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April 18, 2017MULTIFACTOR PRODUCTIVITY GROWTH IN THE PROVINCES, 2015 Statistics Canada has released its provincial multifactor productivity and related variables for the business sector for 2015. Multifactor productivity measures are derived using a growth accounting framework that includes measures of how capital input and skills impact labour productivity growth. The residual portion of labour productivity growth that is not attributable to other factors is the multifactor productivity(MFP) measure. The multifactor productivity captures the efficiency by which inputs are used in productions, these can be associated with technological change, organizational change or economies of scale.
Labour productivity growth grew 2.3 per cent in Nova Scotia in 2015 and the Maritime provinces saw faster growth than other provinces. Labour productivity was down in Newfoundland and Labrador, Quebec, Saskatchewan and Alberta in 2015.
The growth in labour productivity can be decomposed into contributions from capital intensity (capital investment's effect on productivity), labour composition (education and experience effect) and the multifactor productivity that accounts for all other factors including technological change and changes in economies of scale. In 2015, lower multifactor productivity accounted for most the declines seen in Newfoundland and Labrador, Saskatchewan and Alberta while Quebec labour productivity declined from lower capital intensity. Nova Scotia labour productivity growth was the result of increases in multifactor productivity (+2.1%) and capital intensity (+0.2%) and no change in labour composition (0.0%).
Across Nova Scotia industries, average labour productivity growth was 0.2 per cent in the goods sector and 3.2 per cent in the services sector in 2015. Productivity in the agriculture, forestry and fishing rose 8.0 per cent with an increase in multifactor productivity. Mining and oil and gas extraction productivity was up with an increase in the capital intensity outweighing a decline in multifactor productivity. Service sector productivity was up due to multifactor productivity increasing in all subsectors except accommodation and food services. Capital intensity rose 0.8 per cent in the services-producing sector but labour composition was unchanged.
Over the period 1997-2015, Nova Scotia's labour productivity grew at an annual average rate of 0.9 per cent. The fastest labour productivity growth was in Manitoba and Newfoundland and Labrador while the slowest was in Alberta.
Over longer periods of time, the composition of labour productivity growth looks different than for a single year. For all provinces, except Ontario, the largest source of labour productivity growth over the 1997-2015 period come from growth in capital intensity. Changes in labour composition on average make a small and positive contribution to labour productivity. Multifactor productivity made small positive contributions in most provinces but offset significant portions of growth in Saskatchewan and Alberta.
From 1997 to 2015, labour productivity increased 1.4 per cent per year in the goods-producing sector and 0.7 per cent per year in the services-producing sector. Productivity in the agriculture, forestry, fishing and manufacturing sector grew due to multifactor productivity while mining, oil and gas extraction and utilities saw growth coming from greater capital intensity. Services-producing labour productivity growth was the result of increase in capital intensity (+0.8% per year) and labour composition (+0.2% per year) offsetting a decline in multifactor productivity (-0.3% per year). Capital intensity and labour composition increased on average in all service sectors over the 1997-2015 period.
Estimates of multifactor productivity growth in the provinces, 2015
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