Canada, UK and Australia plunge into productivity sink hole


The Resolution Foundation claims that record immigration into the UK is masking a crisis in productivity and has failed to improve Britons’ living standards.

The think tank said the fastest population growth in a century had propped up the British economy since 2010, with three-quarters of the six million increase in population accounted for by net overseas migration.

However, this immigration has done little to boost GDP per capita, which has risen by only 4.3% over the past 16 years, well below the 46% increase witnessed in the previous 16 years.

The UK’s average annual productivity growth of 0.4% over the past 16 years also represented the slowest increase in almost 200 years, leaving the average wage more than £14,000 below its pre-crisis trend, according to the think tank.

UK productivity growth

“Britain’s middling growth record has been propped up by a booming population”, said Greg Thwaites, Research Director at the Resolution Foundation.

“The extra six million people in Britain have certainly made the economy bigger, but has done little for GDP per capita”.


“In fact, the UK’s record on productivity – which is what really matters for living standards – is exceptionally bad”, he said.

The same criticisms can be levelled at Canada and Australia, which have also experienced record levels of net overseas migration.

Canada’s labour productivity has plummeted amid the record immigration-driven population increase, which has diluted the country’s capital base:

Canada capital shallowing

The comparison to productivity in the United States is startling.

Canada’s output per worker has tanked, while it has lifted in the United States:

Canada output per worker

As a result, Canada’s real per capita GDP has plunged, whereas it has risen strongly in the United States:

Canada vs USA GDP per capita

Similar forces are at play in Australia, which has grown its population even more strongly via net overseas migration:

Population change

Like in Canada, decades of strong immigration have diluted Australia’s capital base and reduced productivity growth:

Capital shallowing

As a result, per capita GDP growth in Australia has ground to a halt:

Australian per capita GDP growth

A population-driven economy is a low-productivity economy.


Sadly, most Anglo nations are following the same dumb economic model and living standards are falling in response.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.