1An Agenda for Equitable Growth in Canada

Andrew Sharpe
Executive Director
Presentation to the Senate Prosperity Action GroupMay 28, 2021

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An Agenda for Equitable Growth in Canada
The objective of this paper is to lay out an agenda for an equitable growth strategy for CanadaFirst the issues to be addressed in such an agenda are discussed. Second, the landscape for
economic policy advice in Canada is surveyed and weaknesses from the perspective of equitable
growth identified. Third, an Equitable Growth Institute is proposed as a player to develop an
equitable growth agenda for Canadians. An appendix provides estimates of the costs of slower
productivity growth in Canada since 2000.

Issues to be Addressed in an Inclusive Growth Agenda
There are many specific issues that an inclusive growth strategy could investigate. They fallbroadly under three general areas: first, potential growth issues (productivity and labour force),
second, equity issues related to social and economic outcomes and environmental challenges,
and third, the linkages between dimensions of growth and equity. Within each research area,
discussion can be on the state of the current or future situation and the determining factors,
andon what public policies and private sector action can be taken to foster equitable growth.
A comprehensive research agenda for an inclusive growth strategy is well beyond the scope of
this paper, but for illustrative purposes three specific research projects or issues are discussed ineach of the three general areas.
Potential growth issues
The research agenda on the issue of potential economic growth is limitless. General topics
include the reasons for slower labour productivity growth, and negative total factor productivity
growth since 2000; the impact of new technologies such as AI on productivity; the relative
effectiveness of different public policies as tax policies, industrial subsidies, and training
programs on business productivity; the effect of immigration on both economic and productivity
growth; and the measurement challenges in public sector productivity. Three specific projects
related to potential growth, namely benchmarking Canada’s productivity performance,increasing the labour force participation rate of disadvantages groups, and broadening theconcept of output and productivity, are briefly outlined below.

Benchmarking productivity performance
The average level of labour productivity in the Canadian business sector is only around threequarters that of the United States. Indeed, many industries have even lower relative productivity
levels compared to their US counterparts (Rao, Tang and Wang, 2004), although there have been
no recent studies on this topic. Equally, Canada has few if any industries that are at the global
productivity frontier, although we may have a number of firms that are world class.
For the development of an effective strategy to improve productivity it is imperative to know thelandscape of our industry productivity performance. We can then build on our strengths andaddress our weaknesses. Fortunately, Statistics Canada produces excellent productivity statistics,

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particularly at the detailed industry level, with provincial disaggregation. Firm-level productivity
estimates are also available (Gu, 2019 and Sharpe, 2021). Yet Canadian researchers haveunderutilized these productivity statistics. What is needed is a project that exploits the existingproductivity resources, both domestic and international to the fullest degree possible to shedlight on the reasons for our poor productivity performance, to benchmark this industry and firm
performance against that of other countries and against international best practices and the world
productivity frontier, and to identify policies that could improve this performance.

Increasing the participation rate of disadvantaged groups
Potential economic growth is determined by trend labour productivity or output per hour growthand potential hours growth, which in turn is driven by the underlying source population, theaggregate labour force participation rate and average working hours. The aggregate participation
rate in Canada for the benchmark 25-64 age group is fairly high by international standards. In
2019 it was 82.1 per cent, above both the OECD average (78.4 per cent) and the United States(78.2 per cent). Nevertheless, there is still potential to increase labour force participation, as
evidenced by higher participation rates in a number of OECD countries, including Sweden (89.1
per cent), Iceland (88.9 per cent), Switzerland (87.6 per cent), New Zealand (85.2 per cent), andGermany (84.4 per cent).
Families with young children often experience difficulties finding child care, forcing a family
member, generally the woman, to stay home The availability of affordable child care in Quebec
has led to increased female labour force participation, with the female labour force participation
rate of women in the 25-44 age group 3.3 percentage points above the national average (86.7 percent versus 83.4 per cent) and the highest of any province. In its 2021 budget the federal
government announced it plans to work with the provinces to make the Quebec early childlearning model available throughout the country.
Indigenous Canadians have significantly lower labour force participation than non-Indigenous
Canadians. According to the most recent census in 2016, the Indigenous participation rate was
61.4 per cent, 4 percentage points below the non-Indigenous rate of 65.4 per cent (NIEDB,2019). The participation rate of First Nations on reserve is particularly low at 48 per cent in 2016
and getting worse, down from 50 per cent in 2006.
The participation rate of persons with disabilities in Canada is well below that of the overall
population. In 2012, the participation rate of the 25-64 age group was 55 per cent, compared to84 per cent for persons without disabilities (Turcotte, 2014), A total of 11 per cent of the
population in this age group reported a disability, 2.1 million persons. If these individuals had thesame participation rate as persons without disabilities, the labour force would increase by 609
thousand. The size of the 25-64 age group in 2012 was 16.8 million so such a situation would
boost the aggregate participation rate of this age group by 3.6 per centage points. This is ofcourse unrealistic as certain severe disabilities may represent an insurmountable barrier to labour
force participation. Nevertheless, there is undoubtedly much potential to increase the overall
participation rate through increased participation of persons with disabilities.

