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Canada has a productivity problem - our young people are the solution

Written by The King's Trust Canada CEO Farah Mohamed. Originally published by The Globe and Mail. Read the article here.

Canada has been facing a worsening productivity crisis for years. Think tanks, academics and governments have regularly sounded the alarm that low productivity threatens our economic growth, quality of life and, of course, amplifies inflation.


This week, Carolyn Rogers, the Senior Deputy Governor of the Bank of Canada, sounded the alarm on productivity, urging immediate action. Ms. Rogers emphasized the importance of utilizing the traditional levers of productivity, such as investing in research and development and new technology and, importantly, upskilling our workforce.


But what is productivity and why does it matter? Quite simply, our rate of productivity is the amount that we produce during each hour of work. So, if you use artificial intelligence to increase your productivity, or you teach your workers new skills, you can raise your productivity per hour and, in turn, accelerate the country’s economic growth.

EXPLAINER: What is productivity and why is it so low in Canada?

Over the past few decades, Canada’s productivity has slipped behind the United States, plummeting from 88 per cent of the U.S. economy’s value generated per hour in 1984, to a meager 71 per cent in 2022. This isn’t just a statistical blip; it’s a systemic issue rooted in the underinvestment by employers into both labour and technology. Canada’s employers just don’t invest in these silos like employers in the United States do.


When you talk to Canadian employers about why they don’t invest in labour and tech, they will cite a tax system that doesn’t incentivize employer investment and a financial system that doesn’t take risks on small and medium-sized businesses. But employers will also tell you that they struggle to find workers with the right skills and that students at Canada’s post-secondary institutions are graduating without the skills needed to meet the demands of today’s economy, let alone tomorrow’s. Canada’s skills shortage isn’t just up to employers to solve; it’s a national imperative for driving productivity and competitiveness.


While immigration can indeed be a source for bolstering our workforce with impressive talent, too often newcomers are locked out of utilizing their skills because of credentialing, bias and networks – and this certainly needs to be addressed given Canada’s ambitious immigration targets.


But until then, there is a segment of the population that we regularly overlook. They’re in our own backyard – our own basements, even! There are an estimated 860,000 youth in Canada who are currently not enrolled in an education or training program or are unemployed. Ignoring their potential has social and economic consequences, decreased productivity being just one of them.


Canada must invest in programs to reintegrate these young people into the workforce, honing their talents to drive economic growth. By prioritizing our investment in young people, we can unlock their potential and propel sustained economic growth. Equipping young Canadians with skills demanded by high-value sectors isn’t just about meeting the country’s immediate labour market demands; it’s about laying the foundation for long-term economic resilience and prosperity. After all, these are the future assistant deputy ministers, managing directors and professors – we must equip them for success.


The youth unemployment crisis isn’t a dress rehearsal; its impacts are already reverberating in countries worldwide. Canada must act swiftly with an all-hands-on-deck intervention. Our education system must better prepare youth for the workforce, employers must offer higher entry wages and create entry-level positions to train their young staff, and governments must take decisive action, trim: investing in and introducing innovative policies to upskill young workers while incentivizing employers to hire them.


As BlackRock CEO Larry Fink writes in his most recent anticipated annual letter to investors, citing changing demographics and workforce participation in the United States: “What I do know is that any answer has to start by bringing young people into the fold.... Their lack of hope also shows their lack of confidence – far less than any previous generation – in every pillar of society: In politics, government, the media, and in corporations. Leaders of these institutions (I am one) should be empathetic to their concerns.”


We may view youth issues as something inconsequential or of importance only in the distant future, but in reality, it’s only a short span of time until today’s teenagers enter the workforce and start contributing to our productivity. The time to act and to support their future potential is now.