Productivity pains pounce Canada

Sonya Khanna

Business Editor

Two decades of less-than-optimal productivity growth in Canada can be blamed for lower than attainable individual wealth and corporate profits. Let the finger pointing and angry jeers ensue.

According to a report published by the Conference Board of Canada, if Canadian productivity had been on par with that of the United States from 1988 and 2008, real GDP per capita would have been approximately $8500 higher in 2008, personal disposable income would have been $7500 higher, and corporate profits as well as federal government revenues would have generated favourable revenue gains.

“The Centre on Productivity conducted a model simulation that shows how much richer Canadians would be, how much more profitable corporations would be, and how much more revenue governments would have at their disposal, if Canada’s labour productivity growth had kept pace with that of the United States over 1988–2008,” the analysis says. “The results are startling.

To assess the differences in Canadian productivity growth the Conference Board cheap viagra canada prepared a simulation, increasing Canadian labour productivity growth by 0.8 per cent from 1988 to 2008. This increase is comparable to the difference between annual labour productivity growth in the United States and Canada over those 20 years; a difference of 2.2 per cent and 1.4 per cent, respectively.

The report was prepared by the Centre on Productivity in effort to gain a broader outlook on the issue of Canada’s lagging productivity performance over the past two decades. The report posits that based on 2008 figures, individuals in the United States were over $13,000 richer than Canadians, taking into account purchasing power parity. To add insult to injury, in a desirable scenario in which the productivity growth of Canada matched that of the United States, the gap would have been less than $7000.

“Putting it plainly, increasing our productivity growth performance over the past two decades to equal that of our neighbour would have significantly increased Canadian wealth and improved our standard of living,” said Mario Lefebvre, Director, Centre for Municipal Studies. “These results should impress upon policymakers, as well as average Canadians, just how vital it is for Canada to improve its productivity performance.”

Coulda, woulda, shoulda. These are words we chant internally to put our minds at ease and lessen the pain of what could have been, or more aptly, where we could have thrown the extra disposable income. Wasting time sulking over something that never was might be a further inefficient waste of productive resources, but many might be wondering just when and how Canada dropped the ball on multi-factor productivity and capital intensity.

The Conference Board has indicated that the key drivers to productivity growth are labour quality, capital intensity and multi-factor productivity. Canada’s performance since the 1980s in facets surrounding multi-factor productivity, including technological progress and organizational changes, as well as capital intensity, has puttered along sluggishly relative to American performance. Despite the negative connotations of these indicators, the quality of labour in Canada has remained stable.

The report indicates that productivity growth in Canada would have generated an increase in wages, stimulating higher consumer spending by 25.5 per cent. Total business and government investments would have been roughly $51-billion higher and total federal government revenue would have been 31.1 higher.

The Conference Board reported that output from a goods-producing standpoint would have been 20.4 per cent higher and 24 per cent higher on the services side, reporting that Universities would have benefited the most from productivity growth.