Canada is grappling with a serious productivity problem, but one industry’s situation is more grave than the rest. Construction. After successive slides, Canada’s construction productivity has hit a 30-time low.
As per a recent report on the country’s productivity problem titled, From Bad to Worse: Canada’s Productivity Slowdown is Everyone’s Problem, the growth has slowed down in virtually every industry since the pandemic including the manufacturing, retail, and service industry. The report says, “Among industries, construction is the worst of the lot with labor productivity at a near 30-year low.”
It’s noteworthy that the decline in construction productivity isn’t limited to Canada. Instead, it’s a global issue that’simpacting both developed and developing nations.
Among all the construction segments, the residential segment is having the worst run. Canada’s productivity performance has dropped significantly since the pandemic. But the pandemic isn’t the sole culprit. It’s a mix of economic factors including interest rates, inflation, and poor job market that is taking a toll on the market.
Regarding the solution to this pervasive problem, the report says, “There is no silver bullet to fixing Canada’s productivity woes because the underperformance has become so pervasive. The often-cited solutions are intuitive but elusive for Canada: fostering competition, retaining skilled workers, reducing barriers to trade and investment (both internally and externally), and improving incentives for technology adoption. This is the minimum needed to keep Canadians from being the poor cousins of the G7.
The report stresses the significance of residential segment in improving the state of Canadian real estate. The report reads, “A focus needs to be on the construction sector, especially residential building. It is composed mainly of small firms, which are slower to adopt new technologies. Productivity has been weakest in building construction, which has the largest share of small firms. Targeted strategies to address constraints to growth could be beneficial. Harmonizing building codes and licensing requirements across provinces could help increase competition while allowing for greater returns to scale across the industry.”