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While not a disadvantaged group, there may be still considerable potential for voluntary
increases (that is those not forced upon older people by economic necessity) in the labour force
participation of older Canadians, given better health and longer life expectancy. The participation
rate of Canadians 65 and over at 14.9 per cent in 2019 was slightly below the OECD average(16.0 per cent), and well below that of New Zealand (24.2 per cent), Japan (22.2 per cent) andthe United States (20.2 per cent).1
The participation rate of the 55 and over age group has progressed significantly in Canada inrecent years. From 23.8 per cent in 1996 it rose to 36.7 per cent in 2013. Further gains have beenmuch smaller and by 2019 the rate was 37.9 per cent. Much of the post-1996 increase was
fuelled by the increasing importance of the 55-64 age sub-group in the 55 and over age group as
the former has a much higher participation rate, around five times, that the 65 and over age
group. The stabilization of the relative importance of the 55-64 group in the older population in
the early 2010s accounts for the much slower increase in the 55 and over participation rate sincethen. Yet a more granular look shows that the participation rate for five-year age groups exhibits
continued upward movement after 2013.2 This trend is expected to continue and could
potentially be boosted by appropriate policy measures promoting the labour attachment of older
Canadians.
The labour market performance of recent immigrants, especially those in Canada for less than
five years, is below average with, higher unemployment rates and lower hourly wages than the
Canadian-born in comparable education groups. However, the participation rate of recent
immigrants, which has been below that of the Canadian-born, had equalled or surpassed that of
the Canadian-born by 2019 (Kim, 2020)
A project is needed to better understand the participation rate dynamics of the groups identified
above, as well as other groups facing labour market challenges,. This knowledge can then be
used to identify and develop measures to foster labour force participation and, except for older
workers, move participation rates as close to the national average as possible.3

1

2

See OECD Labour Market Statistics at https://stats.oecd.org/Index.aspx?DataSetCode=LFS_SEXAGE_I_R

The participation rate of the 55-59 age group rose from 73.7 per cent in 2013 to 75.8 per cent in 2019, that of the
60-64 age group from 53.3 per cent to 56.9 per cent, that of the 65-69 age group from 26.5 per cent to 26.6 per
cent, that of the 70-74 age group from 12.2 per cent to 14.1 per cent and that of the 75 and over age group from
3.4 per cent to 4.3 per cent.
3
For a discussion of these policies see Drummond, Capeluck and Calver (2015)

