But we are slipping from this position because our productivity is slipping. Improved productivity can improve our standard of living, and our quality of life. So what can we as individuals do to improve our productivity?

The process being promoted is for us to build a "Global Knowledge Based Economy". Be innovative, improve our skills, adopt the latest technologies, improve our productivity, and look for opportunities on a global basis.

Our focus is too concentrated on the U.S. We need to nave a more global outlook. We need to improve our image globally especially in the perceptions of innovation and performance.

The key to growing in the knowledge based economy is by using the Internet. We are in the midst of an information revolution not an evolution. We need to develop our E-commerce potential.

Canada's standard of living is stagnant. To improve our standard of living we need to improve our productivity. We need to commercialize our knowledge.

And if you don't believe me about the statistics, read this.

The exact extract follows:

quote:

---

Ordinary

The New Era of productivity growth was already starting to fray around the edges when two hijacked airplanes plowed into the twin towers last week. Benchmark revisions in July lowered real gross domestic product growth for the 1998-2000 period. With output reduced, output per hour worked -- a.k.a. productivity -- was revised down as well.

Looking at the productivity growth rates on an industrial production peak-to-peak basis for various business cycles, what's remarkable is how unremarkable the 2 percent annualized rate from the third quarter of 1990 to the third quarter of 2000 was, according to Paul Kasriel, director of economic research at the Northern Trust Corporation in Chicago.

While better than the 1979 to 1990 cycle's 1.3 percent annualized rate, productivity growth in the most recent period matched that of the 1973 to 1979 period and fell well short of the 2.7 percent annualized rate from 1959 to 1969 and the 2.4 percent rate during the 20-year peak-to-peak period from 1959 to 1979, Kasriel says.

---

DECADE - ECONOMIC GROWTH RATE (USA statistics - GDP growth in percent per year)
1950s - 4.0% per year
1960s - 4.4% per year
1970s - 3.0% per year
1980s - 2.8% per year
1990s - 3.2% per year

1990 - 1995 was a lousy stinking 1.8% per year. The only reason the 1990s come in better than the 1980s is because of the explosion in the late 1990s when growth rates ramped up to >4% per year. Unsustainable, given a long-term post-1973 growth rate average of around 2.5% per year. The two sole factors in heightened noninflationary growth rates were:

quote:

---

I wouldn't want to wake up tomorrow and find I'm in a country that has a standard of living comparable to the U.S. Wouldn't that be scary.

---

quote:

---

I get the feeling a lot of people view that measure of standard of living as incomplete, hence indexes like the UN Human Development Index.

---

The federal government used to bristle at any suggestion that Canadians had less buying power than Americans, but recently, they finally owned up to the accuracy of the 70% figure.

These are out of date, but show your point. (I assume they are accurate, I have a tough time finding stats like this on the net)
(argh, the HTML is screwing the graph...)
Purchasing (% of US)
Power 1991 1970 1991
United States $22,204 -- --
Germany 19,500 75% 88
Canada 19,178 72 86
Japan 19,107 57 86
Denmark 17,621 71 79
Norway 16,904 54 76
Sweden 16,729 77 75
Netherlands 16,530 72 74
Finland 15,997 58 72

So, you say that our purchasing power is now back to 1970 levels, or GDP per capita? Anyway, as my economics teacher explained, the marginal utility of the first dollar is much greater than the marginal utility of the last dollar. I haven’t been convinced that money is the end all, be all of living standards. Obviously, you can tell I attach much more meaning to this term than is generally accepted.

While looking for some stats, I found [URL= this from the Bank of Canada on Exchange rates, the dollar and standard of living. Any armchair economists might like to read this. Here is the abstract:

quote:

---

This article examines the recent proposition that the decline in Canada's standard of living relative to that of the United States is causally related to the decline in our exchange rate. The authors explore the main channels through which the exchange rate and the standard of living could be related—productivity and the terms of trade—focusing mainly on productivity. They conclude that the decline in world commodity prices and weak demand for domestic output were affecting both Canada's standard of living and the exchange rate and that the flexible exchange rate regime itself did not play an independent role.

