Newfoundland and Labrador’s labour productivity leads the country, fuelled by the oil boom of the last decade, according to a report coming from the Centre for Applied Research in Economics (CARE) at Memorial University.
The report is the first thing to come out of CARE since its inception last fall, and it looks at productivity in the economy.
“Productivity is a very useful concept. In the long run, it is the driver of growth in living standards,” said Andrew Sharpe, one of the study’s authors.
“Regular people should care about productivity growth. It determines their potential real wages since it determines the amount of real output that an hour of work can produce.”
Productivity is essentially a measure of how efficiently an economy works, turning inputs like natural resources into outputs like products to sell to the rest of the world.
Sharpe said oil-producing economies tend to have very high productivity; it takes a relatively small labour force to pump it out of the ground and it’s valuable to sell.
But if the oil dries up, then the productivity and the economic benefits that go along with it could go away, too.
“If and when the oil runs out, Newfoundland and Labrador will be in trouble. Government revenues will drop. High-wage employment opportunities will decrease,” Sharpe said.
Memorial University economist Doug May said with productivity and wealth tied to offshore oil production, people should definitely be worried about what may happen when it runs out.
“You always wonder if, in fact, in the longer run is it going to be another Newcastle or Detroit or something like that,” he said.
But just because it’s only a small number of workers directly employed in the oil industry. May said that doesn’t mean the wealth and productivity from the oil boom doesn’t filter out into the rest of the province.
“When you look at the money coming in from oil, even before you get it in you’ve got to spend on increases in civil service salaries, new hospitals, new schools, repaving of roads. That’s got to have a real impact on the economy, and I think it has,” he said.
“I think the real story here is the extent to which it has spread through the economy.”
CARE is aiming to produce more Newfoundland and Labrador-oriented economics research.
“We can deal with lots of esoteric academic games and do things that get published in mainstream journals, but the kinds of things that are interesting and important here might not get the attention that they otherwise should,” said MUN economics professor Wade Locke.
“If you do research for us, we’ll let you publish it anywhere you want to. The only thing we’ll say is that we’ll put it on our website. It’s important for us to put the information out so that people can use it if they want to use it.”