Productivity growth is the key to sustainably improving the quality of life of Canadians. Over the long run, wages, wealth and GDP per capita are integrally linked to a country’s productivity performance. Yet the alarming reality is that labour productivity growth in Canada’s business sector has been in structural decline since the 1970s. Even more concerning is that since 2000, labour productivity growth has slowed to a crawl. The scope of this trend has not been mirrored by other developed countries, and it is taking a toll on Canada’s international economic clout. Between 1990 and 2008, Canada’s GDP per capita slipped from 5th to 11th among OECD countries.
If Canada wishes to maintain its place as one of the world’s richest countries, productivity growth must improve. But there are reasons beyond international standings that necessitate the need for action. Demographic challenges are poised to place enormous pressure on Canada’s economy into the foreseeable future. The simplest way to confront this reality is through improved productivity. Further, if the recent trends in globalization persist, Canada can expect global competition to become a lot more intense over the next two decades. Unlike the historical experience with globalization, these competitive pressures will increasingly come from high value industries. If Canadian firms cannot become more productive, they will simply go out of business. No matter how you look at it, Canada must find ways to become more productive.
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This report has been posted with permission from TD Bank Financial Group.
