The record productivity gap between Canada and the U.S. has generated much handwringing, including my own. Canada, however, has not been alone in this disparity. There is a wide range of productivity performance in this cycle. We can explain at least part of these differences by the degree to which government and business responses to the crisis impacted the labour force. For example, in countries such as the U.S., Spain and Ireland, the initial response to the crisis was to massively cut employment/hours and to freeze or even cut wages. Union power diminished and government encouraged much of the reduction. The culture and political backdrop in these countries permitted this aggressive response, and unemployment rates rose sharply. In contrast, in other countries such as Canada, Germany, France or Sweden, employment and average hours worked fell much less.So the good new is that our social system saved us from the worst of the recession. But the bad news is that our social system has weakened the drive to climb to the top of the heap. The "barbarians" to the south of us will soon invade and take us over much as the Celts and Germans and Huns and Visigoths dismembered the lax Romans after 1000 years of civilization. That is the way of the world!
In the case of these relatively low-unemployment countries, the fall in GDP was much larger than the decrease in hours worked leading to, by definition, a decline in productivity. For the U.S. and Spain, productivity growth has surged. The conscious decision in the lowproductivity countries to reduce the impact of the recession on labour might have reduced productivity and profits in the short-term, but the jury is out as to whether it might have been the right move for longer-term growth in productivity and profitability, not to mention job loyalty, enterprise engagement of the workforce and employee satisfaction.
These factors aren’t just emotional. In countries with an aging population, labour shortages are inevitable in the future. There is not an easy replacement for the highly trained and experienced boomers that represent a large portion of the workforce. The aging population is a far bigger issue in Canada, Germany, France and Sweden than in the U.S. because American birth rates have been much higher for decades, generating a large pool of younger workers that dwarfs the boomer pool. In Canada, however, boomers represent 32% of the population (26% in the U.S.) and roughly 40% of the workforce. With fertility rates in Canada at a mere 1.6 children per woman on average for many years (compared to 2.1 in the U.S.), labour shortages are coming as the recovery continues. We already see labour shortages in high-growth areas like technology. In low-growth sectors, however, like the auto industry, large layoffs and plant closings did take place.
Our choice is to lay down and accept our fate, while drinking the wine of civilization and enjoying the comforts of a cradle-to-gave social system. Or we could gird our loins, cut our social benefits, and give our children that "lean and hungry look" of Brutus and his crowd, those all too eager to take down the peace of Caesar and replace it with the bitterness of a long and bloody civil war in the vain hope of restoring an ancient democracy, but in reality creating a newer, more centralized, and greater reaching empire under Augustus.
I'm for laying down and enjoying these last fruits of civilization knowing full well that the ravenous offspring of the underclass in the United States will eagerly invade to take the fruits of this lax country and redistribute it upward to the soon-to-be trillionaires who run things in that aggressively "productive" economic engine called "the United States". It will be an ignominious end, but it is clearly the end to be expected because history always gives the victory to those who keep their middle and lower clasees on a short leash, eager to pick the ripe fruits around them in hopes of a better tomorrow. But these "inheritors" will be sadly disabused when their overlords use their control through a bought-off Congress to quickly suck these rich rewards out of the grasp of the lowly and into the greedy hands of the unbelievably rich, soon-to-be trillionaire overlords who really run the good old US of A.