Dismal economic growth prospects should raise alarm bells in P.E.I.

According to a recent study, Canada ranked third-last among 30 high-income OECD countries for growth in per-person GDP, a common measure of prosperity and living standards, from 2014 to 2022 (the latest year of available data). Canada’s growth was barely half of growth in Australia and the United Kingdom, and less than one-third of the United States and New Zealand.

Worse yet, Canada’s projected growth between now and 2060 is the lowest among the 30 countries. Barring a change in course, this means Canadians will experience declining living standards compared to our peers in other developed countries.

This should concern all Canadians. But in Prince Edward Island, it should raise alarm bells, for at least a couple of reasons.

P.E.I. is the lowest-income province in Canada with a per-person GDP of $47,288 (in 2019 dollars), trailing the Canadian average by a whopping $12,092. Low projected growth for the country does not bode well for those who are already well below the Canadian average.

Furthermore, while the Island’s rapidly increasing population has led to much discussion of growth, it’s important to distinguish between aggregate (overall) growth and per-person growth. One can argue whether rapid aggregate population (and GDP) growth is good or bad for the Island. However, the average person likely cares most about their own incomes, which makes per-person measurements most relevant. As noted above, P.E.I.’s per-person GDP statistics tell a much different story than the aggregate economic growth numbers.

For example, while per-person GDP did grow in P.E.I. between 2010 and 2022, the Island’s growth ranked in the middle of the pack in Canada, and was 48th among 60 North American jurisdictions. In that same period, the Island’s status as the lowest-income jurisdiction in North America did not change.

Second, while several factors influence Canada’s growth projection, relatively poor performance on investment (as measured by capital per worker) remains a key contributor. By this measure, after adjusting for inflation, P.E.I. recently ranked second-last within Canada, substantially trailing both the Canadian average the average of all U.S. states.

The good news? For both P.E.I. and Canada as a whole, growth-oriented policy reform can help turn things around. Three immediate policy levers are available to both the provincial and federal governments.

First, reduce the size of government—at current spending levels in both Ottawa and Charlottetown, the size of government hurts economic growth.

Second, implement predictable competitive regulatory regimes, particularly for natural resource development.

Third, reduce taxes to improve tax competitiveness relative to other jurisdictions, thereby making the province more attractive to investment and skilled workers.

There’s no reason for Islanders to accept the declining living standards as a matter of fate. Despite modest recent growth, P.E.I. remains a low-income province within a declining-income country. The data should prompt Islanders to demand better policies from their elected officials.