translation and accelerate lifelong learning and intergenerational collaboration across the workforce.
- Mid-career professionals could take on temporary internship-style roles in adjacent teams where there could be more opportunities for growth. The new benefit proposed in the Liberal platform could facilitate this type of work-integrated learning, not just participation in training programs.
- Teams of workers without sufficient work could be temporarily embedded in other parts of an organization or in other organizations to build cross-sectoral knowledge and collaboration.
- Workers who do get laid off could spend the time upgrading their skills, including exploring career and labour market dynamics to improve career literacy, instead of looking for work in a field where there may be no work for a while or pursuing skills that are not going to lead to satisfying work.
In each case, employees would be gaining new skills and market insights that their current or next employer would need to execute new business strategies and seize new opportunities.
These suggestions aren’t fantasy. These ideas and others are being explored in creative ways by many firms right now. In the last three weeks alone, Challenge Factory has been in many discussions with industries actively seeking to pilot this type of short-term workforce redeployment.
To make this work, existing rules around EI – including income support, support for training and job-sharing regimes – should be updated to incentivize these kinds of forward-thinking approaches. The building blocks are there in the current system, and in the Canada Training Credit, but they need to be improved to encourage these kinds of innovative approaches to training and learning.
In past periods of economic shock, workers have relied on EI to weather the storm, and some employers have severed employment relationships with the hope that they’ll find new, qualified workers to hire once their business environment is in recovery. Both groups were essentially crossing their fingers that they’d come out all right on the other side.
Our approach needs to be better this time – for companies, workers and the economy as a whole. EI eligibility rules can evolve to allow for this kind of support and small employers can be supported to get creative in how to retain and retrain staff.
In Canada, we’ve done hard things before, and we can do them again. When the future is uncertain, it is important to invest and prepare. Governments know how to design and deploy support programs for workers and businesses. But this time, it’s critical to deliver them in ways that give people the time they need to prepare, adapt and plan for what comes next. Sitting at home on furlough – rather than working and learning new parts of the business – will not help us prepare for change.
Now is not the time to retreat or just endure challenging times. It’s time to get curious, get creative and get moving, supported by our social safety net system. Let’s turn workforce disruption into workforce evolution – because we have the talent, tools and tenacity to lead our own way forward.
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Lisa Taylor is an author, entrepreneur, consultant, futurist and community leader focused on shaping the world of work. She is CEO of Challenge Factory, a Canadian research and advisory services firm that helps clients achieve productivity gains and positive social impact.
How employee ownership can help secure Canadian sovereignty | ImpactAlpha
By Matthew Mendelsohn | Part of our Always Canada. Never 51 series. | This post first appeared in ImpactAlpha
Canada’s investors and businesses are focused on the economic attacks by the Trump administration on the Canadian economy. Trump’s tariffs are creating higher prices, job losses and uncertainty in both countries. But for many Canadian businesses, there is a bigger existential risk.
A weak Canadian dollar, low interest rates and expected liquidity challenges for some Canadian businesses that rely on exports to the US all create the conditions for an acceleration of private equity-led buyouts of Canadian firms. While Canada’s policymakers try to figure out how to make the Canadian economy less vulnerable to Trump’s whims, many Canadian businesses are going to look like a good deal for American investors – even in the context of America’s own economic turmoil.
Predatory foreign ownership, focused on stripping assets and extracting wealth for American investors, will be bad for the long-term resilience of the Canadian economy. These kinds of acquisitions will hurt Canadian economic sovereignty and the local community economies in which many of these businesses have thrived for decades.
Just a few weeks ago, iconic Canadian department store chain Hudson’s Bay—founded in 1670—was forced into liquidation. The company’s slow death began in 2008 after it was acquired by National Realty and Development Corp. Equity Partners out of the US. Now, at a time when Canadians are racing to protect and shore up their economic security and control of their assets, Canadian communities may lose 80 local stores, along with 9,400 employees at one of Canada’s most iconic brands.
Employee ownership
Many Canadian entrepreneurs have been thinking about retiring and are looking to sell to secure a comfortable retirement. Some 76% of business owners are planning to retire in the next decade – with business assets worth over $2 trillion, according to the Canadian Federation of Independent Business.
