There’s a natural solution to Canada’s productivity and economic challenges, but our leaders are ignoring it.
Our country faces significant economic challenges, low productivity, declining living standards, regulatory uncertainty and weak business investment.
The Bank of Canada has characterized Canada’s lagging productivity as an “emergency,” and the International Monetary Fund recently noted that “boosting Canada’s lagging productivity and raising living standards remains the key priority.”
Our challenge is clear. To improve living standards for all Canadians we must increase productivity. It’s a proven strategy for raising wages, which are currently being outpaced by the cost of living. We need to create an environment that draws in investment through streamlined regulations and a clear opportunity for return. Providing workers with essential equipment and technology is crucial to advancing our industrial base.
We can do all these things through a renewed focus on supporting and investing in Canada’s natural resources sector.
Increasing investment in high-productivity sectors, particularly within natural resources, is an obvious remedy to our productivity challenges. Canada is a natural resources powerhouse. Our resource sector is the second-largest contributor to GDP, and its strong productivity record supports annual employee compensation nearly $25,000 above the national average.
Its myriad benefits reverberate throughout the economy, with Canadian businesses benefiting from associated supply chain opportunities. Natural resources — whether oil and gas, mining, agriculture or other sectors — also contribute significantly to Confederation through taxes and royalties. These funds are essential for programs Canadians depend on, such as health care, education, and supports for society’s most vulnerable people.
A new report from the Canadian Chamber of Commerce’s Business Data Lab highlights the importance of the natural resource sector to the economy.
Natural resources represent nearly 50 per cent of Canadian exports. Without them, Canada would have faced a $214-billion trade deficit in 2023. As the driving force of Canadian trade, the sector supports the value of the Canadian dollar, making imported essentials such as food, clothing and electronics more affordable for Canadians.
The natural resource sector is also crucial to the economic well-being of many Indigenous communities; the sector enjoys an above-average Indigenous workforce participation rate and provides communities with some of the highest paying job opportunities in the country. By supporting the natural resources sector, Canada can continue to advance economic reconciliation with Indigenous communities, and further these efforts by continuing to support Indigenous-owned businesses and equity partnerships.
However, the Business Data Lab report also reveals that a number of hurdles inhibit the natural resource sector’s ability to maximize its contributions to Canadians’ standard of living — policy instability, regulatory delays and impediments to businesses’ ability to compete internationally. There is an urgent need for balanced regulatory reforms and a national strategy that protects the environment while maximizing the sector’s economic benefits.
Other recommendations in the report include prioritizing the international competitiveness of Canada’s natural resource industry, developing a trade infrastructure plan to support investment, and promoting public awareness and support for resource development.
All of these findings complement recent research by economist Trevor Tombe, which shows that excluding just the oil and gas sector from the Canadian economy would lower our productivity by five per cent, shrinking the economy by $150 billion annually and making the average Canadian $3,700 worse off every year. For the sake of Canadian families and businesses struggling to deal with high costs for goods, services and business inputs, we can’t ignore the existing benefits of the natural resources sector, nor its untapped potential.
Indeed, at a time when the Canadian Maru Household Outlook Index is seeing 67 per cent of Canadians say that we are on the wrong track when asked about the state of the economy, it is high time to double down on our natural wealth and capitalize on one of our greatest economic advantages.
Bryan Detchou is senior director of natural resources, environment and sustainability with the Canadian Chamber of Commerce. Andrew DiCapua is senior economist with the Canadian Chamber of Commerce.