Canada Must Overhaul Education to Boost Productivity Gap

Canada is grappling with a significant productivity crisis that endangers its economic stability and long-term growth. Currently, Canadian productivity is trailing behind the United States by a staggering 28 percent, placing the country 18th among member nations of the Organisation for Economic Co-operation and Development (OECD). This productivity gap has direct implications for wages, competitiveness, and the overall quality of life for Canadians.

Understanding productivity is essential; it reflects the economic value generated from goods or services relative to the effort involved in their production. This metric influences inflation and income, impacting the daily lives of all citizens. A recent analysis highlights that Canada is falling behind its peers in living standards, prompting urgent discussions about the country’s potential to catch up.

Human Capital Development in Canada

The issue of productivity is closely linked to the development of human capital, which encompasses the knowledge, skills, and abilities possessed by the workforce. Canadian researchers in management and economics are collaborating on a project titled The Productivity Project, aimed at assessing how the nation cultivates its human capital. This initiative involves partners such as the Alberta Centre for Labour Market Research, the Canada West Foundation, and the Institute for Community Prosperity at Mount Royal University.

In Canada, a significant reliance on post-secondary education exists for the enhancement of human capital. Approximately 63 percent of the population has completed higher education, which is notably 22 percent above the OECD average. Despite this investment—20 percent more than the OECD average—Canada faces a troubling paradox of high graduate underemployment. Currently, the number of unemployed degree holders surpasses available jobs requiring such qualifications by a factor of five.

Compounding the issue is a persistent mismatch between the skills Canadian workers possess and the competencies demanded by the economy. Research indicates that the most critical shortfall lies in foundational competencies, particularly adaptability—the ability to learn, unlearn, and relearn as circumstances change.

While Canada scored above the OECD average in literacy assessments, only slightly more than half of the workforce can adequately meet the growing literacy demands of most jobs. Studies suggest that even a one percent improvement in literacy could enhance productivity by up to five percent. Given the rapid advancements in artificial intelligence and automation, the gap between current worker competencies and future economic needs is expected to widen.

Demographic Shifts and Education System Limitations

Demographic changes further exacerbate Canada’s productivity challenges. The education system, rooted in the Industrial Revolution, was designed for a time when life expectancy was just 40 years. Today, individuals born in 2024 are projected to live to approximately 83 years, leading to longer working careers. Yet, Canada continues to allocate $60 billion annually to a post-secondary education system focused primarily on young adults, with 83 percent of students aged 29 or younger.

The existing human capital system, which has historically supported Canada’s social and economic prosperity, lacks the flexibility to adapt to the demands of the future. A simple increase in funding will not suffice; a fundamental shift in how Canada develops its human capital is necessary.

The first step involves reevaluating the current educational model to identify the most effective methods for unlocking the productivity potential of all Canadians.

The multidisciplinary team behind The Productivity Project has conducted extensive research over the past year, culminating in a six-report series titled Productivity and People. This series highlights two crucial conclusions. First, achieving a meaningful paradigm shift requires collaboration among policymakers, employers, credentialing bodies, learning providers, and individuals. Second, most learning occurs outside traditional classrooms, taking place in workplaces, community organizations, libraries, places of worship, and through various media, including podcasts and blogs.

Accelerating this shift presents Canada with a unique opportunity to enhance productivity by leveraging existing learning resources.

The technology sector faced similar challenges two decades ago and responded by embracing open innovation, fostering collaboration to drive advancement. Adopting an open learning approach could unlock the entire learning ecosystem, transforming it into a dynamic structure that empowers learners to explore diverse pathways. Such a system would be more inclusive and adaptable, promoting innovation through collaboration.

Currently, public institutions dominate approximately 90 percent of the post-secondary marketplace in Canada, often lacking the necessary incentives and culture to provide the innovative learning experiences required. Consequently, the post-secondary journey resembles a rigid ladder rather than a climbing wall of endless possibilities.

A central aspect of this paradigm shift involves separating learning pathways from the recognition of that learning. Today, a bundled four-year degree, consisting of about 40 courses, can cost approximately $75,000. This financial burden contributes to nearly one-third of students failing to complete their degrees. An unbundled system would enable individuals to choose their own learning paths, with outcomes evaluated by an independent authority endorsed by provincial governments.

The principle of unbundling is not a novel concept; it was previously applied to driver licensing in Canada over a century ago. Today, the driver’s license represents the country’s most extensive open learning system, allowing individuals to learn in ways that suit them, with standardized assessments determining competence.

To address Canada’s declining productivity, a comprehensive change in how human capital is cultivated is essential. The nation’s future economic and social well-being hinges on leadership willing to champion a new paradigm that aligns with contemporary realities and anticipates future opportunities.

Janet Lane, a senior fellow at the Canada West Foundation, co-authored this article. David J Finch receives funding from the Alberta Centre for Labour Market Research, while Joseph Marchand is funded by the Government of Alberta to develop the Alberta Centre for Labour Market Research and has previously received federal funding from the Canada First Research Excellence Fund and the Social Sciences and Humanities Research Council.