By Siddhartha Bhattacharya, Senior Economist at ATB Financial and speaker at CPA Alberta’s upcoming Evolve 2024 conference.
Given Canada’s productivity problem, the topic of productivity has emerged from economist backroom debate to public discourse. It’s even been called an “emergency” by Bank of Canada Senior Deputy Governor Carolyn Rogers. There’s been lots of coverage on the national story, so we decided to look at this from an Alberta angle.
In case you missed it, ATB’s research report dives into detailed industry data with a focus on how labour productivity is responding to the massive drop in energy investment since 2014.
Why should I care?
Improvements to labour productivity—our country’s ability to turn effort (hours worked) into output—is linked to higher living standards and wages. It also matters to inflation (see below). With the population aging and more people retiring, productivity will need to carry the economic weight.
Main findings
Elevator pitch (5 floors)
Alberta has higher levels of labour productivity than other provinces, but the gap has narrowed over the last decade.
Elevator pitch (15 floors)
There are important industry dynamics at play. The main (but not entire) reason for Alberta’s productivity advantage is industry mix—that is, Alberta has more workers in higher-productivity sectors (namely oil and gas and related). But over the last decade, growth has slowed significantly in part because of a shift in the workforce way from higher-productivity sectors, as well as a slowdown in service sector productivity.
Elevator pitch (30 floors and thinking how long is this guy going to talk to me about productivity?)
Diversification and productivity are often treated as separate topics. They shouldn’t be. Industry mix matters. The energy sector is highly productive, so retaining Alberta’s advantage will involve playing off that strength for the foreseeable future.
But new opportunities are emerging for workers in other sectors. And there’s good reason to believe that Alberta is better positioned to excel at energy and diversify. The oil and gas sector is not drawing as many workers and putting the same pressure on wages as in the past, and record migration inflows have added to the supply of labour. The diversification door has widened.
Stepping away from industry mix, there are some things that can improve productivity across all sectors—investing in machinery and technology, transportation corridors, freer internal trade, streamlined regulatory approvals for major projects, small business growth, more commercialization of research, improved training, and better matching skills to workers, to name just a few.
Speaking of productivity… I’ll be speaking on November 19 at Evolve in my session “ATB Economic Update”. I hope you join me, and I look forward to taking a bird’s eye view of the global, national, and provincial economy.
