THE CONVERSATION — The COVID-19 pandemic , Canada’s GDP , the economy seems to be heading for , inflation is and unemployment has decreased to — close to pre-pandemic levels.
Despite these positive economic indicators, recent surveys suggest Canadians are . An overwhelming believe the country is already in a recession, with 73 per cent anticipating one within the next year. .
This discrepancy prompts the question: Why are Canadians’ sentiments so ? As economists, we have identified several reasons that explain why this gap exists.
1. Growing socio-economic divide
are both growing at an alarming rate in Canada. account for more than two-thirds of net worth, compared to the 2.7 per cent held by the bottom 40 per cent.
for 40.3 per cent of net disposable income in 2023, while the bottom 20 per cent accounted for just 6.1 per cent. The , meanwhile, have grown even richer.
In contrast, the number of people in the keeps increasing. Net saving for the lowest income households decreased by in the third quarter of 2023 compared to the previous year.
2. Debt servicing burdens
Since the onset of the pandemic, net savings have deteriorated for all except those with the highest incomes, as renters and lower-income families tend to spend more than they make on necessities.
Canada currently holds the among all G7 countries. With the current high interest rates, the burden of interest payments for households as a percentage of disposable income recently reached its highest level in 12 years.
3. Interest rates
The average disposable income for the of any income group. This means those with financial assets benefit from rising interest rates, while those at the bottom suffer from the burden of greater debt service.
4. Housing costs
Skyrocketing housing prices have outpaced income and mortgage rates have gone up dramatically, resulting in the lowest in the last 40 years. The dream of home ownership seems more distant than ever for many.
5. Impact of inflation
Although , it still remains fairly high. It reached , hitting the hardest.
6. Growing corporate concentration
Canada’s most concentrated industries have become even , and the number of highly concentrated industries is growing. and markups of already profitable firms is increasing.
This trend negatively impacts consumers and broader society by reducing industry dynamism, resulting in fewer choices and higher costs.
We are seeing this currently play out in the grocery sector, where . This is the same reason why and remain higher in Canada than in comparable countries.
7. Mental health struggles
The proportion of people reporting very good or excellent mental health .
The prevalence of some chronic conditions, including high blood pressure, heart disease and obesity, increased from 2015 to 2021 as well.
Financial anxiety, pandemic-related stress and other issues are making , which affects their outlook on life and the economy.
8. Long COVID
While the impacts of the pandemic are slowing down, long COVID is still a significant issue for many. who contracted COVID-19 suffer from symptoms, including brain fog, , fatigue and shortness of breath, that affect their health and well-being.
It is shortsighted to assume we have all recovered equally from the pandemic when some people are still being affected by it.
9. Higher education funding cuts
College education has historically served as “” and an instrument of intergenerational social mobility, but in the face of , this may no longer be the case.
The financial situation of many colleges is , meaning post-secondary institutions could end up raising tuition fees or rely more on international students to meet their budgets, both of which affect domestic students.
Students from the lowest economic stratum will increasingly find it difficult to trade the security of a job right out of high school for the high cost of a university or college degree. This, in turn, will reduce their chances to move up in the socio-ecnomic ladder.
10. Youth struggles
are more anxious about their future, concerned about their mental health and educational prospects and more disillusioned by politicians than previous generations.
Despite being resilient and pragmatic, and the future ahead. They worry about their financial security, with high costs of rent and groceries.
found that nearly three-quarters of Gen Z disagreed that, as a generation, they would surpass their parents. Fifty-six per cent feel afraid, sad, anxious and , while 78 per cent reported that climate anxiety is impacting their mental health.
Navigating the disconnect
While more than hope for positive outcomes in 2024 and the macroeconomic indicators show prosperity, there exist numerous factors causing dissatisfaction in large swathes of the population in Canada.
Managers, business leaders, policymakers, government officials and economists should all care deeply about this issue. Over-relying on aggregate indicators — like macroeconomic prosperity — while making strategic, investment, hiring and financing decisions could lead to unexpected outcomes and challenges.
For example, a real estate company might decide to invest in a large, low-end housing project based on economic numbers. While the initial logic may seem sound — if the economy is doing well, that there should be a huge demand for housing — issues might arise if the target population is financially strained and unable to afford the housing.
A comprehensive understanding of the mindset, risk preferences and motivating factors of key customers, stakeholders, investors, employees and voters is essential for making well-informed decisions that benefit all parties involved.
, Professor and Canada Research Chair, Haskayne School of Business, ; , Assistant Professor, Trulaske College of Business, ; , Associate Professor of Accounting and Future Fund Fellow, Haskayne School of Business, , and , Assistant Professor, Department of Accounting,
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