February 1, 2000
Kamloops Daily News


 

Although worker productivity is low in Canada compared to
the United States, there are some bright spots.  An
editorial from the Ottawa Citizen reported that "With the
exception of Jean Chretien, most agree that Canada's level
of productivity ... has declined relative to our main
trading partner (re-printed in the Daily News, January 27)"

The editorial was referring to a conference of the Centre
for the Study of Living Standards, held January 21 and 22. 
The CSLS is a Canadian organization which serves as an
intermediary between the academic community and public
policy makers.    

One of the presenters at the conference, Jim Stanford, was
not so gloomy.  Stanford, an Canadian economist who is not a
spokesman for Prime Minister Chretien, reported to the
conference that productivity is actually higher in Canada
for a handful of sectors, including the automobile
manufacturing sector.

The auto industry is one of a few manufacturing sectors in
which Canadian productivity exceeds that of the United
States, and the Canadian productivity advantage has grown
through the 1990s.  In 1998, for example, it took an average
of 22.6 hours to make a vehicle in a General Motors plant in
Canada compared to 32.6 hours per vehicle in the United
States.  The differences were less at other plants, and
varied year to year, but on the average, Canadian
productivity was 20 percent higher throughout the 1990s.

Productivity is often confused with work effort.  Some
Canadians argue that if workers just worked harder, or if
the unemployed were made more desperate for jobs by cuts to
welfare and unemployment benefits, productivity would
increase.  Desperation and unskilled workers contribute to a
decline in productivity.  If the effort expended by workers
was a significant factor, productivity would be highest in
third world countries where people work very hard.   In
Mexico, for example, it takes 39.4 hours to assemble the
same vehicle that would take 22.6 hours in Canada.

Unions are also sited as factor in reducing productivity. 
Rigid collective agreements and the work-to-rule mentality
of employees, the thinking goes,  reduces productivity.  But
Canada's automobile industry is highly unionized;
approximately 90 percent for assembly plants, and 50 percent
for auto parts plants.  Unionization in the  United States
is only slightly lower for assembly plants, and much less in
the parts industry (20 percent).

However, there are difference between Canadian and American
automobile unions.  The United States automobile union has
traditionally followed a more "accommodating" strategy in
its dealings with automakers than has the Canadian union
--being much more open to various "cooperative" ventures
such as wage concessions, profit-sharing schemes, and the
introduction of workplace "teams."

Reduced work time has been implemented by the Canadian
union.  The Canadian Auto Workers has negotiated 2 paid
weeks off per year (called Scheduled Personal Absence) in
addition existing days off.  Since productivity has been
growing faster than vehicle demand, a reduction in work time
has kept employment levels up.

One of the main ingredients in productivity is investment,
which forms part of what Jim Stanford calls the "virtuous
cycle".  Investment in new technologies improves
productivity -- more products are produced per worker. 
This, in turn, generates a lower unit-cost for the product,
resulting in more profits and capital to invest in 
production and labour.  Investment in labour also increases
productivity. When workers are well educated and trained for
jobs, labour becomes a valuable asset.  Investment in skills
and capital investment both increase productivity.

Unfortunately, productivity is not good in other sectors of
Canada's workforce.  Decreases have been a result of the
deliberate actions of some large companies. By shedding
employees, companies have improved their financial picture
for the short-term, but  decreased national productivity. 
That's because laid-off workers end up in low paying wages
or in self-employment with very little access to technology
and information.  These companies have increased profits by
reducing employee costs and by not investing in new capital
equipment and information technology that would improve
efficiency.  The strategy is short-sighted because it trades
long-term investment for short-term gain.

Since the federal government hasn't attempted to develop
legislation that make it more cost effective to keep
employees, rather than dump them, I assume that government
finds the resulting drop in Canadian worker productivity
acceptable.  

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