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Productive R esources

Summary:
Canadas productivity gap is looking worse
than ever
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Tim Shuffled | May 29, 2012 6:00 AM ET

Productive Conversations
As the global economy enters a long stretch of slow growth, our
workforce ages and the loonier stays near par, improvements to
Canadian productivity and competitiveness will be key to our
prosperity.
Its not often economists will admit to bafflement, especially on
a matter of utmost importance to national economic health.
As the predominant measure of standard of living, productivity
of labor in Canada has fallen notoriously short of standards set
by the U.S. economy. On the output side, the results have been
pathetic, economist Don Drummond said in a recent journal
article in which he condemned everything I have ever done on
productivity.
He estimated that policymakers in Canada had implemented
about 70% of the measures typically advocated by analysts.
The World Economic Forum has ranked Canada in the 92nd
percentile among the economic and policy environments
required for a highly competitive economy.
Yet output per hour worked in the business sector averaged just
0.7% annual growth over the past 10 years, opening up a
competitive shortfall of 30% against the Untied States.
Even during the last recession, which typically affords plenty of
incentive for the business sector to operate leaner, Canadas
labor productivity slipped for the first time in eight recessions
spanning the past 30 years, according to Statistics Canada.
Its frustrating, said Eric Lascelles, chief economist at RBC
Global Asset Management. Canada should be massively more
productive than it was before and yet we still seem to be falling
behind.
In the long term, productivity is one of the most important
factors in determining standard of living, interest rates,
inflation, and a lot of other things, said Benjamin Tal, deputy
chief economist at CIBC World Markets.
Mathematically, GDP growth is the product of two forces the
application of more labor and/or productivity enhancements.
In the process of recovering from the financial crisis and
ensuing recession, Canada returned to output growth through
the expansion of its labor force.
The U.S. predicated its growth on improving productivity.
In 2011, Canadas labor productivity improved by 1.4%, which
isnt exactly horrible, until set aside U.S. gains, which measured
3.8%.
Its impossible to meet that benchmark, Mr. Tal said, arguing
that comparing Canadian productivity to that of the U.S. is
unfair. Theyre able to squeeze so much out of the existing
labor force. There are merits to the Canadian approach of
building economic strength through numbers. The jobs lost to
the recession were recovered relatively quickly; an
accomplishment that still eludes the U.S. economy.
But demographic pressures strain Canadian labor forecasts
more so than in the U.S.
An aging population translates to fewer workers as a share of
the total population, which will constrain fiscal flexibility and
the capacity to grow.

This article overviews the global economy as it enters a

extensive stretch of slow growth, the workforce is getting
old and is soon going to retire, in order to keep our
economy healthy improvements to Canadian productivity
and effectiveness w ill be key for the success of our
economy. Eventually as the standard of living is falling,
productivity of labor in Canada is decreasing dramatically
due to the short of standards set by the U.S. economy. In
addition the results have been "Pathetic," economist Don
Drummond explained. He estimated that officials in Canada
had applied about 70% of the measures typically advocated
by experts. Since the last collapse, w hich resulted as
incentive for the business and major corporations, Canada's
labor productivity tripped for the first time in eight
recessions covering the past previous 30 years, according
to Statistics Canada. Additionally Statistics also state during
2011, Canada's labor productivity improved by 1.4%,
compared to U.S., which measured 3.8%. Furthermore if the
pace of Canadian productivity growth remains as it is, the
economy will experience about 1% real growth the article
stated. Subsequently had Canada corresponded the
productivity record of the United States during the past 25
years, incomes would be $7,500 higher, w hich goes to show
how dramatic this issue is. If it w asnt for the mitigating
immigrants Canada would have not met their productivity
weaknesses. Moreover this conflict is a result close trade
links to a weak U.S. economy. All in all this article sheds
light on the problems that Canada is facing due to the lack
of labor, this was a provincial issue but now has progressed
to become a national issue which is affecting the whole
country.

Economic Concepts:
This article relates to productive resources in many ways.
To begin w ith it discusses the shortage Canada is facing
which reflects the idea of productivity: land, labor and
capital used to make good and services, because its main
focus was to address the shortage that we are facing in the
labor industries. It also illustrates the concept of Labor and
explains it in depth; by explain the obstacles Canada has to
overcome and the barriers they have to break in order to
resolve this nation-wide issue. Since labor is a very key
aspect of the economy Canada can face severe problems if
this shortage is not dealt with. Over all this article
efficiently relates to our unit: Productive resources