“On the surface, Canada seems to be doing well. We came out of the recent economic crisis relatively unscathed compared with our neighbour, the United States,” said Glen Hodgson, senior vice-president and chief economist. “But we remain at the back of the class on labour productivity, which is a key economic challenge for Canada. Labour productivity can be a confusing concept. It’s not about working harder, longer hours. It’s about working smarter and getting higher value for the same hours worked.”

Historical data for the peer countries reveal a strong positive relationship between investment in M&E and labour productivity. However, Canada’s labour productivity growth ranks 12th among 17 countries in the Conference Board’s How Canada Performs analysis.

By investing in M&E, companies provide their workers with the latest technologies, allowing them to produce more and higher-quality goods and services. Firms can contain their costs and increase their output, while substituting capital for labour — important as labour markets become tighter in Canada.

In the past, Canada’s under-investment in M&E was attributed to the low value of the dollar. When the loonie rose relative to the U.S. dollar, real M&E investment grew by 13.8 percent in 2005 and 10.7 percent in 2006. Despite this recent growth, Canada’s M&E investment as a share of GDP, as of 2009, remains below that of most of its peers.

Canada’s shortfall in M&E investment – specifically information and communications technologies (ICT) – has been a key contributor to the labour productivity gap between Canada and the United States. In the late 1980s, the U.S. invested $500 more per worker in ICT. By 2009, the U.S. was investing $1,500 more per worker.

How Canada Performs is a multi-year research program at The Conference Board of Canada to help leaders identify relative strengths and weaknesses in Canada’s socio-economic performance. The How Canada Performs website presents data and analysis on Canada’s performance compared to 16 peer countries in six performance categories: Economy, Innovation, Environment, Education and Skills, Health, and Society.

www.conferenceboard.ca