Friday, September 4, 2015

Population Growth and the Economy

Amid all the talk of how serious Canada's recession during the first two quarters of 2015 actually was, one point seems never to be mentioned--population growth. Given that Canada's population is growing at an average of 1.1% per year, the economy needs to grow at at least 1.1% a year just to stay in the same place on a per capita basis.

We are now told that Canada's economy shrank on an annualized basis by 0.8 % in the first quarter and 0.5% in the second quarter--by 1.3% on an annualized basis overall, in other words. But factor in population growth: on a per-capita basis that's a decline in GDP of 2.4%.

Sure, this recession seems to have been not particularly deep compared to some in the past. But to suggest that a per capita 2.4% economic decline is a mere technicality is to significantly distort the facts.

The point is one that deserves to be made whenever GDP figures are released--though the effect it draws attention to will not always move the numbers in the same direction. In a country such as Japan, for example, population is now falling by about 0.2% annually; calculating the per-capita rate of GDP growth in such circumstances requires an upward rather than a downward adjustment to the raw figure.

Regardless of the direction, it would be a healthy development if, whenever GDP figures are released by a country, statisticians routinely provided the equivalent as a per capita figure.

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