Canada has ‘fallen considerably behind’ in productivity: report

The mining, oil & gas and manufacturing sectors were major causes of a post-2000 slowdown in labour productivity in Canada, according to Statistics Canada’s Canadian Productivity Review.

The study’s authors, John Baldwin and Wulong Gu, write that productivity growth in Canada, having increased by an average of three percent per year over the past 20 years — approximately in line with the U.S. — has slowed significantly since 2000 to 2.2 percent per year.

They examined three key components of labour productivity: capital intensity (adequate investment in new machinery and equipment), labour composition (the relative level of job skills and training) and multi-factor productivity (technology, innovation, firm organization, scale and capacity utilization effects).
The study explains that the post-2000 slowdown in labour productivity was mostly accounted for by the slowdown in two major industry groups: mining and oil & gas, and manufacturing.

They found that the capital intensity of Canadian firms during the past eight years was on a par with the U.S., as was the composition of labour (i.e. the relative level of job skills and education). However, multi-factor productivity growth in Canada during this same period was much slower than in the U.S., and consequently was the major contributor to a divergent pattern of overall productivity growth between the two countries.

“Labour productivity grew more quickly in Canada from 1961 to 1985, then less quickly until 1990, by which time the two countries had returned essentially to their 1961 relative levels,” the study explains. “The relative growth rates were about the same throughout the 1990s. Since 2000, Canada has fallen considerably behind.”

It’s worth noting that despite this slower growth, real income per capita in this country over the past eight years has increased by 15.6 percent compared to 8.6 percent in the U.S. This is due in part to strong, resource-driven inflows of foreign investment and the appreciation of the Canadian dollar versus the U.S. currency.