The 2001 to 2004 Revisions of the Canada–U.S. Labour Productivity in the Business Sector

Archived Content

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please "contact us" to request a format other than those available.

Revisions for 2001 to 2004

In general, the revisions of Canadian data for the period from 2001 to 2004 that were published in The Daily on June 9, 2005, resulted in almost no change from previous estimates. However, revisions of American data for the 2002 to 2004 period that were published in News of the Bureau of Labor Statistics on August 9, 2005, resulted in a decrease in the growth rate of labour productivity in the United States for each of the last three years of this period. The downward revisions range from 0.3% for 2002 to 0.5% for 2003 and 2004.

Even though the revisions for the last two years are significant, they do not alter the fact that there is a Canada–U.S. labour productivity gap for those years.

Canadian businesses outperformed their American counterparts in productivity growth in only one of the past five years: 2000; productivity growth gap was 0.6 percentage points (Table 1a, line 13). Since then, the gap in productivity growth, according to this last round of revisions, varied from 0.8% to 4.3% per year in favour of the United States before revision, compared with 1.0% to 3.7% after revision. From 2000 to 2004, the average annual growth rate was 0.9% in Canada and 3.5% in the United States (see Table 2); U.S. labour productivity growth was almost four times higher than its Canadian counterpart. It should be noted that the period from 2000 to 2004 is short and covers much less than a full business cycle. In the early 1990s, Canada also lagged the United States in productivity growth during a recessionary period, but ended up at approximately the same point by the end of the decade.

It is also important to note that the annual productivity differences reported over the period from 2000 to 2004 are based on preliminary data which are still subject to revision. Since 1998, the Canada–U.S. gap has generally shrunk following revisions to the preliminary data. The revision made to the Canadian productivity estimate in 1999 is almost entirely due to revisions in GDP. Almost half of the change caused by the revision in 2000 comes from this source.¹ During this period, the System of National Accounts has made two changes that increased the rate of growth of output and therefore of labour productivity. First, it started capitalizing software expenditures (the United States had introduced this in 1999). Second, it has gradually been introducing new surveys associated with the Project to Improve Provincial Economic Statistics (PIPES) that has extended coverage of its economic surveys.² During this period, the productivity program also revised its estimate of hours worked, downward.³

Over a longer period (1981 to 2000), there is a small gap in productivity growth between Canada and the United States. For this period, productivity has grown at an average annual rate of 1.5% in Canada compared with 1.9% in the United States. The recent revisions in June 2005 for Canada and August 2005 for the United States to the productivity estimates had virtually no effect on average annual productivity growth in Canada for the period from 1981 to 2000. The average gap in annual productivity growth in favour of the United States was only 0.4 percentage points.

All things considered, the 2001 to 2004 revisions of GDP in Canada resulted in a narrowing of the gap in productivity growth. The revisions have had little effect on Canada–U.S. differences over the last two decades — from 1981 to 2000. During this period, Statistics Canada's estimates of productivity growth have consistently shown that Canada lagged less than 0.5 percentage points behind the United States. In early 2000, we compared the long-term performance of Canada to the United States⁴ over the period from 1989 to 1997 and reported that Canada lagged the United States by only a small amount. As of 1999, the average labour productivity growth of the business sector in Canada from 1989 to 1998 was 1.19%⁵ while it was 1.34% in the U.S.⁶ over the same period. In early 2000,⁷ the Americans made major revisions to their National Accounts for much of the 1990s, increasing their average rate of growth between 1989 and 1998 to 1.89%. This widened the Canada–U.S. difference from around 0.15% to over 0.60%. The revisions introduced by the United States increased the rate of growth because computer software was moved from intermediate expenditures to investment and because of a number of improvements in coverage, especially in trade. The recent Canadian revisions covering the years 1999 and 2000, incorporating similar changes on the software side and improvements in coverage due to PIPES, have moved the relationship for the entire 1990s back to the level previously reported.

The remainder came from a revision to the labour statistics.

The GDP revisions in 1999 and 2000 came from new benchmarks of manufacturing activity derived from the Project of Improve Provincial Economic Statistics, upward revisions in exports, and the incorporation of software as an investment rather than as an intermediate expenditure. In addition, the productivity program fully integrated its output measure with that produced by the Income and Expenditure Accounts Division.

The revisions in hours worked in 2000 came from new information on the methodology actually followed by the Labour Force Survey for the year 2000 but not for other years. The information resulted in an upward adjustment in holidays in this year.

J.R. Baldwin, T.M. Harchaoui and J.-P. Maynard. 2001. "Productivity Growth in Canada and the United States." In Productivity Growth in Canada. Catalogue no. 15-204-XIE. Ottawa: Statistics Canada. Chapter 4.

As of June 30, 1999.

As of October 1999.

As of April 9, 2000.

You need to use the free Adobe Reader to view PDF documents. To view (open) these files, simply click on the link. To download (save) them, right-click on the link. Note that if you are using Internet Explorer or AOL, PDF documents sometimes do not open properly. See Troubleshooting PDFs. PDF documents may not be accessible by some devices. For more information, visit the Adobe website or contact us for assistance.