Productivity gap called ‘tragedy’
Canada’s slipping prosperity should be election issue, Rotman dean says
The Globe and Mail
By Heather Scoffield
Canada is making essentially no progress on the productivity front, and University of Toronto’s Roger Martin is fed up.
After issuing report after report detailing how business and government can improve productivity, the dean of the Rotman School of Management is now calling on voters and politicians to turn Canada’s prosperity gap (compared with the United States) into an election issue so that leaders are forced to act.
“We call for a shifting of our overall attitude from collective complacency to a shared determination to close the gap,” Mr. Martin writes in his fifth annual report on how to make Ontario more prosperous. “We just have to take this agenda seriously.”
Year after year, Mr. Martin’s Institute on Competitiveness and Prosperity has tracked the province’s performance compared with similar jurisdictions in North America. Ontario has slid from the middle of the pack two decades ago, to the bottom of the pack, along with Quebec.
“I’m frustrated,” Mr. Martin said in an interview.
“It feels to me a tragedy, that 17 years ago we were at the median. We’re now about $6,000 in GDP per capita . . . behind, and it’s robbing us of massive fiscal capacity. And we’re just sort of like, ‘well, that’s okay.’ ”
Because Canada is prosperous by international standards, the public is not very concerned about a deterioration in Canada’s relative standard of living, he worries.
“The stealthily slow drift of underachievement could erode our economic strength before we know it.”
In 2001, Mr. Martin designed a strategy for Ontario to edge its way back to the middle of the North American pack by 2012. But since the province has made no progress, he has extended the timeline to a more realistic 2020.
While Canadians may feel comfortable right now, and are just as prosperous as many European countries, closing the gap with the United States is crucial, Mr. Martin argues. That’s because the country is not living up to its potential, and it means that Canadians are accepting a lower standard of living than they have to — meaning lower wages, lower-quality jobs, more dependence on government support, and forgone income.
He figures closing the prosperity gap with the United States would increase disposable income for each Ontario household by about $8,400 a year.
To close the gap, public support and pressure on politicians is a prerequisite, if policy makers are to find the political will to implement productivity-enhancing measures, he says.
And with provincial elections pending in Ontario and Quebec, and a federal election on the horizon, “this is a particularly timely opportunity to set out an agenda for our prosperity.”
He’s hopeful that Ottawa will jump on his bandwagon tomorrow when Finance Minister Jim Flaherty presents a long-term economic plan for the country.
But neither Mr. Martin nor Mr. Flaherty should expect any of their productivity rhetoric to resonate loudly with the public, said pollster Allan Gregg, chairman of Strategic Counsel.
“It’s a classic politicians’ dilemma. How do you take what you believe to be good public policy, and make good politics out of it,” Mr. Gregg said.
No matter what type of language is used, discussions about productivity tell the public that business needs lower taxes while individuals need to work longer and harder, Mr. Gregg said.
“The problem is that productivity is a concept whose liabilities are very real: I must work harder. And its benefits are entirely ethereal. Something happens, our economy grows.”
