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Panel Background and Mandate

Introduction

This reference document is intended to provide supplementary information relating to issues discussed in Section 1 of the panel's Consultation Paper. That section covers the following:

  1. the rationale for the review, together with related background information on the Canadian economy's performance in respect of innovation and productivity growth; and
  2. an overview of the panel's mandate and approach.

Supplementary Information

The following key facts build on the topics covered in the background information presented in the consultation paper:

  • Canada's relative weakness in BERD intensity (business expenditures on R&D as a proportion of GDP) is reflective of a long-term trend. The following graph depicts BERD intensity trends for the period spanning from 1981 to 2008.

    Source: OECD, Main Science and Technology Indicators (Vol. 2010/1).
  • Relative labour productivity in Canada's business sector has been lagging behind that of the US business sector for many years, and the gap has been widening since the mid-1980s. The below graph depicts relative labour productivity levels in the business sector in Canada (as a percentage of the US) for the period spanning from 1947 to 2009.

    Source: Centre for the Study of Living Standards (2010), Aggregate Income and Productivity Trends: Canada vs. the US.
  • Due to the aging of the "baby-boomer generation," improving business innovation in Canada is an increasingly important issue. The demographic shift resulting from the aging of the baby-boomers is expected to result in a sharp decline in labour participation rates. As the labour market shrinks, maintaining or increasing Canada's standard of living will depend evermore on a more innovative business sector driving up its productivity growth, that is, its ability to derive more economic benefit from each hour of work. According to Mark Carney, Governor of the Bank of Canada:

    The combination of slower productivity growth and demographic shifts could well mean that the average rate of potential growth for the Canadian economy will be closer to 2 per cent going forward… If this differential were to persist over a decade, the cumulative loss of income would be almost $30,000 for every Canadian. Given Canada's demographic trends, the principal way to avoid this loss is by improving our productivity.

    (Mark Carney, The Virtue of Productivity in a Wicked World, Address to the Ottawa Economics Association, 24 March 2010)