Frequently asked questions (FAQ)

How is productivity defined?

Productivity measures the efficiency with which resources such as labour or capital are employed in the production process. There are two widely used productivity measures; labour productivity and multifactor productivity.

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What is the difference between labour and multifactor productivity?

Labour productivity is measured as real output per hour worked. Multifactor productivity, a broader measure of efficiency, is measured as real output per unit of combined inputs (capital, labour, etc).In essence, this is the efficiency of all or your factors of production.

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Why does productivity matter?

Progress in productivity constitutes a significant source of increased standard of living. In the long run, increases in real hourly earnings are tied to productivity gains. The Canadian economy has been able to produce more goods and services over time, not by requiring a proportional increase of resources such as labour, but by making production more efficient.

The overall performance of any company, operating in any industry, is comprised of at least seven key criteria:

• effectiveness
• efficiency
• innovation
• productivity
• profitability
• quality
• quality of work life

Productivity growth plays an active role in offsetting inflationary pressure and as well as long tern economic growth. This is achieved through greater resource allocation and human resource efficiency, effectiveness and engagement; increased innovation and technology diffusion and capital investment. Productivity is an essential component to the success and health of every company in Alberta and the overall standard of living.

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Alberta has a great economy. Why do we need to worry about productivity?

Our province has experienced seemingly high productivity over the past decade, due largely to the massive capital investments in the energy sector (the oil sands). However, the real issue is Alberta’s productivity growth rate (how quickly we’re improving our productivity).

Over the long run, Alberta’s productivity growth rate has been the lowest in Canada – especially in the manufacturing and service sectors not directly involved in the energy sector.

Canada doesn’t fare any better when compared to countries around the world. As a country, we lag behind nations such as Korea, Ireland, Sweden, the United States, Finland, the UK, France, and Germany. On the macroeconomic level, Canada’s prospects are very rosy, but from a microeconomic perspective our performance is of serious concern.

Compared to other developed economies, Canada has very weak labour productivity growth and sliding real income growth. Concerns about weak productivity growth will only intensify as structural changes in the global economy shift the engines of economic growth to China, India, and Brazil.

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Doesn't Alberta have a young, growing population? Won't that be enough to address the productivity gaps?

Alberta’s population, while among the youngest in North America, is aging. More and more workers, especially the Baby Boomers, are or will be approaching retirement age in the very near future. When this group of workers begins to leave the labour force, it will place great demands on the existing workforce and on the economy as a whole.

Canadians relocating from other parts of the country or immigration from abroad will not address the full shortage of workers in the Alberta economy. In order to successfully meet the challenges of the demographic shift and the high demands of today’s employers, we need to tackle the labour issue from both the supply and demand sides of the equation.

It is important to understand that all companies compete in a global market place and, more often then not, are competing with companies with a greater cost advantage. To ensure Alberta’s companies are able to sustain themselves, they must look at how they can improve operational efficiencies to maintain their competitive advantage.

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Why is Alberta performing so poorly in productivity growth?

Various factors have contributed to our poor productivity growth:

• slow or no adoption of new processes and technologies to enhance efficiency
• underinvestment in machinery, equipment, and technology
• lack of innovation to enable the creation of new products and technologies
• lagging workplace re-organization and worker training

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So, what is the Alberta government doing to address the productivity gaps?

The Alberta government, in close partnership with industry and other levels of government, is working on a strategic three-pronged approach to address the productivity growth challenges faced by our province:

1. education and awareness of productivity
2. productivity enhancement tools
3. policies to promote and enhance productivity and innovation

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Is this just a ploy to get employees to work harder for lower wages?

No. Increasing the productivity of the labour force is an important contributor to how fast workers’ incomes improve. Productivity growth allows real wages to increase by lowering prices, leading to real improvements to our standard of living.

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Why is the Alberta government developing a productivity web portal?

There is a clear lack of detailed information specific to Alberta in the areas of productivity and productivity measurement and benchmarking. The Alberta government is working to address this issue in a meaningful way that will inform all Albertans and Alberta-based industry on the importance of productivity to the future growth and sustainability of our economy.

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Date Updated: Jan 30, 2008
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