Multifactor productivity, measured as output per unit of combined labour and capital inputs, increased 0.5% in the Canadian business sector in 2020. The growth in 2020 reflected a 6.5% decrease in output, and a 7.0% decline in the combined inputs of capital and labour.
Multifactor productivity growth in 2020 was comparable to the average annual growth during the pre-pandemic period from 2010 to 2019. For the period from 2010 to 2019, multifactor productivity increased at 0.5% per year on average in the business sector.
Multifactor productivity measures the extent to which inputs are used efficiently in the production process. Growth in multifactor productivity is often associated with technological change, organizational change or economies of scale.
Multifactor productivity is one of the three components of labour productivity, the other two being capital intensity and labour skill upgrading. An increase in capital intensity arises from investment in equipment, structures and intellectual property that contributes to growth in labour productivity. Skill upgrading is measured by labour compositional changes toward those workers who are more educated and more experienced. It captures the effect of an increase in worker skills from education and experience on labour productivity.
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