Multifactor productivity (MFP), measured as output per unit of combined labour and capital inputs, declined by 1.7% in the Canadian business sector in 2023, following a 0.6% increase in 2022. The decrease in MFP in 2023 reflected a 1.2% gain in gross domestic product (GDP) relative to a 3.0% increase in the combined inputs of capital and labour.
MFP measures the efficiency with which inputs are used in the production process. Growth in MFP is often associated with technological progress, organizational innovations or economies of scale.
MFP is one of the three key components of labour productivity, alongside capital intensity and labour skill upgrading. Capital intensity is a measure of the amount of capital available per hour worked, and it contributes to labour productivity growth through a firm's investment in equipment, structures and intellectual property. Skill upgrading refers to shifts in labour composition toward more educated and experienced workers. It captures the effect on labour productivity of increases in worker skills from education and experience. The growth in MFP is the residual portion of labour productivity growth that is not attributable to changes in capital intensity and skills upgrading. Understanding the sources of labour productivity is important, as the growth in labour productivity largely determines the growth in Canada's GDP per capita and living standards.
In 2023, labour productivity declined 2.1% in the Canadian business sector, driven by the decline in MFP. MFP accounted for 1.7 percentage points of the drop in labour productivity, while a decrease in capital intensity contributed an additional 0.6 percentage points.
The negative impact of declining MFP and capital intensity in 2023 was partially offset by positive labour compositional changes. Skill upgrading contributed 0.2 percentage points to labour productivity growth.
The decline in labour productivity in 2023 marks the third consecutive annual decrease. Labour productivity fell by 4.4% in 2021 and by 0.6% in 2022. The declines in these years were driven by a decline in capital intensity and, to a lesser extent, overall declines in MFP. Additionally, there was little skill upgrading during this period. Skill upgrading declined by 0.1 percentage points in 2021, showed no change in 2022 and increased slightly in 2023.
Note to readers
Multifactor productivity (MFP) estimates by major business sector for 1961 to 2023 are now available. The detailed industry productivity database for 1961 to 2021 is also now available.
Revisions
Data in this release reflect the latest supply-use tables for 2021, published in The Daily on November 7, 2024; data on fixed capital, published in The Daily on November 14, 2024; data on real gross domestic product, published in The Daily on February 28, 2025; data on hours worked, published in The Daily on February 10, 2025.
Multifactor productivity measures
MFP measures at Statistics Canada are derived from a growth accounting framework that allows analysts to isolate the effects of increases in input intensity and skills upgrading on the growth in labour productivity.
The residual portion of labour productivity growth that is not attributable to gains in input intensity and skills upgrading is called growth in MFP. It measures the efficiency with which the inputs are used in production. Growth in this area is often associated with technological progress, organizational innovations or economies of scale.
Reference
Data tables: 36-10-0208-01 and 36-10-0217-01.
- Note: some data tables may best be viewed on desktop.
Definitions, data sources and methods: survey number 1402.
Previous release: Multifactor productivity growth estimates and industry productivity database, 2022.
Contact information
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