Lead on to Fortune: Canada's Productivity Impasse

Imagine working diligently for years and years, and despite your best efforts and pats on the back, you learn you delivered about 3/4 of the value that your peers accomplished in the same time. This is our reality in Canada. In 1984, Canada's economy produced 88% of the value generated by the U.S. economy per hour worked. Fast forward to 2022, and that figure has declined to 71%. This decline is not a reflection of our work ethic or our character, but a symptom of an economy hampered by a lack of investment, complicated regulation, and misaligned immigration policies.

If you're like me, the concept of lower productivity doesn't really sound like it strikes me, but it does every day...the highest phone bills in the OECD - 20% to 140% higher to be exact (Newswire), expensive air travel, wait times at hospitals, slower internet and higher prices are all a symptom of this productivity gap.

Canadian businesses have historically invested less in machinery, equipment, and intellectual property than our OECD peers. (Business Council of Alberta). In 2022, the country spent approximately 1.55% of its GDP on R&D, which is lower than the 2.73% OECD average (Trading Economics). One of the issues causing this is our economy is heavily weighted to natural resources and traditional manufacturing sectors where, historically, investment in R&D is not as intensive as in high-tech industries. Our issue is a lack of stimulus in the right places, guiding us to focus on growing innovative industries rather than relying on what works today.

Likewise, Canada's economic landscape is characterized by complex interprovincial regulatory frameworks. These obstacles hinder competition and allow inefficiencies to persist within protected industries (Financial Times). We foster less competition in sectors that are highly competitive for consumers elsewhere, such as in our telecom (Rogers, Bell, Telus) and finance sectors ("The Big Six") where oligopolies prevail.

While Canada boasts high labour force participation rates, there is a notable misalignment between workers' skills and the needs of high-productivity sectors (Financial Times). While Canada attracts a well-educated workforce, skills mismatches and underemployment persist amongst new Canadians. Overeducation—where individuals work in roles below their qualifications—remains a concern. Among those with some postsecondary education, 41% of recent immigrants (under 10 years in Canada) hold lower-skilled jobs (Statistics Canada). Enhancing credential recognition, targeted job placement, and employer engagement are critical to integrating immigrants into roles that fully utilize their skills, improving productivity.

The repercussions of sluggish productivity growth are far-reaching. They include slower wage growth, diminished economic expansion, and a decline in quality of living standards relative to more dynamic economies. The way forward is through policy leadership that cultivates a competitive economy that enhances the quality of life for the next generation.