Canada's Quiet Decline

[ainvan]

The low productivity of Canadian companies threatens our living standards



The causes of the low productivity of Canadian companies are well known and documented: they invest little, spend less on research and development than those in other rich countries, and have a low propensity to innovate. These behaviours tend to limit their productivity gains and, consequently, restrict the growth of the Canadian economy.

There is an urgent need to act because the consequences of inaction are enormous. In 1981, Canadians enjoyed a $3,000 higher per capita standard of living than the major Western economies (adjusted for inflation and currency fluctuations). Forty years later, Canada was $5,000 below that same average. If the trajectory continues, the gap will be nearly $18,000 by 2060. Canada’s Department of Finance has also reported these alarming projections.

In examining why Canadian businesses are so reluctant to invest and innovate, the Centre for Productivity and Prosperity – Walter J. Somers Foundation (CPP) concluded that the problem is a lack of internal competition. Competition among Canadian companies is too weak and simply does not generate the incentives that would normally boost their competitiveness.

Canadian firms operate in small, highly dispersed markets that are very segmented economically and legislatively. They therefore compete much less with each other than American or European firms, which operate in two large, highly unified and integrated domestic markets that provide an adequate level of competitive pressure. This is not the case here: Canadian companies do not need to invest and innovate as much to stand out and maintain their market share. As a result, they are not competitive enough to compete in foreign markets. Growth suffers and the country’s economy stalls.

Source

[SignalHillHiker]

Walter J. Somers Foundation seems to be most heavily involved in the hospitality and investment industries, so... I'd take this with a grain of salt. They seem particularly focused on weakening provincial jurisdiction by harmonizing legislation between the provinces. Some of that is objectively good, even to a leftist like me, but with the goal of squeezing more productivity out of every worker... we're likely not on the same side in terms of the world we want to live in haha.

[ainvan]

Human Development Index 1998



Human Development Index 2022

[TownGuy]

Have you seen our labour laws? We're too busy trying to compete with the bottom of the barrel to even consider trying to compete with those at the top. This is why things like Ontario's 3 paid sick days policy was fought so hard against, and reversed by Doug Ford. They'd rather have a sick, unproductive employee show up for their shift than pay-out for a day of proper rest. Same goes with 2 weeks holidays, which is bordering on worst in the world. There's no need to innovate when you can have the same old worn out workers plugging away endlessly.

[esquire]

Has Canada declined? Or have other countries improved at a faster rate?

[MonkeyRonin]

In short:

• A disproportionate amount of business expenditures are diverted to rent/real estate, which means less funds available for wages, investment, and innovation; and discourages entrepreneurialism and risk-taking.
• A disproportionate amount of investment dollars are also directed to real estate instead of more innovative & productive industries, because;
• Tax rules favour real estate & associated rent-seeking behaviour, and discourge productivity.
• Our immigration programme is designed to bolster said real estate market and suppress wages, instead of actually address skilled labour shortages. And growth is so high as to offset any GDP gains.
• A disproportionate share of Canada's business activity comes from a handful of (often government-sanctioned) oligopolies who's success is predicated on high costs/poor service instead of actually having to compete in the market.

[kwoldtimer]

Originally Posted by esquire

Has Canada declined? Or have other countries improved at a faster rate?

The latter, for now.

[Dartguard]

Originally Posted by TownGuy

Have you seen our labour laws? We're too busy trying to compete with the bottom of the barrel to even consider trying to compete with those at the top. This is why things like Ontario's 3 paid sick days policy was fought so hard against, and reversed by Doug Ford. They'd rather have a sick, unproductive employee show up for their shift than pay-out for a day of proper rest. Same goes with 2 weeks holidays, which is bordering on worst in the world. There's no need to innovate when you can have the same old worn out workers plugging away endlessly.

You have a different definition of innovation that I do. Your statement is social policy and Mr Trudeau has thrown alot of spaghetti at the wall for that stuff.In fact he has doubled the National debt to keep 17 year olds at home for 2 grand a month. Gaming skills are up though.

[MonkeyRonin]

Originally Posted by kwoldtimer

The latter, for now.

Stories like this come to mind: https://www.cbc.ca/news/canada/infan...nada-1.6772351

Canada's infant mortality rate has dropped by more than half since 1980. That sounds good of course, but at the same time, we've also fallen from having one of the lowest infant mortality rates amongst developed countries to one of the highest. In other words, most of the progress has likely been driven by wider technological/medical improvements; as opposed to our health system having achieved anything particularly successful.

[thewave46]

First: I love 40 year projections. The error bars are so large as to be useless. Plus or minus 25%-50% estimates are just short of silly wild assed guesses. Wonder how the Aussies will do in the age of declining demand for coal in 2060. Apparently really well, if the projection is to be believed. Interesting for a country that can't even produce an automobile anymore.

Second: I suspect Canada's decline is mostly centered around the upper-middle class rising/lower-middle class declining split. If you're on the winning side, great, the losing side, not so much. Depends how many end up on each side of it as to how we'll do.

