Skip to main content

Should Canada take steps to boost its long-term productivity growth, including measures to accelerate the substitution of capital for labour and to increase the pace of upskilling?

Translated from policy-ese: would you like a $13,500 raise?

A lot of the debate over increasing productivity and competitiveness resembles that first sentence, and sounds like a note from the boss telling you to stop lollygagging. Canadians could be forgiven for tuning out of a debate that seems to centre on why they should work harder to plump up corporate profits.

But what if the productivity debate were framed around individual prosperity -- the question being whether you want a low-wage or a high-wage economy?

A speech by former federal finance minister Bill Morneau last week hinted at that approach. After some familiar bemoaning of the lack of urgency about fixing our lack of competitiveness, Mr. Morneau pivoted to a frame of individual prosperity. “Let me put it another way,” he said in a speech Wednesday evening to the C.D. Howe Institute. “If we had maintained our rate of productivity growth from 2000 on, the average annual income for a Canadian worker would have been about $13,500 higher in 2019.”

To be sure, there’s nothing to guarantee that the benefits of higher productivity flow to workers. Some of that extra income will take the form of higher profits -- and rightly so, if businesses are to expected to invest heavily in robots and other forms of automation.

But Mr. Morneau’s words brought to mind a recent tour I had of a printing plant in southern Manitoba owned by Friesens Corp. Like many companies in Manitoba and elsewhere in Canada, Friesens has had to contend with an ongoing labour shortage. Unlike many, the company is automating parts of its production lines. One result: the back-breaking job of lifting and stacking is now performed by robots, not humans. It’s safer, cheaper -- and has freed up those humans for more technically demanding work. And their wages are higher, too.

So, a suggestion for Mr. Morneau, or anyone else looking to pontificate on the need for a focus on higher productivity: Don’t. Instead, talk about the choice between low-paid grunt work, and better paid, more interesting jobs.

Taxing questions

Responding to a recent Tax and Spend, one online reader pointed out that the decoupling of the Canadian dollar from energy prices is exacerbating inflationary pressures in Canada .

That’s true. In previous oil-price spikes, the Canadian dollar has appreciated, cushioning the blow from rising crude prices (which are denominated in U.S. dollars). That not only acts to keep pump prices lower than they otherwise would have been, but also makes imports relatively less expensive.

Not so in 2022. University of Calgary economist Trevor Tombe has estimated that the softer Canadian dollar has added an extra 20 cents a litre to fuel prices. In part, that decoupling has occurred because rising energy prices no longer spur as large a flood of capital investment into Alberta’s petroleum sector. Such capital investment is what super-charged the Alberta economy in the first decade of the century.

But the decoupling of the Canadian dollar from swings in the oil market isn’t necessarily a bad thing, in the long run. A relatively lower dollar does make imports more expensive, but it also makes domestic products more competitive in Canada and abroad.

Line Item

Crude calculus: The Canadian dollar may be stepping off of the oil rollercoaster, but the Alberta budget is still strapped in. In a recent post on the C.D. Howe Institute’s site, Prof. Tombe writes that the oil prices that markets are predicting for the next three years could give Alberta a three-year windfall of more than $25-billion, almost half of which could materialize in the current fiscal year. The resulting hefty surplus is an ideal opportunity for the province to commit to weaning itself from resource revenues, including spending restraint and rebuilding the Heritage Fund, Prof. Tombe writes.

Follow me on Twitter, @PatrickBrethour or ask your Taxing Question here.

Sign up for the Tax and Spend newsletter here

Your Globe

Build your personal news feed

Follow the author of this article:

Follow topics related to this article:

Check Following for new articles

Interact with The Globe