Canada Must Revolutionize Education to Boost Productivity

Canada is grappling with a significant productivity crisis that threatens wages, competitiveness, and long-term prosperity. Currently, Canadian productivity lags behind the United States by 28 percent and ranks 18th among the countries in the Organisation for Economic Co-operation and Development (OECD). This gap in productivity is vital, as it directly influences inflation and income, impacting every Canadian citizen.

Productivity hinges on three key factors: robust capital investment, a supportive business environment, and, most importantly, a workforce equipped with the necessary skills. This human capital encompasses the knowledge, skills, and capabilities present within the workforce. Building and nurturing this capital is a shared responsibility among families, educators, employers, and policymakers, starting from early life and continuing throughout various learning experiences.

The pressing question is whether Canada’s current educational framework is adequately preparing its citizens for the challenges that lie ahead. Researchers in management and economics, as part of The Productivity Project, have examined how Canada can better develop its human capital, collaborating with organizations such as the Alberta Centre for Labour Market Research and the Canada West Foundation.

Challenges in Post-Secondary Education

In Canada, post-secondary education plays a crucial role in shaping human capital. Approximately 63 percent of the population holds a post-secondary qualification, significantly exceeding the OECD average by 22 percent. Furthermore, Canada invests 20 percent more in post-secondary education than the OECD average. Despite this investment, the country faces a troubling trend of graduate underemployment, with the number of unemployed degree holders surpassing available jobs requiring such qualifications by a factor of five.

Compounding this issue is a persistent mismatch between the skills that Canadian workers possess and those demanded by the economy. Research indicates that the most significant shortfall lies in foundational competencies, particularly adaptability—the ability to learn, unlearn, and relearn. Literacy is a critical component of adaptability; while Canada scored above the OECD average in a recent assessment, only slightly more than half of the workforce can meet the increasing literacy demands of most jobs. A mere one percent improvement in literacy could potentially enhance productivity by up to five percent.

As artificial intelligence and automation rapidly evolve, the skills gap will only widen, placing greater pressure on the workforce.

Rethinking Education for a Modern Economy

Demographic shifts further complicate Canada’s productivity challenges. The nation’s education system, rooted in the Industrial Revolution, needs to adapt to a society where life expectancy is projected to be 83 years for those born in 2024. This extended lifespan leads to longer working lives, with 40-year careers becoming the norm. Yet, Canada continues to allocate $60 billion annually to a post-secondary education system that primarily caters to young adults rather than supporting lifelong learning. Currently, 83 percent of post-secondary students are under 29 years old, and 67 percent are under 25.

To effectively address its productivity challenges, Canada requires a paradigm shift in human capital development. The initial step involves moving away from the traditional education model and asking a fundamental question: what is the most effective way to unlock the productivity potential of all Canadians?

A recent series of reports titled Productivity and People from The Productivity Project has explored this question. Two key conclusions emerge: first, achieving a true paradigm shift necessitates collaboration among policymakers, employers, credentialing bodies, learning providers, and individuals. Second, learning pathways are diverse, with most occurring outside traditional classrooms in workplaces, community organizations, and other informal settings.

Accelerating this shift presents Canada with a unique opportunity to enhance productivity by leveraging existing learning assets. The technology sector’s past challenges mirror those facing today’s post-secondary education system. Open innovation, which promotes ecosystem collaboration, has proven effective in driving progress. Open learning can similarly unlock a broader educational ecosystem, empowering learners to explore varied pathways tailored to their individual needs.

The current post-secondary landscape, controlled largely by public institutions, often lacks the necessary flexibility and innovation. This rigidity hinders the creation of a dynamic and inclusive lifelong learning system. A shift towards open learning could facilitate a more adaptable framework that better serves the diverse learning needs of Canadians.

Additionally, unbundling learning pathways from the recognition of qualifications can further enhance this model. Currently, a bundled four-year degree costs approximately $75,000, resulting in nearly one-third of students failing to complete their degrees. An unbundled approach would allow individuals to select their learning paths, with outcomes certified by independent authorities recognized by provincial governments.

Canada’s historical experience with unbundling can be seen in its driver licensing system, which allows individuals to learn at their own pace, followed by standardized assessments to determine competence.

To overcome its productivity challenges, Canada must fundamentally rethink how it develops its human capital. The nation’s future prosperity hinges on leaders willing to embrace a new paradigm that aligns with contemporary realities and anticipates future opportunities.

Janet Lane, a senior fellow at the Canada West Foundation, co-authored this article. David J Finch and Joseph Marchand are affiliated with relevant research initiatives supporting these findings.