Free Republic
Browse · Search
Topics · Post Article

Skip to comments.

Less productive, but richer (Compared with U.S., Canada's output/hour is down, but Incomes are up)
Financial Post ^ | 12/31/2011 | William Watson

Posted on 12/31/2011 7:27:37 AM PST by SeekAndFind

This roll the country has been on lately, where we burn brighter and brighter while our traditional lodestars, the United States and Europe, sink deeper into the western sky — and, moreover, the rest of the world seems to be noticing our ascent — has produced strangely unaccustomed feelings of self-confidence in many Canadians. It’s not that they aren’t nice feelings. But for a country more used to thinking of itself as not being terribly noticeable, superstar status — well, OK, let’s not get carried away — rising-star status takes getting used to. Not since Expo 67 or the early post-war years has the country been so high on itself.

If you’re not yet fully at ease with the idea of Canada as an emerging world exemplar but still prefer our more familiar role of having deeply mixed feelings about our accomplishments, you’ll love a two-page Economic Insight briefing that Statistics Canada has brought out just for the holiday season. It’s called Economic Growth in North America: Is Canada Outperforming the United States? The question mark is characteristically Canadian and the insight doesn’t ultimately remove it.

(The brief comes with a very seasonal “Note of Appreciation” that, possibly through oversight, I hadn’t noticed in StatsCan publications before: “Canada owes the success of its statistical system to a long-standing partnership between Statistics Canada, the citizens of Canada, its businesses, governments and other institutions. Accurate and timely statistical information could not be produced without their continued co-operation and goodwill.” Is this the statistical agency’s way of saying you’d better fill out your long-form census or just an expression of no hard feelings after the political slugfest with the Tories?)

Anyway, the insight is about how we’re doing economically compared to the Americans. This is not the world’s fairest test, the Americans being deep in despond. Dysfunctional doesn’t begin to describe a political system that can’t even decide on a two-month extension of a payroll tax cut. But the United States is whom we always compare ourselves with. We could be at the very bottom of the world ladder, but so long as we were a rung higher than the Americans we would be happy.

So how are we doing compared with our permanent rivals?

Over the last 15 years, our labour productivity — as measured by GDP produced per hour worked — has fallen by 17% compared with theirs. As Adam Smith taught and as every economic history text since has stressed, the way you get economic development is to increase your productivity: Don’t make pins one person at a time. Get some pin-making machinery and build yourself a pin factory!

It’s not that our labour productivity hasn’t been growing. We’ve averaged 1.3% a year since 1997, which isn’t quite horrible. But the Americans have been doing double that at 2.7%. Since the Crash they’re 2.9% and we’re just 1.5%. Good thing we beat them in the hockey finals in the Vancouver Olympics. Of course, that may be the last time we beat them if they keep out-producing us so badly.

But if you change measures, it seems there is hope for us. If you look not at output per hour but at GDP per capita — the amount of output we produce per person — we actually do better than the Americans over the last 15 years, and are up 5% in total, averaging 1.6% a year growth versus their 1.3%. (That’s not to say we have 5% higher GDP per capita than they do, only that we’ve got 5% closer to them.)

How is it we have more output per head even though we have less output per hour? Because we have more hours per head — or at least have had our hours per head grow faster than theirs over the last 15 years (at 1.7% per year for us and just 0.6% a year for them).

Is working more hours a good way to see your relative standard of living grow? If the increase in hours comes because unemployed people get jobs, maybe it is. Lately, our labour market has been doing better than the Americans in that respect. On the other hand, if more hours is a case of “working like an American,” which in Europe means driving yourself insanely hard, maybe fewer hours and more output per hour is best.

Finally, the StatsCan insight looks at the income side of how we’re doing. You might think the output side and the income side would say the same thing, since people — and economies — earn income by producing output. But the rate of transformation of output into income can change. You’ll have a higher income if the value of what you produce goes up. And that’s precisely what has happened to us (on average) over the last 15 years. Our “terms of trade” — the price of our exports relative to the price of our imports — have gone up. As a result, our incomes have grown faster than our outputs. And faster than Americans’ incomes: We’ve averaged 2.1% a year increases in real personal disposable income per person, while they’ve averaged only 1.7%. Which means that over the 15 years we’re up 12% compared with them.

So, there you have it. If you want to be hyper-bullish on Canada — Americanly bullish, as it were — our incomes are up 12% compared with Americans’. If you prefer habitual Canadian modesty and pessimism, our output per hour is down 17% compared with Americans’. Take your pick.

And Happy New Year, everyone!

TOPICS: Business/Economy; Canada; Culture/Society; News/Current Events
KEYWORDS: canada; diversity; income; productivity

1 posted on 12/31/2011 7:27:41 AM PST by SeekAndFind
[ Post Reply | Private Reply | View Replies]

To: SeekAndFind

Prosperity is easy. Exploit your resources. Cut taxes. Balance the budget. And then get the government out of the way. Its too bad Mr. Obama does not understand that.

