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'Craig Read ~ Economic Prospects for Canada ~ productivity'

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After working for a few large IT firms Read born in 1966, is currently an entrepreneur and Venture Capital Advisor and Managing Consultant for Wireless and Mobile technologies [including the internet] and in particular, in software applications for the Wireless or Mobile Industry. www.craigread.com/ RESOURCE: www.craigread.com/displayArticle.aspx?contentID=9&subgroupID=21

"....Capital Productivity: The use of capital in the US to drive output is quite a bit..........Craig Read, productivity, social spending in Canada, Competitiveness in Canada, Confederation, Reform in Canada, Toronto Reform, Canadian Against High Taxation, Toronto Taxation, canaht, Toronto taxes, Tax Reform, Toronto Citizens for Tax Reform, Canadian....."
Article by Craig Read
Date: December 15 2003

Canada’s level of output per person was 81 % of the US level in 2002 worsened during 2003. The only way to arrest GDP per capita – and therefore true riches – decline, is to increase productivity. Since 1994 the productivity gap with the US has surged causing a standard of active gap with the US that is at least 20 % and widening.

The main reasons for lower productivity and breathing standards in Canada are:
- Lower capital intensity in business in Canada
- Innovation gap in Canada
- Underdeveloped high tech sector in Canada
- Less social capital in engineering, R&D in Canada
- Limited economies of scale in Canada

These primary factors need to be addressed by Canadian society if Canada wants to maintain its high standard of alive and social welfare programs. Considering the depression dollar, poorer investment climate, protectionism and monopolies in key sectors, artificially higher interest rate regime [in order to ephemerally boost the C$], and regulatory encumbrances that tax away profits, which exists in Canada, an increase or investment in productivity is not to be expected. Canadian firms are famous for employing low cost labor in lieu of investing in capital and productivity enhancing equipment.

Capital Productivity:
The use of capital in the US to drive output is quite a bit higher than in Canada. This ratio is much lower in Canada than in the US running at about 52-57 % of the US level. A key integral part of the overall capital productivity equation is the capital per labor ratio in machinery. In Canada this ratio is approximately 85 % of the US level in recent years. Another way to view capital productivity is to look at the capital intensity as measured by the capital-labor ratio [capital per worker or capital per hour worked] which is much lower in Canada than in the USA.

It is estimated that this lack of capital intensity in Canada bill for about 20-26 % of the productivity gap with the US. Combined these two measures suggest that Canada is falling further the US in productivity assets. Relying on cheap labor has allowed Canadian jobs to be maintained but a in store cost that comprises profits and about to be wages. This lack of capital investment severely affects profit per employee, profit per plant and the ability of Canadian business to respond effectively to competitive challenges from abroad including cost pressures, innovations and new market penetration. There is a huge discrepancy in R&D expenditures.

Technological Innovation:
In reinforcement to the productivity gap with the US there is an innovation gap. 2.7 % in the US. Recent data states that Canada spends 1.67 % of its GDP on R&D vs.

Canadian patents are also lower. Part of the gap is due to the resource intensive nature of the Canadian frugality [30 % directly, 50 % overall of the parsimony is resourced based] and the divers foreign owned affiliates that operate in Canada which do R&D in the home country. The rate of bulls eye according to this study of Canadian patents is low versus other nations. According to Trajtenberg [2002 study] Canada is mid way in the G7 in patents per capita and has been overtaken in recent years by Finland, Israel, Taiwan and soon South Korea.

Human Capital:
The profiles of attainment differ as well amid the two countries. Critical areas lacking patent input are computer, electrical and electrical product areas. Upper education %’s are however lower in Canada with about 88 % of 25-34 attaining upper education, versus 90 % in the USA. By 2000 about 40 % of Canadian women and 38 % of Canadian men amidst ages 25-64 had attained a tertiary education versus 36 and 37 % in the US. 0.8 % in Canada.

In the graduation rate for advanced research programs the US outperforms Canada with 1.3 % of the population attaining a PhD vs. The US has proportionally 35 % more scientists and engineers in R&D and far more Noble prizes per capita. A major vigor for the US is the high quality of its research universities. It is estimated that Canada’s languor in personal capital budget for a in quantity proportion of the productivity gap with the US – with some studies suggesting 80 %or more of the productivity gap due to individual capital weakness. Such research power greatly impacts productivity, new technology developments and applied patents. Such intra-Canada trade patterns typically result in smaller plants and longer distances.

Economies of Scale: There is still a vivid east-west trade pattern in Canada as well as the North – South pull. With NAFTA in force now for 8 years, the trade barriers and border affect will succeed to decline but there will always remain a border diversion which for Canada. This is the ‘border effect’ which economists estimate reduces trade flows by 25-50 %. Such lower rates of profit growth mean underADJ Expensiveness capital mortal capital investments. This revenue that in a smaller geographically spread market, there will fall in to be smaller and expensive capitalized plants and firms and below average profits per unit. 31 % if one counts tax and non tax receipts, 2003 figures].

Taxes:
The nation is far larger in Canada than in the US [42 % vs. Mintz at the CD Howe Institute] is the following:
- High corporate taxes stifle investment
- High personal taxes as if in a dream affect labor supply and helps call a brain drain
- Lower little business taxes in the US allow faster capital and job creation and investments
- Higher indirect taxes and regulations add about $12 billion in costs to Canadian business a higher sum than proportionally endured by US businesses. The union with Taxes and productivity [forwarded for instance by J.

There is not a direct irrefutable copula amidst taxes and productivity. This decreases capital formation. The Netherlands for instance has a far higher tax foundation than the US but enjoys a productivity level in some sectors that is higher than the US level. But no doubt it aggravates a bad situation. Without question higher taxation impeded capital investment, job creation and profits. Nevertheless the Dutch standard of breathing is below even that of Canada though it has a more comprehensive tax and social welfare framework. For Canadian firms this motivates them to employ labor and not capital in the course of in the US the opposite thrust is created.

Summary:
In the US payroll taxes as a % of total pay are higher than in Canada. In the US the emphasis is on labor utilization and plant productivity and capacity usage. Coupled with a lower dollar appreciate in Canada it is cheaper for Canadian firms to forego importation of capital equipment and technology from US suppliers and compete on labor cost advantage.

As well Canadian firms due to a smaller more dispersed market are under at a disadvantage intense competition than their US peers. Technology and investments in plants and assets thrum a more full of meaning role in US business than in Canada.

Due to range of factors that comprise productivity the US enjoys a more productive, wealthier environment with a 20 % advantage in lively standards over Canada. Regulatory barriers are higher in Canada which decreases competition and there are social and behavioural differences in market competition midst the 2 countries which impacts productivity. the United States. Canadians in various studies downplay this gap by pointing to greater economic and social symmetry and ‘certainty’ in Canada vs. GDP per capita which is the main rubric for how well a society is on duty – was likewise only at 85 % of US levels from 1990-2003.

The productivity problem shows up in GDP per capita and in the flesh standards. As the levels of productivity and GDP per capita decline relative to the US, Canada’s standard of animated will follow in a series to fall relative to US levels. As US growth and productivity follow in succession to accelerate, this gap will only widen.
- The Sources of Economic Growth in OECD Countries - 2003.

Sources:
- International Productivity Monitor - various issues 2003. Nicholson, Canada’s Long Run Economic Prospects, 2003
- Statistics Canada
- OECD Accounts 2003
- Centre for the Study of Living Standards

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- P.J.
- P.J...."

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Unique Free Article: 'Craig Read ~ Economic Prospects for Canada ~ productivity'

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'Craig Read ~ Economic Prospects for Canada ~ productivity'