It is of course perfectly reasonable for a business owner to sell to the highest bidder, including private-equity buyout funds. But many of these retiring baby boomers are deeply torn, knowing that if they sell their business to American investors, they might be doing long-term damage to their community, the workers who they have relied on and Canada’s economic independence. Policymakers are currently designing solutions to these challenges.
One approach: making it easier for new Canadian entrepreneurs to buy existing businesses, via a program modeled after the US Small Business Administration’s 7A Loan program, which helps finance working capital, equipment purchase and business acquisitions.
Another is to significantly increase the number of employee-ownership transitions, which Canada calls Employee Ownership Trusts, or EOTs. Canada passed a new EOT legislation last year and should be ramping up to achieve a goal of 10% of all sales of Canadian businesses to their employees by 2030. We know this target is achievable because it’s happening in the UK. More than 400 businesses were sold to employees in the UK last year.
Not only did that improve economic security for 40,000 new employee-owners in the UK, those businesses remain domestically owned and rooted in their local communities. Achieving similar employee-ownership conversion rates in Canada would take 300 businesses a year off the market from American buyouts, with head offices staying in Canada and improving the resilience of the Canadian economy in the face of an autarkist American administration.
Mobilizing capital
To achieve these targets, Canada needs to mobilize capital to support these transitions.
Canada already has a number of funds and intermediaries working on employee-ownership conversions, but they generally target risk-adjusted market returns. At a time of extreme vulnerability and risk, there are legitimate obstacles to making EOT conversions work. Business owners are far more likely to accept a buy-out offer in cash, rather than deferred payments from an EOT.
Capital could be mobilized more urgently in different ways. Through the government’s public financial institutions, including the Business Development Bank of Canada, concessionary capital should seed a fund to crowd in investments from banks, philanthropic foundations and other investors. This could be stylized as a sovereign fund, making low-interest loans focused on employee-ownership conversions of viable businesses that need time to overcome liquidity crises and re-tool away from dependence on the American market.
The federal government could guarantee a benchmark rate of return to ensure that foundations’ capital is not at risk, which would make the fund more appealing to both Canadian and American impact investors.
Some advisors within the field suggest there is enough capital already in private financial institutions to finance many EOTs, but that financing often comes with onerous conditions that make these employee-ownership transitions too risky for many workers. In particular, employees are often required to sign personal guarantees for the amount of the loan, which transfers all the risk onto workers and makes the deals far less likely to happen.
We need to expand pathways to wealth and ownership for workers, which is why we suggest the federal government also offer a loan guarantee program. This would reduce risk for employees and business owners undertaking employee-ownership transitions and protect all types and sizes of lenders, including banks, pension funds and foundations. Other blended finance models could be considered, but transferring more of the risk onto the government in the form of a loan guarantee probably makes the most sense.
As Canada faces Trump’s mercurial and predatory approach to trade and economic policy, employee-owned companies, which are shown to be more innovative and resilient during economic downturns, can bring much-needed stability and less economic vulnerability. Canada should mobilize capital to scale employee-ownership transitions through loan guarantees, blended finance and concessionary capital to build and secure more economic resilience and wealth for working people.
Canada Growth Summit 2025: Unleashing Canada’s potential in turbulent times
A Quick Start Plan to Double Down on Investment
Panel discussion: Here’s how global experts suggest we can accelerate investment to drive economic growth and create a sustainable, prosperous environment.
Thursday, April 24, 2025
10:15 a.m.
Fairmont Royal York
100 Front Street West, Toronto, ON M5J 1E3
Panelists
Matthew Mendelsohn
CEO, Social Capital Partners
Michelle Harradence
Executive Vice-President and President, Gas Distribution & Storage, Enbridge
Peter Tertzakian
Founder, ARC Energy Research Institute
Moderator
Luiza Ch. Savage
Executive Editor, POLITICO
New Canadian Tax Observatory seeks visionary founding CEO
April 10, 2025, Toronto (ON): Canada’s tax system is contributing to economic inequality and an increased concentration of wealth, but there is a widespread misunderstanding of how our tax system works and who it serves. Many well-funded interests falsely suggest that tax fairness would undermine economic growth.