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Broadening the concept of GDP and productivity
Recent decades have seen an active debate on the adequacy (or inadequacy) of GDP as a metric
to track changes in living standards and well-being over time or between jurisdictions with
important implications for how we measure, interpret and analyze productivity. Not only thenumerator (output or GDP) may be affected by our changing views on what should be measured,
whether it is health or well-being outcomes or environmental values. The denominator (inputs)
may also be affected as some inputs, e.g. various intangibles, will matter more for creating thosebroader or more fundamental outcomes compared to GDP and productivity as traditionallymeasured.
An important strand of this narrative has focused on the need for broader measures that more
fully capture well-being or social welfare than GDP currently does. At one end of that debate,some have argued that GDP is an outdated measure that should be scrapped and replaced, whileat the other end some have defended GDP as a valuable measure and suggested improvements or
extensions.
Possible extensions include better measurement of prices (both shadow prices of “free” goods
and prices of difficult-to-measure products), shifts in the production boundary, or satellite
accounts that connect specific economic, social or welfare domains (such as health, humancapital or environment) to the core GDP concepts as permitted in the SNA.
Possible changes in the concept of GDP—whether that be improving measures within the current
framework, extending the current framework, or completely scrapping GDP—raise fundamental
questions about how productivity should be measured.
A case can be made that the concept of “productivity” can be broadened to the idea of outcomes
and resources needed to achieve those outcomes. This broad concept can be operationalized interms of a numerator which measure outcomes that go beyond the conventional measure of
output as expressed by GDP and, similarly, a denominator which includes a wider range of
inputs, leading to a potentially quite broad definition of productivity. This framework connects tothe literature on well-being and social welfare given that those measures can be the outcome
measure.
Even with a focus on a broad measure of well-being as the appropriate outcome, it still isimportant to consider the resources necessary to achieve that outcome. Ultimately, whatever typeof outcomes we aspire to, we should aim to optimize the usage of scarce resources (human,
physical or natural capital), to reduce waste, and to increase the scale at which those resources
can be employed. From a policy perspective, this latter step is crucial. An alternative tobroadening the outputs and inputs is to retain the more traditional view of GDP as the preferredmeasure of economic performance. From this perspective, one would tend toward moreconventional (or perhaps extended) measures of GDP in the numerator and labour (and perhaps
capital) inputs in the denominator, and develop complementary and possibly broader measuresreflecting non-economic outcomes and better understand how they can be achieved througheconomic means.

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A project that broadens the productivity debate from its narrow economic focus on GDP andlabour and capital to a broader social focus on societal outcomes, and the resources needed toachieve these outcomes, is needed.
Equity issues
The research agenda on the issue of equity issues is also massive. Three specific research
projects that would add to our knowledge base on equity issues are explaining inequality trends,
assessing the equality of opportunity available to Canadians, and broadening the concept ofinequality beyond income and wealth. They are briefly outlined below.
Explaining inequality trends
It is widely recognized that income inequality has increased in Canada. Yet the timing of thisdevelopment and the reasons for it are poorly understood by the public. There are numerous
measures of income inequality, but the broadest and most commonly used metric is the Gini
coefficient, which can be measured for market income and for post-tax and transfer income.
Statistics Canada publishes estimates of the Gini coefficient for the 1976-2019 period. One
observes very different trends within this period. In the last quarter of the 20th century inequality
increased, with the market Gini coefficient rising 5.5 points from 38.9 in 1976 to 43.9 in 2000.
The after-tax Gini coefficient also increased from 30.0 to 31.7, one third the rise of market
inequality. After 2000 inequality actually fell, with both the market and after-tax measuresfalling 1.7-1.8 points to 42.1 and 29.9 respectively by 2019. While it is correct to say that market
income inequality has increased in Canada over the last 43 years, all the increased took place
before 2000. On the other hand, there has been no long-term change in after-tax income
inequality, as evidenced by the Gini coefficient.
The income share of the top one per cent of the income distribution is another widely cited
metric of rising income inequality (Osberg, 2018). This measure has indeed risen over time, but
again all the increase took place in the 1980s and 1990s. The share of income (including capitalgains) of the top 1 per cent of tax filers rose from 6.3 per cent in 1982 to 10.6 per cent in 2000
and then has fallen, reaching 9.8 per cent in 2019.
Consequently, both the rise in inequality in the last quarter of the 20th century and the stability,
at a higher level, or slight fall, in inequality in the first two decades of the 21st century need
explanation. Our understanding of these developments is still imperfect. The two main factorsthat have been put forward to account for rising inequality before 2000 include skill-biased
technical change favoring well-educated workers, and globalization hurting workers vulnerable
to competition from low-wage countries. The key factors identified by Green, Riddell and StHilaire, 2017) as preventing additional increases in inequality after 2000 were the resource boom
from 2000 to 2014 and the increase in the real minimum wage from around $9 (2018 dollars)
per hour in the early 2000s to $13 in 2018 (Government of Canada, 2019:Figure 7).
There is still much we do not know related to trends in inequality in Canada so a project on this
topic is needed. Recent research for the United States by Mishel and Bivens (2021) make thecase that there has been a “rigging of the system” that empowered employers over workers due

