Wealthsimple CEO calls Canada's productivity gap a 'crisis' - BNN Bloomberg

James Marple, associate VP and senior economist at TD Economics, joins BNN Bloomberg to talk about Canada’s productivity slowdown.

(Bloomberg) — The head of Wealthsimple Inc. called Canada’s productivity problem an “absolute crisis” that will take great entrepreneurial spirit to solve.

Michael Katchen, CEO of Canada’s Online Investment Service, said turning around the issue will take a “cultural change” and policymakers and the business community will get on board. Worse, the problem is about to get worse as the country’s main growth strategy — mass immigration — is being “eroded” as federal policymakers dramatically scale back targets for permanent and temporary residents, he argued.

Part of the problem is an over-reliance on a handful of industries, Katchen said, pointing to the resources sector.

“I think Canada’s problem is that we do two things: we dig things out of the ground and we finance the digs out of the ground,” Katchen said at a conference in Toronto organized by technology publication The Logic. “And to be honest, we don’t always do that well. And I think the challenge is, if that’s the story we tell ourselves in 20 years, we’re in big trouble.”

Katchen added that the ticket to boosting productivity is to grow the country’s industries and diversify the economy, which can be solved through entrepreneurship.

In March, Carolyn Rogers, senior deputy governor of the Bank of Canada, identified the country’s productivity problem in a speech that kicked off a national dialogue that drew input from other policymakers and business leaders.

Governor Tiff Macklem said Canada’s productivity growth lagged behind the U.S. as the countries emerged from the Covid-19 pandemic. Canada’s economy produced 88% of the value the US generated per hour in 1984, a figure that had fallen to 71% by 2022, the central bank has said.

“If it was a simple problem, we would have solved it by now,” Macklem said at the same event in Toronto. “It is a multi-faceted problem and it will take a concerted effort from companies, governments and the academic community to put their heads together, set priorities and find a way through.”

Macklem added that Canada has world-leading companies investing and innovating in almost every sector. “The problem is we just don’t have enough of it.”

In its latest economic forecasts, the Bank of Canada predicted that gross domestic product per capita would rise over the next two years. It expects lower interest rates to boost spending per person and business investment even as population growth slows – although the forecasts were published a day before the government significantly cut its targets.

As immigration increased in recent years, some economists warned that a steady supply of cheap labor was preventing companies from investing in technology or equipment that would increase worker productivity.