Alberta’s premier said Wednesday that Canada’s economic productivity crisis can only be resolved if the federal and provincial governments come together to address issues such as approving large projects and trade barriers between provinces.
“Every government at every level in this country needs to move in the same direction,” said Daniel Smith, speaking at the National Conference on Productivity in Calgary. Productivity is a term that describes the amount of economic output per hour of work.
“There are too many regulatory hurdles, too much red tape, too many barriers to the free movement of goods and services and labor. And, frankly, too many taxes.”
Improving productivity is seen as a way to boost wages and living standards as well as GDP and help fight inflation.
The conference, hosted by the University of Calgary’s School of Public Policy, was attended by leading economists from across the country and finance ministers from several provinces.
Productivity, or rather Canada’s lack of productivity, has been in the spotlight in recent months. Earlier this year, Bank of Canada senior deputy governor Carolyn Rogers called Canada’s lagging productivity record an “emergency.”
He noted that while Canada’s productivity in 2022 is 71% of the United States, Canada also lags behind G7 countries.
According to Statistics Canada data, Canadian business productivity has declined by 0.6% over the past five years, while U.S. productivity has increased by 10.1% over the same period.
According to a report from the University of California School of Public Policy, productivity levels in Canada are 12% lower than the UK, 20% lower than France and 32% lower than the US.
Chris Regan, associate professor of macroeconomics at McGill University, said this was a problem because productivity was the best way to ensure job and wage growth while reducing the risk of inflation.
“We can raise wages for workers, we can increase profits for businesses, and we can lower prices for consumers,” Mr. Regan said at a conference in Calgary.
“All of this typically comes from increased productivity.”
Alberta has the highest economic productivity of any province, thanks to an oil and gas sector that ranks among the most productive of any industry, along with utilities and mining.
However, a recent report from TD Economics found that productivity in the oil and gas sector has declined by an average of 0.5% each year since 2019.
Mr Smith said this was a result of reduced investment in the sector, largely due to political and regulatory hurdles making it extremely difficult to build new projects and infrastructure.
“Capital is mobile. Capital goes where it can get the highest and safest return. Canada is increasingly seen as a risky investment,” he said, citing Energy East and Northern. He cited canceled oil pipeline projects such as Gateway.
“The path from prospectus to profit is no longer clear or certain.”
Martha Hall Findlay, a former Liberal MP and current director of the U of C’s School of Public Policy, says Canada should invest in technologies such as carbon capture and storage, rather than putting up barriers to the oil and gas industry. said. This is to enable us to simultaneously expand production and reduce emissions.
But he said the time it takes for large projects to be approved in Canada is a major impediment to business investment.
“If it takes 10 to 15 years to build something in this country or any country, that’s a very long time for capital to sit there without actually getting a return on it.” she said in an interview Wednesday.
Other ways experts suggest increasing productivity in Canada include investing in skills and training, funding research and development and eliminating barriers to commercialization, and reducing barriers between provinces to the extent possible. It’s about removing as much as possible.
Some economists have suggested that removing interprovincial trade barriers, such as restricting cross-border sales of alcohol and meat products, could increase Canada’s GDP per capita by up to 4%. are.
Alberta Finance Minister Nate Horner said he believes it’s a low-hanging fruit when it comes to improving productivity.
“It could lead to more difficult conversations between the states, but if we can increase profits by 3 to 4 percent, that should be the easiest place to start,” Horner said in an interview.
Horner echoed Smith’s message that all levels of government need to work together to solve productivity challenges.
“Instead of all the states getting together and fighting over how to divide the pie, we need to get in the room and talk about how to grow the pie,” he said.
This report by The Canadian Press was first published Oct. 16, 2024.
