The economic productivity conversation

The photo shows my neighbour Shane at the top his game, and the top of a tree, skillfully falling a 50 meter Douglas-fir.

So today is another Friday, which is the day I set aside to do some reading and reflecting, and follow my interests down various rabbit holes. And today the rabbit hole is the crisis of “productivity“ in Canada.

The term productivity crops up a lot when policy makers, and those with an interest in how economic policy affects corporate activity begin talking about their worries and fears. Productivity is simply an economic measurement that divides the gross domestic product – the value of all goods and services produced by a country – by the number of hours worked. Now right off the bat you can see that there are enormous problems with using such a simple metric as such a fundamental pillar of economic policy. For example, unpaid labour can’t be measured either in terms of output or hours worked. That was famously one of the reasons why back in the 1980s, Marilyn Waring launched her critique of GDP as an effective measurement of well-being in a society.

Over the past several years people like the deputy governor of the Bank of Canada, Canadian Chamber of Commerce, and other economic think tanks have described Canada‘s productivity levels as a crisis. Their analyses all seem to sing from the same song book. The Canadian Dimension shows that there is a lot hidden in the measurement of productivity, including who benefits from it.

But let’s look at the stuff that’s in our current public conversation. When you look at this table, you can see that in 2023 we “produced“ only 78% of what Americans do.

Remember this is a completely arbitrary measurement. But let’s take it on it’s own terms and unpack a bit what it might mean

Here is a pretty mainstream definition and discussion about, what the term “productivity” actually means?

So in general when people talk about productivity levers, they mean things such as skilled labor, good machinery, and technology that helps workers work more efficiently. People in the private sector, often call for more investment in skilled labor (usually by calling on governments to do so they don’t have to). People who support free market economics, call for reducing regulation and taxation to enable businesses to invest more, even though very large businesses don’t tend to invest their profits in productive ways, but often engage in acquisition of smaller firms, buying back their own shares, or paying out executive bonuses. For many large companies, the production of material goods is simply the channel to sustained investor returns. I do think in an era where we have financialized everything, the discussions about productivity related to industrial equipment and skilled trades labourers seem almost archaic , if not disingenuous. But here’s a thing. When I looked at the above table, I noticed that there were several countries who outpaced the United States in productivity. You will notice that three of these countries are Nordic countries who have similarities and differences with Canada.

We are similar in that our economies are quite resource dependent, but we are very different in terms of our population density and our cultural attachment to a social safety net. While solutions that work in the Nordic countries are not directly applicable to Canada, it strikes me that we might still learn from what they do.

And glaringly and obviously, that is the role of public services and a robust social safety net, even though nobody in this country seems to talk about that in relation to the “productivity crisis.”.

If one of the easiest ways to increase productivity is to introduce more skilled labour into the workforce then it strikes me that an over abundance of investment in our education system would have both an immediate and long-term impact. Imagine what would happen if we lowered or eliminated tuition and forgave student debt. What if we supported continuing education, professional development, and skills upgrading as an ordinary part of a person‘s work life? Imagine creating employment standards that require businesses and organizations to provide two weeks a year of paid leave for learning for every employee. Imagine all the social and public enterprise that would spring up around that need to provide workers in every industry with ongoing learning and development, materials and experiences.

Imagine if these resources were also available to small businesses and entrepreneurs. People could truly choose their own adventure in life. Learning and creating as much or as little as they wanted to. Fostering creativity and inspiration and motivation and possibility to live your life how you want to.

It is also clear to me, that a robust social safety net provides peace of mind and both tangible and intangible security for citizens who can then feel more free to put their talents to best use in a society. One of the big differences between Canada and the United States is how restricted my American friends are to quitting their jobs, starting businesses, or looking for other work, if what keeps them in a dead end situation is a decent healthcare plan. In 1999 when I started my business consulting I had one client, a toddler at home, and another child shortly on the way, I didn’t think twice about quitting my government job. I wasn’t losing fundamental healthcare benefits. I lived in a housing co-op with a rent geared to my income, which had been capitalized by a federal government housing program in the 1970s. My ability to start a business was enabled by our collective social safety net. I was able to quickly save money as a result and when we had enough to move out of the co-op another family could take our place. At the time, many of my American friends who wanted to do the same, were unable to do so. They stayed in unsatisfying jobs, doing the bare minimum to get by because quitting was too financially precarious. And this was in a good economic period.

Scratch the surface and I think you find that all stories of bootstrapping are based on that fact that someone made the shoes for you in the first place.

We are in a period in this country where social services are being eroded and eliminated, where provincial governments are critically underfunding, health and education and other essential services and where the rhetoric is that the market can provide better public services than governments. But we are also in an era where our economic system has financialized everything from intellectual property to housing to water. This means that any public benefits provided by the market are only incidental results of providing a return to shareholders.

Of all the times in history, this is not the moment to erode public services that support citizens in pursuing their highest and best purposes. Nor is at the time to look to the free market to provide investments in public and social infrastructure when they have an actual fiduciary duty not to do so.

Today’s rabbit hole has convinced me more than ever that our continued hand wringing about Canada‘s productivity crisis is simply empty bluster if it isn’t also accompanied by a demonstrably robust investment in our social safety net. We are on the verge of losing so much.

During a teachers’ strike a number of years ago I asked my MLA what the core issue was, and he boiled it down to teachers demanding more money than we had in the provincial treasury. We did a little thought experiment together, and I dared him to think about what would happen if we accidentally overfunded education. Imagine the terrible fallout of small class sizes, individual learners getting attention to foster their passions, special needs professionals supporting unique learners, abundant resources and tools, and beautiful state of the art classrooms and environments for kids to learn in. Sounds bad, eh?

I still await that day with bated breath.

Thanks for reading this far. I’m really curious about this topic and I’m just learning about it, so if you have anything to add or correct me on, let’s talk about it in the comments.