‘In emergency, break glass’: Bank of Canada leader cites problem of Canada’s productivity

Says level of productivity in Canada’s business sector ‘more or less unchanged’ from seven years ago

‘In emergency, break glass’: Bank of Canada leader cites problem of Canada’s productivity

The need to improve productivity in Canada has reached an emergency level, according to a senior Bank of Canada official.

That’s because, in the future, inflation could be more of a threat to the Canadian economy than the past few decades,

“I want to talk about Canada’s long-standing, poor record on productivity and show you just how big the problem is. You’ve seen those signs that say, ‘In emergency, break glass’. Well, it’s time to break the glass,” says Carolyn Rogers, senior deputy governor, Bank of Canada, speaking in Halifax.

She notes that while Canada’s labour productivity eked out a small gain at the end of last year, according to Statistics Canada, that came after six straight quarters where productivity fell.

And while the pandemic was a major disruptor of the economy, productivity in Canada has not improved after the health crisis, she notes. 

“Given how nimble companies were, we thought productivity would improve coming out of the pandemic as firms found their footing and workers trained back up. We’ve seen that happen in the US economy, but it hasn’t happened here. In fact, the level of productivity in Canada’s business sector is more or less unchanged from where it was seven years ago.”

Faster growth, more jobs

Strong productivity — which leads to faster growth, more jobs and higher wages — is an important way to protect the economy from the risks of high inflation, says the Bank of Canada.

Three elements contribute to stronger productivity, it says:

  • capital intensity: giving workers better physical tools like machinery, and using new technologies to improve efficiency and output
  • labour composition: improving workers’ skills and training
  • multifactor productivity: using capital and labour more efficiently

Few employers actually measure productivity, according to a previous report.

What can Canadian employers do to increase productivity?

To improve productivity, Canada must invest, says Rogers.

“When you compare Canada’s recent productivity record with that of other countries, what really sticks out is how much we lag on investment in machinery, equipment and, importantly, intellectual property,” she says.

Companies need to own or have the rights to patents that will allow them to compete by adopting “productivity-boosting processes,” she says.

“Higher productivity should be everyone’s goal because it’s how we build a better economy for everyone. When a business gives workers better tools and better training, those workers can produce more. That, in turn, means more revenue for the business, which allows it to absorb rising costs, including higher wages, without having to raise prices.”

Artificial intelligence (AI) monitoring and financial wellbeing have an impact on productivity, according to previous reports.

Here are some other ways employers can improve worker productivity, according to Nectar’s Amanda Cross:

  1. Focus on employee health.
  2. Use employee recognition to encourage productivity.
  3. Limit unnecessary meetings.
  4. Create a genuinely-enjoyable work environment.
  5. Stop micromanaging and start empowering staff.
  6. Improve employee compensation.

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