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Business and Reconciliation (92)

Bank of Canada paper on Indigenous economy highlights the data deficits that hamper progress

October 19, 2023

The Globe and Mail: OPINION – A new paper from researchers at the Bank of Canada tells us a lot about the state of the Indigenous economy within Canada. But one thing that stands out is how much the paper can’t tell us – because the basic economic data, in 2023, don’t exist.

The 30-page overview, published last week, is a terrific roundup of the characteristics of and important deficits in the economies of Indigenous communities. It’s a must-read for anyone engaging in the conversation of economic reconciliation, in examining the challenges and obstacles preventing too many of those communities from realizing their economic potential.

The first challenge: finding data to measure the state of the Indigenous economy with any accuracy or timeliness. As the Bank of Canada paper makes abundantly clear right off the top, these vital building blocks for economic policy are crumbly and incomplete.

“Attempts to measure the size or contributions of the Indigenous economy in Canada are limited by data availability and quality,” the report says in its introduction. “Those data provide only a partial picture of the Indigenous economy.”

The paper cites numerous instances where key measures are anywhere from two to eight years old; many are only updated every few years. The existing statistics contain only spotty information about the number and performance of Indigenous businesses, and we know shockingly little about Indigenous ownership of physical capital (buildings, machinery and equipment used in production). The data underestimate the contribution of traditional Indigenous land-based economic activities, such as hunting and fishing.

In the case of Statistics Canada’s monthly employment and inflation reports, activity on reserves – home to about 17 per cent of the Indigenous population – isn’t included at all. “These gaps often reflect community size, remoteness and jurisdictional issues that limit data collection and validation,” the paper says.

From simply an arithmetic standpoint, the data gaps make it difficult to get any accurate measure of the size of the Indigenous economic contribution within Canada. Statistics Canada’s best guess of Indigenous GDP for 2022 was $48.9-billion, equal to about 2.2 per cent of Canada’s total GDP, though the Bank of Canada paper acknowledges that this is just one of many estimates in the past several years, which “vary considerably.”

But regardless of the precise number, we can safely say the Indigenous economy is dramatically undersized, relative to that of non-Indigenous Canada. Indigenous people make up about 5 per cent of Canada’s total population, yet their contribution to Canadian GDP appears to be less than half that much.

Estimates of the number of Indigenous-owned private businesses are similarly varied. But again, it appears the Indigenous share of business ownership is only about half as large as the population share.

And the data indicate that a key barrier to business formation and, by extension, to economic growth is the restrictive regime of land ownership governing First Nations under the Indian Act. The inability for First Nations peoples to own, mortgage and transfer their reserve lands under the act makes it difficult for on-reserve businesses to use collateral to raise financing, which greatly hinders business creation and expansion.

As a result, the bulk of Indigenous businesses are off-reserve, which creates another economic problem for those communities, the report says.

“A large share of earnings leave the community, because households consume goods and services off reserve.”

Tellingly, the Métis, who make up a little over one-third of the Indigenous population, account for about 44 per cent of Indigenous GDP, and about 47 per cent of Indigenous businesses. The Métis have never been subject to the land-ownership restrictions of the Indian Act, and that difference may well be a big part of the explanation behind the outsized Métis economic performance. (The Métis also have the highest employment and income levels among Indigenous population groups.)

The available data also show that the Indigenous population has much higher unemployment (nearly three percentage points) and much lower average wages (about 10 per cent) than Canada’s overall labour force. This represents another hard brake on Indigenous economic activity.

All of these barriers to Indigenous growth and well-being are also a missed opportunity for the Canadian economy as a whole. The data, as imperfect as they are, imply there’s more than $50-billion a year of economic output that Canada is leaving on the table, simply by failing to deliver to Indigenous communities the same economic capacity as the non-Indigenous economy.

This represents a significant source of underutilized labour that is bound to grow, proportionally, as more of the non-Indigenous population ages into retirement.

But to dig down to the roots of these challenges and opportunities, Canada is going to need more detailed and frequent statistical information on the Indigenous economy than it has now. Until we can identify and measure the issues we’re talking about, we can’t properly address the problems and close the Indigenous economic gap.

“Continued progress is needed to improve data on the Indigenous economy. This would enable policymakers and Indigenous leaders to measure progress and make informed decisions,” the paper concludes.


David Parkinson: Staff Reporter

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