**Dawn Desjardins, Chief Economist at Deloitte**

Canada’s productivity has deteriorated to just 71% of U.S. levels — a decline from about 88% four decades ago — underscoring what Dawn Desjardins, Chief Economist at Deloitte, called “a serious and persistent challenge” for the country’s competitiveness.

“As an economist, I think of productivity as how much is being produced per hour worked,” Desjardins told MPs on the House of Commons Industry and Technology committee this week. “It’s well known that Canada’s productivity performance has deteriorated and our country has failed to keep up with most of our trading partners.”

She attributed the underperformance to a combination of weak business investment, structural inefficiencies and slow technology adoption. “The composition of our economy, which relies on small- and medium-sized enterprises, may also have contributed to this lower productivity,” she said.

Desjardins said high taxation, complex government incentive programs and regulatory burdens continue to impede capital formation. “We know there's not one policy or one change that's going to transform our economy,” she said.

However, she argued that reducing interprovincial trade barriers could deliver an immediate and measurable boost to economic growth. “If we could completely phase out interprovincial trade barriers over the next five years, that could generate an additional $881 billion in economic output by 2040 and create over 100,000 new jobs in the process,” Desjardins told the committee. “Clearly, the longer we wait and leave these trade barriers in place, the more money we leave on the table as a country.”

Building and workforce ambitions

Desjardins also identified Canada’s housing and infrastructure goals as critical levers for improving productivity. “Our building ambitions, from homes to national infrastructure, is a key element to improving productivity,” she said. “Affordability challenges act as an impediment to attracting labour in Canada in places where we need it most.”

Meeting the government’s construction targets will require substantial labour expansion. “Our modelling estimates that just with the status quo, Canada would require as many as 500,000 workers to join the construction industry if these ambitions are going to be realized,” Desjardins said.

To fill that gap, she called for a “multipronged approach” that includes targeted immigration, faster credential recognition and greater workforce diversity. “The objective should be to get newly-arrived skilled workers into work sites within weeks, not years,” she said. “Encouraging women and under-represented groups to pursue careers in the trades is another option — women make up only about 13% of the construction workforce.” She also suggested “funding accelerated programs at colleges that fast-track new entrants into high-demand skills.”

The promise and risk of AI

Desjardins highlighted artificial intelligence as both a potential driver of growth and a disruptor of labour markets. “Our research suggests AI adoption could add almost $300 billion to Canada’s real GDP cumulatively over the next 10 years,” she said. “While this would boost our economy and has the potential to improve productivity, there’s also potential for some negative impact on labour markets.”

She warned that automation could “hollow out mid-income jobs” by replacing clerical, accounting and customer service roles. “It’s essential that governments design learning and development strategies that both reskill workers displaced by the recent economic shocks and AI, and upskill workers to better leverage new technologies,” she said.

Falling behind the U.S.

When pressed on Canada’s widening investment gap with the United States, Desjardins acknowledged the growing risk of long-term divergence. “For each dollar a U.S. company puts behind a worker, a Canadian company puts about 52 cents,” she said, citing a C.D. Howe Institute study. “When we look back to where we were investing in 2015, we’re not back there right now. We had anticipated that, but then we’ve had this interruption.”

She cautioned that without policy and regulatory reform, Canada could “risk continuing to lag and fall further behind.” Businesses, she added, are hesitant to invest amid “impediments to actually getting that return on investment quickly.”

Desjardins also pointed to trade uncertainty and geopolitical instability as major sources of hesitation for Canadian firms. “It is such an uncertain environment,” she said. “Whether or not you have a deal one day and not the next is certainly within the realm of reality,” she said.

The Bank of Canada’s latest survey, she noted, shows that firms are “sitting back because we are just unsure.” That hesitation has translated into firms prioritizing “maintenance investment” over expansion. “It’s very concerning,” Desjardins admitted, “but understandable. Until we have a sense of what that playing field is going to look like, businesses are trying to get a better read on how this is going to play out.”

Ultimately, Desjardins said the stakes go far beyond balance sheets. “Transitioning to a more productive economy is critically important as it will boost wages and living standards for all Canadians,” she said.

“Businesses are hesitant about putting money to work,” she concluded, “and I think that’s really what we have to work on.”