“The amount of new investment Canadian businesses put in place is a key indicator of future prosperity."
December 16, 2015 – For the first time since the 2008-2009 economic crisis and recession, capital investment by business has declined, according to a new C.D. Howe Institute report. In “A Crisis of Capital: Canadian Workers Need More Tools, Buildings and Equipment,” authors Benjamin Dachis, William B.P. Robson and Aaron Jacobs show that, after several years of improvements in business investment per worker, Canada is slipping behind her peers.
“This is a worrying trend. Increased investment per worker means more productive and ultimately better-paid jobs,” commented Robson. “The amount of new investment Canadian businesses put in place is a key indicator of future prosperity,” added Dachis.
The authors find that over much of the past 10 years, investment in Canadian workers was catching up with investments in their American counterparts. After enjoying only 72 cents of new investment for every dollar garnered by US workers from 2006 to 2010, Canadian workers enjoyed 78 cents in 2012. Unfortunately, the average Canadian worker in 2015 looks likely to receive only 69 cents of new investment for every dollar enjoyed by US workers.
Across the country, the worst changes in per-worker investment news are in the West. After flat investment growth in Alberta and Saskatchewan in 2014, the recent plunge in commodity prices, particularly for oil, is expected to cut per-worker investment by more than 10 percent in these provinces in 2015. After reaching record levels in 2014, investment per worker in British Columbia and Manitoba also looks set for dramatic drops in 2015. More happily, total capital investment in Newfoundland and Labrador is expected to be higher in 2015 than it was in 2014. But workers elsewhere in Canada suffer from anemic capital investment relative to their global peers. Per-worker investment in central Canada and the Maritimes is shockingly low: from 28 cents to 50 cents for every dollar invested elsewhere in the OECD and in the United States.
The authors urge policymakers to focus on boosting private-sector investment through trade liberalization, investment-friendly taxation of extractive industries, and lower taxes on non-residential investment.
Click here for the full report.
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.
For more information contact: Benjamin Dachis, Senior Policy Analyst, William B.P. Robson, President and Chief Executive Officer; and Aaron Jacobs, Researcher, C.D. Howe Institute: 416-865-1904 or email: kmurphy@cdhowe.org.