Parliament Hill in Ottawa. The federal government has announced $6-million over 15 years to study Canada’s productivity crisis.Sean Kilpatrick/The Canadian Press
Charles Lammam is an economist and public policy professional. He is a contributor to The Hub.
Last week, the federal government announced $6-million over 15 years to study Canada’s productivity crisis. The initiative is led by Trevor Tombe, one of Canada’s finest economists, and will bring together 30 researchers across 15 organizations alongside six federal departments. It is, no doubt, a serious undertaking.
It is also, in a way only Canadians could appreciate, the perfect symbol of our problem.
Not because research doesn’t matter – it does. Not because Prof. Tombe and his colleagues won’t produce important work – they will. But because Canada’s productivity crisis is not, at this point, a knowledge problem.
Out of nowhere, Canada became poorer than Alabama. How is that possible?
We have known what drives productivity for decades, and we have spent those decades either ignoring the evidence, making minor adjustments or – in some cases – actively doing the opposite.
I say this as someone who has spent the better part of two decades studying these questions. It’s not that we lack answers or that we’ve exhausted all the policy options and come up short. It’s that we lack the political will to act on the answers we already have.
The evidence has been sitting on the shelf for years. The Organization for Economic Co-operation and Development has produced it. The Bank of Canada has sounded the alarm, calling this a “break the glass” moment. Statistics Canada has documented it in study after study.
Our economic institutions have catalogued, repeatedly, the same structural failures: a complex tax system that punishes investment, entrepreneurship and growth; a regulatory apparatus so stifling and unpredictable that capital flows elsewhere; protected oligopolies in key sectors (telecom, airlines, banking and agriculture) that face little competitive pressure to innovate; strained trade and transport infrastructure that can’t move our goods to global markets or people efficiently within our borders; an immigration system that drifted toward low-wage temporary workers who substitute for capital, displacing the high-skilled talent that complements it; and a public sector growing in size but declining in effectiveness and productivity.
These are well-documented failures. And for the most part, we have responded with half-measures: a minor tax adjustment here, a targeted incentive there, and dubious new government programs. Where we haven’t tweaked at the margins, we’ve often moved in the wrong direction entirely – raising or proposing to raise tax rates that disincentivize economic activity and send the wrong signal to talent, investors and innovators; layering on complex regulatory requirements and hurdles; expanding the public sector’s role directing economic activity; and institutionalizing fiscal profligacy.
The cumulative result is a decade of economic stagnation. From 2014 to 2024, Canadian labour productivity grew at just 0.3 per cent a year on average – less than a third of the American rate. Our GDP per hour worked has fallen to 60 per cent of the U.S. level from 67 per cent – and the business investment crisis driving that gap has only deepened.
Then the external shocks arrived. U.S. President Donald Trump’s tariffs and the broader “rupture” in the international order have created a layer of uncertainty functioning as an invisible tax on investment, discouraging exactly the capital deployment Canada desperately needs. But this is not a new crisis landing on a healthy economy. It is a second wave hitting a country already taking on water.
In defence of hewers of wood and drawers of water
This convergence should be clarifying. An existential external threat – compounding a decade of self-inflicted underperformance and arriving in a political moment genuinely open to bold ideas – is precisely when countries make transformative choices. The window to do so is open in a way it hasn’t been in a generation. Political leaders have licence to pursue structural reforms that would have seemed impossible in calmer times.
And Canada’s instinct, at this precise moment, is to commission a 15-year study.
Let me be clear: The Tombe initiative is genuinely valuable. Sustained research infrastructure connecting economists to policy makers matters. It reduces the lag between insight and action, and over time that compounds. But “over time” is doing a lot of work in that sentence, and time is what we don’t have.
The knowledge exists. The policy tool kit is not a mystery. What we need from government is the willingness to go after the sacred cows: the incumbents who benefit from protected markets, the regulations that serve minority interests at the expense of the majority, the bureaucracies grown comfortable with their own expansion, the political calculus that makes major tax reform feel too risky and the incremental tweaks that feel like leadership.
The window to make a wholesale shift in policy doesn’t stay open indefinitely. External crises create urgency; they also pass. This time, the cost of letting it close is one Canada cannot afford.