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to policy changes and changes in business practices that systematically undercut workers’ ability
to obtain higher pay—which generated wage suppression and wage inequality. The authors
identify excessive unemployment, eroded collective bargaining, and corporate globalization as
factors that explain why median wages have failed to keep pace with productivity growth.4
Research is needed on whether these factors played a similar role in the increase in wage
inequality in this country. Work is also needed on the impact of social programs, such as moregenerous child benefits, on the increase in income inequality during the last quarter of the 20th
century and on the stabilization of inequality trends during the last two decades.
Going forward, it will be important to identify, to the degree that this is possible in a very
uncertain world, factors impacting inequality, such as Artificial Intelligence and to develop
policies and programs to address these potential developments. For example, some have put
forward the idea of a basic income program as a means to guarantee a minimum standard ofliving and reduce income inequality in response to the changing nature of the labour market
while others see better ways forward (Green, Kesselman and Tedds, 2021)

Assessing equality of opportunity
The concept of equality has different dimensions, The most common notion is equality ofoutcome as measured by metrics of income and wealth inequality such Gini coefficients. A
second concept is equality of opportunity and which relates to the opportunities for a child inaccessing opportunities to better his situation in life, These life chances are related to thecircumstances in which the child finds itself at birth, and the social and financial barriers faced toobtain an education or to start a business, and the supports put in place to assist thedisadvantaged overcome these barriers.
Canada appears to do fairly well in terms of equality of opportunity. For example, social
mobility appears to be high in Canada. Corak (2006) finds that the generational earnings
elasticity, that is the likelihood that a son will remain in the same income quintile of his father, ismuch lower in Canada (0.19), compared to 0.47 in the United States and 0.50 in the UK, andeven compared to France (0.41), Germany (0.32) and Sweden (0.27). Out of the nine countries inthe study, only three had greater intergenerational mobility than Canada: Denmark (0.15),
Norway (0.17) and Finland (0.18).

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Mishel and Bivens (2021) assess the wage impact of: weaker labor standards (including a declining minimum
wage, eroded overtime protections, misclassification, nonenforcement against instances of “wage theft,” ordiscrimination based on gender, race, and/or ethnicity); new employer-imposed contract terms (noncompetes,
forced private, individualized arbitration, anti-poaching agreements); and shifts in corporate structures suchas fissuring (or domestic outsourcing), industry deregulation, privatization, buyer dominance affecting entire supply
chains, and increases in the concentration of employers. See Scheiber (2021) for discussion on this an

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In addition, the impact of social background on educational achievement appears relatively low
in Canada. Not only does Canada fare well on the student achievement scores of 15 years asreported on the 2018 OECD PISA survey (Council of Ministers of Education and Government of
Canada, 2019), but the strength of the relationship between reading performance andsocioeconomic status is weaker than the OECD average. This means that socioeconomic
disadvantage plays a relatively minor role in explaining variation in student reading performancein this country. To be sure, socioeconomically advantaged students still outperform
socioeconomically disadvantaged students, but by less than in other countries.
A third indication of a relatively high level of equality of opportunity in Canada is the highproportion of the population with post-secondary education. In 2019, 63 per cent of Canadians in
the 25-34 age group had a post-secondary or tertiary education, well above the OECD average of
45 per cent and the second highest in the OECD after Korea. (OECD,2020: Table A1.2). Canada
also had the third lowest share of persons in the 25-34 age group with below lower secondary
education at 6 per cent (only Korea and Slovenia were lower), well below the OECD average of
15 per cent. Widespread recognition of the importance of education for economic success, welldeveloped financial assistance programs for students, and an extensive system of accessible
community colleges account for Canada success in making a post-secondary education readily
available to the overall population.
Canada thus appears to be a country where a certain degree of equality in opportunities is areality for most citizens. However, no comprehensive study has documented this situation. A
project is needed to examine the state of inequality of opportunity in Canada and identify groups
that do not equally benefit from these opportunities and areas or fields where opportunities arestill unequal. The project can also lay out how to best address the remaining inequalities ofopportunity that exist in this country.

