Labour Productivity In Canada Essay

Between 1980 and 2011, labour productivity in Canada grew by 1.4% annually, compared to 2.2% in the United States (U.S.). In simple economic terms, labour productivity refers to output in dollars (or GDP) per hour worked; it is vastly important for one main reason-labour productivity is a key determinant of economic growth and well-being. This succinct essay will explore why Canada's labour productivity growth rate is lower than that of the U.S., the underlying context for the reason identified, as well as some possible policy measures that governments could introduce to reverse the current trend.

Labour productivity is determined by three inter-connected factors: capital deepening (i.e., improvements in infrastructure and technology), labour composition growth (i.e., improvements in the skills and knowledge of the workforce), and multi-factor productivity (MFP), commonly referred to as innovation. The Conference Board of Canada defines innovation as, "a process by which economic and social value is extracted from knowledge by generating, developing, and implementing ideas to produce new or improved strategies, capabilities, products, services, or processes." While Canada's capital deepening and labour composition growth rates have outpaced

One of the most salient examples of this is Canada's on-the-job training rates. Studies by the Conference Board of Canada have found that Canadian employers spent about $705 per employee on training costs in 2011, down nearly 40% from a peak in 1993. Meanwhile, only about 31% of Canadians participated in some type of non-formal job-related education or training in 2009. That's slightly better than the OECD average of 28%, but still below the 33% in the U.S. Research suggests that Canada's risk-adverse culture may be linked to low levels of competition in certain industries, where there is no real incentive to improve