MRO Magazine

Labour productivity up 2.2% last year

Ottawa, ON -- The increase in the number of hours worked in Canada slowed to 0.8% in 2005, down from 2.9% in 2004 a...


Ottawa, ON — The increase in the number of hours worked in Canada slowed to 0.8% in 2005, down from 2.9% in 2004 and 1.5% in 2003. Accompanied by a sizable increase in gross domestic product (GDP), this slowdown in the number of hours worked generated a robust 2.2% gain in labour productivity for the total economy.

Growth rates in hours worked was highly variable from province-to-province. For example, the number of total hours worked increased slightly in Ontario (+0.3%) and remained stable in Quebec but was well above the national average of 0.8% in British Columbia (+2.6%) and Alberta (+1.6%).

Labour market conditions were also variable in Atlantic Canada. Prince Edward Island (+2.6%) and Nova Scotia (+1.9%) posted gains in total hours worked well above the national average. In contrast, Newfoundland and Labrador (+0.3%) and New Brunswick (-0.1%) were below the national average.

HOURS WORKED: DOWN IN MANUFACTURING BUT UP IN MINING AND OIL EXTRACTION

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Differences among the provinces in the growth of hours worked reflected differences in industrial structure and differences in the growth of hours worked from one economic sector to another.

Nationally, in manufacturing, the number of hours worked declined by 3.4% last year. Ontario, the industrial heartland, experienced a substantial reduction (-3.8%) in manufacturing hours, while in Quebec, hours worked fell by 3.1%.

All four western provinces saw reductions in manufacturing hours in 2005. Among the Atlantic provinces, all but Nova Scotia (+4.3%) experienced negative growth in manufacturing hours.

Mining and oil and gas extraction industries saw a large 3.3% increase in hours worked at the national level. Extremely strong gains were posted in Newfoundland and Labrador (+30.6%), Saskatchewan (+10.2%) and British Columbia (+10.0%). In Alberta, mining and oil gas extraction recorded a 3.5% increase in hours worked.

MOST PROVINCES SEE INCREASED LABOUR PRODUCTIVITY

Productivity gains occur when the GDP growth rate outpaces the rise in hours of work.

Labour productivity in the total economy increased in seven provinces last year, with oil-rich Alberta leading the pack.

Productivity fell in all three territories and in Newfoundland and Labrador, Prince Edward Island and Nova Scotia. Productivity soared by 3.0% in Alberta as its economic output increased at three times the growth rate in hours worked.

Labour productivity, as measured by real GDP per hour worked, is a primary determinant of improvements to the standard of living in the long run. It is also the main source of economic growth.

Ontario, Quebec and the three Prairie provinces recorded productivity growth rates in 2005 at or above the national average.

PRODUCTIVITY GROWTH IN ALBERTA WELL ABOVE THE NATIONAL AVERAGE

Productivity growth occurred in provinces where hours worked had increased and in provinces where hours worked had decreased.

In 2005, Alberta registered a 3.0% increase in labour productivity as its economic output increased 4.7%, three times the 1.6% growth rate in hours worked. GDP growth in Alberta was well above that in other provinces.

Economic output rose at a much faster pace than hours worked in both Manitoba and Saskatchewan, resulting in strong gains in labour productivity. Productivity rose by 2.9% in Manitoba as the number of hours worked actually edged down. It went up 2.4% in Saskatchewan, which had a 1.1% increase in hours worked.

In contrast, productivity increased only 1.0% in British Columbia as the growth in hours was slightly less than the gain in economic output.

In Ontario, the number of hours worked edged up 0.3%, while productivity surged 2.5%. In Quebec, the number of hours worked remained stable and productivity increased 2.2%.

In all Atlantic provinces except New Brunswick, the increase in hours worked outpaced GDP growth. In New Brunswick, relatively no change in hours worked was accompanied by a 0.4% gain in labour productivity.

MANUFACTURING SECTOR POSTS LARGE INCREASE IN PRODUCTIVITY

In many industries, large increases in productivity and hours worked do not occur simultaneously.

The 3.4% decline in manufacturing hours was associated with significant productivity gains of 5.7% in this sector.

Significant gains in hours worked in 2005 occurred both in mining and oil and gas extraction industries (+3.3%) and finance, insurance and real estate industries (+3.9%). Mining and oil and gas saw a 2.4% reduction in productivity in 2005, while productivity in finance, insurance and real estate industries declined by 0.4%.

In contrast, construction and wholesale trade industries were sectors where significant increases in hours worked were also accompanied by strong productivity gains. Construction hours rose 1.7%, twice the average of 0.8% for the total economy, while productivity growth hit a healthy 3.0%.

In wholesale trade, hours worked increased by 2.6% while productivity grew by 5.3%.

LABOUR PRODUCTIVITY DECLINES IN THE MINING, OIL AND GAS INDUSTRIES AS A RESULT OF A SURGE IN HOURS WORKED

Within specific industries, the relationship between changes in productivity and hours worked can vary significantly from province to province.

In Alberta, construction industries posted exceptional labour productivity growth of 10.9% in 2005. This occurred while construction hours worked in Alberta increased by 4.5%. In Manitoba, labour productivity in construction industries also grew substantially (+5.0%). But there, construction hours declined by 1.2%.

In most provinces, mining and oil and gas industries saw large declines in labour productivity. In many cases, these productivity losses were associated with large increases in hours worked, particularly in Newfoundland and Labrador and the western provinces.

LABOUR PRODUCTIVITY DOUBLES IN 2005 COMPARED WITH THE PREVIOUS FIVE-YEAR AVERAGE

Canada’s labour productivity growth stood at 2.2% in 2005, double the average annual rate of productivity growth in the post 2000 period (+1.1%).

Average annual productivity rates are often used to measure changes in productivity over longer periods of time. The average annual rates published in this release capture changes in provincial, territorial and national productivity performance from 2000 to 2005.

In general, there are smaller differences across provinces in their average annual rate of labour productivity growth from 2000 to 2005 than in labour productivity growth rates for 2005.

And, for many provinces, these longer-term growth rates differ substantially from their labour productivity growth rates in 2005, which are higher in Western and Central Canada than in Eastern Canada.

In Ontario, Quebec and the western provinces, the growth in labour productivity in 2005 surpassed average annual productivity growth from 2000 to 2005, often by a sizable margin. Ontario experienced a 2.5% increase in 2005, compared to an average annual increase of 0.9% in the post 2000 period. In Quebec, labour productivity grew by 2.2% in 2005, twice its annual average of 1.1% since 2000.

Alberta led the country in labour productivity growth in 2005 at 3.0%. But its average annual rate of productivity growth from 2000 to 2005 was only 0.8%. By comparison, Saskatchewan experienced a large average annual increase in productivity from 2000 to 2005 (+1.6%).

These annual averages are influenced by how rapidly hours worked has increased over the 2000 to 2005 period. Saskatchewan averaged a small increase in annual hours from 2000 to 2005 (+0.2%), while Alberta experienced very strong average annual increase in hours worked (+2.6%).

In Atlantic Canada, a different pattern emerges. All of the Atlantic provinces had changes in labour productivity in 2005 that fell below their annual averages from 2000 to 2005, often by a sizable margin.

Labour productivity in Newfoundland and Labrador remained virtually unchanged in 2005, but it experienced the la
rgest average annual increase of all provinces since 2000 (+2.6%).