Sluggish productivity growth: it cost you $7,500

OTTAWA: Two decades of sluggish productivity growth has left Canadians, businesses and governments much lighter in the wallet, according to a Conference Board of Canada study.

If Canada’s productivity had matched that of the US between 1988 and 2008, real GDP per capita would have been $8,500 higher in 2008, personal disposable income would have been $7,500 higher, corporate profits would have been 40% higher, and federal government revenues would have been 31% higher.

“These results should impress upon policymakers, as well as average Canadians, just how vital it is for Canada to improve its productivity performance,” said Mario Lefebvre, Director, Centre for Municipal Studies.

The report shows that based on 2008 figures, Americans were $13,000 richer than Canadians when measured in purchasing power parity. Under a scenario in which Canada’s productivity growth matched that of the US, the gap would have been less than $7,000.

The Ottawa-based research firm used a simulation boosting Canadian labour productivity growth by 0.8% per year higher from 1988 to 2008, the same increase as the difference between annual labour productivity growth in the US (2.2%) and Canada (1.4%) over the 20-year period.

The Conference Board notes that since the 1980s, Canada’s performance has been sluggish in multi-factor productivity (or innovation) and capital intensity, while labour quality has been relatively stable.

Previous Conference Board research found that Canada’s relatively well-educated workforce does not have the physical capital required to maximize productivity performance.

Click here for a copy of Canada’s Lagging Productivity: What If We Had Matched the U.S. Performance. http://www.conferenceboard.ca/documents.aspx?did=4486

Click here to go back to the Manufacturing Leadership report on productivity.