Labour productivity leaped 3.8% in the last quarter of 2020

Long plagued by weak productivity growth, the Canadian economy experienced a surge in productivity in 2020. Much of the increase was due to the temporary distorting effects of lockdowns, and the effect of a longer-term shift to remote work remains to be seen, says a new study from Statistics Canada.

The national statistical agency reported that labour productivity jumped by 3.8% in the fourth quarter of 2020, compared with 2019, marking one of the largest increases since 1981.

According to its research, about two-thirds of the increase came from large variations in output, hours worked and productivity due to the pandemic.

“Industries that posted larger declines in output and hours worked in the first half of 2020, as a result of lockdown policies, also experienced larger rebounds in the second half of 2020, when many non-essential businesses reopened,” it said.

The remaining one-third of the recorded productivity growth came from a reallocation of labour toward industries engaged in essential activities.

“Although many of the shifts between essential and non-essential production activities reversed themselves over the course of 2020, when viewed over the whole year, the shifts accounted for about one-third of the strong labour productivity growth in 2020,” the study found.

“The overall positive structural-change effect suggests that hours have been reallocated to more productive industries, and non-essential activities are relatively less productive,” it said.

The question that remains to be answered is whether a longer-term shift to remote work will have a more durable impact on labour productivity. The early evidence is unclear.

“One possible permanent change associated with the pandemic is the widespread adoption of work-from-home arrangements,” the study said. “However, no conclusive evidence was found to show that working from home increases or reduces industry productivity performance.”

In fact, it found that “there is little correlation between an industry’s capacity for telework in 2019 and that industry’s growth in labour productivity in 2020.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.