Canadian productivity declines for third consecutive quarter

Harper government first in Canada to oversee negative productivity growth

Wednesday 10 September 2008

The Harper government has become the first elected federal administration to experience a decline in average national productivity during its entire term in office since Statistics Canada began gathering productivity data in 1961, says a study released today by the Canadian Centre for Policy Alternatives (CCPA).

The study, by CCPA research associate and Canadian Auto Workers economist Jim Stanford, draws on this morning’s Statistics Canada reporting that Canada’s national productivity level declined in the second quarter of 2008, for the third consecutive quarter, by 0.2%. Since peaking last autumn, national productivity has declined by a cumulative 1.3%.

Most strikingly, national productivity is now lower than in the first quarter of 2006, when the Stephen Harper government took office. At that point, Statistics Canada’s index of national labour productivity (measured in the business sector of the economy) equaled 104.0 (calculated on a base of 2002=100). As of the second quarter of this year, the index had declined to 103.4, marking a cumulative decline of 0.6% over the Harper government’s term in office.

“Finance Minister Jim Flaherty has repeated many times that Canada’s economic fundamentals are strong,” Stanford says. “But there is nothing more fundamental to our long-term prosperity than productivity. And on that score, Canada’s fundamentals have never been weaker than under the Harper government.”

Stanford blames three major structural factors for the absolute lack of productivity growth during the Harper term in office:

1. The energy and commodity boom, which has undermined productivity in resource industries by luring companies to exploit increasingly marginal deposits.

2. The negative impact of the high Canadian dollar (which tends to follow oil prices) on high-productivity manufacturing jobs.

3. The importance of low-productivity service sectors (such as retail and hospitality) in new job creation. These are the only sectors relatively immune from the negative effects of the high dollar.

“We’ve had three strikes against our national productivity, and they’re all related to the Harper government’s acceptance of Canada’s new status as an energy ‘superpower.’ By endorsing the high dollar and abandoning Canadian manufacturing, this government has done more damage to our national productivity than any other government in our postwar history,” Stanford concludes.

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