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Renewing Productivity as an Idea In Public Policy

Renewing Productivity as an Idea In Public Policy. Chase McGrath MPA Candidate, 2008. Outline. Productivity The Importance of Productivity Canada’s Current Productivity State Influences on Productivity Canada vs. Competitors Improvement Strategies Current Productivity Opportunities

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Renewing Productivity as an Idea In Public Policy

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  1. Renewing Productivity as an Idea In Public Policy Chase McGrath MPA Candidate, 2008

  2. Outline • Productivity • The Importance of Productivity • Canada’s Current Productivity State • Influences on Productivity • Canada vs. Competitors • Improvement Strategies • Current Productivity Opportunities • Conclusion

  3. Productivity • Definition • “the efficiency with which a country’s resources are combined to produce a specific output” 1 • Measurement Style • Total Factor Productivity • Labor Productivity 1 Salgado, R. (1999). Productivity Growth in Canada and the United States. Ottawa: Ontario.

  4. The Importance of Productivity • “Productivity is an economic destiny”2 • 1% increase, 70 years; 2%, 30 years; 3%, 24 years • Rising health and pension costs fade away 2Sharpe, A. (2005). Six Policies to Improve Productivity Growth in Canada. Ottawa: Ontario.

  5. The Importance of Productivity • Perspective required • “Productivity is certainly important, it is not everything”3 • Quality of life and Canada’s economic well-being trump productivity 3Sharpe, A. (2005). Six Policies to Improve Productivity Growth in Canada. Ottawa: Ontario.

  6. Canada’s Current Productivity Situation • Declining since 1973 • 1997-2000 and 2005 increases • One of the least productive industrial countries • Lack of uniform measurement system and lower producing business sector

  7. Who is Responsible? • Government • Business Sector • Trade-oriented vs. domestic oriented sectors • Trade-oriented increases offset by domestic-oriented decreases • Citizens • Need for a collaborative approach among all

  8. Influences on Productivity • Five Key Influences: • Information & Communications sector • Machinery & Equipment investing activities • Aggregate Demand • Business Environment and Policy Framework • The Global Economy

  9. Information & Communication • Drastic declines – 11% to 7% • 4.5 % of business sector employment • Many recent hardships • New manufacturing methods required

  10. Machinery & Equipment • Very low as a result of rising costs • Increase maintenance budgets • Lack of financial resources • Since 2003, rising M&E investments • By 2006, increase M&E investments by 20%

  11. Aggregate Demand • “The quantity of all good and services demanded in an economy, at various price levels, during a specified time period”.4 4 Sayre, J., and Morris, A. (2001). Principles of Macro Economics (3rd ed.) Montreal: McGraw-Hill Ryerson. Pg. 194

  12. Aggregate Demand • Declining • Two “boom periods” since 2000 • Capacity utilization rates falling • Overhead costs • Shifting output and labor resources to the public sector • Capital growth relative to labor force growth

  13. Business Environment & Framework • Openness to trade and investment • Competition • Regulatory regime • Resource allocation

  14. The Global Economy • Impacts Everyone • Awareness Required • Strategies to Cope

  15. Canada vs. Competitors • The U.S. • Widest gap with Canada (approx. 15%) • 2003 – The U.S up 8%; Canada down 7% • Rapid Growth • Fast-paced technological changes • ICT advancements

  16. Canada vs. Competitors • France and other European countries • Canada well behind • Changing workforce • Matching person and job • Less working time • More productive

  17. Canada vs. Competitors • Australia • Out-performed Canada • Similar economic structure • Comparable statistical system • Capital-labor ratio • Workforce composition • Input efficiency

  18. Improvement Strategies • Innovation • Process – Research & Development (R&D) funds for enhancing and reforming • Product – R&D funds for “eureka” moments • Lagging business R&D expenditures • Financial risks

  19. Improvement Strategies • Efficient Allocation • Maximum utility from available resources • Three Critical Elements • Legal Framework • Resource Transfers • Infrastructure

  20. Improvement Strategies • Public Infrastructure Deficit • Private infrastructure development • Ie. The Canadian Railway) • Public-Private Partnerships (PPPs) • Ie. Confederation Bridge • Timely and expensive • No proper infrastructure creation method

  21. Improvement Strategies • Education • Shrinking pool • Investments in research development and teaching • High school drop outs (31% in NS alone) • Take advantage • High investing in the U.S.

  22. Improvement Strategies • Trade Barriers • Conference Board of Canada (CBoC) “Competition Project” • R&D Costs • .75 percent of GDP in Canada; 2% in the U.S.

  23. Improvement Strategies • Demographic Changes • Shrinking population • Declining employment rates • Increased costs of trade • Competitive Markets • Increased response rates and efficiency • New government policies

  24. Improvement Strategies • Work Time • Reduced • More productive, • cost-effective • Full Employment • No slack in economy • Every willing person has employment • Learning by doing, economies of scale, eliminates operating inefficiencies

  25. Improvement Strategies • Government Involvement • Provincial vs. Federal governments • Tax Refunds • Promote infrastructure, reduce trade barriers • Tap into natural resources • Prioritize initiatives

  26. Improvement Strategies • Productivity Budget • High-End Firms incentives • Funding for basic science • Reduce R&D Barriers • Focus on Innovation • Department and Agency budgets must promote productivity

  27. Current Canadian Opportunities • Three Opportunities: • Increasing government commitment • Private Sector long-term investing • Infrastructure • Productivity Increases through: • Higher levels of resource allocation • Leading-edge technology

  28. Productivity Status: 2006 • 2005, increase of 2.1 % • 2006, first three quarters, decline of approx. 1%

  29. Closing Remarks • Collaborative attention to Innovation, Allocation, Education, R&D and Government involvement • Optimistic Future • Increasing standard of living • Continuation of productivity gap

  30. Closing Remarks • Presence in emerging markets • Strengthening ties outside of the U.S. • Inward and outward investing • Exploit natural resources • Restructure current legislation

  31. Closing Remarks • Not in a state of crisis • Governments and businesses start “doing” rather than “talking” • Collaboration is key to success; requires improvement and dedication from all

  32. Thank You!

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