Broadening the concept of inequality
The debate on inequality generally focuses on inequality in monetary terms. But the concept ofinequality goes well beyond income and wealth inequality to include inequality in theavailability of services such as health services, educational opportunities, legal services, financial
advice, broadband, inequality in access to affordable housing, safe neighborhoods and topolitical decision makers as well as inequality in many other dimensions of life, such as regional
inequalities To be sure, lack of financial resources is the root cause of many of these broader
dimensions of inequality. Persons lower down the income distribution experience much moreacutely these inequalities than persons at the top of the income distribution.
Governments take measures to reduce these broader dimensions of inequality, just as they takemeasures to reduce income inequality though taxes and transfers. The classic example isuniversal health care which is considered a right of citizenship by Canadians. Indeed, to ensure
equal access to health care, the provision of private health care services is not permitted. Student
financial assistance programs promote access to post-secondary education, Legal aid programs
equalize to some extent access to legal representation. Programs to support the provision of

9broadband reduce the digital divide. Restrictions on donations to political parties dampen theinfluence of money on politics. Despite all these measures, historical and structural realities
mean that many manifestations of inequality, in addition to income and wealth inequality,
continue to exist in Canada,
A project is needed to document and examine the many dimensions of inequality
affecting Canadians, to benchmark progress over time in reducing inequalities, and to compare
Canada’s performance to that of other countries. The effectiveness of both public and private
measures to reduce equality can be assessed and policies developed to address weaknesses
where social and economic inequalities are at unacceptable levels.
Linking Growth and Equity
The motivation for twinning the terms “equity” and “growth’ is the recognition of their dual
importance and interlinkages. Economic growth is the bedrock of an equitable society as itprovides the additional resources to raise living standards and fund public services such as healthand education and social transfers. But economic growth without a fair or equitable sharing of
the benefits of this growth is not in the overall societal interest. Hence the need for inclusive
growth. There can also be a positive feedback loop or mechanism between policies that promotesocietal equity and economic growth.
Three specific issues can be identified on the linkages between growth and equity. First, what are
the linkages between economic growth/and its two components, employment and productivity,and equity and well-being? Second, what is the relationship between changes in inequality andeconomic growth? Third, what is the impact of current government policies to address climatechange on traditional productivity and economic growth metrics?
Impact of economic growth on well-being
The traditional view is that that economic growth contributes to well-being and social progress
overall even through it is recognized that some aspects of the economic growth process such ascongestion, pollution, concentration of economic power and wealth can be detrimental to wellbeing, Governments are in principle tasked to take action to minimize negative externalities
associated with economic growth, but do not always get this right.
Economic growth is determined by both employment growth and productivity growth.
Employment is crucial to well-being as it provides a source of income. In addition, work isimportant as a source of purpose, identity, and social interaction. It is not surprising that the
unemployed report much lower levels of life satisfaction than the employed. This means that a
low unemployment rate consistent with maximum or full employment is an important economic
and societal objective and with a rising source population, jobs must be created to attain thisobjective.
Productivity growth also contributes significantly to well-being, Increases in output per hour area necessary, but not sufficient condition, for increases in real wages and hence material wellbeing. Increased output and income from productivity gains generate additional tax revenues thatcan be used for public services such as healthcare which improve health outcomes and life