I think back to 1998. Then I compare to now. If I'm young in '98, Canada is a less generous country and things are harder (see: minimum wage, government aid programs, unemployment rate), but a lot cheaper for the things I need (What was the house cost or even rent in Toronto in 1998?). I know the country is riding a rising tide for the next couple of decades, and government is getting its fiscal house in order, and the country can endure low commodity prices, lean government spending, and big slack in the labour market. Stuff might not be great, but it's cheap. The actual middle was larger.

If I'm young today, the government programs are better (OAS, Canada Child Benefit, minimum wage), but living is much more expensive. To the point that things are nigh unaffordable in many places. The three-legged stool we got comfy with sitting on looks iffy. High commodity prices, fat government spending projected to continue rising, big housing prices. Hope one of the legs doesn't give out. It'll hurt. The split is widening into the winners and losers.

I'd say that being young when things were harder and older when they're easier seems like the way to go. Maybe we should think about what happens if the stool we sit on starts creaking ominously. Doesn't seem like we're planning for that, though. It might be ugly.

[ssiguy]

Will Canada decline............depends on what you are talking about.

Canada's influence in the world will continue to increase. For just 40 million,, Canada is an incredibly influential country and is a member of the G7, the world's most exclusive club that dictates world financial, political, and economic policy. We are always comparing ourselves to the US and hence seem small and some what insignificant but the reality is that Canada is one of the world's top 10 most important nations. Depending on who you site, Canada has already overtaken Italy in GDP and by all metrics will within the next 3 years.

The issue is that we are increasing in importance due to our fast growing population while many of our contemporaries are suffering from population stagnation or even decline. We are gaining in terms of our GDP but losing ground in terms of our per-capita GDP which is the one that matter most to us as individuals because it dictates our standard of living and quality of life.

[kwoldtimer]

Originally Posted by thewave46

First: I love 40 year projections. The error bars are so large as to be useless. Plus or minus 25%-50% estimates are just short of silly wild assed guesses. Wonder how the Aussies will do in the age of declining demand for coal in 2060. Apparently really well, if the projection is to be believed. Interesting for a country that can't even produce an automobile anymore.

Second: I suspect Canada's decline is mostly centered around the upper-middle class rising/lower-middle class declining split. If you're on the winning side, great, the losing side, not so much. Depends how many end up on each side of it as to how we'll do.

I think back to 1998. Then I compare to now. If I'm young in '98, Canada is a less generous country and things are harder (see: minimum wage, government aid programs, unemployment rate), but a lot cheaper for the things I need (What was the house cost or even rent in Toronto in 1998?). I know the country is riding a rising tide for the next couple of decades, and government is getting its fiscal house in order, and the country can endure low commodity prices, lean government spending, and big slack in the labour market. Stuff might not be great, but it's cheap. The actual middle was larger.

If I'm young today, the government programs are better (OAS, Canada Child Benefit, minimum wage), but living is much more expensive. To the point that things are nigh unaffordable in many places. The three-legged stool we got comfy with sitting on looks iffy. High commodity prices, fat government spending projected to continue rising, big housing prices. Hope one of the legs doesn't give out. It'll hurt. The split is widening into the winners and losers.

I'd say that being young when things were harder and older when they're easier seems like the way to go. Maybe we should think about what happens if the stool we sit on starts creaking ominously. Doesn't seem like we're planning for that, though. It might be ugly.

Or, an ebb tide lowers (almost) all boats.

[76samian]

Originally Posted by kwoldtimer

Or, an ebb tide lowers (almost) all boats.

Can you offer an example of upper middle class rising? (excluding government and public sector)
The problem is the rapid decline.

[ericmacm]

Originally Posted by MonkeyRonin

In short:

• A disproportionate amount of business expenditures are diverted to rent/real estate, which means less funds available for wages, investment, and innovation; and discourages entrepreneurialism and risk-taking.
• A disproportionate amount of investment dollars are also directed to real estate instead of more innovative & productive industries, because;
• Tax rules favour real estate & associated rent-seeking behaviour, and discourge productivity.
• Our immigration programme is designed to bolster said real estate market and suppress wages, instead of actually address skilled labour shortages. And growth is so high as to offset any GDP gains.
• A disproportionate share of Canada's business activity comes from a handful of (often government-sanctioned) oligopolies who's success is predicated on high costs/poor service instead of actually having to compete in the market.

I agree heavily with your points about increasing amounts of investment dollars being diverted to real estate instead of actual meaningful business investment, in addition to oligopoly dominance and consolidation in key sectors. I would also add to that further, less competition resulting in higher prices for products, as well as high rent or mortgage prices from the inflated real estate sector also means less disposable income for the average person that could otherwise go towards either investing in a business or toward supporting value-added or accessory industries like entertainment, luxury products, travel, etc.

I think there is also a lot that can unfortunately be said about being almost identical to the US in every way except with smaller size, more protectionism and stricter regulations. Due to the deep integration of our economies, it just makes more sense from a money perspective for the bulk of business interest in North America to be concentrated in the US with smaller, ancillary investments made in Canada. A great example is semiconductor production - the re-domestication push for semiconductor production is basically going to be entirely concentrated in the United States with massive fabrication operations being setup across the country. The extent that Canada will be involved in this toward the foreseeable future will be limited to packaging and testing with some design.

