EDITORIAL: Low productivity hurting Canadians

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It’s good news that Canada’s unemployment rate fell to 5.3% in March, the lowest level in the modern era.

But Finance Minister Chrystia Freeland in her budget last week acknowledged Canada is a laggard in the most important measure that determines the standard of living for Canadians: productivity.

Increasing productivity doesn’t mean making people work longer or harder.

It means giving them the tools to work smarter by finding the most efficient ways to produce goods and services.

It’s key to economic growth.

Freeland’s budget warned if nothing changes, Canada will have the lowest productivity — defined as annual growth in real GDP per capita — from now until 2060 among the 38 developed nations belonging to the Organization for Economic Co-operation and Development.

That means Canada will perform the worst economically of all of our major competitors, including every other member of the G-7 — the U.S., U.K., Germany, Japan, France and Italy.

Freeland described low productivity as the “Achilles heel of the Canadian economy” and that it matters because strong economic growth, “guarantees the dream of every parent — that our children will be more prosperous than we are.”

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Millions of Canadian families know this is no longer true today as they watch their children struggle to enter the workforce, establish careers and find housing they can afford, all of it made worse by two years of the pandemic recession.

Fixing the problem means giving businesses the tools to work smarter by investing in innovation and new ways of doing business through technological advancement, fuelled by research and development.

The problem is the Trudeau government’s main solution to low productivity appears to be more government programs and subsidies where the government tries to pick economic winners and losers.

That won’t work. It never has, which is why Canada has experienced low productivity for decades.

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Productivity is only improved when businesses see the economic value of investing in new ways of providing goods and services more efficiently.

The role of government is to increase innovation by lowering barriers to trade and competition and avoiding or reducing taxes that discourage it.

It’s one thing to identify the problem of low productivity in Canada which has been known about for decades. It’s another to fix it.