Canada used to have one of the most productive economies in the world, but now? Not so much. We have already fallen behind the average developed economy, and the OECD now expects Canada to have the lowest per-capita GDP growth of any member country.
So what gives? A big part of the problem is our lagging productivity level. But what does that actually mean?
William Huggins, a lecturer at The DeGroote School of Business, joined us this week on Free Lunch by The Peak to break down everything you need to know about productivity:
What is productivity and why is it important?
“The simple idea is that we can get more stuff out with less stuff in— that's productivity. And you are more productive if you can get more output for the same amount of output or inputs. That's the basic concept. One of the easy ways to measure is to look at, what is the total amount of GDP generated for each hour of labour? And if we can add more value with the same hours of time, awesome.”
Why should regular people care about the productivity of our economy?
“If we fail to keep making our economy more productive, we're going to have a hard time facing the headwinds that we will face in the next 50 years. Broadly speaking, we have a huge amount of old people coming down the pipeline, and we have a massive transition ready for our energy sector. We have to completely rewire our economy for aging and sustainability. Where are the resources for this gonna come from unless we try to make things more efficient? Unless we can grind out much more output from each person and each dollar that we have, we're just going to come up short.”
How does Canada compare to the rest of the world when it comes to productivity?
“We are about 10th out of almost 200 countries in terms of GDP per capita, which is a really rough way of measuring the accumulated productivity of your economy over time. But it's been easy to win as Canada. We haven't had to try. And so if we don't start trying, we're gonna slowly coast while other people catch up and go past us. That's what's been happening the last 30 years. We've been coasting.”
This interview excerpt has been edited for clarity and length. To catch the full episode with Will on Tuesday, subscribe to Free Lunch by The Peak.