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A worker pours molten metal from a furnace into a ladle during casting at the Wabi Iron and Steel fabricating division and foundry in New Liskeard, Ont. (Fred Lum/Fred Lum/The Globe and Mail)
A worker pours molten metal from a furnace into a ladle during casting at the Wabi Iron and Steel fabricating division and foundry in New Liskeard, Ont. (Fred Lum/Fred Lum/The Globe and Mail)

The Productivity Challenge

Productivity that starts on the shop floor Add to ...

On the surface, Wabi Iron and Steel Corp. looks like a small company destined to succumb to the forces that have sent much of Canadian manufacturing to the scrap heap.

Wabi's factories are almost a century old. Many of its products - mining cages, ore loading systems and pump housings - are bound for export markets, a problematic destination when the Canadian dollar is strong, as it is now. To add to its challenges, Wabi is located in New Liskeard, Ont., in the heart of Northern Ontario mining country, but thousands of kilometres from mines operated by some key customers.

None of that bothers Wabi president Peter Birnie. He and his management team thrive on what others might consider disadvantages.

"New Liskeard, in our opinion, is the centre of the world," Mr. Birnie says.

Take a tour through New Liskeard, Ont.'s Wabi Iron and Steel Corp. and find out

For Wabi, the battle against larger rivals in distant markets such as Chile and Australia starts on the factory floor with a non-stop campaign to improve efficiency, reduce waste and eliminate bottlenecks - in short, to increase productivity.

Wabi's daily fight for higher productivity is being duplicated at many Canadian companies. The outcome of their struggles will determine how Canada fares in the global market against growing competition from low-wage countries such as Mexico, China and India.

The G20 summit focused partly on correcting global fiscal and trade imbalances. To help redress the imbalance on the trade side, Canada must boost its exports. Fixing its lagging productivity would go a long way to helping the country become more competitive in global markets.

In recent years the bulk of businesses across Canada have done a poor job of doing more with less. The country's dismal productivity performance has prompted Bank of Canada Governor Mark Carney to call out Canadian firms, blaming executives for the poor showing and urging them to increase investment.

Improving the country's performance is crucial for all Canadians and not just a theoretical exercise for economists, Bank of Canada governors, and consultants bearing flow charts.

"In the long run, our standard of living is based on the productivity of the country. It's that simple," says Andrew Sharpe, founder and executive director of the Ottawa-based Centre for the Study of Living Standards.

Canadian productivity has inched ahead by only about 0.7 per cent a year over the past decade. And in 2008, it actually shrank by 0.6 per cent, according to the Organization for Economic Co-operation and Development, which ranks this country's performance behind such economic basket cases as Greece and Spain. That same year, the United States, Canada's biggest trading partner, boosted its productivity by 1.3 per cent, widening an already large gap.

Toronto-Dominion Bank recently described Canada's record on productivity as appalling. If Canadian productivity growth remains sluggish over the next 10 years while an aging labour force expands at a projected annual rate of about 0.5 per cent, GDP will grow at only slightly more than 1 per cent a year, or about a third of its historic pace, calculates Craig Alexander, chief economist with the bank.

Slow growth would, in turn, hurt the ability of governments to raise sufficient revenues to meet the rising costs of health care, education and other social priorities. "This is why productivity is probably the No. 1 problem facing Canada today, from an economic perspective," Mr. Alexander says.

"My main worry is that Canada is becoming too resource-dependent and is not obsessing enough over human capital," says Tyler Cowen, an economics professor at George Mason University in Arlington, Va., who specializes in globalization issues. "High resource prices have been good for Canada, but at the same time have given the country too easy a ride."

There are time-honoured ways to boost productivity, including increasing investment capital, reducing wages and making better use of technology. Failure to tackle the problem can sound the death knell for any company.

"Are there [Canadian]companies that have not succeeded because of productivity? Unfortunately, yes," says Robert Hattin, president of Edson Packaging Machinery in Hamilton.

Mr. Hattin believes many companies are not willing to invest enough to take advantage of growth opportunities presented by global markets. "It's a mindset within these companies, whether they are branch plants of multinationals or private companies. You have got to want to play. If you're scared of it, do your employees a favour. Sell your company to somebody who wants to make it grow."

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