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Why U.S. Productivity Gains Will Continue To Outstrip Its Northern Neighbor


August 8, 2007 - 0 Comments

OTTAWA, CANADA – If there’s one subject bureaucrats within the federal government continually worry about up in the great white north, is the increasing productivity gap between the U.S. and Canada. Business leaders and government bureaucrats alike have repeatedly raised the alarm over the failure to address the growing gap. For the same reason U.S. politicians don’t like to talk about the importance of productivity, Canadian politicians haven’t figured out how to sell or impart the importance of tackling the issue. Let’s face it; besides difficulties trying to frame arguments into ideas and policies that equate to votes, the average person believes productivity involves working harder for less money. Making the issue even more urgent, will be future demographic challenges and the associated labor shortages that only stand to exacerbate the issue. According to the Institute for Competitiveness & Prosperity (http://www.competeprosper.ca/), Canada trailed by $9,200 in per capita GDP compared to the U.S. While other factors contribute to the problem (i.e. high capital, corporate, & personal tax rates), a fundamental underlying issue is the lack of ICT investment by Canadian companies in comparison to Americans. In the same report, it points out that US companies invest nearly 67% more per employee in ICT equipment than companies in Canada.What’s interesting about the under investment of ICT by Canadian companies is the contrary investment cable and telcos have been making in residential markets. In its recently released annual Telecom Report (http://www.crtc.gc.ca/eng/NEWS/RELEASES/2007/r070726.htm), the CRTC noted that this market continues to experience growth driven by residential adoption of new technologies, with overall telecom revenues growing to $36.1B ($CDN) up nearly $2B from the previous year. Among G8 countries, Canada still retains the number one rank with respect to broadband adoption, but slipping. However, the news isn’t all bad. Broadband deployment continues to progress and its availability increased from 92% of households in 2005 to 93% in 2006. The number that subscribe to high-speed Internet reached 60% of all households. But that still represents an increased of more than 17% from the previous year. This bodes well for continued efforts in Canada as the infrastructure is in place to utilize new Web 2.0 collaborative technology tools now and into in the foreseeable future. So why isn’t the private sector investing in the technological productivity tools to utilize the platform that has been built out? Part of it is attributable to the high-tech bubble hangover that still lingers. Perhaps it’s part of a”been there, done that” public policy mindset. But in order for Canada to increase productivity and grow its current standard of living, governments need to once again develop innovative, bold, and forward thinking policies that either incent or create the climate for increased private sector ICT investment. Without more political attention on productivity levels, U.S. gains will continue to outstrip those of Canada’s. With the network becoming the platform for increasing productivity gains, multiplier effect will increase exponentially when the U.S. Congress is able to adopt and implement a viable, national, and truly high speed broad-band policy.

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