Canada’s Productivity Problem Demands a Full Policy Toolkit Revamp

Published in The Hill Times

Transformation cannot happen in isolation, which is why changes in eight interconnected policy areas must reinforce one another. Otherwise, reform in one area will be held back by little to no action in another.

By Jeremy Kronick and Charles Lammam

More than two years ago, Bank of Canada senior deputy governor Carolyn Rogers called this country’s weak productivity a “break the glass” moment. 

The glass is broken. What matters now is what we reach for next. The answer is reform across many policy areas, pursued together.

Productivity can sound like an abstract idea, but a great deal rides on it for ordinary Canadians. It shapes the incomes they earn and what those incomes can buy. 

One simple gauge of living standards is GDP per capita, roughly the income available to each of us. It is not a perfect measure of comparison as it abstracts from the distribution of that income. However, it is instructive when looked at over time, especially when the comparison is made across a number of countries. 

Canada’s GDP per capita kept pace with the United States from 1994 to 2014. Since then, we have fallen behind—and the U.S. is not the only country pulling away. Canada’s 3.5 per cent growth in GDP per capita from 2014 to 2024 is the weakest among nine advanced economies, including the U.S., Switzerland, Sweden, Japan, France, Australia, the United Kingdom, and Germany.

The same pattern shows up in productivity, or how much we produce for each hour we work. If we compare these same countries from 1994 to 2024, only France has had worse productivity growth than Canada. 

Over time, productivity is the main source of rising incomes, and Canadian compensation has tracked it closely. When productivity stalls, higher incomes get harder to sustain, and so does our purchasing power and ability to fund public services.

A big reason for the slowdown is weak business investment. Canada ranked second-to-last among the nine countries above in 2024 on investment as a share of the economy, trailing most of them on investment per worker. 

In 2025, Canadian workers received only 55 cents of new capital for every dollar going to workers in the U.S., and just 70 cents for every dollar going to their OECD counterparts. Workers with fewer tools are less efficient, making wage growth harder. Tariff threats and a “rupture” in the world order only raise the stakes.

Ottawa has started to act. It hosted the Canada Investment Summit in Toronto this past September, aiming to catalyze $1-trillion in investment over five years. It announced the Productivity Mega Deduction, which would let businesses immediately deduct the cost of new investments for roughly two-thirds of capital assets. It also created the Major Projects Office, and introduced Bill C-39 to set a one-year timeline for federal project reviews.