2 posted on 12/31/2011 7:47:34 AM PST by Former Proud Canadian (Obamanomics-We don't need your stinking tar sands oil, or the jobs that go with it.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Former Proud Canadian

Also don’t guarantee to protect your banks from the results of their own stupidity. If they know they are working without a net they won’t act so stupidly.

3 posted on 12/31/2011 8:07:38 AM PST by KarlInOhio (Herman Cain: possibly the escapee most dangerous to the Democrats since Frederick Douglass.)
[ Post Reply | Private Reply | To 2 | View Replies]

To: SeekAndFind

It’s human nature to want to believe one’s own nation to be somehow better, somehow superior, but it also leads to folly.

The folly in this is in imputing safety from higher wages with lower productivity in comparison to the nation to which Canada is inextrably linked, economically.

In periods of economic difficulty, unemployment rises, and those who retain employment work longer hours for the same pay, or work the same hours for less pay. This explains both the overall income disparity and the productivity disparity, since “job scared” people as a whole are more productive.

However, one can look at the United States as not one, huge monolith with an aggregate economy that is the same in California as it is in New Jersey as it is in Texas, and then be befuddled by widely varying statistics from one state to the next and from one region to the next.

The fact is, commodity-heavy regional and state economies have held up quite well through the course of this unadmitted depression thus far. There are numerous reasons for this, but the number one reason is also derived from fear, and that would be flight to safety investment in addition to stimulus money, all piling into commodities.

Canada is much smaller than the United States, economically and geographically. It is behaving as parts of the midwest and Texas are behaving, because commodities have been flush due to the aforementioned effects. Will this continue? I suspect not. Worldwide aggregate demand is not increasing.

So, enjoy it while you can, Canada. You have had a brief respite from the ill wind blowing across the world. Use it wisely.

Just my opinion, of course.

4 posted on 12/31/2011 8:17:15 AM PST by RegulatorCountry
[ Post Reply | Private Reply | To 1 | View Replies]

To: KarlInOhio
The US banking system is out of control, I agree, but the banking systems of the two countries are entirely different. In some ways they could not be more different. In other ways they are becoming quite similar.

The short story is that Canadian banks are traditional, conservative banks. They take deposits and make loans and mortgages to businesses and individuals. Although some of these loans and mortgages are guaranteed by the government, they are all held by the banks themselves until they are paid off. They are not "bundled" and sold off. When a bank makes a mortgage in Canada, they hold and service that mortgage until it is paid off.

Goldman Sacks is considered a bank by the US government. It would never qualify as a bank in Canada and would not be entitled to deposit insurance etc.

5 posted on 12/31/2011 8:20:24 AM PST by Former Proud Canadian (Obamanomics-We don't need your stinking tar sands oil, or the jobs that go with it.)
[ Post Reply | Private Reply | To 3 | View Replies]

To: RegulatorCountry
A few quibbles.

Canada is one tenth the size of the US economically, much larger geographically.

The reason for Canada's recent economic performance is the huge resource boom it has enjoyed. This is especially true in the energy sector. The US is also an energy colossus, but it lacks the political will to exploit these resources.

If TSHTF Canada will be affected. However, abundant domestic energy and agricultural resources will still exist and help to cushion the blow.

6 posted on 12/31/2011 8:30:07 AM PST by Former Proud Canadian (Obamanomics-We don't need your stinking tar sands oil, or the jobs that go with it.)
[ Post Reply | Private Reply | To 4 | View Replies]

To: SeekAndFind

So after providing us with a fascinating set of statistics that brings the reader to the brink of comprehending the cause of the demise of the West, this financial reporter can’t decide whether Canadians should be happy or unhappy about the fact that that they don’t have a 25 percent real unemployment rate.

7 posted on 12/31/2011 8:31:08 AM PST by haroldeveryman
[ Post Reply | Private Reply | To 1 | View Replies]

To: Former Proud Canadian

Well, if you count the vast, virtually unpopulated areas, yes. It’s really the veritable 200 mile deep and 3000 mile long country that Canadians themselves joke about, though, for all intents and purposes.

8 posted on 12/31/2011 8:56:32 AM PST by RegulatorCountry
[ Post Reply | Private Reply | To 6 | View Replies]

To: RegulatorCountry

It is in the vast, virtually unpopulated areas where all the natural resources lie.

9 posted on 12/31/2011 1:55:16 PM PST by Former Proud Canadian (Obamanomics-We don't need your stinking tar sands oil, or the jobs that go with it.)
[ Post Reply | Private Reply | To 8 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794 is powered by software copyright 2000-2008 John Robinson