Will the Kids Be Alright? The Arithmetic of Productivity Trends in Canada and B.C.

How can Canada and British Columbia improve productivity?

This edition of Policy Perspectives discusses long-term trends in GDP per person and productivity. It lays out the implications of these trends for the living standards of future generations of Canadians and British Columbians. It also offers five key areas where policy could help foster higher productivity growth, and therefore higher living standards, over time.

Highlights

• Growth in Canadian real income per person has trended lower since the 1960s. Prior to 2000, Canadian incomes per person were doubling in roughly 30 years (i.e. one generation). At recent growth rates, this feat would take four to five generations.
• A key contributor to the slowdown in income growth is labour productivity (real GDP per hour of labour input). Canadian productivity growth has trended well below 2% per annum since the 1970s.
• This pattern of slow productivity growth has opened a sizable gap in productivity levels relative to many other advanced countries: 26% below the US, and 22-23% below Germany and France.
• British Columbia has closed its historical gap in productivity levels with the Canadian average and ranks third among the provinces in recent productivity growth performance.
• Five policy priorities to support productivity growth are: removing disincentives to scaling up businesses; streamlining regulatory approvals processes that can inhibit capital formation; intensifying competition in product markets; building human capital; and promoting the commercialization and ownership of Canadian innovations.