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6th December 2011

CD Howe Report Highlights Best and Worst Provinces for Business Investment

C. D. Howe InstituteRobust business investment in Alberta, Saskatchewan and Newfoundland and Labrador continues to outstrip the poor performances of other provinces, according to a report released today by the C.D. Howe Institute. In “The Retooling Challenge: Canada’s Struggle to Close the Capital Investment Gap (PDF),” authors Colin Busby and William B.P. Robson find that new capital spending on tools for Canadian workers, in the form of machinery, equipment or buildings, still lags that in the United States and other major developed countries. While Canada narrowed the gap in the late 2000s, preliminary figures for 2010 and 2011 suggest that Canada is slipping again. Considering the outsized contributions of the three resource-based provinces to the national performance, other provinces clearly need to raise their game.

“Comparing how Canadian workers are equipped relative to their counterparts abroad is a key indicator of Canada’s competitiveness and relative prospects for higher incomes and economic security in the future,” commented William Robson, President and CEO of the Institute.

From 2005 to 2009, new investment per worker in Canada was about 97 cents for every dollar of new investment per worker in OECD countries, on average, and about 87 cents for each dollar of new investment per US worker. In 2010, new investment per Canadian worker registered 96 cents for every dollar of new investment per worker in OECD countries on average and 86 cents relative to new investment per worker in the United States, while the preliminary figures for 2011 show Canadian workers getting 95 cents for every dollar for their OECD counterparts and only 83 cents compared to US workers.

Much of the boost to Canada’s recent performance, moreover, comes from just three provinces – Alberta, Saskatchewan, and Newfoundland and Labrador – that have enjoyed booming prices for their fuel and non-fuel minerals. By contrast, Quebec’s story is one of low-level stagnation: from 2005 to 2009, for every dollar of new investment per worker in the OECD and in the United States, new investment per worker in Quebec was 62 and 56 cents, respectively; in 2010, the figures were 63 and 57 cents, and for 2011 the preliminary figures are 62 and 54 cents. Ontario’s record is also poor, registering 71 and 63 cents relative to the OECD average and the United States, respectively, from 2005 to 2009, then 70 and 63 cents in 2010; with the dismal preliminaries for 2011 being 67 and 58 cents.

Business investment in plant and equipment is a foundation for raising output and living standards over time, note the authors. It both complements and reinforces the investments in education and training that explain why Canadians enjoy standards of living so much higher than their ancestors did.

This entry was posted on Tuesday, December 6th, 2011 at 11:53 am and is filed under Business News, National News, Research Studies. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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