Recognizing the need for more balance in publicly available information, Social Capital Partners and other funders are incubating a new, non-partisan, nonprofit Canadian institution to lead an informed national conversation on the links between taxation, economic fairness and a thriving democracy.
“There is a global groundswell of interest in economic systems that deliver equitable benefits across society. Our vision for a more democratic capitalism in Canada requires well-regulated markets and policy changes that provide real opportunities for people to build economic security. And it also requires fair taxation,” says the Canadian Tax Observatory’s founding board chair, Matthew Mendelsohn. “We are seeking a visionary leader who can shape and grow the Observatory into a permanent, influential Canadian institution connected to global networks identifying better, more effective ways to achieve tax fairness.”
The organization’s mission is to support a more equitable tax system that advances shared prosperity and economic growth through rigorous research, collaboration, advocacy and public education. The board has secured seed funding of approximately $550,000 per year over three years and is in the foundational stages of building the incorporated nonprofit organization into a registered charity. The board is open to adapting the Observatory’s operating structure to suit the preferred leadership model of the chosen leader.
To learn more about the Founding CEO position and how to submit a Statement of Ambition expressing interest in this transformative role, please visit: www.socialcapitalpartners.ca/ObservatoryFoundingCEO
About the Canadian Tax Observatory
The Canadian Tax Observatory is an essential voice in Canadian tax policy. A non-partisan nonprofit established in 2025, the new organization supports a more equitable tax system that advances shared prosperity and economic growth through rigorous research, collaboration, advocacy and public education. The Canadian Tax Observatory’s founding board of directors is comprised of Chief Executive Officer of Social Capital Partners Matthew Mendelsohn (Board Chair), Professor of Political Management at Carleton University Jennifer Robson and Executive Director of Euphrosine Foundation Niamh Leonard.
About Social Capital Partners
Who owns the economy matters. Social Capital Partners believes working people deserve a fighting chance to build economic security and wealth. A Canadian nonprofit organization founded in 2001, we undertake public policy research, invest in initiatives and advocate for ideas that broaden access to wealth, ownership and opportunity, and that push back against extreme economic inequality. To learn more, please connect with us on LinkedIn or Bluesky or visit socialcapitalpartners.ca.
For more information, please contact:
Katherine Janson
Director of Communications
Social Capital Partners
647-717-8674
katherine@socialcapitalpartners.ca
Request for Statement of Ambition: Visionary Founding CEO to lead the Canadian Tax Observatory
What is the Canadian Tax Observatory:
The Canadian Tax Observatory (the “Observatory”) is a newly established non-partisan, non-profit organization committed to confronting wealth inequality through transformative tax policy. Our mission is to support a more equitable tax system that advances shared prosperity and economic growth through rigorous research, collaboration, advocacy and public education.
Why are we launching the Canadian Tax Observatory?
Highly unequal societies are not compatible with democratic governance. They are too unstable and vulnerable to the erosion of democratic norms. Democratic capitalism requires well-regulated markets, real opportunities for people to build economic security, and fair taxation. Today’s tax debate is shaped by wealthy interests and the organizations and lobbyists they support. Tax policy is increasingly structured to benefit the wealthy. Misleading stories about the tax system abound and are pushing Canada to accept rising inequality and wealth concentration as the price of economic growth. We want to correct this.
What we aim to achieve:
The Canadian Tax Observatory will be a catalyst to confront wealth inequality in Canada. We aim to reshape Canada’s tax landscape by delivering evidence-based analysis and workable options that will promote a more equitable and growth-oriented tax system. Confronting growing wealth concentration requires a full range of policy and legislative solutions, including tax reform.
Our journey thus far:
We are in the foundational stages of building this organization: we have incorporated as a nonprofit and are in the process of registering as a charity. The Observatory is currently incubated by Social Capital Partners, a nonprofit organization that provides robust governance, administrative and operational backing during this transitional period. We have secured initial seed funding of roughly $500,000 per year for the first three years and are actively developing partnerships with other organizations. We are ready for a leader who can shape and grow the Observatory into a permanent, nationally recognized Canadian institution.
