The Warning Signal Behind the Numbers
Canada’s economy continues to create jobs, yet output per worker remains stagnant. Statistics Canada reports that labour productivity in the business sector declined 0.6 percent in Q2 2025, following five consecutive quarters of stagnation. The OECD now ranks Canada 25th among advanced economies for productivity growth.
| Indicator | 2023 | 2024 | 2025 (Q2) | Source |
|---|---|---|---|---|
| Real GDP / hour worked (index 2012 = 100) | 108.2 | 108.0 | 107.3 | Statistics Canada |
| Business R&D as % of GDP | 0.9 % | 0.9 % | — | OECD Main Science & Technology Indicators |
| U.S. Business R&D as % of GDP | 2.0 % | 2.1 % | — | OECD |
Structural Causes
- Under-investment in capital: machinery and software investment per worker is 25 % below the G7 average.
- Skills mismatch: 37 % of Canadian firms cite lack of technical talent as a growth constraint.
- Scale barriers: 90 % of firms have <100 employees, limiting process efficiency and export capacity.
Why It Matters
Low productivity caps wage growth and competitiveness. Real GDP per capita has fallen for six straight quarters — the longest decline since the early 1990s. Without productivity gains, income growth will depend solely on population increases.
What Leaders Can Do
- Invest in automation and analytics. Target 10–15 % ROI productivity projects with short payback.
- Re-engineer workflows. Use Lean 6 Sigma and digital twins to identify non-value-added steps.
- Measure relentlessly. Add output-per-hour and unit-labour-cost KPIs to dashboards.
- Benchmark globally. Compare against international peers, not local averages.
Arcus Insight: productivity is not an HR issue — it’s a board-level strategy. Firms that double digital capital intensity within three years can outpace national GDP growth by 2 points annually.