Every Saturday, one of our journalists answers one of your questions on the economy, finances, markets, etc.
Published at 6:00 a.m.
Hello, I would like someone to explain to me what the calculation of the productivity of one country compared to another is made of. Thank you so much.
Rejean Potvin
Labor productivity is measured the same way in all industrialized countries. It is the result of gross domestic product (GDP) divided by the total number of hours worked. GDP, it should be remembered, is the value of all goods and services produced in a year.
In short, productivity tells us how much value an economy manages to create per hour of work in a given year. In Canada, productivity was almost $85 per hour worked in 2023.
By comparison, worker productivity stands at $104 per hour worked in the United States (in Canadian dollars), compared to $108 in France, but only $66 in Japan, according to recent data from the Center on Prosperity and Growth. productivity of HEC Montréal.
That said, it is not so much this quotient that is compared as its growth over time. For what ? Because the value of a GDP depends on the nature of the products of an economy. For example, the oil industry has a much higher value per labor hour than clothing.
It is therefore a country’s ability to increase its productivity over time that is most important, at least for the main industrialized countries.
This growth in productivity, it must be understood, is the only way for an economy to generate wage growth without at the same time creating inflation. It is central to improving the standard of living.
In this regard, Canada has performed poorly for several years. Average annual productivity growth has been 0.7% over the past 10 years, compared to 1.3% in the United States.
Quebec fared better over this period, at 0.9% per year. This level, however, remains well below the productivity growth that would need to be achieved over the coming years to compensate for the aging of the population, among other things, i.e. more than 1% per year, according to many economists.
Raising productivity does not mean requiring workers to work ever faster. Productivity growth mainly requires investment, technological innovation and improvement of work processes.
For example, self-service checkouts in grocery markets allow companies to have better turnover per hour worked.
Another way to increase a country’s productivity: increase the presence of industries with high added value while reducing those with low added value.
Several factors therefore explain Canada’s weakness in terms of productivity, notably the lack of investment, research and innovation, in addition to an economic structure that less favors competition.
