Workers looking at a computer.

Are Canada’s workers facing a capital crisis?

For the first time since the 2008 economic crisis and recession, capital investment by Canadian businesses has declined according to a new C.D. Howe Institute report, A Crisis of Capital: Canadian Workers Need More Tools, Buildings and Equipment.

According to the report, Canada is slipping behind other developed nations after several years of improvements in business investment per worker, dropping from $14,300 of new non-residential business investment per worker in 2014 to $13,200 in 2015. The amount of new capital investment by businesses is seen as a key indicator of future prosperity for both businesses and workers, where increased fixed investment typically means more productive and better paid employees.

Regionally, Western Canada saw the lowest per-worker investment in Canada for 2015. After a year of flat investment growth in Alberta and Saskatchewan in 2014, the recent plunge in commodity prices, particularly for oil, is expected to cut per-worker investment in these provinces by more than 10 percent in 2015. Interestingly, the same cannot be said for Newfoundland and Labrador, where total capital investment is expected to be higher in 2015 than it was in 2014.

The authors of the report emphasize that investments per worker naturally rise and fall with economic cycles and trends that favour some industry sectors more than others. What is troubling to the authors, however, is the break from the historical trend of Canada closing the gap on investment per worker compared to the United States. In 2012, Canadian workers saw 78 cents of new investment for every dollar garnered by US workers. In 2015, however, Canadian workers were likely to receive only 69 cents of new investment for every dollar enjoyed by US workers. This widening gap will have an impact on productivity and innovation, two areas where Canada needs to be more competitive.

This post first appeared in TINAN 71. Subscribe to TINAN for the latest economic development news and resources.