The poor performance of Canada and Quebec in terms of productivity easily passes for a question too abstract and complex for one to be interested in it unless one is an expert or an old curmudgeon who finds that people do not work hard enough. These days. However, our standard of living is more at stake than ever. It’s not a question of working more, but of working better, and our performance in this area is really very poor, and has been for a very long time.
The Bank of Canada’s senior deputy governor had something important to say Tuesday during a speech to a Halifax development agency. As expected, Carolyn Rogers began by taking stock of “the greatest global inflationary drift in recent decades” and welcomed the fact that “inflation has fallen significantly”, thanks in particular to the sharp rise in rates. of interest of the central bank.
However, she warned that with the decline in the process of global economic integration, the aging of populations and the economic impact of climate change, the “threat of inflation risks being more present” from now on. To continue to hope to be able to reconcile vigorous economic growth and a slight increase in the cost of living, we will increasingly have to rely on an increase in productivity.
We are not talking here about asking Canadians to take fewer vacations and work more hours per week, she recalled, but about finding a way so that each of these hours is used to produce goods and services of greater value. “It should be an aspiration, not something to fear.” The company that increases its productivity increases its income, and it can therefore offer better wages to its staff without having to raise its prices. »
The problem, she continued, is that Canada has had a “poor record” in this area “for too long.” ” There is danger in delay. We must act. »
A widespread problem, but more serious here
For years now, we have deplored the slowdown in productivity growth in several countries. But Canada and Quebec are in a league of their own, the Center on Productivity and Prosperity (CPP) of HEC Montréal reported again at the beginning of the month in its annual portrait of the situation.
Not only is productivity per hour worked lower than that of the vast majority of developed economies, but this gap tends to widen, with average annual growth of 1.01% in Quebec and 1.11% in Canada. from 1981 to 2022, ahead of only Italy (0.87%) and doing worse than France (1.44%), the United States (1.51%), Germany (1.53 %), Sweden (1.59%), Japan (1.93%) or Finland (2.01%).
In 1981, the value generated per hour worked in the Canadian economy represented 88% of that in the United States. This proportion would only be 71% in 2022, Carolyn Rogers gave as an example. We believed for a moment that the ability to adapt that businesses had to demonstrate during the COVID-19 pandemic would then translate into improved productivity: this is what happened in the United States, but not in Canada.
The secret to productivity remains largely a mystery, economists admit. Nor is there any consensus among them on the best way to improve things.
It is generally agreed that there are three main ingredients in the recipe. The first is the money we invest in machines and technologies, of course, but also — and perhaps above all — in research, development and intellectual property. On this side, for at least 50 years, businesses have invested less in Canada than in the United States in proportion to the number of workers.
The second ingredient is the quality of the workforce, starting with initial training at school through to requalification and continuing training in the workplace.
As the importance of technology is often discussed, we logically think that the priority should be to train more workers experienced in cutting-edge technologies, such as computing, robotics or artificial intelligence. But this is a misunderstanding, showed a study carried out among Ontario business leaders who were asked to specify what their digital skills needs consisted of more precisely. In three quarters of cases, it was only a question of a basic level of digital literacy, much more modest and accessible, such as the ability to use word processing software (Word), presentation software (PowerPoint) or spreadsheet (Excel).
The third ingredient of productivity refers to all efficiency gains attributable to economies of scale, technological changes and improved organization of production. Called “multifactor productivity,” this factor is the one that contributed the most to the improvement in productivity in Canada during the decade preceding the pandemic — and where Quebec stood out favorably from Ontario.
Solutions
In terms of labor, Carolyn Rogers calls for better consideration of the skills of the mass of immigrants welcomed to Canada each year. “Too often, people new to the country hold jobs that poorly match their acquired skills. »
In terms of investments, a recent Statistics Canada study suggests that the lack of effort by Canadian companies is linked to the fact that they are not sufficiently exposed to domestic and foreign competition despite the numerous free trade agreements signed. by the country.
It is also one of the favorite things of the CPP. Just like evoking a culture of complacency inherited from too many years of taking advantage of the artificial advantage conferred by the weak exchange rate of the Canadian dollar. But above all to denounce the deleterious effect of governments’ industrial policies, particularly in Quebec. “Deeply anchored in a reality that has long been outdated,” these policies continue to encourage job creation — while Quebec faces a problem of labor scarcity — and mainly benefit large, already well-established businesses. whereas we should encourage smaller newcomers through which innovation comes.
While the CPP mocks governments which massively support supposedly promising industrial niches, such as the battery sector, Carolyn Rogers encourages them on the contrary to “remain attentive to the emergence of future value-bearing sectors”.
As has been said, there is no consensus on productivity among experts. “Our only certainty is that it is urgent to act,” summarized the deputy governor.