As pandemic restrictions fade and new technologies emerge, 2023 could be Canada’s chance to break out of its decades-long productivity slump.-BY Daniel Perez

For too long, Canada has lagged other highly developed nations when it comes to productivity metrics. Often, the country barely manages to remain in the top 20 nations worldwide. However, rather than bemoan Canada’s past, the reset and restructuring of the nation’s economic operations afforded by the recent pandemic instead provides an opportunity to look optimistically at the future.

Canada is well positioned to capitalize on new trends worldwide that could unlock a fresh surge in economic productivity. Here, some of those trends will be examined, including the power of new technology, opportunities to realign workers, pay, and outcomes, and the fresh motivation of government groups to be partners in meaningful growth.

Capitalizing on new technologies

One factor that suppresses productivity is persistent inflation, a problem Canada has been increasingly struggling with of late. However, according to Tiff Macklem, Governor of the Bank of Canada, one of the ways that the country can create productivity gains in an inflationary environment is by capitalizing on new technologies and innovations. This is particularly salient because more than one-third of Canadian businesses report adding a digital tool or process over the last two years, yet some 40% of workers report that they’re not trained on or comfortable using the new software systems and AI tools in their workplace.

Bringing workers collectively up to speed would be a large training investment, and likely one that would require a concentrated government program to pull off. Yet when considering national initiatives with real potential to drive long-term growth, getting the workforce “modernized and digitized” is a worthy goal. In fact, over in Europe, 2023 has been declared a year of skill building, with a special emphasis on improving digital skills across the continent. If the heads of Europe – home to many of Canada’s peers and competitors – are willing to dedicate a year-long program to understanding the latest technologies, can Canada really afford not to make a similar investment?

Aligning national goals with individual values, pay programs, and desired outcomes

Another potential trend that could unlock fresh and significant productivity gains is realigning national business goals with individual goals and desires. Internationally, developed nations are struggling with worker engagement levels at or near all time lows. Headlines highlight such trends as “laying flat” or “let it rot” or even straight up “quiet quitting” for workers, showcasing ways in which modern societal expectations around work and life are in conflict.

Canadian firms can use this as a conversational starting point to unlock fresh insights into what workers want from their jobs. It might be pay issues – compensation in Canada is up in many areas, but not quite keeping pace with inflation – or some element of the job that isn’t meaningful or that has become tedious. Rather than “catering” to workers, this is a chance for re-engagement and an opportunity to look at parts of work/life arrangements that no longer serve anyone post-pandemic.

For example, significant portions of Canadian workers have now had a taste of fully remote work (estimates range from between one-third to half). Since their productivity didn’t drop off, they are reluctant to return to the office full-time now. Firms able to adapt to a hybrid or permanently remote arrangement could boost productivity by reducing turnover and raising engagement and loyalty levels. Or, in lieu of desired higher salaries, firms might be able to offer flexible schedule as a benefit. By endorsing and prompting these conversations, firms and government groups have the potential to align worker desires for meaningful work, time and flexibility for life responsibilities, and appropriate compensation with administrative needs for a stable workforce, engaged workers, and productive hours on the job.

Partnering effectively with interested government groups

Now that the pandemic is fading before other challenges, governments around the world are eager to see businesses spring fully back to life. Toward that end, many are trying to launch fresh funding initiatives, sponsorship programs, and oversight groups to steer things in what they perceive as the right direction.

However, as the Business Council of British Columbia notes, despite 39 Federal Cabinet ministers, there’s no one explicitly dedicated to improving productivity. As a result, some agencies are working to cross purposes, or even inadvertently snuffing out the very gains they’d hope to see bloom.

As an example, consider Canada’s “gazelles” vs “unicorns”. The country has a number of programs to help businesses get started, and indeed, firms under five years old are some of the fastest growing companies in all of Canada. These are known as gazelles. However, when it is time for the gazelles to grow up into billion dollar unicorn firms, the state funding is not being matched by private capital. As a result, gazelles slow down, become more risk adverse, and find themselves undercapitalized for the next stage of growth.

To help reverse this, business development agencies across Canada need to consider the full life-cycle impacts of their programming. In looking at hard data, it may be better to provide additional backstops to banks for funding businesses rather than offering grants to businesses directly. Shifting where the “carrots” are placed can spur start ups to get more publicly competitive earlier in their growth cycle, laying the foundations for national and even international expansion beyond the early “gazelle” style stage.

Concluding Thoughts

In 2023, Canada has the potential to experience a real productivity break out – and one that need not be confined to a single industry. Instead, by capitalizing on new technologies and upskilling the national labor pool, the country can lift everyone together. Further, by pushing for alignment between national goals and personal desires and using data to appropriately shift economic “carrot” policies from the government, Canada could do more to unlock its inherent and unique potential. The best part? While each of these moves can have short-term benefits, they each represent a systemic change that could finally put Canada on the path to serious long-term productivity gains.