How can we reverse Canada’s declining productivity?

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Canada’s labour productivity has fallen dramatically in the last few years, from $68.5 per hour worked in 2020 to $63.6 in 2023. This decline is threatening economic growth, living standards, and Canada’s ability to compete globally. Fortunately, we have the means to reverse course.

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The Productivity Puzzle

When we look at Canada’s economic performance, the numbers tell a troubling story. While our GDP rose by 6.9% between 2019 and 2023, our GDP per capita (or the average productivity of each individual) decreased by 0.2% during the same period. How could that be?

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This contradiction reveals a fundamental weakness. Canada has been expanding its workforce primarily through immigration while underinvesting in what truly drives productivity.

Workforce development. Technological innovation. Capital investments in research and development. The result is that our growing economic activity is spread across more people, with each worker producing less on average than before.

This approach may inflate top-line GDP numbers, but it ultimately leads to stagnant living standards and wage growth for Canadians.

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A Complex Challenge

Research points to several factors:

1. Workforce misalignment: Despite high education levels, many workers, particularly immigrants, are overqualified for their positions, with their skills underutilized in low-productivity roles.
2. Limited capital investment: Businesses are investing less in workforce development programs and automation while relying heavily on temporary foreign workers and immigrants to fill lower-skilled, low-paying jobs.
3. Lag in technological adoption: Canadian businesses have been slower to adopt automation, AI, and other productivity-enhancing technologies compared to international peers.

As Parisa Mahboubi, Senior Policy Analyst, explains:

"Relying on temporary foreign workers and immigrants to fill lower-skilled, low-paying jobs means that labour becomes a cheaper option than capital, which naturally disincentivizes businesses from investing in productivity-enhancing technology. The path to productivity growth requires us to invest in both our technology and our people simultaneously."

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How Can We Reverse The Trend?

Turning this ship around demands coordinated action across multiple fronts:

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1. Economic development authorities need to align investments with productivity-enhancing industries, creating programs that address specific regional productivity gaps.
2. Employers must shift from viewing training as a cost centre to seeing it as an investment, creating pathways for workers to grow alongside technological adoption.
3. When those pieces are in place, job seekers can confidently take ownership of their skills development and build competencies that enhance their productive capacity.

By embracing digital-first workforce strategies, we can boost productivity and build meaningful career paths that lead to a healthier, more productive economy.

The productivity puzzle can be solved, but the solution lies in the strategic development of both people and technology.

Thrive enables organizations and government employment programs to deliver career support to employees and job seekers around the globe. By partnering with Thrive, you gain access to data-driven workforce intelligence that translates directly into strategic action. Connect with us to start building tomorrow’s high-performing workforce today.