Productivity in Canada: A Snapshot
At the recent Canada Investment Summit, Prime Minister Mark Carney unveiled a new “productivity mega-deduction” – a measure intended to attract business investment after a long period of notably sluggish capital formation in Canada. Like most economists, the Prime Minister recognizes that boosting business investment is the key to turning around Canada’s lacklustre productivity performance. And there is no question a turnaround is badly needed: since the early 2000s, Canada has been falling progressively further behind the U.S. – and some other advanced economies – on productivity. Compared to the U.S., Canada today is less than 75% as productive as our neighbour to the south, having lost ground steadily over the past few decades.
Figure 1
Canada’s poor productivity record reflects a mix of factors: relatively low levels of business investment in machinery, equipment, advanced process technologies, and intellectual property; a higher prevalence of small, generally less productive firms in Canada compared to the U.S. and many other developed countries; the slow dissemination and take up of digital tools and technologies across much of the Canadian business sector; an expanding labour force fuelled by immigration-driven population growth, which has dampened incentives for firms to invest in labour-saving technologies; and various features of the tax and regulatory environment that have made Canada less competitive as a location for both productive business investment and business growth.
Figure 2 shows labour productivity – real value-added – for each major Canadian industry, ranked from highest to lowest, in 2025. Note that one important economic sector – Real Estate, Rental and Leasing – is excluded. The reason is that measures of productivity in this industry are distorted because Statistics Canada includes an estimate of the value of “imputed rent” for owner-occupied housing as a component of the industry’s output. “Imputed rent” does not capture actual economic production, so productivity in the Real Estate, Rental and Leasing sector cannot be compared to that in other industries on an apples-to-apples basis.
For industries where economic activity mainly occurs in the broadly defined public sector, we can’t use market prices to determine the value of the relevant output, as most of what these industries produce is not sold on the “market.” Instead, Statistics Canada calculates labour productivity in the public administration, health care and education industries mainly by estimating the value of the “labour input” in these government-dominated sectors. Public sector industries employ many relatively well-paid workers, which may inflate estimates of labour productivity in some parts of the public sector.
Labour productivity is highest in the following six Canadian industries: mining and oil and gas extraction; utilities; information industries (which include telecommunications, software, film production, broadcasting, and publishing); finance and insurance; wholesale trade; and manufacturing. The five lowest productivity industries, ordered from least to most productive, are accommodation and foodservices; other services; retail trade; administrative support services; and arts, entertainment and recreation.
Across all Canadian industries combined, labour productivity averaged $65.00/hour in 2025 (measured in 2017 dollars). Construction ($50.50/hr) came in significantly below the economy-wide average – mirroring the situation in most other advanced economies.
Since 2017, Canadian labour productivity has posted exceptionally feeble growth, with the average level climbing from $62.20/hour in 2017 to $65.00/hour in 2025, after adjusting for inflation. This equates to an increase of just 4.5% over eight years.
Where do Alberta and B.C. stand on labour productivity? Alberta tops the Canadian league table at $78.30/hour in 2025. B.C. roughly matches the Canadian average, at $65.10/hour. Alberta benefits from the presence of a large energy sector, consisting of oil and gas extraction, related support services, refining and petrochemical production, and pipelines. Nationally, oil and gas extraction is the most productive industry based on the value of output per hour of work.
Putting productivity on a stronger growth trajectory is essential if policymakers in Ottawa and the provinces hope to raise Canadian living standards and increase the real incomes of workers and households. In the long-run, higher productivity is foundational to achieving lasting improvements in overall economic well-being.
Figure 2