Inclusive Growth Elusive in Canada
Press Release, Ottawa, January 5, 2022
The Centre for the Study of Living Standards today released the latest issue of its flagshippublication, the International Productivity Monitor. The table of contents of the issue and links
to the articles are found below. The volume contains a symposium on the decoupling ofproductivity and pay in the United States, the UK and Canada by leasing international
economists.
One definition of inclusive growth is that all members of society benefit equally from economicand productivity growth. A metric of inclusive growth is equal rates of advance for medianwages and labour productivity. Both papers in the symposium on Canada show that median
wage growth in this country has significantly lagged labour productivity growth since 1976 .
Productivity gains have gone disproportionately to those in the top half of the wage distribution
and to capital.
In the first article, Jacob Greenspon and Lawrence Summers from Harvard University and Anna
Stansbury from MIT compare productivity and pay in the United States and Canada, They find:•Typical workers’ pay has grown substantially slower than average labour productivity
over the last four decades in both Canada and the US – particularly in the US. Despitemuch slower labour productivity growth in Canada than in the US, the growth in real
median compensation has been about the same in both countries since 1976 due torelatively larger increases in labour income inequality in the US.

•There is evidence for linkage between productivity and pay in both the US and Canada:
years with higher productivity growth rates have also tended to be years with higher
growth rates of pay, suggesting that marginal increases in productivity growth still raisepay holding all else equal. This holds both for the average worker and for a newly
constructed measure of “typical” workers’ pay in Canada, calculated from historical dataon compensation for workers paid by the hour in five sectors of the economy.

•The linkage between productivity and average pay does however appear somewhat
weaker in Canada than in the US. It is possible that Canada’s smaller and more open
economy may mean there is a greater role for international factors in reducing thestrength of the linkage between productivity growth and compensation growth in Canada.
These results suggest that trends or policies which increase the rate of productivity
growth should be expected to increase the pay of typical workers – even as there may at
the same time be other variables acting to suppress the growth in incomes fortypical workers.

The second article by Andrew Sharpe and James Ashwell from the Centre for the Study ofLiving Standards provides a narrative on the evolution of the productivity-median wage gap in
Canada between 1976 and 2019. They find:•Real median wage growth in Canada advanced at only 0.14 per cent per year over the1976-2019 period in Canada compared to 1.10 per cent for labour productivity growth,resulting in a gap of by 0.96 percentage points per year.

•The productivity-median wage gap fell from 1.35 points in 1976-2000 to 0.46 points in2000-2019 reflecting the pick-up in median wage growth and the relative stability of
productivity growth. Median wages actually fell 0.17 per cent per year in 1976-2000 so
the typical worker received no benefits from productivity growth. After 2000 medianwages advanced at 0.53 per cent per year. With productivity growth at 0.99 per centslightly over half of the gains of productivity growth went to the median worker.

•The fall in the productivity-median wage gap after 2000 in Canada can be explained by
the increased bargaining power of labour, as evidenced by the fall in the unemploymentrate, the much slower decline in the unionization rate compared to the last quarter of the20th century, and the fall in the import share.

For further information, contact
Andrew Sharpe
Executive Director
Centre for the Study of Living Standards
613-233-8891
andrew.sharpe@csls.c

International Productivity Monitor, Fall 2021 Number 41

Andrew Sharpe and Bart van ArkEditors' Overview

Symposium on the Decoupling of Productivity and Pay in the United States, theUnited Kingdom and Canada

Jacob Greenspon, Anna Stansbury and Lawrence H. Summers
Productivity and Pay in United States and Canada

Andreas Teichgraber and John Van Reenen
Have Productivity and Pay Decoupled in the UK?

Lawrence Mishel and Josh Bivens
The Productivity-Median Compensation Gap in the United States: The Contribution of
Increased Wage Inequality and the Role of Policy Choice

Andrew Sharpe and James Ashwell
The Evolution of the Productivity-Median Wage Gap in Canada, 1976-2019

Robert Inklaar and Pieter Woltjer
Is Egypt Really More Productive than the United States? The Data behind the Penn World Table

Cindy Cunningham, Sabrina Wulff Pabilonia, Jay Stewart, Lucia Foster, Cheryl Grim, John
Haltiwanger and Zoltan Wolf
Chaos Before Order: Productivity Patterns in U.S. Manufacturing
Robin C. Sickles and Valentin Zelenyuk
Response to Review Article by Bert Balk on Measurement of Productivity and Efficiency, Theory andPracticeThe Centre for the Study of Living Standards (CSLS) is a national, independent,
Ottawa-based not-for-profit research organization. Its primary objective is tocontribute to a better understanding of trends and determinants of productivity,living standards, and economic wellbeing in Canadians through research.