---

The figures you supplied are for 1991 - a lot has changed since then. Canadian incomes stagnated, taxes increased, the Canadian dollar lost a quarter of its value, while U.S. incomes rose sharply.

As for the Bank of Canada piece on exchange rates, if they think a 63-cent dollar doesn't affect the standard of living, they're living in a dream world. Amongst other things, it hurts productivity by giving Canadian firms an "edge" in labor costs (by means of a wage cut for their employees), and by making imported equipment needed for productivity growth more expensive. In other words, in the U.S., machines are cheaper than people, while the situation is the opposite, or at least becoming so, in Canada.

BTW that difference in exchange shows up virtually everywhere where consumer goods are concerned, even when those goods are made in Canada. One good example: a couple of months ago, I was pricing out Canadian-made Chryslers at a B.C. dealership - $C 45,000. In the U.S., the same model was US 29,000.

Money isn't everything, as you say, but without it, life can become quite miserable, or worse (as the unfortunate Kimberly Rogers could attest).

quote:

---

BTW that difference in exchange shows up virtually everywhere where consumer goods are concerned, even when those goods are made in Canada. One good example: a couple of months ago, I was pricing out Canadian-made Chryslers at a B.C. dealership - $C 45,000. In the U.S., the same model was US 29,000.

---

$29,000 normalized at today's average exchange rate of $1.55 Cdn = $1 US gives a price in Canadian dollars of $44950.

So after factoring in currency differences, something like 99% of the number differential disappears *blip* like that.

And BTW, international chains that exist in the USA and Canada have the exact same numerical prices for their menus - eg. an "All-American Slam" in Canada costs, I think, $7.79 Cdn here and $7.79 US there.

So in effect we pay less to eat out.

quote:

---

The authors conclude that exogenous forces – notably the decline in the world prices of commodities and the weak demand for domestic output – were affecting both Canada’s standard of living and the exchange rate and that the flexible exchange rate regime itself did not play an independent role in the relative decline in Canada’s standard of living.

---

The paper questioned whether the falling dollar was a cause of a decline in standard of living and asked whether or not a fixed rate regime would have halted this side. The paper concludes that a fixed dollar didn’t matter. The sliding dollar was a symptom of other problems, and thus not to be blamed. The weak domestic demand comment perplexes me a bit: does that mean simply what we buy, or what we make and sell everywhere?
Apparently I’m right about the strict GDP per capita measure of living standard

quote:

---

In this article, only the conventional real income- or expenditure- based definition of standard of living is used, instead of broader definitions that would include other economic and non-economic factors (eg wealth, pollution, and income inequality).

---

quote:

---

Canada's standard of living is stagnant. To improve our standard of living we need to improve our productivity. We need to commercialize our knowledge.

How do we do this?

---

More gov't spending on education. Greater recognition of foreign education credentials. Make it easier for labour to move between provinces. Convince young people to vote in greater numbers, since they are what will drive Canada's future productivity.

As well, I note that manufacturing in Canada has "hollowed out" just as it has in the USA. This directly impacts productivity since manufacturing tends to be higher-productivity than primary industries or the service sector.

Finally, the Strategis site hints at, but then ignores, a very real effect of monetary policy on lower GDP growth rates, lower productivity growth rates and lower real GDP per capita growth rates.

Alan Greenspan, since he took office, has in general pursued a looser monetary policy than in Canada, and this is borne out by average inflation rates that are about a percentage point higher through the 1990s. As a result, unemployment fell more than in Canada, and ironically this would have directly caused firms (at still modest interest rates relative to Canada's) to invest more in productivity-enhancing methods.

By contrast, our monetary policy is conducted, with official blessing, solely in the interest of inflation control, which weakens the economy and forces unemployment up. High unemployment tends to depress wages and while Strategis may claim that unemployment accounts for a smaller portion of the productivity gap, I submit that they're missing the boat on this one. Why? Because high unemployment is starting to lower the capital-to-labor ratio which is fairly unusual for an advanced country like Canada.

Again, I remind us all that Canada's unemployment rate had not dropped below 7% between 1977 and 2000.

This is the link to Industry Canada report on Productivity simple quiz (hint multiple correct answers).

And a link to the home page.

Productivity Home Page

[ September 26, 2001: Message edited by: prince ]