Canada’s Lagging Productivity Compared to US Proves Costly

Canadians would be a lot richer today if only the country’s productivity growth had kept pace with that of the U.S. over the last two decades, says a new report published Wednesday.

A simulation conducted by the Conference Board of Canada for the period 1988 to 2008 found that 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 percent more, and federal government revenues would have been 31.1 percent (or nearly $77 billion) greater

The report noted that in 2008 Americans were $13,000 wealthier than Canadians in terms of purchasing power parity, and if Canada’s productivity growth had matched that of the U.S., the gap would have been less than $7,000.

“Increasing our productivity growth performance over the past two decades would have cut in half the current per capita income gap between Canadians and Americans,” the report said.

 

Considering that productivity is fundamental to raising living standards and business competitiveness, “these striking results should impress upon policymakers, as well as average Canadians, just how urgent it is to improve Canada’s recent productivity performance,” said the report.

The report is based on findings from a model simulation that boosted Canada’s labour productivity growth by 0.8 percent per year for the 20-year period. This is the difference between Canada’s average productivity growth of 1.4 percent per year and that of the U.S. at 2.2 percent