Thank you, Chair and committee members, for the opportunity to appear today.
My name is Stephen Tapp. I'm the CEO at the Centre for the Study of Living Standards. CSLS is a Canadian non-profit research organization that was founded in 1995.
Canada's productivity performance has been a long-standing concern, but it's now widely acknowledged that we face a productivity emergency. Over the past 50 years, our labour productivity growth has slowed dramatically. In the post-war period, productivity grew at nearly 4% a year. Since 2000, it has grown by less than 1% a year. To put this change in perspective, before the slowdown, productivity doubled in 19 years—now it takes about 90 years. This means that the economic progress that each generation previously enjoyed now takes longer than most lifetimes. If we don't reverse these trends, growth and living standards will remain too sluggish, and it will be harder to fund the essential public services that Canadians rely on.
In CSLS research, which was part of an international collaboration led by the U.K.'s Productivity Institute, Andrew Sharpe and I examined Canada's historical productivity performance. While far from perfect, we find that Canadian governments have generally pursued a lot of different pro-productivity policies over the years, from liberalizing trade to targeting inflation, modernizing taxes and investing in human capital. Despite these actions, productivity growth has stagnated in Canada and across most advanced economies. Why?
There are many factors that help explain the slowdown, including that Canada has a small domestic market that represents a shrinking share of global economic activity. Most of our firms are small and have had limited success in scaling up. Competitive pressures and business dynamism have weakened over the last decades. Regulations have increased, becoming more complex and costly to navigate. Our international trade position was lagging well before recent U.S. protectionism.
Ultimately, however, we think the biggest drivers of Canada's poor productivity are slow technological progress and chronically weak business investment. It's encouraging, then, that budget 2025 seeks to raise investment, as we think this correctly diagnoses a key part of the problem.
That said, we must acknowledge that Canada's economy is at its most challenging juncture in decades. U.S. tariffs and threats have created massive uncertainty, and the Canada-U.S.-Mexico agreement will soon come under existential pressure in the 2026 review. This makes efforts to spur investment even more important, but also more difficult.
Given these external challenges, Canada should focus on what it controls, with a policy agenda that aims to incentivize technological adoption and investment, support international trade participation and diversification, improve internal market efficiency, modernize the tax system, and enhance skills and workforce training. Gabriel mentioned artificial intelligence. We think that AI, a technology that Canada helped to pioneer, also represents a major opportunity.
That's why, in June, the CSLS launched the Canadian AI adoption initiative, in partnership with CIGI and the University of Waterloo, to support and track progress on broad-based AI adoption across the economy.
In all areas, we should reach for every basis point of growth we can get. Gradual, sustained progress can meaningfully improve living standards when compounded over time.
Before closing, I want to highlight that while national GDP and productivity indicators provide essential signals, they don't capture the full picture. Broader measurement that digs into and beyond the national numbers, like the CSLS indexes of economic well-being and human development, reveals large disparities across Canada.
On human development, for example, we estimate that Canada's top-ranking jurisdictions of Ontario, Quebec and Alberta would place 15th to 17th globally. By contrast, in the territories, Nunavut ranks around 70th globally. This effectively represents the difference between living in a place like the U.K. versus Albania, based on these implied rankings. Such disparities underscore the enduring challenges, particularly in Canada's north and indigenous and remote communities, as well as the need for place-based policy approaches.
CSLS research also suggests that traditional economic indicators, as disappointing as they've been, may actually have overstated Canada's progress, because when you look beyond the aggregate results, you see that we face more inequality and more risk than we did decades ago.
In closing, Canada's productivity performance has been disappointing, and the outlook is challenging. It will take time to address these complex and long-standing challenges. By correctly diagnosing the root causes, leveraging new technologies and implementing policy reforms, we can strengthen productivity slowly but surely to make a meaningful difference over the long run.
To guide that progress, traditional indicators should be complemented with beyond-GDP measures to support more inclusive and resilient prosperity for all Canadians.
Thank you for your time. I look forward to your questions.
