Canada`s Productivity Measure
Economistsdefine productivity as the efficiency with which, industries, firms,organizations, countries and the economy in its entirety convertinputs involving labor, capital, and the materials into products.Productivity will turn these inputs into outputs for a given cost andany rise in the cost of any of the inputs leads to a decreasedproductivity of the firm or country (Gross et al., 2015). Forinstance, when a country has a deficiency in labor or raw materials,the productivity of the nation is likely to slow down. On the otherhand, productivity grows when the output grows at a higher rate thanthe inputs, thus making the productivity process more efficient andhighly productive. Further, productivity is not a measure of thevalue of the outputs but rather the measure of efficiency a systemuses its resources to produce the outputs. Therefore, the knowledgelevels and skills of the labor force, the effectiveness of themanagement strategies, and the efficiency of the machinery employedin the production process highly influence the productivity of acountry (Gross et al., 2015). This research paper will describe theproductivity of Canada and its comparison to other OECD membersespecially the U.S. over a period of 25 years.
Economicgrowth level of a country can be a measure of productivity for firmsand individuals. However, the national level of productivity cansurpass that of an individual and firms since competition will tendto favor the most competent of the firms and individuals. However,measured productivity is the quotient of the total output to a givenmeasure of inputs employed in the production of goods and services(Foster, 2016). Therefore, the productivity growth is the residualgrowth difference between the inputs and outputs used in a productionprocess. In measuring productivity, it is essential to considermultifactor productivity (MFP) and labor productivity. MFP measuresthe growth in that value of added output per unit labor and capitalemployed in the production process while the LP measures the increasein value-added output per unit labor employed in the productionprocess.
Thequality of life is directly proportional to the living standard ofthe citizens, which also depend on the productivity of the country.However, non-economic factors are also significant in the measure ofthe quality of life and the living standards of the people. Canadahad a high GDP per capita in the 1950s through to the mid-1970s, andshe was one of the most competent members of the OECD nations. It isessential to understand the importance of a rise in productivity forCanada since it leads to improved services, living standards and agood quality of life. GDP in dollars per the hours worked measuresthe labor productivity of any nation, and in 1976, the measure was$26.40 in Canada. The measure grew to $34.06 in 1999. While theperformance indicates an increase in labor productivity levels overthe 25 years period, the growth marked a steady compound increase of1.1% throughout the period. On the other hand, the labor productivityin the manufacturing industry was $20.52 in 1976 while in 1999 itincreased to $31.36, which was a 1.9% per annum increase over the 25year period. Therefore, the labor productivity grew at a higher rateas compared to the economic growth within the same period andenvironment. The country possibly engaged in free trade with herneighboring countries, which led to the closing of the gap betweenthe economic and labor productivity growths.
Between1966 and 1973, she boasted a favorable growth rate in productivity ofapproximately 4% per annum while the productivity levels grew by morethan 2% in multifactor productivity. The United States experienced asimilar productivity growth with the help of measured output of 2.59%economic growth in the 1970s while the business sector rates at 2.06%per year. Though the nation has had a slowdown over the 25-yearperiod of 1976 – 1999, the change is much higher than the steadygrowth that Canada experiences. The projected changes over the yearsbased on the growth trend experienced show a 0.69% and 0.17% slowdownof the growth in both the productivity and labor productivity in theUnited States (Baumol & Blinder, 2015). However, the hugeslowdowns could be an attribute to the pipelines, the auto repairs,oil and gas extractions and the aging population. The baby boomerstheory in the United States affected the growing economy of thecountry.
Thestatistics above indicate that both Canada and other OEDG nationsshared a common growth rate and privileges. However, the actual GDPper capita of Canada maintained a slow improvement as compared toother nation in the G-7. The counterfactual GDP per hour worked didnot improve much marking a 0.017% increase throughout the 1970s andimproving slightly by 0.8% in the following years. The highestrecorded of the parameter was in 2007 recording an increase of 46from 28 in 1974. In 1999, the U.S. benchmarked an output per employedperson of 100 while Canada recorded 81.4 in the same parameter. Thegap between the labor productivity growth rate and indicate that theUnited States and Canada enjoyed equal growth in the 1970s while gapgrew between them and Canada assuming the slower growth of the twonations. While the output per worker in the U.S. remained at 100 overthe 25 years period, the same parameter for Canada decreased by theyears. It was highest in 1977 (90) and decreased to 67 in 1999(Blinder & Baumol, 2015). Therefore, the United States economyand manufacturing remained relatively constant regarding changeswhile the same parameters in Canada decreased drastically.
Insummary, Canada has performed poorly as compared to OECD countriesdue to some factors. The nation has had an insufficient capitalaccumulation, and investment led to a decrease in labor productivitygrowth rate even as her competitors engaged industrialization andimproved labor productivity. The work force is more productive whenworking with efficient and up-to-date tools and technologies. Theopposite is also true, which suggest that the Canadian workforcelacked the efficient technology to improve their overallproductivity. Additionally, the computer-productivity paradox pointsto time in the 1990s when the Information Communication Technologytook over the production processes in many firms across the world.Canada made a huge investment in computer technology to improve herproductivity in the 1990s. However, her performance in the ICT sectorwas poor regarding productivity and economists believe that thecountry invested computers everywhere but in statisticalproductivity. Furthermore, the gap between the U.S. and Canadaregarding innovation and manufacturing has been increasing throughthe years (Fuglie et al., 2012). The two countries fared well andwere on par regarding electricity and electrical manufacturing in the1970s, but the statistics changed in 1990s (Harder, Patten &University of Alberta. (2006). Therefore, Canada imports some of itsmanufacturing purposes so that she can meet her demands forproduction.
Baumol,J. W. & Blinder, S. A. (2015). Economics:principles and policy,New York, NY: Cengage Learning.
Blinder,S. A. & Baumol, J. W. (2015). Micro-economics:principles and policy,New York, NY: Cengage Learning.
Foster,K. R. (2016). Productivityand prosperity: A historical sociology of productivist thought.Toronto: Buffalo.
Fuglie,K. O., Wang, S. L., Ball, V. E., & C.A.B. International.(2012). Productivitygrowth in agriculture: An international perspective.Wallingford Oxfordshire, UK: CABI.
Gross,T., Guo, C., & Charness, G. (2015). Merit pay and wagecompression with productivity differences and uncertainty. Journalof Economic Behavior & Organization, 117,233-247.
Harder,L., Patten, S., & University of Alberta. (2006). TheChrétien legacy: Politics and public policy in Canada.Montreal: Published for the Centre for Constitutional Studies byMcGill-Queen`s University Press.
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