Canada's productivity 'emergency' and the role newcomers play

financialpost.com:

Ever since the federal government announced its decision to place caps on temporary residents, economists have been talking about how the move could potentially compel businesses to invest more on technology instead of relying on “cheap labour” from abroad, which in the long run should help boost Canada’s struggling productivity rate.

Concerns around productivity received even more attention last week after Bank of Canada senior deputy governor Carolyn Rogers said the country needs to tackle its poor efficiency numbers to inoculate the economy against future inflation.

“You’ve seen those signs that say: In emergency, break glass — well, it’s time to break the glass,” she said in a speech on March 26.

The number of immigrants isn’t the only factor that influences productivity, but it’s important to understand its impact considering Canada’s population grew at a record pace during the past two years — primarily due to temporary residents — by adding more than two million people.

Statistics Canada defines labour productivity as a measure of the country’s gross domestic product (GDP) per hour worked. GDP measures the value of goods and services produced during a specific time frame.

But other metrics are also used. For example, some economists define productivity as GDP per capita, which divides the GDP figure by the country’s total population. Some say that this is a better metric since the number of hours worked can be artificially distorted due to strikes.

Regardless of the formula used, the results have been poor. Canada’s labour productivity increased just once in the past seven quarters, while its GDP per capita has declined in five of the past six quarters.

But declining productivity isn’t a new phenomenon. As Rogers