StatCan Reports Canada's Underground Economy Grew to $68.5 Billion in 2021

07 Oct, 2023

StatCan Reports Canada's Underground Economy Grew to $68.5 Billion in 2021

Canada's underground economy surged in 2021, reaching a substantial $68.5 billion, equivalent to 2.7% of the total GDP, according to a comprehensive report by Statistics Canada.

The report reveals that the underground economy experienced significant growth, surging by 4.8% in real terms in 2021. This remarkable expansion was primarily driven by an astonishing 18% increase in underground economic activity related to investments in residential structures. In contrast, the underground economy had experienced a 4.5% decline in 2020, primarily due to reduced underground economic activity in household final consumption expenditure, which had plummeted by 8.4%.

The underground economy, as defined by the report, encompasses market-based economic activities, whether legal or illegal, that remain unmeasured due to their hidden, illegal, or informal nature. It's worth noting that the report excludes certain illegal activities such as those related to drugs (except cannabis) and prostitution.

The StatCan report highlights the significant role played by the residential construction industry in Canada's underground economy in 2021. This sector contributed a substantial 35.0%, equivalent to $23.9 billion, making it the largest contributor. Following closely were real estate landlords, responsible for 12.7%, followed by retail trade at 10.5%, and accommodation and food services at 7.3%. Together, these four industries accounted for approximately two-thirds of all underground economic activity in Canada.

Notably, underground economic activity in the residential construction industry saw an impressive 32.8% increase in 2021, aligning with the 31.3% rise in business investment in residential structures across the entire economy.

In terms of distribution, nearly 45% of unreported income in 2021, totaling $30.6 billion, went to employees as wages, representing about 2.4% of all employee compensation in the economy. Incorporated business owners received approximately 30%, while unincorporated business owners received around 24% of the remaining underground income.

The report also sheds light on the underground economy associated with household spending, which amounted to $38.3 billion in 2021. Of this, 26.3% originated from purchases of alcohol, tobacco, and cannabis, making up four percent of total household spending in the economy. Rental fees for housing (19.5%) and food and beverage services (18.8%) were the next significant contributors to the underground economy in household spending.

Ontario led the nation in terms of the highest value of underground economic activity in 2021, totaling $26.9 billion, followed by Quebec with $15.5 billion. Alberta and British Columbia reported $11.1 billion and $6.8 billion, respectively. Together, these four provinces accounted for 87.9% of the total underground economic activity, closely mirroring their contribution to the overall economy at 87.1%. However, Prince Edward Island and British Columbia had the highest proportions of underground economic activity as a percentage of their total economy-wide GDP in 2021, with 3.4% and 3.2%, respectively. In contrast, Nunavut had the smallest share at just 0.4%.