The head of Wealthsimple Inc. called Canada’s productivity problem an “absolute crisis” that will take a major entrepreneurial push to fix.

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Michael Katchen, chief executive of the Canadian online investment service, said turning the issue around will take a “cultural change” and require policymakers and the business community to get on board. Worse still, the problem is poised to deepen because the country’s primary growth strategy — mass immigration — is being “gutted” as federal policymakers dramatically scale back targets for permanent and temporary residents, he argued.

Part of the problem is an overreliance on a handful of industries, Katchen said, pointing to the resource sector.

“I think Canada’s problem is we do two things: We pull things out of the ground and we finance pulling things out of the ground,” Katchen said at a Toronto conference hosted by technology publication The Logic. “And frankly, we don’t do it all that well all the time. And I think the challenge is, if that’s the story we tell ourselves in 20 years, we’re in deep trouble.”

Katchen added that the ticket to boosting productivity is to grow the country’s industries and diversify the economy, which can be solved through entrepreneurship.

In March, Bank of Canada senior deputy governor Carolyn Rogers flagged the country’s productivity problem in a speech that kicked off a national dialogue, drawing input from other policymakers and business leaders.

Governor Tiff Macklem said Canada’s productivity growth has lagged that of the United States as the countries emerged from the COVID-19 pandemic. The Canadian economy produced 88 per cent of the value generated by the U.S. per hour in 1984, a figure that fell to 71 per cent by 2022, the central bank has pointed out.

“If it was a simple problem, we would’ve solved it by now,” Macklem said at the same Toronto event. “It’s a multifaceted problem and it’s going to take a concerted effort by businesses, by governments, by the academic community, to put their heads together, set some priorities and work their way through it.”

Macklem added that Canada has world-leading businesses in nearly every sector that are investing and innovating. “The issue is we just don’t have enough of them.”

In its latest economic forecasts, the Bank of Canada projected that gross domestic product per capita would rise over the next two years. It expects lower interest rates to lift per-person spending and business investment, even as population growth slows — though the forecasts were released a day before the government significantly lowered its targets.

As immigration ramped up in recent years, some economists warned that a steady supply of cheap labour was dissuading businesses from investing in technology or equipment that would boost workers’ productivity.

Bloomberg.com