Productivity lagging, report concludes Governments not investing enough
Globe and Mail
By Simon Tuck
OTTAWA—Canada’s productivity is lagging that of the United States’ by 15 per cent because individuals and companies in this country invest less than their counterparts to the south, a report concludes.
The report, written by the independent Institute for Competitiveness and Prosperity, said the productivity gap between the two countries costs the average Canadian $6,300 and all levels of government $75-billion a year in tax revenue.
It directly attributed that to a lack of investment, which means Canada isn’t getting as much productivity as possible out of its human and natural resources.
For example:
Canadian businesses invest about 12 per cent less in machinery, equipment and software than Americans;
Canadians spend less on education than Americans, especially higher education, and have lower aspirations;
Governments at all levels are shifting more spending toward consumption of wealth, such as health care and social services, at the expense of investments, such as education and transportation;
Governments are under-investing in cities and not doing enough to help immigrants gain skills;
“The report makes clear why we trail the U.S. in productivity and prosperity,” Roger Martin, the institute’s chairman, was quoted as saying in a press release. “It’s because we under-invest.”
The report, titled Partnering for Investment in Canada’s Prosperity, was presented yesterday at the annual meeting of the World Economic Forum in Davos, Switzerland.
James Milway, the institute’s executive director, said federal and provincial governments could also help boost productivity by cutting taxes, particularly on capital investments.
Although Canadian tax rates have been reduced in recent years, Mr. Milway added, they have been cut even further in the United States during the same period.
“We’re leaving prosperity on the table.”
Mr. Milway said there are signs of hope that Prime Minister Paul Martin will take some positive steps to improve productivity but it’s too early to say for sure.
Finance Minister Ralph Goodale has said Ottawa plans a wide variety of new expenditures and tax cuts, but that there’s little fiscal room to do much in the coming federal budget.
Mr. Goodale has said the government will not fall back into deficit even though it has an estimated surplus of just $2.3-billion for this fiscal year, and has promised the provinces up to $2-billion in extra health care money.
Liberal MP Roy Cullen endorsed the report’s basic thrust, but pointed out that investing in education and cities has been among the federal government’s priorities. “Canada has lagged in terms of investment,” he said.