The leader we’re seeking:
We are searching for a visionary—a Founding CEO who sees beyond conventional boundaries. This person is innovative, strategic, deeply committed to social justice, and capable of engaging diverse stakeholders, ranging from civil society, academic experts, industry stakeholders and government leaders. The ideal candidate will possess:
- Exceptional strategic vision with the ability to translate ideas into actionable policy solutions.
- A proven track record in organizational leadership, fundraising, and building influential partnerships.
- Credibility and expertise in economic and tax policy, preferably with a focus on Canadian public policy.
- Powerful communication skills to inspire, educate, and advocate across varied audiences, along with comfort engaging with the public, decision-makers, and expert policy networks.
- An ambitious, entrepreneurial spirit eager to build and sustain an impactful, lasting institution that will have a transformative impact in Canada on the sustainability of democratic capitalism.
Your application – an invitation to dream big:
We invite you to craft and submit a letter of no more than three (3) pages outlining how you would build and lead the Canadian Tax Observatory. Your letter should clearly state your vision for the Observatory and how you plan to bring this vision to life.
We are committed to adapting the Observatory’s operating structure to support the leadership model best suited to the chosen Founding CEO. All candidates should feel comfortable reaching out to us for a preliminary conversation to help determine their suitability for the role or to ask any clarifying questions.
Please submit your letter of no more than three (3) pages, along with your CV (including a list of your relevant publications), to careers@socialcapitalpartners.ca by May 21, 2025. As applications will be reviewed as they are submitted, we encourage all interested individuals to submit their application package as soon as possible.
Next steps:
Selected candidates will be invited to present their vision to our founding board and key stakeholders and will be compensated for their time. Our goal is to appoint our Founding CEO as soon as possible to promptly begin laying the groundwork for the Observatory’s next steps.
We are excited to learn about your bold vision for building this new Canadian institution—a beacon for economic fairness, sustainable economic growth and a thriving democracy.
Together, let’s redefine what’s possible for Canada.
Canada’s pension funds need to get their elbows up
By Matthew Mendelsohn and Michelle Arnold | Part of our Special Series: Always Canada. Never 51.
With over $3 trillion in assets, Canada’s pension funds are some of the most powerful institutional investors in our economy—and in the world.
But as questions of economic sovereignty and resilience take centre stage, it’s time to ask: are they doing enough here at home?
Data show that, at the end of 2023, Canada’s pension funds had reduced their holdings in publicly traded Canadian companies to just 4% of total assets, down sharply from 28% in 2000. Canada’s largest pension funds—the so-called Maple 8—currently hold more public and private equities in China than in Canada. That’s hard to justify.
In the 2023 Fall Economic Statement, the federal government announced a commitment to creating more opportunities for pension funds to invest domestically. Then, in March 2024, a group of over 90 Canadian business executives published an open letter urging the federal government to amend the rules governing pension funds to encourage more investment in Canada. However, they fell short of arguing for a formal “dual mandate” as exists for la Caisse de dépôt et placement du Québec, which balances returns with economic development goals.
The open-letter proposal was met with significant opposition from current and former pension executives, who published warnings that any directive would compromise returns and hurt Canadian retirees.
Those on both sides of this argument were very self-interested. The call from business executives to invest more in corporate Canada would likely inflate stock prices, which would be good for them, but not the wider Canadian economy. Similarly, the warnings from the pension executives reflected a vested perspective: they have been very well-compensated and left alone to do as they please, even as they oversee funds that don’t perform better than the markets.
In April 2024, the federal government took a tentative approach in appointing former Bank of Canada governor, Stephen Poloz, to lead a federal working group to work with pension plans to identify opportunities to unlock more domestic investment. His recommendations were not made public, and the process did not invite broad participation on the question of how pension funds could be required to deliver better results for Canadians and a resilient economy. But the 2024 Fall Economic Statement pulled from his report and announced that that they would try to crowd in venture capital, incent new investments in mid-sized firms focused on growth, allow funds to take a larger stake in Canadian companies, and encourage investment in existing infrastructure like airports.
These suggestions don’t go far enough, nor are they built for the collective challenges we face at this historic moment of economic disruption and transition. Rather than pensions simply investing more in the TSX or investing in and then selling existing infrastructure, pension capital should spur new ventures, support new infrastructure and help Canadian businesses grow and thrive.
