Canada Innovations: Productivity in Canada and Impediments to Innovation

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There are differing opinions of Canada’s productivity challenges. This has involved high-ranking politicians who argue that Canada’s production is satisfactory. These politicians are possibly exonerating themselves from any blame on the poor state of Canada’s economic performance. It is not possible for politicians, in any part of the world, to accept the responsibilities of a country’s poor production system. So it is not accurate to use politicians as sources of information on the state’s economic performance. According to a research study done by several organizations, the results have shown that indeed Canada’s productivity has become poor and is likely to lower the city’s living standards. Canada as a country has a wealth of resources including the great capacity to produce new ideas. It has well-equipped institutions which can be used to improve productivity. So it is evident that lack of proper resources is not the reason for poor productivity (McFetridge, 2008). This paper discusses the subject of innovation and its impediments and productivity in Canada.

Canada’s poor productivity performance

The poor productivity in Canada is one of the main obstacles facing its economic growth. This is brought about by factors relating to competition about other nations like the USA and management especially when it comes to implementing new technologies and other processes related to it.

Canadian manufacturing industry structures have long-term problems. The productivity level which is the main determinant of that sector’s competitive ability has only increased by less than 10% from the year 2000. In addition, Canadian firms are not able to take advantage of the economies of scale due to their small sizes. The possibility is that investment in productive capital which includes public infrastructure, information, communication, and machinery may be inadequate.

Labor is an important component of production, and as much as the manufacturers may not be sufficiently innovative, the skills of the Canadian workforce may also be below, however, a section of the workforce claims to be overqualified for the kind of work they do yet there is still a shortage of labor for certain skilled economic activities. This is a double loss in terms of improved productivity.

Increasing Canada’s productivity “picture”

The scale of economies is one of the tools which can be used to increase Canada’s productivity. Increasing the number of manufacturing plants will enable the economy to take advantage of and efficiencies of mass production. This will also ensure that fixed costs are spread over large productions leading to a reduction in unit cost as compared to a small number of production plants. While paying attention to legitimate security concerns; Canada should discuss with its business and development partners especially the United States about streamlining border administration so that trade efficiency may be optimized (Niosi, 2008)

Moreover, the tax policy regarding small firms needs to be reviewed. This policy works well with the small firms but it does not encourage the expansion of these firms into bigger ones. For instance, businesses with a turnover of less than $500,000 annually pay 16.5% in tax while businesses earning above the aforementioned amount have to part with 33.3% in tax payment. This does not offer any stimulation to expand. Most small firms will remain small to avoid possible high costs of production with low returns. The standard corporate tax rate should be reduced to increase the incentives for the expansion and growth of these businesses.

The infrastructural deficit in Canada is another challenge to its economic development. This is due to reduced expenditure on infrastructure. More funds should be dedicated to improve and expand the facilities. This will boost production in many sectors of the economy.

The Canadian manufacturing industry is less innovative. More innovative activities should be initiated; there should be a link between the manufacturing industry and the academic and research institutions. The close link between these institutions and the manufacturing sector will ensure existing knowledge is improved and new one acquired and applied profitably.

There are many skilled and knowledgeable immigrants moving into Canada. But due to structural impediments, especially to the mobility of labor, these immigrants are not able to get into the market to ease the shortage of labor in some needy sectors. The accreditation process should be simplified so that Canada can benefit from highly knowledgeable immigrants (McFetridge, 2008).

It will also be of benefit if Canada facilitates the immigration of foreign experts and intellectuals to come and work in the country. The easy immigration into Canada will create incentives for experts who need better pay to move to Canada. In most cases, such experts are likely to come from third-world nations where living standards are still low.

Focusing on producing export goods and services will also attract foreign exchange which can be used in purchasing capital goods like machinery from countries like the USA and Japan. The increased capital goods will boost the productive capacity of Canada’s economy.

Addressing the impediments to innovation

Firm characteristic informs its perception of the type of impediments it experiences toward its innovation ability. Reportedly, larger firms are highly likely to report the high cost of funding innovation and also cite rigidity within the organization as impediments to innovation as compared to small firms.

The most serious impediment to innovation whether by small or big firms is the organizational rigidities. When these rigidities are removed then others can be overcome easily. A country with a desire to improve and increase its productivity must dedicate a certain percentage of its finances to innovative activities.

Impediments to innovation may also include poor training at school. Educational institutions should ensure that they design their syllabus in a way that encourages innovation amongst the students. The students should be given skills that are relevant in the labor market. Innovation amongst students can be improved through the organization of competitions in which they showcase their innovations and inventions and be rewarded either financially or through scholarship. This shows it will motivate more students to be interested in innovation and invention activities.

The role of post-secondary education in the country’s productivity challenges

With growing competition in the world, Canada needs to improve its post-secondary training and skills. This will consequently ensure it has a flexible, qualified, adaptable, and innovative workforce that will make it remain prosperous and competent in the current society. The government needs to identify key areas where certain knowledge is missing and focus on training competent citizens in those areas. This will bridge the intellectual gap that exists in the country.

The government should facilitate this by availing funds to sponsor bright students to pursue post-high school training that can enable them to fix in the job market. Moreover, it is highly significant for high school students to be informed on the kind of careers available after high school. This gives them time and opportunity to decide on a beneficial career to pursue. It will also avoid cases where individuals make bad choices and end up not being able to appropriately participate in the economic building of the country.

Some students are not able to pursue further education. Such students should be given vocational training so that they may also participate in the country’s economic growth. The government can ensure this by setting up technical institutions in various parts of the country. Again, the government should set aside a certain percentage of the budget annually to fund research institutions.

Post-secondary education in Canada has different categories; these are trade vocational schools, community colleges, and university colleges. Different levels of post-secondary education have different advantages. Those people with university degrees are said to get more rewards than those with degrees from community colleges.

It is estimated that a third of high school men graduates attend community and trade colleges after high school, a quarter proceeds to university, and the number of women who attend the community and trades colleges is more than that of men. The type of education preferred by a post-secondary school graduate is determined by how much one wants to earn in terms of salary, this is also dictated by the availability of financial resources to fund the education level chosen


Canada has been facing productivity challenges due to factors related to competition, management, low increase rate in productivity level, diverted focus from infrastructures, and low implementation of new technologies. Many small firms in Canada do not have the incentives to expand or merge due to low tax rates for small firms which are earning less than $500,000 and a discouraging rate for firms earning more than that(McFetridge, 2008).

To improve the productivity of its economy, Canada should focus on relaxing its policies on foreign investments, amend the tax policies to give incentives for expansion, and also train its post-high school graduates on areas of its limitations. It is also economically viable to manufacture goods and services meant for foreign markets. Increasing this class of production will attract more foreign currencies and hence the ability to pay for imports. In doing this the government should offer some tax holiday regimes to boost productions mainly meant export.

Canada should work by all means to ensure the living standards of its citizens do not flop. It has a wealth of untapped resources that can be tapped into improving its productivity and hence improves the social lives of the public members (McFetridge, 2008; Niosi, 2008).


McFetridge, D. (2008). Innovation and the Productivity Problem. Web.

Niosi, J. (2008). Connecting the Dots between University Research and Industrial Innovation. Web.

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