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Title page 1

Contents 6

Foreword 4

Acknowledgements 5

Executive summary 9

1. Overview 13

1.1. Introduction 13

1.2. A complex challenge 14

1.2.1. Reviving economic growth requires restoring productivity growth 14

1.2.2. A more efficient use of resources is needed within and between firms 15

1.2.3. Trade tensions, structural change and demographic developments are generating new challenges and opportunities... 16

1.2.4. To support structural transformation there is a need to enhance the adaptability of firms, workers and the labour market 17

1.3. The role of skills 18

1.3.1. Policies to promote the efficiency of formal education 18

1.3.2. Policies to promote the use of skills in the workplace 18

1.3.3. Policies to promote the adaptability of the workforce through reskilling and upskilling 19

1.4. The role of job mobility 20

1.4.1. Policies to promote the creation of jobs in high productivity firms 20

1.4.2. Policies that support voluntary mobility to more productive firms 20

1.4.3. Policies that support the mobility of workers between provinces and territories 22

1.4.4. Policies to support worker transitions in a context of rapid structural change 24

1.5. A focus on migrants 25

References 28

Notes 30

2. The productivity challenge 31

In Brief 32

2.1. Introduction 33

2.2. The productivity slowdown in Canada: The macro picture 34

2.2.1. Economic growth has declined strongly 34

2.2.2. Reviving economic growth requires boosting productivity growth 36

2.2.3. Weak labour productivity growth reflects limited gains in efficiency and weak investment 38

2.3. Beyond aggregate trends: A micro perspective 41

2.3.1. Weak productivity growth reflects both weak growth within firms and weak efficiency-enhancing job reallocation 41

2.3.2. The slowdown in productivity growth is concentrated in high productivity firms and manufacturing industries 43

2.3.3. The decline in efficiency-enhancing job reallocation is driven by a weakening of the job ladder 44

2.4. The role of megatrends 46

2.4.1. Population ageing affects productivity growth in various ways and possibly in opposite directions 47

2.4.2. Balancing labour market pressures and productivity objectives in migration policies 48

2.4.3. Green jobs are set to grow as oil and gas employment levels off, with significant opportunities and challenges for labour productivity 50

2.4.4. The productivity gains of Artificial Intelligence are potentially large but require workers with digital skills 52

2.5. Concluding remarks 53

References 54

Annex 2.A. Microdata analysis 58

Notes 59

3. Turning skills into growth: Unlocking Canada's productive potential 62

In Brief 63

3.1. Introduction: Why do skills and their use matter for productivity? 65

3.2. Do adults have the skills to succeed in the labour market in Canada? 66

3.3. Are adults in Canada using their human capital effectively? 72

3.3.1. Canada leads in the use of information-processing skills at work, but many Canadians do not make full use of their qualifications 72

3.3.2. Canadians too often work in small, less productive firms 76

3.3.3. The returns to top talent in Canada are lower than in the peer countries 78

3.4. Career guidance and adult learning in Canada: Unlocking potential or falling short? 81

3.4.1. Few Canadians use career guidance services 82

3.4.2. Many Canadians participate in adult learning, but the courses they take tend to be short, and their content does not necessarily... 84

3.5. Underused talent: Who is not reaching their full potential in Canada? 90

3.5.1. Older workers 91

3.5.2. Women 93

3.5.3. Migrants 94

3.5.4. Place of residence 94

3.6. Concluding remarks 95

Annex 3.A. Additional materials 100

4. Promoting job mobility to foster productivity growth 106

In Brief 107

4.1. Introduction 108

4.2. Promoting job opportunities in high productivity firms 109

4.3. Support the mobility of workers to more productive firms 110

4.3.1. Non-compete agreements 110

4.3.2. Professional licensing regulations 113

4.4. Support the mobility of workers between provinces and territories 116

4.4.1. Differences in professional licensing regulations between provinces and territories 116

4.4.2. Housing-related barriers to geographical mobility 121

4.4.3. Other barriers to interprovincial labour mobility 124

4.5. Policies to support worker transitions in a context of rapid structural change 124

4.5.1. Displaced workers in energy-extraction industries and industries dependent on US imports tend to be hit particularly hard 126

4.5.2. Policies to support displaced workers 128

4.6. Concluding remarks 132

References 132

Notes 138

5. A focus on migrants 140

In Brief 141

5.1. Introduction 141

5.2. Stylised facts on the integration of migrants 142

5.2.1. It takes time to integrate immigrants in high value-added activities 142

5.3. Policies to support better labour market outcomes of international migrants 143

5.3.1. Bridge gaps between immigrant selection and employment requirements 143

5.4. Conclusions 146

References 146

Notes 147

Figures 7

Figure 1.1. The loss in economic welfare due to slowing economic growth is substantial 15

Figure 1.2. Productivity growth has declined within and between firms 16

Figure 1.3. The overqualification rate in Canada is above the OECD average 19

Figure 1.4. Occupational entry regulations are relatively strict in Canada 22

Figure 1.5. Occupational entry regulations vary widely across provinces and territories 23

Figure 2.1. Economic growth has weakened 35

Figure 2.2. The shortfall in economic growth Canada over the past two decades 36

Figure 2.3. The decline in economic growth is driven by slower labour productivity growth and, to a lesser extent,... 37

Figure 2.4. The decline in labour productivity growth reflects slower efficiency gains and weaker investment 39

