The main solution to the economic impact of the aging population will not be immigration. Rather, it will consist of finding a way to produce more wealth with the available labour. Doing so will require giving far more attention and resources to productivity issues than has been the case in years.
Many Quebecers probably learned this week that, according to experts, the number of immigrants received has relatively little impact on the economy in general and on the labor shortage in particular. Indeed, while a reinforcement of foreign workers can help certain companies or very specific industries, immigration would have a relatively modest effect overall, because its contribution to the supply of goods and services would be equivalent, roughly speaking, to its upward effect on their demand. Thus, it would be much less important to try to find new workers abroad at all costs than to seek to increase the wealth produced by those we already have.
Three major factors influence this labor productivity, Statistics Canada pointed out last week in a portrait of the situation. The most important in Canada over the past ten years has been technological and organizational changes as well as an optimization of current production capacities.
A second factor is the investment of private companies and public authorities in tangible assets (machines, automation and computer technology, but also roads, Internet network, ports, etc.) and intangible assets (research and development, mining prospecting, etc.).
Investment deficits
However, despite the foreseeable arrival of the demographic shock, investments by private companies have stagnated in proportion to the size of the economy for at least forty years in Quebec, as in Ontario, lamented this winter the Institut du Quebec during the pre-budget consultations. It is the fault of excessive taxation and industrial policies focusing on job creation, denounced at the same time the Center for Productivity and Prosperity of HEC Montreal in its most recent report on the situation. But not only. “Likely accustomed to having an abundant and inexpensive workforce, businesses in the province have apparently not considered it necessary to prepare for the demographic shock. »
The situation does not appear to be improving despite the economic recovery, the increasingly acute labor shortage and promises of a digital shift and acceleration of the green transition raised by the crisis of the COVID-19 pandemic. When last asked what their strategies were going to be over the next 12 months, less than 8% of Quebec companies said they wanted to “rely more on automation and technology than on the workforce” , compared to 25% who intend to improve their products or services, 14% who will expand their offer, 14% who don’t know and 45% who admit to having none.
Quebec companies are not the only ones to have neglected to invest in improving their productivity. For at least 10, if not 30 years, the level of investment by companies and governments in the main Western economies has been declining despite extraordinarily low interest rates, the dilapidation of public infrastructure, the digital revolution and the imperative of the green transition, noted this summer the economic columnist of the FinancialTimes Martin Sandbu. Instead, companies preferred to increase the returns they paid to their shareholders and governments, reduce their taxes or increase their expenses. The West is now paying the price for this short-term vision with anemic economic growth prospects, the analyst lamented.
The context will not make things easier for those who would like to correct the situation. The increase in interest rates in recent months has made credit more expensive. Disruptions to supply chains have made it difficult to import new technologies. As for the efforts made to reduce the degree of exposure to external upheavals, or even to increase the degree of national industrial autonomy, they may succeed in reducing certain vulnerabilities, but at the cost of a certain effectiveness, noted Statistics Canada in its picture from last week. Experience has shown that “exposure to foreign markets and productivity growth go hand in hand”.
The human factor
The third major factor that influences labor productivity is the quality of this workforce, particularly in terms of training, technical and professional skills, and creativity and innovation. The usual way of looking at things is to consider investment in machinery and equipment by companies as the trigger for a virtuous circle that will lead to calling on more qualified personnel, observed the Institut du Québec this winter. But “after decades of efforts (without satisfactory results) to stimulate investment”, it is perhaps time to reverse this logic and explore “the potential of a process where it is the development of the skills of workers that would boost productivity growth. The availability of a qualified workforce would thus become an “incentive to induce businesses, especially SMEs, to invest in new technologies and new processes, to modernize and at the same time to stimulate their innovation practices “.
It now remains to be seen whether Quebec could be better at fighting school dropouts, encouraging students to go to the sectors that need it the most and convincing companies of the need to provide continuing education to their employees.