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The article discusses a productivity gap between the United States and Canada. Though labour and capital are both cogs in the output machinery, what produces a thriving economy is how efficiently the former uses the latter. Increased efficiency due to technological innovation boosts productivity, and in turn, the economy. But what exactly is productivity? Put simply, it is an indication of output relative to input. There are two main measures. The first and more commonly used is labour productivity, calculating real output per hours worked. The second measure is multifactor productivity, which calculates the contributions of both labour and capital to output. Both are litmus tests for the state of the economy, as poor productivity can be a symptom of dwindling economic health. Canadian low productivity relative to the United States has aroused much concern within economic circles. However, it is uncertain whether the lower numbers are a result of lagging performance, or a manifestation of inconsistencies in how productivity is measured. To date, there is no consensus in the explanation of the U.S.-Canada productivity gap, though it is possible the gulf isn't as wide as it appears. Some economists speculate that differences in the nature of the two countries' manufacturing sectors contribute to the productivity discrepancy. There is a concentration of transportation and natural resources in Canadian manufacturing; in the United States, there is more electronics and machinery production, which leads to higher productivity reports. However wide the productivity gap may be, technological improvements could help bridge it. |
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