Mar 24, 2025
AI as a solution to stagnant productivity
Artificial intelligence
Following several years of stagnant economic growth in Canada, experts are increasingly questioning the issue of productivity.
Among the factors that explain stagnant productivity, four seem to play a key role: lack of investment in production forces, insufficient adoption of technology, insufficient competition in certain sectors, and gaps in workforce training. Many are banking on artificial intelligence (AI) to solve this problem, and it does indeed present itself as a promising solution. But how? Let's see if it is possible for AI to address the current economic challenges of our country, where productivity has experienced worrying declines
Why is productivity stagnant in Canada?
In 2023, Canadian business productivity fell by 1.8%, marking the third consecutive year of decline. This is due to several factors: the economic recovery from the pandemic was slower than expected, inflation remained a pressure factor on the economy, high interest rates were implemented to control said inflation, and finally, labor productivity.
Productivity is measured by the value produced per hour worked. When labor productivity stagnates, it means that the amount of goods and services produced per hour worked is not increasing enough to support robust economic growth.
This trend is worrying because low productivity translates into low wages, reduced innovation and less competitiveness on the international stage.
What does this mean for the average citizen? Fewer job opportunities, stagnant wages, and a stagnant standard of living. On the other hand, increased productivity can improve working conditions, raise wages, and spur innovation.
AI as a solution
According to a PwC report, AI has the power to radically transform business productivity and GDP potential globally. The study estimates the potential contribution of this technology to the global economy at US$15.7 trillion by 2030. As for the GDP of local economies, it could reach 26% growth.
Improvements in labor productivity will drive the first increases in GDP. This is because by automating certain tasks and roles using AI, companies will be able to increase the productivity of their workforce and therefore generate more value more quickly. The study also shows that 45% of total economic gains by 2030 will come from advanced product personalization thanks to AI, which will stimulate consumer demand by better meeting their needs. These economic gains in North America will be 14.5%, which equates to a total of $10.7 trillion.
In Canada, adopting AI could reverse the trend of stagnant productivity. Why is this important? To strengthen competitiveness, spur innovation, improve operational efficiency, and create a more resilient Canadian economy. Furthermore, let's not forget that high productivity leads to higher wages and better working conditions for everyone.
Concrete improvements
A series of studies conducted last year showed how generative AI can boost the productivity of people in a variety of jobs across a multitude of industries. For example, economists at Stanford and MIT found that call center workers are 14% more productive when using AI-powered chatbots. There's also a 35% improvement in the performance of inexperienced and low-skilled workers.
In the manufacturing sector, AI optimizes production lines, reduces costs, and improves product quality. In the service sector, AI improves the customer experience by providing personalized recommendations and automating administrative tasks.
Better quality products, more efficient services, and reduced costs are all direct benefits of adopting AI.
Creating new economic opportunities
Artificial intelligence is much more than just an automation tool; it also has a significant impact on the local economy. By stimulating innovation, it creates new economic opportunities and revitalizes entire sectors. For example, the often more traditional manufacturing industry is experiencing a renaissance thanks to AI. Smart factories use it to automate repetitive tasks and optimize their operations.
The cleantech sector is also benefiting greatly from advances in AI. Solutions are being developed to optimize energy consumption, reduce carbon emissions, and manage natural resources more efficiently. These innovations contribute not only to economic growth but also to the creation of a more sustainable and resilient economy.
AI therefore represents a unique opportunity to overcome current economic challenges and improve living standards. Sweden, which is renowned for its high productivity largely due to its rapid adoption of advanced technologies, is a testament to this. Over the past two decades, labor productivity in Sweden has increased significantly, and it is expected to grow by 37% by 2035 thanks to AI.
How does this translate? You guessed it: higher wages improve living standards, and increased innovation makes Swedish companies more competitive globally. As a bonus, AI is even being used to improve the efficiency of public services, such as healthcare and education, benefiting the entire population!
We could do the same thing in Canada. Is this a vision of the future that resonates with you?
