This HillNote compares Canada’s productivity performance with that of other Group of Seven (G7) countries and Australia, which has a resource-rich economy that is similar to Canada’s.
The HillNote is the second in a four-part series on productivity. The first HillNote explained what productivity is and why it matters, while the third and fourth will examine the potential causes of Canada’s relatively low productivity growth and explore possible solutions.
As discussed in the series’ first HillNote, productivity can be measured in two main ways – labour productivity and multifactor productivity (MFP), also known as total factor productivity:
- Labour productivity measures how efficiently working hours create goods and services. It is usually expressed as the gross domestic product (GDP) per hour worked, that is, the total value of goods and services produced within a country divided by the total number of hours worked.
- MFP accounts for other factors that are not attributable to labour and capital. Economists use it to measure how efficiently all inputs are combined to generate outputs. According to Statistics Canada, MFP is a comprehensive measure of efficiency and reflects technological innovation, improvements in production organization and economies of scale.
Labour Productivity
Figure 1 shows labour productivity – measured as GDP per hour worked – over the past three decades in G7 countries and Australia. It is expressed in US dollars using Purchasing Power Parities (PPPs), with 2020 as the base year, to ensure constant prices. According to the Organisation for Economic Co-operation and Development (OECD), PPPs are currency conversion rates that equalize purchasing power by removing differences in price levels between countries. The data in Figure 1 are presented by decade to smooth out year-to-year fluctuations and highlight long-term trends.
Figure 1 – Labour Productivity in Group of Seven (G7) Countries and Australia Between 1995–2004 and 2015–2023 (Gross Domestic Product [GDP] per Hour Worked, 2020 US$ Purchasing Power Parities [PPP])
Source: Figure prepared by the Library of Parliament using data obtained from Organisation for Economic Co-operation and Development (OECD), “Productivity levels,” OECD Productivity Database, accessed 30 July 2025. The 2015–2023 period only contains nine years as the database only contains data from 1995 to 2023 only.
Over the past three decades, Canada had the second-lowest labour productivity, ahead of only Japan, while France and Germany maintained the highest labour productivity throughout the period. Although the labour productivity levels of all countries grew over the period, they grew more rapidly in some countries than others. The two countries in the comparison that present the greatest contrast were the United States and Italy. During the decade between 1995 and 2004, the United States’ labour productivity averaged US$58 of GDP per hour worked, close to the G7 average. By the 2015-to-2023 period, it had surged to US$79 per hour worked, the third-highest level of the countries examined. Labour productivity in Italy, by contrast, barely moved: it rose from US$66 to US$69 per hour worked over the three periods.
Canada and Australia also offer a useful comparison. Between 1995–2004 and 2015–2023, the average labour productivity in Australia increased by US$14, rising from US$54 to US$68 per hour worked. In Canada, it grew by US$10, from US$49 to US$59 per hour worked.
Multifactor Productivity
Figure 2 shows MFP growth in G7 countries and Australia over the three decades between 1993 and 2022. The average MFP level of each country during the first decade (1993–2002) is set to 100 to illustrate changes over the following two decades.
Figure 2 – 10-Year Multifactor Productivity Averages in Group of Seven (G7) Countries and Australia Between 1993–2002 and 2013–2022 (1993–2002 Average = 100)
Source: Figure created by the Library of Parliament based on data obtained from Organisation for Economic Co-operation and Development (OECD), “Productivity growth rates,” OECD Productivity Database, accessed 30 July 2025. The most recent year available in the database is 2022; therefore, the starting year of 1993 was used to present 30 years of data.
Over the last three decades, the United States experienced not only strong labour productivity gains but also the fastest growth of 10-year average MFP among all the countries studied, increasing by 19% over a comparable period. This means that the United States improved its efficiency in combining inputs like labour and capital to generate outputs more than its G7 counterparts and Australia.
Notably, while Italy’s labour productivity stagnated over the same three decades, its 10-year average MFP declined by 4% over a comparable period. All the other countries in the comparison recorded increases in their 10-year average MFP over the same period, albeit at varying rates.
The United Kingdom’s labour productivity performance was close to the G7 average during the past three decades, but its MFP presents a mixed picture. After recording the fastest 10-year average MFP growth of the countries examined between the first and second decades, its MFP stalled thereafter. While France achieved the highest labour productivity over the last 30 years, its 10-year average MFP – similar to the United Kingdom’s – struggled to improve between the second and third decades.
Canada and Japan, the two countries with the weakest labour productivity performance over the last 30 years, saw their 10-year average MFP grow slightly faster than the G7 average but slightly slower than that of Australia.
Key Observations
As Figures 1 and 2 illustrate, over the 30 years between 1993 and 2022, Canada’s labour productivity was the second lowest among the countries compared, whereas its MFP was slightly above the G7 average. Although some improvements were made in both indicators, the gains were roughly in line with the G7 average.
Australia outperformed Canada with respect to both productivity indicators, with a more pronounced gap in labour productivity.
Most countries included in the comparison made gains in labour productivity and MFP, although the United Kingdom and France showed some signs of stagnation in their MFP over the past two decades.
The most noteworthy cases are those of the United States and Italy, whose productivity levels diverged considerably over the last three decades. The United States recorded significant growth in both productivity indicators, while Italy’s labour productivity stagnated and its MFP declined.
By Shaowei Pu, Library of Parliament
Categories: Business, industry and trade, Economics and finance, Employment and labour