We are calling on the government to establish a small number of strategic investment priorities and then deploy de-risking tools to encourage pension fund investment in these areas. It is possible to use co-investment vehicles, invest first-loss capital and guarantee benchmark rates of return to create blended-finance models that enable pension funds to invest in domestic resilience at a scale they are accustomed to, without compromising their fiduciary duty to shareholders.
Three areas we think Canadian pension investment could make a significant impact:
1. Bolstering Canada’s manufacturing sector and other key vulnerable sectors by investing alongside government in a new, independently managed sovereign buy-out fund. This fund would buy or invest in existing firms that face liquidity challenges in the coming years and leverage sector expertise and patient capital to build out an advanced and resilient manufacturing sector. This fund could be created as a new entity modeled on the Canada Growth Fund, or integrated within the existing Canada Growth Fund structure, with a newly appointed independent fund manager.
2. Advancing Employee Ownership Trusts (EOTs) by co-investing in a fund to facilitate employee-ownership transitions by making loans to employees to purchase the businesses they work for. The federal government would offer concessionary capital in order to de-risk pension investment. This too could mimic, or be housed within, the Canada Growth Fund.
3. Supporting housing affordability by contributing long-term capital to expanding their real estate portfolios to include more affordable housing development, which would positively impact the financial security of both current and future pension contributors. Although real estate is an important asset class for pension funds, most of it is in things like airports and commercial real estate, with the sole goal of delivering financial returns. We need more investment in new infrastructure, like affordable housing near economic activity, which has not been a strategic priority.
If pension funds allocated just 5% of their $3 trillion in assets toward strategic domestic priorities, that would amount to $150 billion in catalytic capital. Even if those investments yielded returns 1% lower than the rest of their portfolio (which we think is unlikely), the overall return would only fall from 8% to 7.95%, a negligible difference with enormous potential upside for the country.
This approach would not only be good for Canada, but for pension funds. Pension funds’ success depends not only investment returns, but on the overall health and stability of the economy, which requires Canadians to have steady jobs, steady incomes and affordable housing near economic centres.
We also believe that if pension funds asked their members, to whom they are beholden, whether a portion of their capital should be invested in the local economy, even if it meant a modest reduction in returns, the answer would be a resounding “Elbows Up.”
Our new federal government needs to insist that all pools of capital find more creative ways to help Canada emerge from this geopolitical transition stronger, more resilient and less exposed to future vulnerabilities. If pension funds approach the challenge creatively and collaboratively, there are ways they can deploy their enormous wealth for the benefit of both plan contributors and Canada’s longer-term economic well-being.
Watch the video: New ideas for a democratic economy | DemocracyXChange 2025
What kind of economy do we want for Canada—one that prioritizes growth and productivity, at any cost, or one that focuses on greater shared prosperity? As technology disrupts industries and global forces reshape our economic landscape, tough choices lie ahead. On April 5, 2025, this keynote panel at DemocracyXchange 2025 brought together diverse perspectives to debate the trade-offs, possibilities and bold ideas shaping Canada’s economic future.
Panelists
Matthew Mendelsohn
Social Capital Partners
Daniel Debow
Build Canada
Moderator
Murad Hemmadi
The Logic
Why commercial rent control is key to Canada’s economic sovereignty
By SCP Fellow Liliana Locke | Part of our Special Series: Always Canada. Never 51.
The Trump administration’s tariffs and threats are hurting many Canadian businesses. But there is an equally concerning threat closing main street doors and costing jobs: skyrocketing and unregulated commercial rent increases.
Business closures in Ontario increased by almost 10% between January 2023 and January 2024. I interviewed a dozen long-time business owners in Ontario who say they wouldn’t start their businesses here today if given the chance to begin again. These are skilled entrepreneurs, often running family businesses with decades of experience. The problem isn’t their business models or talent—it’s the mounting external pressures that make success so difficult.
While business costs are up across the board, one of the biggest pain points is commercial rent. According to a recent survey by the Better Way Alliance (BWA), a network of Canadian business owners that advocate for fair wages, reasonable work hours and equitable workplace conditions, 75 per cent of businesses that had renewed their commercial leases experienced a rent increase by double or triple digits.
