In a new study, the Brookings Institution, in collaboration with the Martin Prosperity Institute of the Rotman School of Management at the University of Toronto, has carefully examined Canada’s industrial mix and finds that despite the many strengths Canada is facing serious structural problems. Specifically, the research team argues that Canada needs to urgently ask if it has the right combination of industries that perform well enough to bring new levels of prosperity. These advanced industries include automotive and aerospace production, oil and gas extraction, and information and telecommunications technologies.
Canada is facing a major problem of productivity. Researchers show that in 1996, the productivity gap between the Canadian worker and the average American worker in the high-tech industries was relatively small (17%). Today, the gap has widened to 100, while US employees remain twice as productive as their Canadian counterparts. In other words, if Canadians were as productive as Americans, Canada’s gross domestic product would increase by about $ 780 billion, which would translate into a national economy that is 50% larger than it is today.
While Silicon Valley generates tremendous wealth and is extraordinarily productive, Canada also has industrial clusters that have similar potential to create world leaders. With more than 800,000 jobs in advanced industry, the province of Ontario alone accounts for over 43% of these jobs across Canada. It stands out as the third largest cluster in North America, outside of California (technology cluster) and Texas (energy cluster).
With nearly 432,000 jobs in advanced industries, Quebec accounts for 23% of all these jobs across Canada. After Toronto (384,000 workers), Montreal stands out as the second-largest in Canada (260,000 workers). By adding Calgary (138,000) and Vancouver (134,000), about 50% of jobs in advanced industries are located in these four metropolitan areas of Canada.
To address productivity gaps and revitalize the economy, researchers recommend four lines of action to political and economic leaders, the four Cs:
- availability of capital;
- technological complexity.
In terms of capital, researchers note that Canada’s largest companies are not reinvesting enough in their own growth, particularly in their critical infrastructure, such as information and communications technology. Small businesses need increased access to patient capital. However, the new Canada Business Growth Fund should partially address the problem. To read more
Source: Économie Science et Innovation newsletter
Credit photo : Invest Canada Alliance