Canada’s productivity crisis is real — and it’s the biggest strategic challenge facing business.
Arcus Consulting Group – Workforce & Transformation
1. Why productivity matters more than ever
With Canada’s GDP growth expected to remain modest, gains in output per hour worked (productivity) are one of the few levers that can drive real income, corporate margins and competitiveness. The OECD notes that between 2000 and 2008 Canada’s annual productivity growth averaged ~1 % while the United States achieved ~2 %. OECD In recent years Canadian productivity growth has slowed further.
2. Productivity trends & labour metrics
| Indicator | Latest value / change | Take-away |
|---|---|---|
| Labour productivity (Q1 2025) – business sector | +0.2% quarterly. Statistics Canada | Very modest rate of improvement; signals structural weakness. |
| Labour productivity growth by province (2024) | National level +0.2%; only Quebec and Newfoundland & Labrador (NL) posted gains (+2.0% and +1.1% respectively). Statistics Canada | Productivity gains uneven across geography and sectors. |
| Canada’s productivity relative to U.S. | Productivity growth rate dropped from ~102% of U.S. level in 1980 to ~77% by 2022. Library of Parliament | Growing performance gap with peer economy. |
3. Strategic response for firms
Invest in automation and digital. Firms should adopt data-analytics, process automation and digital tools to raise output per labour hour.
Upskill and re-skilling. With demographic headwinds and slower population growth, shifting from labour-intensive to knowledge-intensive work is vital.
Lean operations. Continuous improvement in workflow, value-stream mapping and lean methodologies will have outsized returns when growth is weak.
Measure productivity rigorously. Boards and execs must integrate productivity metrics (output per hour, unit labour cost) into dashboards — not just revenue or headcount. The first-quarter drop in unit labour cost (-0.3%) shows the potential for cost leverage. Statistics Canada
4. Implications for the Canadian economy and firms
The slow productivity growth is more than a business issue — it’s a national competitiveness concern. For companies: being able to sustain margin growth without relying on volume means productivity gains are core to strategy. For media: stories that highlight how firms are improving productivity (case-studies), investing in technology, upgrading staff skills are likely of high interest.
5. Execution checklist for business leaders
- Establish productivity baseline and targets (output-per-hour, unit-labour-cost).
- Audit current workflows and identify bottlenecks where digitisation or automation could yield 10-20 % gain.
- Link investment planning to productivity return (not just revenue growth).
- Track productivity by business unit or geography — not only at corporate level.
- Communicate productivity agenda internally — culture change and incentives matter.