To Improve Canada's Standard of Living, Business Leaders Need to Adopt Innovations into Productivity

Canada is widely recognized as one of the most innovative countries in the world. Our universities produce excellent research, our scientists and engineers generate important discoveries, and our entrepreneurs create promising new technologies. Yet, despite these strengths, Canada’s productivity growth has lagged behind that of the United States for more than two decades. As a result, Canada’s standard of living has been gradually slipping relative to our largest trading partner.

This issue should concern not only economists and policy makers but also business leaders, procurement officers, media editors, educators and the broader Canadian public. The decisions made in boardrooms, procurement offices, newsrooms, universities, colleges and classrooms will play an important role in shaping Canada’s economic future. The central question is straightforward: Why is Canada falling behind?

The answer lies largely in one economic factor: productivity. Economists describe the relationship between productivity and living standards through a simple equation: GDP per person = productivity × hours worked per person

In other words, productivity refers to economic output per hour worked — essentially, how much value workers create in each hour of work. Over the long term, a nation’s standard of living rises primarily when workers become more productive. As a result, if productivity growth slows, the growth of wages and purchasing power slows as well.

But we do not need economic equations to understand this relationship. A simpler way to think about the standard of living is to ask a practical question: what can one hour of work buy? In order to understand this better, consider a simple everyday example — a basic lunch consisting of a burger, fries and a drink.

Around 1970, when the minimum wage in Ontario was about $1.30 per hour, that meal cost roughly one dollar. Simply put, it took about 40 minutes of work to buy it. In contrast, the minimum wage in Ontario today is about $17.60 per hour, while the same basic lunch may cost $14 or $15. That means it takes close to an hour of work to buy the same meal.

This simple example illustrates the idea that the standard of living is ultimately about purchasing power — what an hour of work can buy. Behind that purchasing power lies a deeper chain of economic cause and effect that business leaders understand well, and it all starts with innovation.

In essence, innovation introduces new technologies, improved processes and better products. But innovation alone does not create prosperity, and it must be invested in, adopted, implemented and scaled within enterprises and institutions.

When that happens, productivity rises, and when productivity rises, companies can afford to pay higher wages while remaining competitive. Higher wages then translate into stronger living standards. Unfortunately, this chain has not been working as effectively in Canada as it has in the United States.

According to the Organisation for Economic Co-operation and Development’s productivity database, Canada’s GDP per hour worked is now roughly 70–75 percent of the US level, meaning Canadian workers produce about 25 –to 30 percent less economic value per hour than their American counterparts.

A second striking indicator is the difference in productivity growth. Between 2000 and 2023, labour productivity in the United States grew roughly 1.8 percent per year, while Canada’s productivity growth averaged about 0.8 percent annually, according to data from Statistics Canada and the U.S. Bureau of Labor Statistics.

Small annual differences compound over time — and over two decades, they translate into large differences in wages, investment, business expansion and, ultimately, national prosperity. Despite that, Canada faces an important paradox.

Our universities, scientists and entrepreneurs produce worldclass ideas and technologies, such as artificial intelligence and stem cell research. As such, Canada is widely recognized as a country with strong research institutions and highly talented people, but, too often, the economic benefits of these innovations are realized elsewhere.

The pattern is familiar. A technology is initially developed in Canada, but instead of growing on Canadian soil, it is acquired, financed or scaled abroad, which results in manufacturing, commercialization and global market expansion occurring outside the country. As a result, the productivity gains, jobs and profits evade Canada and instead follow the country that commercialized the technology.

In short, Canada frequently innovates — but others reap the benefits of commercialization.

My own experience building DALSA illustrates how different the outcome can be when innovation is actually adopted and scaled.

When DALSA was founded, we worked on advanced charge-coupled device (CCD) image-sensor technology, capable of converting light into digital signals with extraordinary precision. These sensors represented a major innovation in imaging technology. But invention alone would not have created value since we still had to invest in the technology, build manufacturing capability and bring products to market.

When that happened, the impact was remarkable. CCD image sensors developed and manufactured by DALSA were adopted worldwide in industrial, medical and scientific applications. Some of these sensors were used in cameras deployed by the National Aeronautics and Space Administration to transmit images from Mars.

That experience demonstrated the simple truth that innovation creates productivity and wealth only when it is implemented, manufactured and scaled. This lesson applies not only to individual companies but also to national economies. In many ways, Canada’s challenge is not a shortage of ideas; instead, it is a shortage of investment, adoption and large-scale commercialization of our own innovations. At the same time, Canada possesses the powerful but often underused advantage of our domestic market.

Canada has large and sophisticated sectors, including health care, infrastructure, energy, natural resources, advanced manufacturing and digital technologies. Together, these sectors represent hundreds of billions of dollars in annual demand.

If Canadian innovations are adopted within these sectors, the domestic market can serve as a powerful platform for growth. Canadian companies can test technologies at home, refine their products, scale their operations and then compete globally. With that in mind, three changes are essential if Canada aims to strengthen its productivity and long-term prosperity.

First, Canadian enterprises and institutions must become more willing to adopt Canadian innovations. After all, ideas have economic value only when they are implemented in real systems and real markets. Second, Canada must allow Canadian companies to scale within the domestic market, which should serve as a launch platform for globally competitive firms. Finally, Canada should strengthen Canadian supply chains in strategic sectors so that innovation leads to production, job creation and productivity growth within the country.

These efforts will require leadership from many parts of Canadian society.

On the one hand, business leaders and CEOs must be willing to invest in new technologies and adopt innovations that improve productivity. Procurement officers — particularly in large institutions such as hospitals, public agencies and infrastructure projects — play a crucial role, as their purchasing decisions can either accelerate or delay the adoption of innovative technologies.

On the other hand, media leaders and editors must help shape the national conversation about productivity, innovation and economic growth, while educators in universities, colleges and high schools help prepare the next generation to not only invent new technologies, but also to bring them successfully into the marketplace.

It is important to emphasize that advocating for the adoption of Canadian innovation does not mean lowering standards or weakening competition. On the contrary, Canada should continue to insist on excellence, high quality, open competition and transparent procurement processes such as requests for proposals.

At the same time, Canadian companies, enterprises, government departments and public institutions should actively engage with Canadian suppliers and provide constructive feedback. Procurement officers and technical users should openly communicate where Canadian products meet requirements and where they fall short, and clearly indicate what improvements are needed.

Today, in many cases, this feedback process does not take place. Without such communication, Canadian innovators and manufacturers have fewer opportunities to improve their products and specifications.

Constructive feedback from customers is one of the most powerful drivers of innovation. When suppliers understand the performance expectations of their customers, they can then improve their technologies, enhance product quality and develop solutions that become globally competitive.

Canada has the talent, research capability and entrepreneurial spirit needed to succeed in the global economy. The challenge before us is not invention — it is implementation. When Canadian innovations are invested in, adopted and scaled within our own economy, the chain becomes clear: innovation leads to productivity, productivity leads to higher wages, and higher wages lead to a stronger standard of living.

Canada’s path forward is therefore straightforward. We must learn to convert Canadian innovation into Canadian productivity — and, in doing so, secure greater prosperity for future generations.