Figure 2.5. Productivity, wage and inequality developments in Canada 40

Figure 2.6. Productivity growth within and between firms 42

Figure 2.7. The contribution of provinces to the slowdown in aggregate productivity growth 43

Figure 2.8. The decline in within-firm productivity growth is concentrated in frontier and resource-intensive firms 44

Figure 2.9. The decline in between-firm productivity growth is driven by a weakening of the job ladder 45

Figure 2.10. Workforce ageing contributed to the productivity slowdown 46

Figure 2.11. The share of older individuals of working age in the working-age population has increased significantly 48

Figure 2.12. In Canada about one in five persons is born abroad 49

Figure 2.13. Migrant inflows to Canada are high and have increased in recent years 2019-2023 50

Figure 2.14. Canada has the second highest value added from energy supply industries 52

Figure 2.15. Cost is the most frequent barrier to AI adoption, government regulation the lowest 53

Figure 3.1. Human capital is positively correlated with productivity at the country level and wages at the individual level 65

Figure 3.2. Educational attainment in Canada increased dramatically over the last 30 years, and the share of those with tertiary... 67

Figure 3.3. Numeracy skills in Canada are above the OECD average, but lower than in the top-performing countries 68

Figure 3.4. Educational attainment in Canada could translate more efficiently into skills 69

Figure 3.5. In countries with the highest labour productivity, such as Switzerland, Denmark and the United States,... 72

Figure 3.6. Information-processing skills are used at work more often in Canada than in most OECD countries 73

Figure 3.7. The over-qualification rate in Canada is above the OECD average, and higher than in some countries with the same... 74

Figure 3.8. Overqualification in Canada appears to be driven by the excess supply of workers with tertiary education,... 75

Figure 3.9. In Canada, workers with the same human capital earn less in smaller firms, and they are less likely to further develop... 77

Figure 3.10. Wage levels for Canada and peer countries, by worker skill level 79

Figure 3.11. Wage level comparison by skill level and firm size 80

Figure 3.12. Many Canadians have experienced changes in their work environment 82

Figure 3.13. Adult learning participation is relatively high in Canada 85

Figure 3.14. The intensity of non-formal job-related courses is relatively low in Canada 86

Figure 3.15. Relatively limited share of training in Canada and the OECD facilitates the adoption of new technologies 87

Figure 3.16. Which groups are falling behind in Canada? 91

Figure 4.1. The contribution of job reallocation to growth is higher in countries with high growth 109

Figure 4.2. Occupational entry regulations are relatively strict 114

Figure 4.3. There are stark differences in occupational licensing requirements across Canadian provinces and territories 117

Figure 4.4. Inter-provincial job mobility for regulated and not regulated professions 119

Figure 4.5. Households housing costs are above the OECD average for renters 122

Figure 4.6. Displaced workers in energy-supply industries face large and persistent losses in productivity 127

Figure 5.1. Working in lower-paying sectors and firms accounts for over half of the initial immigrant pay gap 142

Figure 5.2. Immigrants with degrees obtained outside Canada are more likely to be overqualified compared to immigrants... 143

Boxes 35

Box 2.1. The welfare losses of declining economic growth in the long-term 35

Box 2.2. The implications of demographic change for future economic growth in Canada 37

Box 2.3. Productivity growth has not become less broadly shared in Canada 39

Box 2.4. Trade shocks, internal barriers and labour productivity in Canada 40

Box 2.5. Productivity developments vary widely across provinces 42

Box 2.6. Workforce ageing has tended to slow growth-enhancing job reallocation 45

Box 2.7. Recent trends in temporary and permanent migration to Canada 50

Box 3.1. Strengthening the Apprenticeship Offer: Lessons from OECD countries 71

Box 3.2. The labour market in Canada is changing 82

Box 3.3. New approaches to collecting and sharing labour market information 83

Box 3.4. Good practices on outreach and providing career guidance to adults 84

Box 3.5. Individual learning accounts in France, Lithuania, Czechia and Korea 87

Box 3.6. Comprehensive strategy to foster AI talent in the labour market in Korea 89

Box 3.7. EDGE UP 2.0 helps displaced oil and gas professionals move to new jobs in tech 90

Box 3.8. Good practice examples of policies to boost the productivity of older workers 92

Box 4.1. The economic effects of restrictions on non-compete agreements and the role of policy design: The case of Austria 111

Box 4.2. The dual role of professional associations 115

Box 4.3. Differences in occupational licensing requirements across provinces and territories: Some concrete examples and some evidence 118

Box 4.4. The regulation of professions: The case of the EU 120

Box 4.5. Models for affordable housing markets across the OECD 123

Box 4.6. Supporting structural change while preventing job losses: The role of job retention schemes 125

Box 4.7. Wage support schemes in the United States, Germany and France 129

Box 4.8. The Australian Job Seeker Assessment Framework 131

Box 5.1. Retaining talent in Canada 145

Annex Tables 8

Annex Table 2.A.1. Data sources 58

Annex Figures 8

Annex Figure 3.A.1. Relationship between skill proficiency and wages, by decile of proficiency 100

Annex Figure 3.A.2. Literacy and problem-solving skills in Canada are above the OECD average 101

Annex Figure 3.A.3. Many employees in Canada report learning-by-doing at work 102

Annex Figure 3.A.4. Many Canadians who experienced a change in the workplace did not receive training from their employers in response 102

Annex Figure 3.A.5. At all levels of education, foreign-born individuals who hold a degree from abroad as their higher qualification,... 103