As a topic for public policy debate, productivity has no charisma. It’s a political conversation killer combining arcane economics with uncomfortable preconceptions about working harder.
In spite of this, in recent weeks two respected voices in Canadian public policy have bravely stepped forward to shine a spotlight on this issue which is about nothing less than the standard of living that we will bequeath to future generations of Canadians. ITAC believes that, in spite of its drab appearance, improving productivity in Canada is an issue of vital importance to all Canadians.
In his roles as Deputy Minister of Industry, of Finance and latterly as Clerk of the Privy Council, Kevin Lynch has always been outspoken about the importance of this problem. It is encouraging to see that while he has retired from the public service, he still continues to champion the need to address our lagging productivity. In a thoughtful Globe and Mail essay on January 30, he delivered this call to arms.
“Canadians have been collectively incarcerated in a beguiling productivity trap for almost a generation. We work harder and harder, and use up our natural resources faster and faster, while the trap keeps us less rich, less able to provide public goods and less competitive. Canadians see more people working, and goods being produced as proof that productivity is not a problem. Yet this is the beauty of the productivity trap: while the illness worsens, the patients believe they are feeling better.”
Among the qualities that characterized Kevin’s tenure in government was his superb capacity to make complex economic ideas accessible to lay people. This is a tremendous asset in the discourse on productivity. For example, his argument beautifully illuminates the role that ICT can play in driving productivity and as a pre-condition for a better performance in innovation:
“A key source of the U.S. productivity growth has been the development and production of information and communications-related goods, and subsequently the broad application of these throughout the U.S. economy particularly in the service sector… Unfortunately the intensity of usage of information technology by Canadian business is only half of the U.S.
“International comparisons again demonstrate the research gap between Canadian business and their competitors. In 2007 Canadian business ranked 14th among OECD countries in research and development… This suggests that Canadian business has less capacity to be receptive to innovation, and less of a focus on innovation as part of an integrated business strategy in Canada.”
Then last Friday, Bank of Canada Governor Mark Carney drew a very clear picture of why Canadians need to care about productivity. Speaking to the Winnipeg Chamber of Commerce, he said:
“While the Bank does not entirely understand why productivity growth has been as slow as it has been, we do understand the consequences. Slower productivity growth means that the rate of potential growth – the speed limit, if you will – of the Canadian economy has fallen. This has implications for both the growth of Canadian living standards and the conduct of monetary policy… The combination of slower productivity growth and demographics could mean the rate of potential growth for the Canadian economy will be closer to 2 percent going forward than the more than 3 percent average rate we enjoyed in the first half of the past decade and the latter half of the 1990s. If this differential were to persist over a decade, the cumulative loss of income would be almost $30,000 for every Canadian.”
This is an excellent way of personalizing a complex notion by a highly credible economic thought leader. Slowing our economic growth rate by a third and picking our pockets of $3 thousand per year… this exposes our poor productivity for the truly malevolent force that it is.
The ICT industry by its very nature is committed to improved productivity – at the enterprise level, through our interaction with customers and at the economic level in important discourse like this. Sometimes the conversation can get pretty lonely. But the engagement of some of the best and brightest of our economic thought leaders certainly makes it as interesting as it is important.