Canada’s economic output per person is lower than it is in the United States, but the gap has narrowed since the turn of the millennium, according to Statistics Canada.
Canada's gross domestic product (GDP) per capita stood at 84.3 per cent of GDP per capita in the U.S. in 2005, an improvement from the low of 81 per cent in 1998. This was also slightly above the average of 83.2 per cent for the 12-year period between 1994 and 2005.
The gap in GDP per capita between Canada and the U.S. is driven by two factors. These are the differences in labour productivity, which are measured as GDP per hour worked, and the differences in the number of hours worked per capita between the two countries.
The relative importance of these factors has been changing over time. Prior to 2000, both components were relatively constant. However, since 2000, relative productivity in Canada has declined, while relative hours worked per capita variable has gone up dramatically.
The study found that in the 1990s, over two-thirds of the gap in GDP per capita between the two countries was due to differences in hours worked per capita and about one-third due to differences in labour productivity. By 2005, on the contrary, differences in labour productivity between the two countries accounted for two-thirds of this gap.
Since 2000, hours worked per capita in Canada have improved because the Canadian economy has been generating new jobs at a much faster rate than the American economy. This has led to the recent improvements in Canada's relative GDP per capita.
Large gains in Canada's hours worked per capita relative to the U.S.
Starting in 2001, Canada experienced large gains in hours worked per capita relative to the U.S. From the mid- to late-1990s, the number of hours worked per capita in Canada represented only about 88 per cent of the level in the U.S.
However, since 2000, this proportion has increased sharply. By 2005, the number of hours worked per capita in Canada reached 94.7 per cent of the U.S. level.
These recent increases in the relative number of hours worked per capita in Canada have been driven by stronger job growth in Canada than in the U.S. These strong gains have narrowed the gap between Canada and the U.S. in terms of the ratio of jobs to the working age population.
In 1999, the ratio of jobs to the population aged 15 years and over in Canada was 90.6 per cent of that in the U.S. Since 2003, this ratio has stabilized around 97 per cent.
Decline in relative labour productivity partially offsets gain in relative hours worked per capita
Recent gains in the relative number of hours worked per capita in Canada have been partially offset by reductions in Canada's relative labour productivity.
Labour productivity is measured as the nominal GDP per hour worked for the overall economy.
In 2000, productivity in Canada was 94.1 per cent of that in the U.S. By 2005, this proportion had declined to 89 per cent. In recent years, the Canadian economy has experienced several shocks, including the severe acute respiratory syndrome crisis, the outbreak of bovine spongiform encephalopathy, the power blackout in Ontario, and the sharp appreciation of the Canadian dollar.
From 1994 to 2005, Canada's annual labour productivity was, on average, 92.2 per cent of labour productivity in the U.S.