It’s time for Canadians to get over our collective aversion to the word ‘productivity’

As published in the Toronto Star

It’s time for Canadians to get over our collective aversion to the word ‘productivity.’  

For a couple of decades now, any mention of the concept has been met with disdain, mainly because the conventional wisdom was that it meant we all had to work harder — and we were already collectively exhausted. 

But ‘productivity’ isn’t about working harder — it’s about working smarter. 

On that score, we’re in trouble, as pointed out in a new economic outlook from the public policy group at law firm Bennett Jones. 

While economists and business leaders have fretted for years about Canada’s inability to keep up with competitors and trading partners, productivity of late has been declining outright. And that has material impacts on our capacity to pay higher wages, deliver better public services, and improve the quality of life of Canadians.  

Since the beginning of 2020, our real GDP per capita — the measure of production per person in Canada, and a useful proxy for standard of living — has been shrinking by 0.5 per cent a year. In the U.S., on the other hand, GDP per capita has been expanding by 1.6 per cent a year. 

This is not about working more hours

If Canada had chugged along as the same pace as the United States since January 2020, our output per person would be 7.8 per cent higher by now, a difference that’s worth about $5,700 annually for each one of us, as contribution to GDP, and ultimately as income. 

Turning this around is not about working more hours. Canadians are on the job.  

The tight labour markets that have confronted employers over the past couple of years have loosened a bit lately, because of high interest rates and a slowdown in the economy. But over the medium term, the aging of our population means the right labour will remain hard to find, and the unemployment rate is likely to remain quite low. 

Nor can we solve our problem just by bringing in more immigrants or temporary foreign workers. We need new skilled workers to help fill labour gaps, but our immigration policy must be matched with enough infrastructure to absorb newcomers. 

The only way to lift our GDP per capita sustainably is to raise output per hour worked — our productivity. There. It is not so hard to say.  

More productive workers would earn higher wages

The Bennett Jones report outlines some avenues to get there. None of them are easy, but they’re a heck of a lot better than continuing on a trajectory that will not just erode our standard of living but also our quality of life. 

We could begin with a three-way conversation that draws together government, businesses, and workers to collaborate on strategic ways to aggressively invest in a more productive labour force. 

Arming workers with all the tools they need to produce more is a perfect start — machinery, hardware, software, artificial intelligence, or whatever it takes. 

This would be paired with new investment in training on those tools, and encouragement for workers to upskill and jump on new technology when it comes along.  

More importantly, the resources of employers, workers and governments could be applied more intensely to innovation, to take on the rest of the world with new ideas and with greater ambition.  

More productive workers, in more innovative and winning firms, would earn higher wages.  

Couple that investment in capital, skills and innovation with an understanding between government and business to focus on our economy’s strengths in world markets, and we have a formula to boost growth in a big way.   

We have always been strong in the energy sector, and now, with the right investments, we are well situated to take on the energy transition.  

Technology could torque up our food sector

We have always been known for our agricultural exports, and now, we are positioned to torque that sector with technology to help meet the world’s needs for food security.  

We led the world in pioneering artificial intelligence in the early days, and now we have the expertise in our midst to push smartly for widespread application of the technology in an ethical, productivity-enhancing way. With the right workforce, AI can supplement, rather than simply replace work, and create new value.   

To support businesses and workers, governments have to look at their policy tool kits and act on the levers that will bolster the incentives for private investment and innovation. For example, the burden of taxation should shift toward consumption, and away from investment. In an uncertain world, governments also have to work with businesses to keep doors open for our exports. 

With a concerted, collective effort, we could be poised to ratchet up our economy’s capacity, bolster growth, and re-establish our standard of living as one of the best in the world. 

Absent that effort, our businesses and our workers are left guessing about the game plan, fending off regulatory processes that deter growth and slows down decisions, and mitigating threats instead of pursuing opportunities. The flow of investment capital is not even close to what is needed to transition to a low-carbon economy, to adapt to a digital world, and to lift our productivity. 

More government transfers to individuals as favoured in current fiscal plans may benefit some Canadians, but they do not readily raise our collective wealth,nor our capacity to earn more tomorrow.     

We need to talk, Canada. And yes, we need to talk, without compunction, about productivity.