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Productivity lag pinned on self-employed Canadians

Productivity lag pinned on self-employed Canadians

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It is an enduring economic conundrum: Why does Canada chronically lag the United States in productivity?

The conventional wisdom is that the gap is due to Canada's smaller market, generally smaller companies and the challenging reality of a large population spread thinly over a vast geographic expanse.

A new report by a trio of researchers at Statistics Canada offers another possibility.

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Apparently, it's all those self-employed Canadians. Unincorporated businesses are badly dragging down overall labour productivity in Canada, according to the report.

"The Canadian unincorporated sector contributes a sizeable portion of the gap between Canadian and U.S. labour productivity," the authors conclude. "This contribution was more substantial in the 1990s; it has declined post-2000 as a gap between the Canadian and U.S. corporate sectors increased."

Overall productivity in Canada was 88 per cent of what it is in the United States in 1998. If you remove unincorporated businesses from the equation, the gap virtually disappears.

The study leaves readers wanting more, posing as it does the possibility that self-employed Canadians are less productive than their American peers. The authors warn that identifying the source of the productivity gap isn't the same as tracing the root cause.

And on that score, Statscan only hypothesizes about possible causes, including the smaller Canadian market, a dearth of entrepreneurs among unincorporated businesses, skewed tax incentives and the harsh Canadian climate.

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About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

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