Policies for Stronger and More Inclusive Growth in Canada

After two decades of solid growth of household disposable income and living standards more generally, Canadians generally enjoy a high level of well-being. However, disparities persist – not all population groups have benefitted equally strongly from past improvements in living standards. Income inequality is close to the OECD average, but the tax and benefit system is less redistributive than those in most OECD countries. Despite high social mobility over a number of different dimensions such as health, earnings, social class or education, middle class self-identification has fallen in recent years. At the same time, productivity growth has slowed own, limiting the potential for further improvements in living standards. The slowdown in productivity growth is linked to a growing divide between high-productivity frontier firms and low-productivity laggards, as well as a weakening of business dynamism. The cross-cutting challenge presented by the persistence of multidimensional inequalities and weak productivity growth underlines the need for a reappraisal of Canada’s policy making process with the aim of fostering stronger and more inclusive growth.