According to a new Statistics Canada report, government regulation has grown over the years and it’s hurting Canada’s economy. The report, which uses a measure of regulatory burden devised by KPMG and Transport Canada, shows government regulatory requirements increased 2.1 per cent a year from 2006 to 2021, which reduced the business sector’s GDP, employment, labour productivity and investment.

The growth in regulation over these years reduced business sector investment by an estimated nine per cent, GDP in the sector by 1.7 percentage points, employment growth by 1.3 percentage points and labour productivity by 0.4 percentage points and it also “reduced business startups and business dynamism.”

While the report only covered regulatory growth through 2021, in the past four years an avalanche of new regulations has made overregulation even worse. The Trudeau government in particular has intensified its regulatory assault on the extraction sector with a greenhouse gas emissions cap, new fuel regulations and new methane emissions regulations. In the last few years, federal diktats and expansions of bureaucratic control have blanketed the auto industry, child care, supermarkets and many other sectors.

Again, the negative results are evident. Over the past nine years, total real growth in per person GDP (an indicator of incomes and living standards) was a paltry 1.7 per cent and trending downward, compared to 18.6 per cent and trending upward in the United States. If the Canadian economy had tracked the U.S. economy over the past nine years, average incomes in Canada would be that much higher today.

Over these same lean nine years, business investment in Canada actually fell, even as it rose more than 30 per cent in the U.S. on a real per-person basis. Workers in Canada now receive barely half as much new capital per worker as in the U.S., and only about two-thirds as much new capital (on average) as workers in other developed countries.

Consequently, Canada is mired in an economic growth crisis — a fact that even the Trudeau government does not deny. “We have more work to do,” said Anita Anand, then-president of the Treasury Board, last August, “to examine the causes of low productivity levels.” The Statistics Canada report, if nothing else, confirms what economists and the business community already knew — the regulatory burden is a big part of the problem.

Regulation is not the only factor hurting Canada’s economy, of course. Higher federal carbon taxes, higher payroll taxes and higher top marginal income tax rates are also weakening Canada’s productivity, GDP, business investment and entrepreneurship.

Although the Statistics Canada report shows that the economic costs of regulation are significant, its authors note that their estimate of the effect of regulatory accumulation on GDP is “much smaller” than that estimated in an American study published in 2020 — which means the negative effects of regulation in Canada may be even higher than StatCan suggests.

Whether or not this latest report underestimates the economic costs of regulation, one thing is clear: reducing regulation and reversing the policy course of recent years would help get Canada out of its economic rut. The country is effectively in a recession even if, as a result of rapid population growth fuelled by record levels of immigration, the GDP statistics do not meet the technical definition of a recession.

With such dismal GDP and business investment numbers, a turnaround — both in policy and outcomes — can’t come quickly enough for Canadians.

Matthew Lau, a Toronto writer, is an adjunct scholar with the Fraser Institute.

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