Institute releases Ninth Working Paper

Released September 1st, 2006

As North Americans celebrate Labour Day and the last long weekend of the summer, the Institute for Competitiveness & Prosperity releases new findings on cross-border differences in work effort

Toronto – Ontario workers are on the job about three and half fewer weeks annually than their counterparts in US peer states and this is costing $3,700 per capita in lower prosperity. Much of the gap in hours worked – the intensity gap – is the result of preferences for more vacations in Ontario. However, a significant percentage of the gap is because many Ontarians are working part-time but would prefer to work full-time. The intensity gap is also wider among more highly educated and higher income Ontarians. These are some of the key conclusions of Working Paper 9, Time on the job: Intensity and Ontario’s prosperity gap released today by the Institute for Competitiveness & Prosperity.

The intensity gap translates to lower economic output in Ontario which in turn reduces after-tax disposable income by $5,500 annually for the average Ontario family. It also reduces federal, provincial, and local government revenues in Ontario by $17 billion. Closing at least some of the intensity gap would contribute to a reduction of Ontario’s worrisome prosperity gap. The prosperity gap refers to how much Ontario trails its peer group of the largest US states and Quebec in Gross Domestic Product (GDP) per capita.

“We have always argued that closing the prosperity gap should come from working smarter, not harder,” said Roger Martin, Chairman of the Institute and Dean of the Rotman School of Management at the University of Toronto. “But we need to understand what’s driving the intensity gap, which is the second most important factor in the prosperity gap, and that’s what we do in this Working Paper.”

Drawing on data from Statistics Canada, US statistical agencies, and Mercer Human Resource Consulting, the Institute has been able to deepen our understanding of the hours worked gap between Ontario and its US peers. From an international perspective, Canada and Ontario are on the middle ground – workers here work more hours than the French and Germans, and fewer than the Americans.

Half of the intensity gap is the result of Ontario workers taking more full weeks off than their US counterparts, including nearly an extra week of vacation annually. “That’s not something that’s likely to change,” said Martin. “It’s in the other half of the intensity gap that the Institute’s work indicates there may be opportunities for change. When we’re at work,” said Martin, “the average work week is about one and a half hours shorter than in the US.”

But that doesn’t mean all workers have a shorter work week than their US counterparts. In fact for two thirds of workers, the Ontario-peer state difference in the hours they actually work in a week is negligible. The real difference is at the two extremes. More of Ontario’s workers are part-time and many of them are doing so because they can’t find full-time work. Involuntary part-time affects workers with less education and skills and this points to the importance of investing in education in Ontario. It also points to the spin-off effects of Ontario’s economy not fulfilling its full prosperity potential. What’s worrisome is that the gap attributable to part-time work has increased over time. In the late 1970s, there was less part-time work in Ontario than in the peer states. Our higher unemployment and our lower competitiveness relative to the peer states mean fewer opportunities for full-time work – and the result is fewer hours worked by Ontarians overall.

The other key contributor to shorter average work weeks is the fact that fewer of our workers put in long work weeks (defined as 50 or more hours per week). Managers and professionals tend more to work long weeks both sides of the border. But among the most highly educated and highest income workers, fewer Ontarians work long work weeks compared to their peer state counterparts. “This is part of a recurring trend we see in our work,” said Martin. “We match the peer states in the basics, but at higher levels we trail.” US researchers have found that high income, highly educated workers are investing in long hours to strengthen skills, build personal networks, and establish their standing within organizations. Our most productive workers do not seem as willing to invest in extra hours.

The Institute also points out that hours on the job will become an increasingly important issue for Ontario’s economy. With the baby boom generation approaching retirement, there will be fewer workers available to build economic prosperity. Smart employers will need creative human resources policies to ensure that critical skills are not lost because of out-dated approaches to retirement. According to Eleana Rodriguez, Principal of Mercer Human Resource Consulting, who provided research data from Mercer’s 2006 Policies & Practices Database to the Institute for this Working Paper, “responding to demographic changes and engaging employees in change has never been more important for organizations and the coming retirement boom presents challenges and opportunities for all of us who have a stake in Ontario’s prosperity.”

Following today’s release, the Institute is continuing its research work into the causes and possible remedies for the prosperity gap. The Task Force will publish results in its Fifth Annual Report to the people of Ontario this fall.

About the Institute

The Institute for Competitiveness & Prosperity is an independent not-for-profit organization established in 2001 to serve as the research arm of Ontario’s Task Force on Competitiveness, Productivity and Economic Progress. The Institute is supported through the Ontario Ministry of Economic Development and Trade. Reports published by the Institute are primarily intended to inform the work of the Task Force. In addition, they are designed to raise public awareness and stimulate debate on a range of issues related to competitiveness and prosperity. Visit the Institute’s Web site www.competeprosper.ca for more information.

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The complete report can be downloaded directly from: http://www.competeprosper.ca/public/wp09.pdf

For more information contact James Milway, Executive Director of the Institute for Competitiveness & Prosperity at 416.920.1921 ext. 222.

Ontario’s peer jurisdictions (14 US states and Quebec)

  • California
  • Florida
  • Georgia
  • Georgia
  • Illinois
  • Indiana
  • Massachusetts
  • Michigan
  • New Jersey
  • New York
  • North Carolina
  • Ohio
  • Pennsylvania
  • Quebec
  • Texas
  • Virginia