Four Decades of Productivity Performance in Canada

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Introduction

Exhortations for improved Canadian productivity performance are common. To contribute to the debate in this domain, this paper explains the concept of productivity and Canada’s historical performance in this area.

The first section of this paper defines productivity and addresses the question of why Canadians should be concerned about productivity performance. The answer is that productivity growth is a key factor contributing to sustainable economic growth and improving the material living standards of Canadians. The influence of productivity growth on living standards accumulates slowly over long periods of time. Its effect becomes apparent only over decades. Small annual improvements in productivity growth, if sustained, add up to substantial improvements in living standards over time. A 2% compound annual increase in output per worker implies that it doubles in about 35 years.

The second section of this paper assesses Canada’s long term productivity performance. Canada’s productivity growth improved in the 1990s, though this performance still remains below the one experienced in the early 1960s. This improved performance will need to be sustained, and even improved, if the Canadian economy is to meet the aspirations of Canadians and to improve the living standards of current and future generations.

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