Canada has a productivity problem and the Bank of Canada says it's urgent you know those signs that say in an emergency break the glass well it's time to break the glass that's Carolyn Rogers the senior Deputy Governor of the Bank of Canada and yeah she says things are bad in terms of productivity over the last few decades the Canadian economy went from being about 88% as productive as the United States down to just 71% in 2022 we're now behind almost every other G7 country and yet we lead the G7 when it comes to having the
most educated Workforce and we work more hours so what's going on when economists talk about productivity we're talking about how much a person contributes to the economy for every hour worked for example in the time a Canadian worker produces a dollar's worth of goods or services a worker in France has produced $120 in the US it's $130 it's important to know because it tells us how efficiently a country is using its Workforce do people have high skill high-paying jobs that produce great output are they well supported do they have the right training the right tools
are they set up to succeed no needless regulatory red tape holding businesses back all of these things help make a country more productive an economy with strong productivity can have faster growth more jobs and higher wages with less risk of inflation but the Bank of Canada gives three big reasons this country is struggling to keep up the first is labor composition or the skills workers bring to the job the more skills you have the more value you bring to the table and this country Imports a lot of skill Canada now has one of the highest
rates of immigration in the world more than a million people came here last year alone many of them with Advanced degrees except 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 so imagine the trained engineer delivering food the trained teacher hauling trash or the trained scientist working retail these aren't bad jobs but these are bad matches and those skills they have Canada desperately needs take Healthcare according to stats Canada only 36% of foreign
trained nurses actually worked in nursing in 2021 compared to 87% of people who trained as nurses in Canada and about a quarter of all immigrants with foreign degrees ended up working in Canadian jobs that only required a high school diploma or less Canada's productivity and in fact our standard of living will depend importantly on how we leverage and develop the skills of these new workers [Music] but if I had to pick the biggest concern in this area I'd say it's competition we know Canada has a competition problem just a few months ago the competition Bureau
put out a report saying the level of competition in Canada has been dropping steadily over the past two decades and just intuitively when you think about what a truly competitive landscape looks like is that really what you have with your phone plan your bank your grocery store or the Airline you choose in Canada there are sectors in our economy where companies face limited levels of competition whether from new entrance or from firms from outside the country or even firms from other provinces competition can be a big driver of productivity it applies pressure to innovate to
differentiate to find efficiencies but a lack of competition can lead to what the Bank of Canada has identified as a third major problem when you compare Canada's recent productivity record with that of other countries what really sticks out is how much we lag on investment in machinery and equipment and importantly on intellectual property okay so let's break that down the first part of this the machinery and equipment is about investing in the tools workers need to be as productive as possible if you're in manufacturing how smooth is the production line if you're in construction do
you have excavator or shovels if you're in retail do you have the tech to speed things up according to a report by the Fraser Institute Canada's investment in these tools is dropping from about $188,000 per worker in 2014 to less than 15,000 in 2021 when adjusted for inflation meanwhile us companies were investing nearly $27,000 per worker AI is another example potentially a big productivity booster right but this report shows by 2021 only 3.7% of Canadian firms were using AI at work meanwhile take a country like Denmark the study found so far they've had double the
rate of adoption the other problematic side to Canada's investment picture according to the Bank of Canada is all about Innovation the Deputy Governor mentioned intellectual property so think about R&D according to stats Canada private sector spending on research and development grew only half a percent in 2022 and in terms of companies that actually include R&D in their business strategy it's fewer than 2% compare that to R&D spending in other G7 countries Canada ranks near the bottom so while Global competitors find new ways to increase output and optimize processes Canada falls behind the big picture isn't
hopeless however these problems are fixable but the in casee of emergency break glass solutions that the Bank of Canada has in mind likely lie as much with private Enterprise as they do with government reducing red tape encouraging competition matching skills to jobs creating the right conditions for Canada's Workforce to hit Peak productivity
