Canada's Productivity Slump Clouds Economic Outlook
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Labour productivity in Canada has declined for 6 straight quarters, which reduces economic growth and Canadians' standard of living. This could also fuel further inflation if wages rise without accompanying productivity gains.
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Canada ranks in the middle of OECD countries for productivity. Low productivity relative to the U.S. and Scandinavia reduces Canadian wages and overall prosperity.
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Factors reducing productivity include lack of capital for workers, interprovincial trade barriers, low R&D spending, and harsh weather. Recent immigrants often start in less productive industries.
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There's no straightforward fix. Suggestions include tax reform, encouraging business investment, and leveraging AI and other innovations to enhance productivity.
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Weak productivity coupled with fast wage growth (5.4% in December) gives the Bank of Canada pause on interest rates, as it watches for signs of lingering inflation.