Boosting Productivity for a Healthier Economy: The Role of Strategic Investors

A healthy economy depends on high productivity. Strong productivity—which leads to faster growth, more jobs, and higher wages—is an important way to protect the economy from the risks of high inflation.

Unfortunately, Canada has seen no productivity growth in recent years. Over the past four decades, we have actually slipped significantly compared with other countries. In fact, relative to the United States, among G7 countries we are now second only to Italy when it comes to productivity decline.

This is important because a number of factors threaten to drive inflation persistently higher in the future. These include global trade tensions, changing demographics, and the economic impacts of climate change. We need to ramp up our productivity now, as a buffer against these and other forces down the line.

What’s Behind Highly Productive Economies?

Three elements contribute to stronger productivity:

1. Capital Intensity: Providing workers with better physical tools like machinery and using new technologies to improve efficiency and output.
2. Labour Composition: Improving workers’ skills and training.
3. Multifactor Productivity: Using capital and labour more efficiently.

Considering these, there are two basic strategies to improve productivity: focus the economy on industries that add greater value, and be more efficient with the work we’re currently doing. Canada generally hasn’t performed well on either front. This needs to change if we want to ensure a stable and prosperous economy for everyone.

The Benefits of Raising Productivity

The bottom line is that the benefits from raising productivity are there no matter what your role is: for workers, for businesses, and, yes, for central bankers, too.

Canada Needs to Do Better

When we look at the factors that drive high productivity, we see some clear areas for improvement:

1. Skills and Training:
   • Canada can focus more on ensuring that the training and education we provide teach the skills needed for jobs today and in the future. This includes post-secondary learning and apprenticeship programs that better respond to what employers are looking for.
   • Leveraging the skill sets of new Canadians who immigrate here is also crucial.
2. Competitive Business Environment:
   • A more competitive business environment would help drive greater innovation and efficiency. This is particularly important for small and medium-sized businesses that can’t take advantage of the economies of scale afforded to larger companies.
3. Investment Levels:
   • Perhaps most importantly, Canada’s investment levels are nowhere near as high as they should be in areas such as machinery, equipment, and intellectual property. In fact, investment levels have decreased over the past decade.

How Strategic Investors Boost Productivity

Strategic investors, including family offices, investment funds, and capital markets advisors, play a crucial role in fostering a robust investment climate that boosts productivity across various sectors. Here’s how they contribute to this vital goal:

1. Strategic Investments:
   • These investors focus on investing in industries that add greater value to the economy. By supporting businesses that are innovating and adopting new technologies, they help drive capital intensity, enhancing efficiency and output.
2. Empowering SMEs:
   • Strategic investors actively support small and medium-sized enterprises (SMEs), providing them with the resources and guidance needed to compete effectively. This includes facilitating access to cutting-edge tools and technologies that can drive productivity gains.
3. Enhancing Skills and Training:
   • Investors prioritize companies that invest in employee development and training, ensuring that the workforce is equipped with the skills needed for today’s and tomorrow’s jobs. This includes supporting initiatives that align educational programs with industry needs.
4. Fostering Innovation:
   • By creating a competitive business environment, these investors encourage greater innovation and efficiency. Their investments are designed to stimulate research and development, leading to new solutions and improved processes across industries.
5. Promoting Sustainable Growth:
   • Strategic investors are committed to sustainable investment practices that not only drive productivity but also address the challenges posed by climate change and shifting demographics. This approach ensures that their investments contribute to long-term economic stability and resilience.

The Role of Investment in Economic Health

Everyone has a role to play in encouraging a strong investment climate that will help boost productivity. With stronger productivity, everyone can enjoy robust growth and better wages without high inflation. And in a healthy economy, we are better positioned to manage inflationary pressures without having to rely so much on raising interest rates.

Strategic investors, through their strategic investments, support for SMEs, and focus on innovation and skills development, are helping to create a more productive and prosperous future for Canada. By leveraging their resources and expertise, they are making a significant impact on the overall health and sustainability of the economy.

Interested in learning more about how strategic investors are driving productivity and economic growth? Connect with industry experts to explore how these investments are making a difference.