Investment, productivity and living standards

Released: 2022-09-01

Over the longer term, improvements in productivity, real earnings and living standards often go hand in hand. Over the last four decades, increases in productivity have been responsible for about 90% of the increase in Canada's gross domestic product. With record inflation and an aging workforce, higher productivity will be required to sustain long-term improvements in living standards across Canada. A new release, "Research to Insights: Investment, Productivity and Living Standards," explores this topic. Here are some highlights from the release.

New business investment needed to fuel sustained productivity gains in the coming years

Overall business spending on structures and machinery and equipment has trended lower since oil prices fell sharply in the mid-2010s. In early 2022, real spending on non-residential structures and machinery was 4% below pre-COVID-19 levels and over 20% below peak levels in 2014. Real spending on research and development was well below pre-COVID-19 levels and peak 2014 levels as well.

What type of investment will spur productivity growth?

High-tech services are leading the adoption of digital technologies. Companies have been changing how information and communications technology (ICT) inputs are being integrated into their production systems. Over the last decade, spending on ICT services as intermediate inputs, possibly linked to cloud computing and other advances in data management, has risen at a faster pace than traditional outlays on ICT capital. The question remains as to how widespread the employment and income gains associated with advances in digital technology will be when compared with traditional forms of investment.

Supply chain disruptions likely to impact productivity growth in the near term

In the wake of the COVID-19 pandemic, logistical challenges continue to mount. According to the Canadian Survey on Business Conditions for the second quarter of 2022, 4 in 10 businesses anticipate transportation costs to be a barrier in the coming months. A small portion of businesses have plans to relocate their supply chain activities into or outside of Canada over the next year in an effort to further secure their production process from external shocks.

Relocation of supply chains may impact productivity in trade oriented sectors more deeply

Manufacturing industries with more exposure to foreign supply shocks (whose production depends more on imported intermediate inputs) experienced a larger decline in labour productivity since the onset of the pandemic. Over three-quarters of Canadian manufacturers rely on imported goods or services, and use these inputs in the production of other goods and services in Canada.

Cross-border access to innovation and technology essential for productivity growth

Industries that are heavily exposed to external supply chain shocks, such as manufacturing and oil and gas extraction, are often those that bring innovative technologies to domestic producers through cross-border trade and foreign direct investment. These cross-border linkages are important sources of productivity growth.

Products

The product "Research to Insights: Investment, Productivity and Living Standards" is now available as part of A Presentation Series from Statistics Canada About the Economy, Environment and Society (Catalogue number11-631-X).

Contact information

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca).