June 6, 2024

Weekly EconMinute—Labour Productivity By Industry

In this week’s EconMinute, we’re talking about labour productivity by industry.

Labour productivity is vital for economic growth and improvements in our standard of living. But over the last decade, productivity has declined in Canada and become a national concern.  

With the recent release of productivity data by industry and province, we were curious to see which industries have the highest level of productivity in Alberta and if or how this has changed over the last few years.

This industry perspective is important. Because economic theory predicts workers are paid based on the value of the work they produce, industries with higher productivity will tend to have higher wages. Similarly, if an industry becomes more productive, perhaps through new technologies or better training, their labour becomes more valuable, driving higher wages.

So which industries have the highest productivity in Alberta? And, contrary to the national trend, have any seen an increase in recent years? Here’s what we found:

  • The sector with the highest labour productivity is mining and extraction which generates an incredible $214 of economic value per hour worked. This includes the oil and gas industry specifically which itself has an even higher average of $300.
  • On the other end of the spectrum is arts, entertainment, and recreation which generates just $29 per hour. To be sure, less productive industries are still important to the economy but, from this perspective, do not bring in as much economic value.
  • Over the last four years, productivity of the private sector as a whole declined by 3%. This was not just driven by any one industry; most industries saw a decline over this time.
  • Specifically, industries that saw the largest decline were construction (-13%), administrative & support (-12%), and transportation & warehousing (-11%).
  • However, one industry that saw a sizable increase in productivity was real estate and leasing (12.5%)—likely reflecting increased demand for, and spending on, housing as the province’s population has exploded. Meanwhile, gains in other industries have been more moderate.

Unfortunately, this means that, though some industries show moderate growth, Alberta is seeing a similar lack of productivity growth as elsewhere in the country. Nonetheless, it also has some standout industries: oil and gas, which generates more value than any other industry by a wide margin, and real estate which has increased its value over time. That said, overall productivity growth will require both a sharper focus on high-value industries and broader improvements economy-wide. To that end, it will be just as vital to focus on productivity in Alberta and the kinds of things we know drive it—such as innovation, capital investment, and building a skilled workforce—to ensure a prosperous future.

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