Statistics Canada has just released productivity estimates for 2012, and for BC the news isn’t very heartening. Labour productivity in the province’s business sector fell by 1.4% last year, after posting a solid 2.8% gain in 2011. In using this measure, Statistics Canada ignores productivity in government administration and other parts of the broad public sector in order to isolate the trend in the business sector, which comprises about 70% of the economy (GDP).

Nationally, business sector labour productivity inched ahead by 0.2% in 2012, with Manitoba (+2.1%) and Alberta (+0.7%) recording the biggest increases. Other provinces that saw productivity decrease last year included Newfoundland and Labrador, New Brunswick and Nova Scotia. Ontario and Quebec both enjoyed slight gains (0.4% and 0.5%, respectively).

Mathematically, business sector productivity in British Columbia declined in 2012 because the quantity of “labour input” – defined as the number of hours worked in businesses – increased by 3%, while the value of business output rose by just 1.7%. Among the industry sectors experiencing absolute decreases in output in 2012 were oil and gas, mining, paper manufacturing, and service industries that support oil and gas and mining extraction activities.

The accompanying table summarizes business sector productivity by province, measured in real (2007) dollars per hour worked, with data provided for 2012, 2011 and 2008. At $43.40, business sector labour productivity in British Columbia was 9.2% below the figure for Canada last year; the gap is little changed from 2008, when it stood at 9.5%.

Productivity in the business sector as a whole reflects the pattern of productivity levels and growth rates across the various industries that make up the broad private sector economy. Among the Canadian provinces, differences in industrial structure – how GDP is divided up among industries, and how many people are employed in different industries – account for some of the variation in labour productivity levels. The extent and growth over time in business investment in plant, machinery, equipment, software, and worker training also influence labour productivity; in general, a larger and more up to date private sector “capital stock” will translate into higher productivity levels in the business sector.

In Canada, the pacesetters in business sector productivity are Alberta, Newfoundland and Labrador, and Saskatchewan. Of interest, these provinces also are also the top three in terms of average weekly earnings for people holding jobs – a finding that underscores the positive linkage that exists between productivity and worker compensation in the private sector portion of the economy. The need to boost BC’s productivity performance was examined in more detail in a recent issue of the Business Council’s Policy Perspectives newsletter.

Business Sector Labour Productivity by Province, 2012
(using 2007 chained dollars per hour worked)

Source: Statistics Canada, CANSIM, Table 383-0029.