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Increasing productivity as a solution to the labour shortage

Montreal, January 31, 2023 – In order to alleviate the lack of labour, the Quebec government should lower corporate taxes, which would stimulate investment in productivity, according to a new study published this morning by the Montreal Economic Institute.

“To address the labour shortage, there is a solution we don’t hear enough about: increasing productivity,” says Nathalie Elgrably-Lévy, senior economist at the MEI and the author of the study. “Instead of focusing on hiring, the government should explore productivity gains in order to meet our labour needs.”

In terms of labour productivity, Quebec lags 8.2% behind Ontario, and 11.4% behind the Canadian average, according to data from Statistics Canada.

According to the economist, in order to catch up to the Canadian average within 10 years, Quebec’s productivity would have to grow over twice as quickly as it is increasing at the moment.

As the study points out, the economic literature shows that there is an inverse relationship between the level of investment in productivity and the level of corporate taxes.

The author therefore recommends that the government reduce the tax burden to stimulate investment in productivity.

“By reducing corporate taxes, Quebec would let our companies keep the funds required for the investments they need to make in productivity,” says Ms. Elgrably-Lévy. “Quebec will not catch up to Ontario by throwing subsidies at a handful of companies, but by allowing all of them to develop.”

The MEI study is available here.

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The Montreal Economic Institute is an independent public policy think tank. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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