According to the Toronto Regional Real Estate Board, retail rents in Toronto have risen by a whopping 128 per cent since 2020. In cities like Toronto, Vancouver and Waterloo, industrial rents have doubled over the past eight years and, in 2024, approximately half of businesses across Canada reported difficulty coping with rising occupancy costs.
Large commercial real estate landlords, and the global multinationals that can afford their storefront leases, are transforming our neighbourhoods in ways that undermine Canada’s economic resilience and economic sovereignty. We’ve all seen a new condo tower wipe out local shops and replace them with predictable pizza chains and cookie-cutter convenience stores–often owned by global firms or American investors.
When those local independent businesses close, we’re not just losing unique retail shops and services—we’re losing good jobs for local workers, wiping out retirement savings for long-time business owners and making it harder for new entrepreneurs to take the leap.
Contrary to some beliefs, a shortage of commercial real estate is not what’s behind the rising rents.
Often, big landlords have little incentive to negotiate fairly, because they’re willing to forgo rent payments today to hold out for a higher-paying tenant tomorrow—even if it means leaving storefronts vacant. For some commercial real estate investors, leaving the property empty and expecting appreciation in its value is a perfectly reasonable business strategy, even if it is bad for the community.
In Canada, commercial renters don’t have the same legal protections as residential tenants. Policymakers and the public both understand that if a business faces tariffs of 25%, they may not be able to survive. And yet provincial and territorial governments have been unwilling to step in to prohibit commercial rent increases of 25% or far more.
“Policymakers and the public both understand that if a business faces tariffs of 25%, they may not be able to survive. And yet provincial and territorial governments have been unwilling to step in to prohibit commercial rent increases of 25% or far more.”
The exploitation happens because it’s been allowed to happen. Commercial leases are not only not protected by province- or territory-wide rent control caps, but most jurisdictions don’t offer affordable dispute resolution: in Ontario, for instance, commercial landlords can evict a tenant only 16 days after rent is missed, effectively making it impossible to withhold rent if a landlord has failed to cover unexpected repairs or renovations.
There are jurisdictions that have solved for commercial rent hikes that we can learn from in this moment.
France caps commercial rent increases at 10 per cent between lease terms and prohibits tenants from paying for major repairs. Small retail tenants in Australia have access to mediation services for disputes. In New York, tax incentives encourage landlords to lease long-term to local businesses in order to create jobs and California recently adopted progressive legislation that caps rent increases for small brick-and-mortar businesses, while granting tenants additional protections.
In Vancouver, the New Westminster city council passed a motion in 2024 asking the province to explore commercial rent controls to help local businesses and Toronto City Council followed suit shortly after. Toronto voted almost unanimously for a motion that requested the Province of Ontario implement commercial rent reform and other legal protections for commercial tenants—unfortunately, for all its “Canada is not for sale” talk (and hats), the province has not yet moved on these small business protections.
Urgent, actionable changes to provincial and territorial commercial tenancies acts can level the playing field for Canadian small businesses under threat. These include:
Standardized commercial lease agreements, which help both parties understand their responsibilities and obligations.
A dispute resolution system to reduce legal fees and costly court delays.
Legal protection that allows businesses to withhold rent to offset money owed by a landlord—without fear of eviction.
Predictable rent increases through rent caps for commercial leases—similar to those in residential tenancy laws—which would provide business tenants with fair rent changes and the stability they need, while allowing landlords to remain profitable.
With commercial rent control, small businesses could focus on growing and investing in their businesses, rather than grappling with uncertain rent spikes. Especially right now, this kind of growth is crucial in fostering the wellbeing of local economies, protecting and generating Canadian jobs and keeping Canadian businesses locally owned.
A lack of commercial tenancy protections causes undue financial distress and threat of closure. Smart policy in the commercial rent market would provide Canada’s small businesses the vital opportunity to make the investments necessary to overcome this moment.
Canadians are seized with a commitment to buy locally. But many of our policy frameworks are crushing local small businesses, and the only ones that can afford rent are the big global chains. That is not good for the resilience of Canadian businesses or communities. It is also clearly not what Canadians want.