{"id":43016,"date":"2024-01-23T11:00:01","date_gmt":"2024-01-23T11:00:01","guid":{"rendered":"https:\/\/www.pantheregroup.com\/2024\/01\/23\/whats-a-population-trap-and-how-do-you-get-out-of-it\/"},"modified":"2024-01-23T11:00:01","modified_gmt":"2024-01-23T11:00:01","slug":"whats-a-population-trap-and-how-do-you-get-out-of-it","status":"publish","type":"post","link":"https:\/\/www.pantheregroup.com\/2024\/01\/23\/whats-a-population-trap-and-how-do-you-get-out-of-it\/","title":{"rendered":"What\u2019s a population trap and how do you get out of it?"},"content":{"rendered":"
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Economists at the National Bank of Canada released a report recently arguing that Canada is caught in a \u201cpopulation trap.\u201d But what exactly does that mean and how does a country get out of it? The Financial Post\u2019s Denise Paglinawan explains.<\/em><\/p>\n
What is a population trap?<\/strong><\/h2>\n<\/div>\n
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The Oxford dictionary defines population trap as an economic \u201csituation where no increase in living standards is possible, because the population is growing so fast that all available savings are needed to maintain the existing capital-labour ratio.\u201d In layman\u2019s terms, this means\u00a0there are so many new people, that all our investment capacity is getting used up incorporating them into the economy and getting them up to speed \u2014 there is nothing left over to actually increase the overall standard of living. St\u00e9fane Marion, one of the National Bank economists who authored the report, described a population trap as something akin to a toolbox not big enough to hold all the tools people need. \u201cIf you invite three people into the country and you only have two hammers, the third person is lacking capital and can\u2019t be as productive (as the other two),\u201d he said.<\/p>\n<\/div>\n
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How does this apply to Canada?<\/strong><\/h2>\n
The concept of a population trap has historically been the preserve of emerging economies. But Canada\u2019s rapidly rising population, a result of recent immigration policies, appears to be mimicking that effect of high birth rates. Immigration is good for Canada\u2019s potential gross domestic product, said Marion, but \u201call good things have their limits.\u201d<\/p>\n
Canada\u2019s population increased by more than 1.2 million people or 3.2 per cent in 2023, five times higher than the average for nations in the Organisation for Economic Co-operation and Development. The economists said this population growth is extreme relative to the absorptive capacity of the economy, given that the workforce is not aging faster than the OECD average. This absorption challenge is most evident in Canada\u2019s housing market, where the supply deficit reached a new record of only one housing start for every 4.2 people entering the working-age population, compared to the historical average of 1.8 ratio, they said.<\/p>\n
What is capital stock?<\/strong><\/h2>\n
The economists say Canada lacks the infrastructure and capital stock to adequately absorb current population growth and improve the standard of living. While the housing shortage has attracted the most attention, capital stock includes components of everything from infrastructure, hospitals, schools, machinery, equipment to software. \u201cGiven that we\u2019re running a current account deficit in this country, the only way that we can grow our capital stock is to attract foreign capital at the same time,\u201d said Marion.<\/p>\n<\/div>\n