This article originally appeared in the Financial Post. Below is an excerpt from the article.
By Jack Mintz, January 23, 2024
Canada’s abysmal productivity growth has been the subject of countless studies. From 1976 to 2000 the growth in our labour productivity — real output per worker hour — was not stellar but, at 1.69 per cent per year, was decent enough. At that rate of growth, it doubles every four decades. Because what people produce in large part determines their incomes, that means living standards can double every four decades, which means they quadruple over eight decades, which is roughly current life expectancy.
After 2000, however, the rate of growth of labour productivity fell sharply: to less than 0.9 per cent per year. At that rate, it doubles only every eight decades. But much of that 0.9 per cent was the result of increases in how much capital workers were using. Once you account for that, total productivity growth was actually negative.
As many economists have pointed out, including yours truly, real GDP per capita has stalled since 2018 and in 2023 it actually fell — by 2.4 per cent — and is likely to fall again in 2024. Our stalled and now declining productivity is fast becoming a crisis. Canadian incomes are falling behind those in other countries, especially the United States, our most important competitor for investment, entrepreneurs and skilled workers. We are setting ourselves up for a brain drain as people and businesses seek better opportunities elsewhere.
Jim Balsillie, former co-CEO of BlackBerry, thinks he has the answer to our slow productivity growth. As he put it in National Post last Saturday: “Over the past 40 years, the global economy has undergone a rapid, unprecedented shift from a traditional tangible asset production economy to a knowledge-based, intangible assets economy.” He then argued that Canadians own too little intellectual property (IP) and data and are therefore missing out on the economic rents that come from selling ideas to the rest of the world.