Ottawa’s regulatory burden is strangling Canadian businesses, says the Montreal Economic Institute (MEI), and must be immediately reviewed.
“Regulation creep is a real thing, and Ottawa has been fuelling it for decades,” said Krystle Wittevrongel, the MEI’s director of research in a May 1 news release. “Regulations are passed but rarely reviewed, making it burdensome to run a business, or even too costly to get started.”
A viewpoint published by the Montreal-based public policy think-tank points to Statistics Canada data that shows between 2006 and 2021, the number of federal regulatory requirements in Canada rose by 37 per cent, from 234,200 to 320,900. This has slowed real GDP growth by 1.7 percentage points, employment growth by 1.3 percentage points, and labour productivity by 0.4 percentage points.
Regulations in the Canadian Federation of Independent Business’ Red Tape report indicate small businesses have been negatively impacted as firms with fewer than five employees pay over $10,200 per employee in regulatory and red tape compliance costs, compared to roughly $1,400 per employee for businesses with 100 or more employees.
Canadian businesses spend an estimated 768 million hours a year on compliance, equivalent to almost 394,000 full-time jobs. The costs to the economy last year were more than $51.5 billion.
MEI views over-regulation as a prime factor in the decline of entrepreneurship in Canada. In the year 2000, 3 out of every 1,000 Canadians started a business. By 2022, that rate had fallen to just 1.3, a nearly 57 per cent drop since 2000.
In the big picture, Canada is expected to experience the lowest GDP per capita growth among advanced economies through 2060.
Wittevrongel proposes looking back to the Chrétien government’s 1995 Program Review, where the feds launched a process aimed at reducing government spending. Over a two-year period, $12 billion in federal spending was eliminated, a 9.7 per cent reduction that restored fiscal balance.
MEI proposes asking these questions to evaluate existing or proposed regulations:
- What is the purpose of the regulation?
- Does it serve the public interest?
- What is the role of the federal government and is its intervention necessary?
- What is the expected economic cost of the regulation?
- Is there a less costly or intrusive way to solve the problem the regulation seeks to address?
- Is there a net benefit?
“Canada has just lived through a decade marked by weak growth, stagnant wages, and declining prosperity,” said Wittevrongel. “If policymakers are serious about reversing this trend, they must start by asking whether existing regulations are doing more harm than good.”
