Bank of Canada Sr. Deputy Governor Carolyn Rogers warned this week the country’s low productivity is now at “emergency” levels. According to Statistics Canada, the country’s productivity rates, which are calculated by a ratio of economic output, or gross domestic product (GDP), to hours worked, have dropped consecutively for the last six quarters (1.5 years). Canada lags behind other G7 countries, with the exception of Italy.Speaking on Canadian productivity at an event in Halifax, NS, Rogers said Canada needs to do more to “inoculate the economy against inflation” and strive for “faster growth, more jobs and higher wages.”“An economy with low productivity can grow only so quickly before inflation sets in,” said Rogers. “Increasing productivity is a way to protect our economy from future bouts of inflation without having to rely so much on the cure of higher interest rates.”She noted factors of inflation include changing demographics, climate change and weak foreign relations. “You’ve seen those signs that say, ‘In emergency, break glass.’ Well, it’s time to break the glass,” she said. Rogers said improving productivity does not equate trying to get Canadians to work harder, but to equip them with tools that will allow them to accomplish more in the same amount of time. She pointed to the lack of business investment in Canada and said in other countries businesses are better at investing in machinery, equipment and intellectual property. Further, she noted when it comes to comparisons with the US, capital spending per Canadian worker has decreased significantly in the last 10 years, as has general productivity levels. In 1984, Canada’s productivity competed with the US at a rate of 88%. As of 2022, it had fallen to 71%.“While US spending continues to increase, Canadian investment levels are lower than they were a decade ago,” she said. “When a company increases productivity, that means more revenue, which allows the company to pay higher wages to its workers without having to raise prices,” Rogers said.“The bottom line is that the benefits from raising productivity are there no matter what your role is: for workers, for businesses and, yes, for central bankers, too.”“Too often, new Canadians are working in jobs that don’t take advantage of the skills they already possess. And too often these people wind up stuck in low-wage, low-productivity jobs. Doing better at matching jobs and workers is crucial to the future of Canada’s economy.”“Of course, every country has certain sectors that it champions and there can be valid reasons to protect local businesses,” she said. “However, too much protection can lead to problems. It can also help to explain Canada’s weak record in business investment.”
