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Upfront Blame Canada Once again, Canada’s productivity (or more accurately, lack of productivity), is in the spotlight. Many in the manufacturing sector, including Canadian Metalworking, have commented about Canada’s productivity lag when compared to other countries such as the US. The discussion has been ongoing for decades because productivity has been an issue for just as long. The most recent comments come from Scotia Capital economist Aron Gampel. Commenting in an online Globe and Mail article, he says Canadian productivity “should be a go-go, but still a no-go.” He cites the higher cost structure (labour costs) in the Canadian manufacturing sector as the top culprit. Others have cited multiple reasons to explain the ongoing productivity gap—the strengthening Canadian dollar, the growing emergence in North America of low-cost offshore competitors from emerging markets in Asia, and poor investment efforts in machinery and equipment and research and development. The government has attempted to address the gap through varied measures, to no avail. The productivity gap has continued to widen and some suggest realistically, Canada may never be able to close it. Last year, The Conference Board of Canada noted in its Forecast 2010, “Canada will have a difficult time trying to close the productivity gap with the United States. Evidence has shown that countries with lower levels of productivity not only have to grow faster to catch up, but they have to maintain faster growth for an extended period of time. “If US productivity grows by its 2008-2009 annual growth rate of 1.67 per cent over the next 15 years, for example, Canada’s productivity growth will have to be 3.22 per cent per year to eventually match the US productivity level. That’s a near-insurmountable four times Canada’s annual productivity growth rate between 2000 and 2008. Closing the productivity gap with the US is essential to closing the income gap, but Canada is going in the wrong direction.” How can Canada change direction? That’s a question many have attempted to answer, but so far, most of the measures—more investment in new machinery and equipment (think government extensions on the Accelerated Capital Cost Allowance), more investment in research and development and more efforts for training a more technically advanced workforce—have not appeared to work. If indeed these are the ways to improve productivity in Canada, why haven’t these measures worked? Why is it this country’s productivity has consistently lagged? As far back as the 1970s, labour productivity grew 1.4 per cent annually compared with the US average of 1.5 per cent. That’s not a huge difference, but US productivity growth has remained relatively stable in recent decades, while Canada’s growth has dropped 0.9 per cent per year on average, according to data from The Conference Board of Canada. What are your thoughts on productivity in Canada? Do you think something can be done to improve the productivity gap? Do you think the issue has been overblown by industry pundits? I would welcome your comments on the issue. MARY SCIANNA, EDITOR
If you want to comment on editorial in the magazine, I’d like to hear from you, so please contact me. mary.scianna@rci.rogers.com
6 | APRIL 2011 | www.canadianmetalworking.com