At least once a quarter, Statistics Canada publishes data on how aggressively mediocre we are.
Most indicators jump around, making us look like world beaters one day and losers the next. But StatCan’s quarterly calculations of labour productivity can be counted on to remind us that the grit we think makes us special on the ice is missing from many of our non-hockey battles.
Labour productivity, the amount of gross domestic product generated per hour of work,dropped0.4 per cent over the final three months of 2018 from the previous period, according to StatCan’s latest report in March. That followed quarterly increases of 0.2 per cent and 0.7 per cent and a 0.3-per-cent drop in the first quarter.
The United States did better, as it usually does. And early this week, the U.S. Labor Departmentreportedthat non-farm labour productivity surged to its fastest rate since 2014 in the first quarter. StatCan hasn’t published similar figures yet. Marker down.
Productivity matters. The Bank of Canada last monthloweredthe rate at which it thinks the economy can grow without stoking inflation to 1.8 per cent because it estimates the country has become less productive, leaning instead on increased levels of immigration to generate the level of demand to which we have become accustomed.
Imagine if all of those immigrants were joining an economy that matched the aspirational energy that drove them to leave home? Too few of us bother. Wealth has come too easily. All we had to do to get rich was catch fish, fell trees, grow grain, dig up rocks, and mine bitumen. We had preferential trade agreements with the most important economies, first Britain and then the United States.
“The biggest problem with the Canadian mindset is that we are OK with being bronze,” James Keirstead, chief executive of Edmonton-basedLevven Electronics Ltd., said in an interview last month. “In the new world, bronze doesn’t even show up.”
Canada spends about 1.5 per cent of GDP on research and development, according to the Organization for Economic Cooperation and Development, a group of 36 wealthy countries. Here are the countries that spend more: Israel (4.5 per cent), South Korea (4.5 per cent), Sweden (3.3 per cent), Taiwan, Japan, Austria, Denmark, Germany, the U.S., Finland, Belgium, France, Norway, the Netherlands, Slovenia, the Czech Republic, and the United Kingdom (1.7 per cent).
Other big economies such as Japan and France are struggling to keep their productivity rates up as their populations age. Those countries have bigger populations on which they can rely. Smaller nations must work harder to generate the wealth they need to support their societies. Australia, Israel, and South Korea are among the advanced economies with stronger productivity rates than ours. That’s probably not a coincidence.
The most innovative countries tend to be the ones whose histories have been “uncomfortable,” said David Johnston, the former governor-general, who devoted a portion of his budget and time at Rideau Hall to studying innovation. Most Canadians understand the benefits of taking risks and becoming more efficient, but “when we get to execution, we have some challenges,” Johnston said in a recent telephone interview. “Life has been very comfortable in Canada.”
Complacency is to us what arrogance is to Americans. We embrace it every time we shut down early on Friday to get to the cottage. We prefer to sell our resources raw rather than put up the money required to develop them at home. Too many technology entrepreneurs are encouraged to sell their companies rather than build them into something greater.
Economists tend to dismiss Canada’s chronically weak productivity numbers as a psychological problem. For them, it’s a condition created by onerous tax policies, cumbersome regulation, and misaligned incentives.
Policy matters, but let’s be honest: This is us. The Rideau Hall Foundation, a charity that Johnston chairs, this weekpublishedwhat it calls the Culture of Innovation Index. The results are based on 20-minute interviews with 2,000 Canadians in early January. Large majorities said it was worth their time to “make something work better” and that it’s “important to take risks that could reap large rewards.” We don’t act on those beliefs. Only half of respondents tried to make things better in their own lives; more than 60 per cent said Canadians were “risk-averse;” and almost 40 per cent identified “inertia” as a barrier to innovation, almost double the number who mentioned “government” and “money.”
Johnston said he thinks it would help if innovation was part of the everyday conversation; two in three Canadians read business news at least once a week, but only one in five report seeingsomething about innovation, according to the Rideau Hall Foundation survey.
A little discomfort might also help. Levven has developed a wireless light switch that is state of the art. Unfortunately, it did so at about the same time that oil prices crashed. With local construction dead, Keirstead and his fellow executives had to look elsewhere for sales. Levven now has a growing list of American clients that it might not have had if local construction had been stronger.
“Two years ago, we could have had a lot more product here,” Keirstead said. “We have no choice but to go outside Canada. That’s not necessarily a bad thing.”