Federal vow to tackle weak Canadian productivity won't be easy: experts

OTTAWA -- The federal Liberals are hoping to solve an economic mystery that has perplexed previous governments for decades: raising Canada's lacklustre productivity.

See Full Article

Policy-makers were reminded of the situation Friday when Statistics Canada released its latest numbers on labour productivity growth. The rate contracted 0.2 per cent in 2015 -- by far its weakest result in three years.

Since coming to office, Finance Minister Bill Morneau has repeatedly vowed to address what he has described as the country's "productivity challenge" and he has even tasked a new economic advisory council with finding solutions.

It's an important goal, Morneau argues, because improving productivity growth would allow Canadians to enjoy their highest-possible standard of living -- even amid mounting economic worries linked to the aging population. He is expected to outline some productivity-related measures later this month in the federal budget.

Regardless of the party in power, productivity growth has proven to be a head-scratcher for governments.

Briefing material prepared for Morneau's predecessor, former finance minister Joe Oliver, noted that Canada's productivity growth between 2000 and 2013 trailed all G7 countries except Italy.

"Boosting our lacklustre productivity performance remains one of the key public policy challenges, especially given the dampening effect that population aging will have on real GDP growth in coming years," reads the "secret" October 2014 memo, obtained by The Canadian Press via the Access to Information Act.

Other documents show that last fall, Economic Development Minister Navdeep Bains was warned that Canadian productivity was "well below" the U.S. level.

Labour productivity data gauge how efficiently goods and services are produced, which is important for a country's economic health.

"It's how we get richer as a society -- by producing more per the amount of effort we put into it," said BMO chief economist Doug Porter.

But Porter predicts it won't be easy for anyone to improve productivity in a country that has averaged just 1.1 per cent annual growth since 1981.

Past efforts by federal governments to raise Canada's productivity have been unsuccessful, he said.

For example, he said some believed the North American Free Trade Agreement and the Canada-U.S. free-trade deal would raise Canadian productivity. Other measures, like cutting personal and corporate taxes, were also expected to do the trick, Porter added.

"I have to say that as long as I've been an economist, this has been a debate and a puzzle that people have tried to solve," Porter said.

"It doesn't matter, really, who's in power or what policies are in place -- it just seems like we're anchored around something a bit above that one per cent growth rate.

"I wish the new government a lot of luck on this front, but I would be frankly surprised if we could seriously move the needle."

Experts caution that one must consider a few important differences when comparing Canadian labour productivity growth with that of the U.S.

For one thing, Porter said the U.S. has a big edge when it comes to scale. The countries have very different industries, with the Americans boasting much-larger companies.

Canada also has to deal with the added hurdles of a harsher climate and huge distances between cities, he added.

Pedro Antunes, executive director and deputy chief economist for The Conference Board of Canada, said it's very difficult to evaluate the records of policy-makers when it comes to dealing with the country's low productivity.

Perhaps, Antunes said, conditions would have gotten even worse without past policy measures, like lowering tax rates.

"We can always say, 'Oh, labour productivity growth hasn't improved,' but the truth is we don't know what the counterfactual would have been."



Advertisements

Latest Economic News

  • The New York Stock Exchange just named its first female president in its 226-year history

    Economic CBC News
    The New York Stock Exchange for the first time in its 226-year history will be led by a woman. Stacey Cunningham, who started her career as a floor clerk on the NYSE trading floor, will become the 67th president of the Big Board. Source
  • Ex-Valeant, Philidor executives convicted of kickback scheme

    Economic CBC News
    A former Valeant Pharmaceuticals International Inc executive and the former chief of mail order pharmacy Philidor Rx Services were found guilty on Tuesday of defrauding Valeant through a multimillion-dollar kickback scheme. The verdict, handed up by a jury in Manhattan federal court, comes on the heels of Valeant's announcement that it will change its name to Bausch Health Companies Inc as it seeks to distance itself from a series of scandals under its previous management. Source
  • Women cite 'grass ceiling' in male-dominated weed industry

    Economic CTV News
    JUNEAU, Alaska -- When Danielle Schumacher attended her first convention of marijuana activists about 15 years ago, she could count on one hand all the women in a room of older men. The lack of diversity struck the then-college student, who remembers feeling out of place but also determined to make her mark. Source
  • Airlines caving to Beijing despite White House protest

    Economic CTV News
    SHANGHAI -- Global airlines are obeying Beijing's demands to refer to Taiwan explicitly as a part of China, despite the White House's call this month to stand firm against such "Orwellian nonsense." The Associated Press found 20 carriers, including Air Canada, British Airways and Lufthansa, that now refer to Taiwan, the self-ruled island that Beijing considers Chinese territory, as a part of China on their global websites. Source
  • McDonald's workers in U.S. file sex harassment claims

    Economic CTV News
    NEW YORK -- Energized by the #MeToo movement, two national advocacy groups are teaming up to lodge sexual harassment complaints against McDonald's on behalf of 10 women who have worked at the fast food restaurant in nine cities. Source
  • OREA isn't backing down from GTHA affordability messaging after TREB controversy

    Economic CTV News
    TORONTO -- The Ontario Real Estate Association isn't backing away from its campaign on the lack of housing affordability in Toronto, even after harsh criticism from the province's largest real estate board. On Tuesday, OREA executives unveiled a Ryerson University report, which it sponsored, that found millennials in the Greater Toronto and Hamilton area are living with their parents longer as they struggle to find affordable houses in a market with limited supply. Source
  • Shopify shares slip after Adobe Systems buys e-commerce rival Magento

    Economic CTV News
    TORONTO - Shopify shares slipped by more than six per cent in today after its rival Magento Commerce was bought by Adobe Systems. The e-commerce company's stock fell by as much as 6.47 per cent to $177 in Toronto in morning trading, a day after the U.S. Source
  • Shopify shares down 6% as Adobe buys rival Magento

    Economic CBC News
    Shares in Canadian e-commerce software maker Shopify Inc fell around 6 per cent on Tuesday after Adobe Systems Inc. announced it was buying rival Magento Commerce. Magento, which counts CocaCola Co, Intelligentsia Coffee, Canon Inc and Burger King among its customers, helps companies build online stores, competing with Shopify whose software and consulting expertise helps merchants sell everything from infant formula to cosmetics online. Source
  • WestJet Airlines and pilots resume contract negotiations in Calgary

    Economic CTV News
    CALGARY -- WestJet Airlines Ltd. says contract negotiations with its pilots resumed Monday in Calgary. Talks between the airline and pilots represented by the Air Line Pilots Association moved from Halifax where they took place last week. Source
  • China cutting auto import taxes as of July 1

    Economic CTV News
    BEIJING -- China said Tuesday it will reduce auto import duties effective July 1 following pledges to buy more U.S. goods and end restrictions on foreign ownership in the industry. President Xi Jinping promised the changes in April amid mounting pressure from Washington to narrow China's multibillion-dollar trade surplus with the United States, though Chinese spokespeople said they had nothing to do with that dispute. Source