Obviously, there isn’t much that our government can feasibly do to appeal to these major companies in light of the heavy-handed and deep-pocketed approach that the United States is taking toward re-domestication of industry. I am of the opinion that as long as we are viewed as virtually similar, yet wholly inferior to the United States, we won’t be taken seriously as a destination for high-value business investment.

[whatnext]

Originally Posted by ainvan

The low productivity of Canadian companies threatens our living standards

The causes of the low productivity of Canadian companies are well known and documented: they invest little, spend less on research and development than those in other rich countries, and have a low propensity to innovate. These behaviours tend to limit their productivity gains and, consequently, restrict the growth of the Canadian economy.

There is an urgent need to act because the consequences of inaction are enormous. In 1981, Canadians enjoyed a $3,000 higher per capita standard of living than the major Western economies (adjusted for inflation and currency fluctuations). Forty years later, Canada was $5,000 below that same average. If the trajectory continues, the gap will be nearly $18,000 by 2060. Canada’s Department of Finance has also reported these alarming projections.

In examining why Canadian businesses are so reluctant to invest and innovate, the Centre for Productivity and Prosperity – Walter J. Somers Foundation (CPP) concluded that the problem is a lack of internal competition. Competition among Canadian companies is too weak and simply does not generate the incentives that would normally boost their competitiveness.

Canadian firms operate in small, highly dispersed markets that are very segmented economically and legislatively. They therefore compete much less with each other than American or European firms, which operate in two large, highly unified and integrated domestic markets that provide an adequate level of competitive pressure. This is not the case here: Canadian companies do not need to invest and innovate as much to stand out and maintain their market share. As a result, they are not competitive enough to compete in foreign markets. Growth suffers and the country’s economy stalls.

Source

As others have mentioned, real estate devours way too much capital in Canada that should go to innovation. The flip side of that is productivity also lags because businesses know they can count on the government to import loads of cheap labour for them.

[acottawa]

I am trying to think of a country that isn't in decline.

The Global North is aging badly and many countries are looking at a pretty severe population decline.

The Global South which should be benefitting from a demographic dividend is increasingly mired in corruption and conflict.

Technological innovation seems to be slowing and it is unclear recent innovations such as AI are beneficial.

Not to mention the deteriorating environment pretty much everywhere.

[casper]

Originally Posted by acottawa

I am trying to think of a country that isn't in decline.

The Global North is aging badly and many countries are looking at a pretty severe population decline.

The Global South which should be benefitting from a demographic dividend is increasingly mired in corruption and conflict.

Technological innovation seems to be slowing and it is unclear recent innovations such as AI are beneficial.

Not to mention the deteriorating environment pretty much everywhere.

Demographic challenges are clear.

On the environment I have a far more positive view. If you come back to the 80s or 90s there has been a lot of improvements. The challenge is we have also had significant growth. We may be doing things in a more environmental sound way, but we are just more of it.

Efficiency is a difficult one. It is commonly measured as GDP/per person. That only tells part of the story. Lets say wheat were our main export and overnight the price of wheat doubled. Suddenly Canada is more productive because of GDP/per person goes way up. Are we more productive? No.

I think we need to take a serious look at the commodities we export and look to restrict export of raw commodities if additional processing can be done in Canada. We should not be exporting raw logs. We should not be exporting unprocessed fish. We may need to bring in more people to do that next stage of processing but that is ok.

Same issue I have with people who are upset we are not exporting LNG to Germany. (Assuming we could magically built terminals overnight) I don't think we want to. Germany is going to turn around and transform that LNG in fertilizer and chemicals. Instead we should manufacture the fertilizer and chemicals and export those.

[Acajack]

Originally Posted by acottawa

I am trying to think of a country that isn't in decline.

The Global North is aging badly and many countries are looking at a pretty severe population decline.

The Global South which should be benefitting from a demographic dividend is increasingly mired in corruption and conflict.

Technological innovation seems to be slowing and it is unclear recent innovations such as AI are beneficial.

Not to mention the deteriorating environment pretty much everywhere.

As I mentioned in this post earlier today, things are slowly and bumpily evening out between the developed and developing worlds in terms of quality of life:

https://skyscraperpage.com/forum/sho...postcount=9196

[esquire]

Originally Posted by casper

Same issue I have with people who are upset we are not exporting LNG to Germany. (Assuming we could magically built terminals overnight) I don't think we want to. Germany is going to turn around and transform that LNG in fertilizer and chemicals. Instead we should manufacture the fertilizer and chemicals and export those.

It feels like we have been saying that for 100+ years. When will we see meaningful progress? We have one heavily industrialized region (GTHA) and one sort-of heavily industrialized region (Montreal). Everywhere else seems to underperform to varying degrees.

[kwoldtimer]

Originally Posted by 76samian

Can you offer an example of upper middle class rising? (excluding government and public sector)
The problem is the rapid decline.

Techies (the country estates and flashy cars would suggest).