Canada Must Transform Higher Education to Boost Productivity

Canada is grappling with a significant productivity crisis, with its output lagging behind the United States by a substantial 28 percent. This situation not only threatens wages and competitiveness but also jeopardizes the long-term economic prosperity of the nation. Currently, Canada ranks 18th among the 38 countries in the Organisation for Economic Co-operation and Development (OECD) in terms of productivity.

Productivity, defined as the economic value derived from goods or services compared to the labor required to produce them, is a pressing concern for all Canadians. Its direct impact on inflation and income underscores the importance of addressing this issue.

Understanding the Root Causes

The crisis stems from a complex interplay of factors, primarily revolving around human capital—the knowledge, skills, and capabilities of the workforce. A collaborative effort among families, educators, employers, and policymakers is essential to build this capital, which begins in early childhood and extends throughout life.

Despite investing 20 percent more in post-secondary education than the OECD average, Canada faces challenges in effectively developing its human capital. Approximately 63 percent of Canadians have completed post-secondary education, which is 22 percent higher than the OECD average. Yet, the country leads globally in graduate underemployment, with five unemployed degree holders for every job requiring a degree.

Research highlights a critical mismatch between the competencies of Canadian workers and the needs of the economy. The most pressing shortfall lies in foundational skills, particularly adaptability—the capacity to learn and adjust to new demands. While Canada performs well in literacy on international assessments, only slightly more than half of the workforce meets the rising literacy demands of many jobs. Studies suggest that enhancing literacy by just one percent could boost productivity by as much as five percent.

As artificial intelligence and automation reshape the job landscape, this skills gap is expected to widen.

Demographic Shifts and Educational Constraints

Furthermore, demographic changes are compounding Canada’s productivity challenges. The education system, rooted in the Industrial Revolution, is ill-equipped to address the longer working lives of today’s population. With life expectancy projected to reach 83 years for those born in 2024, the traditional model of education, which focuses primarily on young adulthood, needs to evolve. Currently, 83 percent of post-secondary students are under 29, while 67 percent are under 25.

Canada’s current educational framework, which has sustained economic prosperity for over a century, lacks the adaptability required for future challenges. Simply increasing funding will not suffice; a fundamental shift in how human capital is developed is essential.

The first step involves reevaluating the existing model and addressing a pivotal question: what is the most effective way to unlock the full productivity potential of all Canadians?

Embracing a New Learning Paradigm

Over the past year, a multidisciplinary team associated with The Productivity Project has explored this question through a series of six reports titled “Productivity and People.” The findings emphasize two critical conclusions.

Firstly, achieving a true paradigm shift necessitates collaboration among policymakers, employers, credentialing bodies, learning providers, and individuals. Secondly, contemporary learning pathways are diverse, extending well beyond traditional classroom settings. Most learning occurs in workplaces, community organizations, libraries, and other informal environments.

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

The technology sector faced similar challenges two decades ago and responded by embracing open innovation, fostering collaboration within ecosystems to drive progress. Open learning, which encompasses a wide range of experiences from workplaces to self-directed learning, could revolutionize the current educational landscape.

In contrast to the existing higher education system, which is dominated by public institutions controlling about 90 percent of the post-secondary market, open learning enables a more flexible and inclusive approach to lifelong education.

Unbundling Learning and Credentials

A vital aspect of this transformation is the unbundling of learning pathways from the recognition of learning. Presently, a typical four-year degree, comprising around 40 courses, costs approximately $75,000. Unsurprisingly, nearly one-third of students do not complete their degree. An unbundled system would empower individuals to tailor their educational paths, with their achievements assessed by an independent authority recognized by provincial governments.

The principle of unbundling is not a novel concept. The European Higher Education Area established priorities for promoting lifelong learning through open recognition of all forms of education in the 2009 Leuven Communiqué.

Canada’s approach to driver licensing offers a successful example of this unbundling, allowing individuals to learn in various ways while undergoing standardized assessments to determine competence.

To address its productivity challenges, Canada must fundamentally transform its approach to developing human capital. The nation’s future economic and social prosperity hinges on the willingness of leaders to champion a new paradigm that aligns with contemporary realities and anticipates future opportunities.

The insights shared in this article stem from collaborative research conducted by experts including Janet Lane, a senior fellow at the Canada West Foundation, along with David J Finch and Joseph Marchand, who contribute to the Alberta Centre for Labour Market Research. Their work emphasizes the urgency of rethinking education to ensure that Canada can compete effectively on the global stage.