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expectancy, and transfers to individuals that potentially reduce poverty and inequality andboosting economic security (Sharpe, 2002).
A project that documents the links directly flowing from employment growth and productivity
growth to the various aspects of well-being is needed. It could identify from both a Canadian andinternational perspective which aspects of well-being and societal equity can in principle beinfluenced and have in reality been strongly affected by economic growth as well as those
aspects of well-being which are less susceptible to positive influence, or not influenced at all,. oreven negatively affected (environmental quality).
Relationship between inequality and economic growth
Economists have traditionally taken the view that there is a tradeoff between equity andefficiency (Okun, 1975). This means that measures to reduce inequality such as generous social
programs were believed to have work disincentive effects which reduce economic growth. On
the other hand, policies that spur growth, such as lower taxes on investment were seen as
boosting income inequality.
This traditional perspective on the relationship between economic growth and inequality has
evolved significantly in recent years, with this view becoming either much more nuanced or evenreversed with less inequality having positive effects for economic growth. A number of
mechanisms have been identified whereby a lower level of income inequality can have positive
implications for economic growth. For example, a more equal distribution of income will reduce
liquidity constraints on the accumulation of human capital by those on the bottom half theincome distribution, Equally, a more equitable society can reduce political tensions, encouraging
investment.
Many policies and programs have been put in place in Canada to create a more equitable society.
These include early childhood learning programs, enriched child benefits, higher minimum
wages, higher taxes on the rich, earning supplementation schemes, student grant and loan
programs, among others. It is very likely that these policies and programs reduced income
inequality. What is less certain is their impact on economic growth. A project that tracks andquantifies the effects on economic growth, both expected and unintended, of policies andprograms motivated and designed to reduce inequality is needed.
Climate change policies and economic growth
A key global priority is the goal of the net zero emissions by 2050 to reduce the impact ofclimate change (IEA, 2021). There is consensus within Canada that movement toward net zero
emissions is necessary to ensure long-run environmental sustainability, an important componentof an equitable growth agenda. The Government of Canada (2020) has developed a strategy toreach the net zero objective. But some worry that policies that make up this strategy, such as
higher carbon taxes, strict environmental regulation on pipelines and resource development,
policies discouraging the development of the oil and gas sector, and subsidies for renewableenergy, will have negative effects on economic growth and hence on societal well-being. But
many environmental policies directly support economic growth, although of a less carbon-

11intensive nature. In addition, environmental measures that do negatively impact growth incarbon-intensive activities can include adjustment assistance programs to facilitate transitions ofresources to more environmentally sustainable activities.
A project on the relationship between climate change policies and economic growth is needed
and should have three objectives. The first is to identify the impacts, both positive and negative,that environmental policies can have on economic growth, including both the employment andproductivity aspects. The second is to attempt to quantify the impacts of current environmental
policies on economic growth. Third, the project can identify and develop measures to mitigate
any negative impacts on economic growth.

A Gap in the Landscape for Economic Policy Advice in Canada
The landscape or ecosystem for the supply or provision of external economic policy advice to theeconomic decision makers in the federal government is both extensive and dynamic. Yet despite
its strengths, we believe that there is a significant or serious gap, namely the existence of a wellfunded and competently staffed independent research organization whose mission is thedevelopment of an equitable growth strategy for Canada.
Sources of economic policy advice to government in Canada currently include universities,
especially researchers in departments of economics and schools of public policy, think tanks or
economic research organizations (CD Howe Institute, IRPP, Fraser Institute, Conference Boardof Canada, CCPA, IFSD, CSLS, etc.), business association, labour unions, the NGO community,and business economists employed largely by financial institutions. Government departments
and agencies such as Finance Canada, Bank of Canada, Statistics Canada and ISED also employ
large numbers of professionals to undertake economic analysis and research for the purpose of
informing senior government officials on economic developments and for the development of
economic and social policies. In additional to government departments and agencies, theParliamentary Budget Office conducts and releases reports on a range of economic topics, most
associated with the fiscal issues and many made at the request of Parliamentarians.
Governments also create from time to time ad hoc bodies to address specific matter. The classic
examples are Royal Commissions, such as the MacDonald Commission on Canada’s Economic
Prospects in the 1980s, the Gordon Commission in the 1950s and the Rowell-Sirois Commission
on Federal- Provincial Relations in the 1930s, a more recent example is the Advisory Council on
Economic Growth created by the Minister of Finance in 2016.
Despite the large supply of both external and internal economic policy advice, we believe that
there is a significant or serious gap, namely the existence of a well-funded and competently
staffed independent research organization whose mission is the development of an equitable
growth strategy or agenda for Canada. Two independent government agencies occupied thispolicy space in the past. The most important was the Economic Council of Canada, whichfunctioned from 1965 to 1992 and published important work on productivity, potential growth,
regulation, the labour market, and many other economic topics. The second was the Roundtableon the Environment and the Economy (1980-2006), which focused on the linkages between
environmental and economic variables. Both organizations were part of the federal government,

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but at arms length. They were directed by an independent Council or Board of Directors
appointed by government.

