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Canada: Productivity Laggard, But Per Capita GDP Champion

ByThe National Bank of Canada
Published 03/07/2012, 04:30 AM
Updated 05/14/2017, 06:45 AM
FTNMX551030
-0.56%

Canada’s sluggish productivity performance in recent years is troublesome for some economists. It‘s because “doing more with less” has always been associated with a rise in living standards as measured by GDP per capita.

Over the last 15 years, based on OECD data, the Canadian economy experienced a below average performance among G7 countries on the labour productivity front. But as today’s Hot Chart shows, this poor performance did not prevent real GDP per capita to record the best progression among G7 countries. It is true that soaring commodity prices played a role in this, but it also contributed to lower productivity growth since mining and oil & gas extraction is by nature a sector where productivity is declining.

That said, from 1997 to 2008, before recession hit the labour market, the employment rate rose by a whopping 5.2 percentage points. That was the largest contributing factor to the rise in the standard of living. In our view, whatever happens to productivity growth going forward, policymakers should strive to maintain the employment rate as high as possible in a context where the aging population is likely to dampen growth and negatively impact public finance (for more details, see the Weekly Economic Letter published on March 5).
Canada Productivity laggard, but per capita GDP champion

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