‘More investment per worker means more productive workers, which in turn means higher living standards’
As Canada continues to deal with a productivity crisis, the country seems to be falling even further behind the United States when it comes to businesses’ investment on workers, according to a recent report.
Business investment per worker in Canada declined from 87.3 per cent of the U.S. level in 2014 to 54.0 per cent in 2024, a Fraser Institute study reveals.
Specifically, real, inflation-adjusted business investment per worker in Canada fell from $20,310 in 2014 to $16,493 in 2024, a decline of 18.8 per cent, while the equivalent U.S. figure rose 31.3 per cent, from $23,263 to $30,555, over the same period.
Business investment covers spending on machinery, equipment, factories, and intellectual property, but excludes residential construction and government outlays, noted authors Tegan Hill, Joel Emes, and Taylor Oliver of the Fraser Institute in their report.
"The economic well-being of Canadians depends in large part on the strength of business investment, so poor investment performance is bad news for workers," said Hill, senior economist at the Fraser Institute, says. Hill added that "more investment per worker means more productive workers, which in turn means higher living standards."
Two experts previously told HRD that Canada’s productivity problem isn’t new. It’s well documented through long-term data on weak business investment. The question facing HR leaders is not whether there is a gap, but why it persists — and what, if anything, they can do about it, according to a previous report.
Provincial results diverge
Provincial performance varied considerably, the report found. Five provinces — Alberta, Saskatchewan, Manitoba, Nova Scotia, and Newfoundland and Labrador — recorded declines in real business investment per worker between 2014 and 2024, ranging from a 13.3 per cent drop in Nova Scotia to a 54.9 per cent drop in Newfoundland and Labrador.
Saskatchewan remained the only province to exceed the U.S. figure in 2024, at $33,386 per worker, despite a 31.5 per cent decline of its own over the decade. New Brunswick posted the largest percentage increase of any province, at 24.3 per cent, though its 2024 figure of $12,302 per worker remained less than half the U.S. level, the report said.
Emes, a senior economist at the Fraser Institute and co-author of the study, noted that Canada's business-sector workforce grew faster than that of the United States over the period studied. The report states that adjusting for this factor does not meaningfully change the overall trend of declining Canadian investment.
Authors flag policy concerns
Hill said in the report that "the waning ability to attract business investment in Canada should sound alarm bells and prompt policymakers to enact immediate policy reforms to make Canada a more attractive and hospitable destination for investment."
Oliver, an intern at the Fraser Institute and the study's third co-author, contributed to the provincial-level analysis underpinning the report's comparisons. The authors state that differences in industrial mix across provinces, including the relative size of labour-intensive service sectors versus capital-intensive energy sectors, help explain the wide variation in investment per worker.
“Policy makers across Canada need to recognize this challenge, understand its causes, and prioritize policies that support business investment and stronger economic growth moving forward,” the authors concluded in the report.
More Canadian businesses are closing than opening, with exits outpacing entries for six consecutive quarters, according to a previous report.