Role of an Equitable Growth InstituteAn equitable growth strategy for Canada needs a credible organization that can champion theobjective of equitable (and sustainable) growth.5 We see that new organization as the Equitable
Growth Institute (EGI) or possibly the Canadian Equitable Growth Institute (CEGI). Through athree-step process, it would:

5•

undertake rigorous and original research on key aspects of an equitable growth
agenda, including the drivers or determinants of potential growth, namely
productivity growth and labour force growth; the strengths and weaknesses of thesocial safety net; and the state of risks facing the environmental landscape;•identify and develop specific policy proposals to boost potential growth in an
equitable and environmentally sustainable manner address, address the
deficiencies in the social safety net to ensure that no Canadians are left behind;and ensure that Canada’s environmental target are met; andThe term “equitable growth” is gaining in popularity as the names of equity-minded research organizations. The

Washington Center for Equitable Growth established in 2015 is a non-profit research and grant-making organization dedicated to advancing
evidence-backed ideas and policies that promote strong, stable, and broad-based economic growth. It works to build a strong bridge
between academics and policymakers to ensure that research on equitable growth and inequality is relevant,accessible, and informative to the policymaking process. The Centre for Equitable Growth (CEG) at the Universityof California, Berkley established in 2017 promotes research that explores ideas for achieving economic growth thatis fairly distributed. Its objectives are to encourage research in equitable growth and to help develop public policythat can simultaneously improve the distribution of economic well-being and economic growth. Therefore, theCenter is primarily interested in research that can inform policy decisions in promoting equitable growth. According
to the CEG website: “The concept of growth, in addition to measures of GDP growth, can also incorporate aspectsof education, health, and environmental sustainability. Equitable growth projects include research on economic
equality and the determinants of economic growth. The Center is particularly interested in research regarding thelinks between inequality and economic growth, the effects of government policies on both the distribution of
economic well-being and economic growth, and the way public views on equity and fairness affect policy making.”

13•

develop board-based support and obtain buy-in for its equitable growth agenda
and strategy by consulting with a wide range of stakeholder groups.

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Appendix: The Cost of Slower Productivity Growth to Canadians
Canada would now be a considerably richer country if labour productivity growth after 2000 had
not fallen off. The magnitude of the costs of this post-2000 productivity slowdown can beillustrated by a simple calculation of what would have happened to GDP and GDP per capita if
labour .productivity growth had continued at the pre-2000 rate.
From 1973 to 2000 labour productivity growth in Canada, defined as total economy real GDP
per hour worked, rose at a 1.32 per cent average annual rate, already down from 2.78 per cent per
year in the pre-1973 period. Between 2000 and 2019 labour productivity advanced at 0.96 percent average annual rate, a difference of 0.36 percentage points per year. In other words, real
GDP growth, which is the summation of labour productivity and growth in hour worked, would
have been 0.36 percentage points per year faster after 2000, that is 2.32 per cent instead of 1.96
per cent,
Real GDP in 2000 was $1,448 billion expressed in 2012 dollars and rose to $2,092 billion by
2019. Had the 1973-2000 labour productivity growth rate continued after 2000, and all the
productivity growth translated into additional output, real GDP in 2019 would have been $2.239
billion, 7.0 per cent or $147 billion above the actual level.
Over the 2000-2019 period the summation of the additional annual gains to output from higher
productivity growth total $1,047 billion that is over $1 trillion dollar. This represents around one
half the level of actual GDP in 2019.6
Both nominal and real GDP per capita would have 7.0 per cent higher in 2019 had there been no
post-2000 slowdown in labour productivity growth, Nominal GDP per capita would have been
$65,691, $4,298 above the actual level. Real GDP per capita, expressed in 2012 dollars, would
have been $59,644, $3,902 above the actual level.
Productivity gains can be taken in the form or greater leisure time as well as more goods andservices. Productivity growth can also be used to decrease working time if the amount of output
remains unchanged. If the labour productivity growth had not suffered a 0.36 percentage point
showdown after 2000 and output in 2019 remained unchanged, 7.0 per cent fewer hours would
have been needed to produce that amount of output. In other words, for the same standard ofliving, the average worker would have had to labour 117 fewer hours over the year, 1,553 hours
per year, instead of the actual 1670. This translates into 2.25 fewer work hours per week.

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Sprague (2021) made a similar calculation for the United States. He found a cumulative shortfall of $10.9 trillion
had labour productivity growth in the non-farm business sector continued at the pre-2005 rate of 2.3 per cent overthe 2005-2018 period instead of the actual 1.4 per cent,17