Advice to Federal Government on Regulation Emphasizes Need for Mindset Shift

Canadians are facing some very big economic challenges. Earlier this year, Senior Deputy of the Bank of Canada, Carolyn Rogers, made a media splash when she talked about Canada’s “long-standing, poor record on productivity” and said, “it’s time to break the glass.” Strong language from a staid institution.  Meanwhile, Canadians in supermarket lines across the country are stressed about affordability and visits to food banks are breaking records.

Against this backdrop, it’s time to think differently about how to turn things around. There are no magic bullets but some concrete first steps to addressing the related concerns of productivity and affordability are outlined in the latest advice letter to the federal government from the External Advisory Committee on Regulatory Competitiveness (EACRC), a group representing industry, academia, and civil society that was first established in the 2018 Fall Economic Statement and tasked with giving government independent advice. The Committee, which I Chair, delivered advice that all governments in Canada working to improve the lives of their constituents can benefit from.

What do productivity, affordability and regulation have to do with each other?

Productivity measures the amount of output in an economy per hour worked.  Higher productivity means more output per hour and translates to good things like higher wages, more money for businesses to invest in equipment (which can increase productivity even more), and more tax revenue for governments to improve services like healthcare. Too much regulation is a tax on our time and that translates to producing less per hour worked, with the consequence of lower productivity and less ability to increase wages, which contributes to affordability concerns.

Changing our mindset around regulation

The optimal amount of regulation is obviously not zero. Regulations exist to promote better human health, safety, and environmental outcomes. But that does not mean that more regulation is always better. The optimal amount of regulation achieves desired outcomes while minimizing regulatory burden. The EACRC calls this regulatory excellence and argues it should be the north star for regulators. For those who like diagrams, regulatory excellence is represented by the star in the Northeast quadrant of the figure below, which represents strong protection for Canadians with lower burden from regulation. The same level of protection could be achieved at higher burden in the Northwest quadrant but that is undesirable because the extra burden is not delivering extra protection, but it is a drag on productivity, which means wages and living standards are lower than they would otherwise be. In plain language, it is an unproductive waste of time.

The benefits of getting serious about promoting regulatory excellence would be huge. Our policy landscape is littered with opportunities to save time while maintaining the health, safety, and environmental protections we value.

In one example, a Nova Scotia government representative shared her team’s work to simplify paperwork for doctors to free up time to see patients. Reducing the use of “sick notes” alone freed up 67,000 hours annually, which is the equivalent of 201,000 patent visits. In another example, Kelowna is using artificial intelligence to reduce wait times for straightforward housing permit approvals from an average of 3 weeks to 24 hours and soon to be a matter of seconds. This improves service to citizens and allows staff to focus on more complex, higher-risk permits.  Businesses often spend years waiting for permits and approvals, imagine the productivity and affordability gains to be made if we cut approval times in half.

Now imagine if every government department at every level were tasked with saving Canadians time using regulatory excellence as a guide. Decisions on big projects would be made faster, small business owners would spend less time on paperwork, doctors could spend more time with patients, individuals from all walks of life would have the gift of time from their governments.  It would be a game changer—a huge lift to productivity and living standards with the bonus of feeling less frustrated.  

Next steps to regulating more productively

To get a productive flywheel started, the EACRC recommends making better regulatory measurement a government-wide priority, with an early emphasis on a searchable database that inventories regulatory requirements. The good news is that Transport Canada has something close to this that should be made public. An easy-to-search database would allow for better targeting of areas where burden could be reduced. Measurement is key to achieving regulatory excellence. As the EACRC says in its letter: “Without better performance measures, the system lacks accountability and is at risk of being rudderless and inefficient.”   

The second recommendation is to maintain strong avenues for external advice. General themes that the Committee heard included the importance of plain language, outreach that starts early, making compliance as simple as possible and creating easier ways for users to provide feedback.  

The potential for the idea of regulatory excellence to lift living standards by contributing to productivity is clear as are some very concrete next steps to get there. Let’s keep pushing governments to make it happen by supporting some boring sounding initial recommendations that promise exciting results.