While Ottawa
defense spending and investment incentives that millions of Canadians are struggling with.
weak
and growing economic instability, which economist Lars Åsberg says has serious social consequences.
“The big missing link is that we don't have much
in Canada, said the Dalhousie University economics professor. – We haven't had this for quite some time, and we're faced with a huge amount
and a long period of real wage stagnation.”
Osberg said the past year has been a rollercoaster:
trade and government policy. Some Canadians may have benefited from this instability through investments, property purchases or business opportunities arising from market volatility, but many households are under intense financial pressure, a reality masked by political talk of “affordability” that fails to address deeper structural problems, he said.
At the heart of the problem, he said, is Canada's broken social safety net, especially
(EI), which, like other social programs, has not kept pace with the modern economy.
EI benefits remain largely the same in cost and replace approximately 55 percent of a person's wages. Benefits are higher than in the US, but they lag significantly behind European countries such as Denmark, where they replace 90 percent of a person's wage, the Netherlands (70 percent) and Sweden (80 percent).
Osberg said more people are working temporary or part-time jobs, unemployment is higher than before, and new technologies such as artificial intelligence are changing the types of jobs available. As a result, he said the system needs to be updated to ensure people are protected when their jobs change or disappear.
More than 870,000 Canadians
reported about the concert work
it will become their main job at the end of 2022, according to Statistics Canada, and temporary and part-time workers report much higher levels of job instability than permanent workers.
But Ottawa is not treating public concerns about economic instability and a weak social safety net as a priority, Osberg said.
“People don't see their problems being recognized in Ottawa,” he said. “A lot of people are feeling insecure and financially strapped, and the federal government just doesn’t seem willing to confront it seriously.”
Canada's unemployment rate was higher and more volatile in 2025 compared to 2023 and 2024. The rate fell to about 6.5 percent at the end of this year, suggesting some weakness in the labor market, but overall the unemployment rate was up from last year.
The rising cost of living is also adding to the pressure, with 67 per cent of Canadians saying the cost of living is worse than ever, according to an Abacus Data study released in December. Food prices rose 4.7 per cent year over year in November, the fastest pace in two years, and families can expect to pay about $1,000 more for food next year, according to the 2026 Canadian Food Price Report.
“This is not a minor concern or a background concern,” said David Coletto, chief executive of Abacus Data. “It is a dominant life experience that continues to shape how Canadians interpret government performance, leadership and competing policy priorities.”
Osberg has been critical of some federal priorities, particularly the government's massive increase in defense spending, which is slated to rise to five percent of gross domestic product (GDP) by 2035 from about 1.4 percent today.
The federal budget provides about $63 billion over five years for military equipment, personnel and infrastructure, as well as about $280 billion for broader capital projects in infrastructure, innovation and industrial development.
The budget did include modest tax cuts for middle-class Canadians and introduced automatic tax filing for low-income households, making it easier for millions of people to claim benefits such as the GST/HST credit and the Canada Child Benefit in 2026.
But Osberg said support from everyday Canadians remains limited.
“If you have a government focused on increasing defense spending to five per cent of GDP and on large projects that are very capital intensive but don't create many jobs, then you have a government that is oblivious to the uncertainty and anxiety that dominates the lives of many Canadians,” he said.
Osberg said prolonged economic instability could have serious social and political consequences, including increased anger, polarization and openness to extremist or exclusionary politics, which are trends already unfolding in other countries, especially the United States.
He said the most pressing issue in 2026 will be the growing sense of insecurity experienced by working Canadians. His prescription is clear: strengthen employment insurance and rebuild the social safety net.
“It’s absolutely possible to walk and chew gum at the same time,” Osberg said. “You can build pipelines and invest in big projects while still maintaining a strong safety net for people who lose their jobs.”
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