In the early 1980s, the standard of living of Quebecers, in 2021 Canadian dollars, was just 5.8% behind the OECD average (of 19 member countries).
The situation has deteriorated greatly over the decades. In 2021, the delay was reduced to 20%. Our standard of living ($58,642/inhabitant) showed a difference of $11,956 per inhabitant compared to the OECD average ($70,598/inhabitant).
Compared to the Canadian average standard of living ($65,651/inhabitant), Quebecers were 12% behind in 2021, or $7,000 per capita.
And our standard of living gap between Quebec and Ontario was $5,960 per capita.
“Some 48% of this gap is explained by Quebec’s lag in productivity and the rest by the lower intensity of work and the employment rate,” explain the authors of the study. Productivity and prosperity in Québec, 2022 report just unveiled by the Center for Productivity and Prosperity at HEC Montréal (CPP).
What do researchers Jonathan Deslauriers, Robert Gagné and Jonathan Paré recommend to improve our lot?
“Given that the catch-up in terms of employment has long since been completed, and that the process of aging of the Quebec population is on the way to reaching its climax, productivity will be the only lever on which the Government of Quebec will be able to support to stimulate the growth of its economy and thus make up for the impressive backlog accumulated over the past 40 years. »
THE CHALLENGE
In 2021, the Quebec government granted some $2.4 billion in tax credits to businesses. This is equivalent to an amount, all things considered, twice the value of the credits offered by the Ontario government.
Was it well advised? Absolutely not, according to the authors of the annual review of the portrait of productivity in Quebec.
That is why they offer several recommendations to help the province improve its productivity performance.
“Without an in-depth reform of the many business support policies, not only will Quebec not be able to achieve its goal of equaling Ontario’s standard of living by 2036, but the province risks getting bogged down in the same spiral that has afflicted the Canadian economy since 2015,” argue Deslauriers, Gagné and Paré.
“In the short term, they add, Quebec risks hitting a wall if it does not undertake an in-depth reform of its industrial policy which, in its current form, targets the wrong targets. »
OUR PROBLEM ?
What is our big problem? More than 80% of the tax support granted to businesses by the Quebec government in the form of tax credits is irrelevant: the government assistance aims to stimulate employment in times of labor shortage when there is should rather stimulate competitiveness.
Consequences ? One, large companies benefit the most, to the detriment of smaller companies. Two, Quebec’s productivity is still seriously lagging behind.
THE SOLUTION ?
Quebec must review its industrial policy. Instead of paying out billions in tax credits, the authors of the study believe that the Quebec government should instead reduce the tax burden on businesses. This greater leeway would allow companies to compete “through a healthy mechanism of competition”, believe the authors of the study.
According to them, the issue of productivity is the only real lever for long-term economic growth that will allow us to eventually erase the economic backwardness accumulated over the past forty years.
And to do this, the Government of Quebec must provide more support for small businesses by improving the competitiveness of the tax system specific to them.
