GDP Per Capita Is The Wrong Way To Judge Canada’s Living Standards

The metric dominating political debate tells us little about how we actually live.

There is an obsession with Canada’s GDP per capita among corporate economists, Liberal and Conservative politicians, as well as numerous media pundits. As the story goes, Canada’s GDP per capita is declining and, consequently, our standard of living is falling. To add insult to injury, we are also doing worse than our peers, such as the United States. If only we could have more corporate tax breaks, deregulation, and public sector cuts to spur private investment that would reverse this impoverishing trend.

Most Canadians who follow the news are familiar with some version of the above narrative, which is regularly repeated in mainstream media. A few examples from the last few years illustrate the pattern:

• A July 2023 Financial Post article claims “Canada’s standard of living is falling behind the rest of the developed world” because GDP per capita is underperforming.

• A September 2024 CBC article asserts that GDP per capita is “an important indicator of living standards” and quotes a former Bank of Canada official saying that Canada’s lower GDP per capita in comparison to the United States means “more and more Canadians have an incentive to move to the U.S. for … a higher standard of living.”

• A September 2025 report by the Fraser Institute examining GDP per capita growth of recent years claimed that the metric “is a key indicator of living standards”. Predictably, the right-wing institute places much of the blame for what it claims has been a decline in living standards on “increased regulation, higher taxes and increased deficit spending.”

There is just one problem: Canada’s GDP per capita—that is, total economic activity in the country divided by the population—is doing fine.

More importantly, GDP per capita is a terrible way to measure our living standards. It’s such a poor measure, in fact, that even the economist credited with its creation warned against its misuse. Simon Kuznets, a Nobel prize winning Russian-American economist who developed the GNP (now known as Gross National Income) and GDP measures, stated the following:

Economic welfare cannot be adequately measured unless the personal distribution of income is known. And no income measurement undertakes to estimate the reverse side of income, that is, the intensity and unpleasantness of effort going into the earning of income. The welfare of a nation can, therefore, scarcely be inferred from a measurement of national income...

In other words, while GDP measures the size of the economic pie, it says nothing about how big a slice any given person is getting. And it says nothing about how much effort went into making the pie. Both these shortcomings prevent GDP per capita from measuring actual well-being or the standard of living in a country.

Despite this, corporate economists routinely present GDP per capita as if it directly measures living standards. Take TD Bank’s 2023 report entitled Mind the Gap: Canada is Falling Behind the Standard-of-Living Curve. Its key highlight is that “Canada has lagged behind the U.S. and other advanced economies in terms of standard of living performance (or real GDP per capita),” and it concludes that “Canada’s standard-of-living challenges will persist well into the future.”

To be sure, GDP per capita holds some relevance when assessing living standards, but it certainly cannot be equated with them, as the TD Bank report so casually does. This is precisely why more comprehensive indicators exist. The Human Development Index (HDI), published annually by the United Nations, incorporates health and education in addition to national income in its global rankings. The UN also produces the Inequality-adjusted Human Development Index, which measures how evenly those achievements are distributed across a population.

The persistent focus on GDP per capita as the primary measure of living standards often serves a political purpose. Since Canada’s GDP per capita is lower than that of the United States, the argument goes, we should adopt more American-style economic policies—lower taxes, deregulation and privatization—to boost economic output.

But even if we were to assume such policies increase overall economic growth, they often fail to improve living standards for the majority. In practice, their effects tend to resemble trickle-down economics: concentrating wealth among a small number of families and corporations while weakening the social programs that directly improve quality of life for everyone else.

Canada’s living standards compare well internationally

Canada does relatively well among its peers when it comes to living standards, and this becomes clear when comparing it with Ireland and the United States.

In 2024, Canada’s GDP per capita stood at $54,340 USD, while Ireland’s was $112,895 USD (more than double Canada’s) and the United States registered at $84,534 USD (56% higher). Following the framing advanced by the authors of the TD report, we would expect living standards in Ireland and the U.S. to be dramatically higher than in Canada.

But this is not what the evidence shows.

Ireland scores only slightly higher than Canada on the UN’s HDI, while the United States scores slightly lower. On the inequality-adjusted HDI, Ireland again scores somewhat higher than Canada, while the United States—owing to severe wealth concentration and weaker social programs—scores substantially lower.

Even the HDI, however, remains only a rough approximation of living standards, as it does not capture factors such as housing costs, household debt, work-life balance, or subjective well-being.

Other international measures attempt to capture these additional dimensions, and Canada performs well on those too. On the OECD’s Better Life Index, which considers ten dimensions including work quality, safety and social connections, Ireland ranks only slightly higher than Canada while the United States ranks significantly lower. Meanwhile, Oxford University’s World Happiness Report places Ireland 15th, Canada 18th and the United States 24th.

Ireland’s case is particularly revealing. Despite having a GDP per capita more than twice that of Canada, average wages in Ireland are significantly lower. According to OECD purchasing power parity (PPP) adjusted figures for 2024, average annual wages in Ireland were $60,431 USD while in Canada they were $69,417 USD—nearly 15% higher.

Ireland’s unusually high GDP per capita stems largely from its ultra-low corporate tax policies, which allow multinational corporations to book vast global revenues through the country. As Ireland’s former Central Bank governor, Patrick Honohan, has noted: “Ireland is a prosperous country, but not as prosperous as is often thought because of the inappropriate use of misleading, albeit conventional, statistics…”

The United States presents a different dynamic. Although it has substantially higher GDP per capita than Canada, it consistently ranks lower on many measures of living standards. The reason is straightforward: much of the country’s economic growth has accrued to a small minority, while social programs and other policies that reduce inequality remain limited.

One stark illustration is life expectancy. In Canada it stands at 81.7 years—above the OECD average—while in the United States it is 78.4 years, below average.

High social development does not require high GDP per capita

Examples from the global south show that countries can achieve strong social outcomes—even with modest GDP per capita.

Take Cuba. While its GDP per capita hovers around $9,000 USD, it has one of the highest literacy rates in the world and a life expectancy of 78 years—roughly equivalent to the United States. Notably, it has achieved this level of social development despite six decades of harsh U.S. economic sanctions.

China provides another example. Its PPP-adjusted GDP per capita is around $24,000 USD—less than a third of that of the United States. Yet its literacy rate is among the highest in the world (97% in 2020 and effectively universal among youth) and its life expectancy is also 78 years. As Cambridge University political economist Jostein Hauge notes, “China has lifted more people out of poverty than the rest of the world put together in the past 50 years.”

At the same time, China has become a global leader in infrastructure, advanced manufacturing, green technologies, artificial intelligence and quantum computing.

Vietnam offers another striking case. Despite a devastating war with the United States that ended just over 50 years ago, Vietnam has achieved a literacy rate of 96% and a life expectancy of 75 years. It is also rapidly expanding its capabilities in advanced manufacturing, engineering and IT services.

All of this has been achieved while millions of Vietnamese citizens still suffer the long-term health consequences of Agent Orange sprayed during the war—and with a GDP per capita of roughly $14,415 USD (PPP), about a quarter of Canada’s.

The real issue: inequality and political choices

Canada is a profoundly wealthy country. It ranks as the world’s 10th largest economy despite being only 37th in population. That wealth has enabled a wide range of social programs that have supported high levels of social development and living standards.

Yet there is still much to improve.

Living conditions in some Indigenous communities remain unacceptably low. Many Canadians work full time yet remain trapped in poverty. Too many students graduate from post-secondary education burdened with heavy debt. And Canada still lacks a fully comprehensive public health system that guarantees timely medical care, dental care and pharmacare to everyone.

Contrary to what many corporate economists and pundits suggest, these challenges are not the result of insufficient national wealth. They are the result of political choices.

A key issue is inequality. Canada’s taxation policies have allowed staggering concentrations of wealth to accumulate among a small number of families. A recent analysis by Canadians For Tax Fairness found that “86 billionaire families held as much wealth as the 6.2 million least wealthy families in 2023.”

Such inequality is not just morally troubling—it undermines the fiscal capacity needed to fund strong social programs that improve living standards for everyone.

Moreover, many social investments are far more affordable than critics suggest. Free post-secondary tuition, for instance, could cost the federal government about $10 billion per year—roughly comparable to the more than $9 billion increase in military spending this year. Combined with other social programs, such policies could free young people from the burden of debt and health costs, allowing them to pursue innovative ideas and entrepreneurial ventures.

Indeed, strong social safety nets are seen as one reason Sweden has produced so many globally successful tech companies, including Skype, Spotify, Soundcloud, Minecraft and Klarna.

Canada could also improve living standards through policies that ensure workers are compensated fairly: higher minimum wages, easier unionization—particularly in low-wage service sectors—and reforms to the Temporary Foreign Worker Program, which currently creates a large pool of vulnerable workers susceptible to exploitation.

Let’s focus on the real problem

The fixation on GDP per capita tells us more about ideology than about living standards.

Canada is already a wealthy country with strong social outcomes by international standards. The real question is not whether we can afford better living conditions—it is whether we are willing to distribute our wealth more fairly and invest in the programs that improve everyday life.

If countries with far lower GDP per capita—like Cuba, China and Vietnam—can achieve major gains in health, education and infrastructure, there is no reason Canada cannot keep making gains with far greater resources.

The problem is not our GDP per capita. The problem is what we choose to do with the wealth we already have.