August 8th, 2002
don't want to work
I want to bang
on the drum all day” – Todd Rundgren, Bang On The
Drum All Day
have a small problem.
According to everyone east of Cranbrook in our
fair country, we live in Lotusland.
We drive recycled aluminum cars that run on
soybean oil. We
wear sandals. We elect the most bizarre political characters in the
country, moving from scandal to election to scandal.
We all play the guitar, have long curly hair,
many parts of us are pierced and we smoke a LOT of weed
while floating in sea kayaks.
But most relevant to today’s discussion… we
only work a few hours a day because we are a) more
interested in the things listed above or b) unionized.
this stereotype has leaked south.
The number one reason for not
getting excited about BC’s technology industry given
by US VCs, tech executives and type A Canadians who left
to join them in the Silicon Valley is… work ethic.
In a nutshell, we are viewed as less committed to
the company, slightly lazier, somewhat flippant and
definitely less productive than our American cousins.
The lack of “appropriate” work ethic leads to
less exciting opportunities and innovation on the whole.
Now this blanket generalization is just that… a
we have our successes and will continue to have them.
But, I am not kidding here.
This Lotusland thing seems to have gone a bit
there anything to this notion that we don’t work hard?
productive are we?
Are we less so than the US or elsewhere?
can we do to a) catch up and b) get rid of the
you asked. It
just so happens that this is being studied to death
right now by those always exciting people to meet at a
party: the economists.
economist joke: A man is flying a hot air balloon around
the world but gets caught in a fog.
He descends to see if visibility is better near
the ground. He
spots a man walking and yells to him.
“Excuse me sir”, he says, “Can you tell me
where I am?” The
man ponders the question from the balloonist for a
minute and then responds, “Well… you are in a
balloonist, without missing a beat says, “You must be
an economist.” The
man on the ground looks surprised and says, “Yes, yes
I am. How
did you know?” The
balloonist said, “Well, you are absolutely accurate,
but completely useless.”}
only reliable measure that we have to see what we can do
with our time spent working is the measure of
productivity that Stats Canada and the Bureau of Labor
Statistics in the US defines as the unit of worker
output per hour worked. The economists chew on these numbers when they are releases
to see how effective an economy is at using its workers. There is also a direct link between productivity and standard
of living, so this means far more than just how sexy our
tech industry is.
the hours worked in a given month go up and the dollar
value of the goods shipped (or served as in a service
business) remains the same, then productivity will drop.
Therefore, if the hours remains the same and the amount
of goods shipped goes up, you get productivity
happens when workers get more efficient.
And they get more efficient in a bunch of ways,
but better management, more experience, better use of IT
and shorter lunch breaks all contribute to increased
is a good thing for the economy because if we make more
with less, we can reap either more profit for
shareholders or more time off to do other things (aha!
Keep this little point in mind for later).
the exchange rates and other complicated assumptions are
factored in, you can compare productivity between two
regions or two economies.
Based on an average hours worked per week of 34
hours in both the US and Canada (across all industries),
worker productivity in Canada is about 10-12 percent
less than in the US in 2002.
Worse, the gap between the US and Canada has been
steadily rising since 1994, with one minor improvement
for Canada in 2001. The most recent productivity change numbers were released
today in the US and they shot up 5.7% in the second
quarter (meaning that US workers are putting out a lot
more per worker per hour than in the first quarter).
Canada’s productivity dropped 0.2 percent in
the first quarter as the exchange rate affected output
and our economy slowed its growth.
based on overall ability to make stuff with fewer hours
worked, the perception that we are not as productive as
US workers over the past decade appears to be true.
economic data points:
a unit labour cost is a measure of how much you
have to pay to a given amount of output.
So, like golf, you want to see this number
trending down. The
most recent data shows the US and Canada going in
opposite directions. The US unit labour cost dropped in the second quarter for the
first time in a year and a half.
The Canadian unit labour cost shot up by 7% in
the first quarter (damn exchange rate, but also too many
workers and not enough output).
really interesting about the productivity gap between
the US and Canada is the reasons for it.
Andrew Sharpe just published a paper for the
Centre For The Study Of Living Standards (http://www.csls.ca)
on his reasons for Canada being behind.
Four of the following commonly discussed reasons
for the US being ahead of Canada are what Dr. Sharpe
concluded make up the biggest part of the gap.
The other four are not significant factors in
explaining this gap.
Go ahead and guess which four and remember, we
are talking about why US workers appear to be more
efficient than ours –
Tax rate differences
Lower R&D spending
Over regulation of business in Canada
Under developed high tech sector
Fewer university and PhD graduates
Limited scale of businesses in Canada
Socialist leaning policies in Canada
you peeked and looked down here. His main reasons
included 2, 4, 6 and 7 and not the others.
Not taxes, not unions, not social policies and
not over regulation.
he’s nuts? Well, six countries with higher tax rates, more social
programs and larger percentage of unionized workers have
kicked our little red and white butts in productivity
over the past decade along with the US.
get back to the “work ethic” label.
If you read Dr. Sharpe and think about his lucid
conclusions, he is saying that we don’t transfer the
most efficient best practices to our workers from abroad
because our companies don’t have the scale and the
lower R&D spending doesn’t encourage home grown
innovations in efficiency. He argues that the high tech boom in the US in the late
90’s showed how a country and its workforce as a whole
benefited from a hyper-efficient telecom and high tech
can’t conclude, however, that their high-tech workers
are more efficient or harder working or more productive
than our high-tech workers.
That study hasn’t been done.
But their mix of industries (more high tech as a
percentage) led them to higher productivity.
yes we are less productive than the US and need to
improve this immediately. We want to do more with less
as an economy so that we can choose whether to work
until midnight to make more profits or go enjoy our
lives after an eight hour day forcing companies to hire
more of us working eight hour days in order to make more
profits. The economists recommend that high tech needs
to be more important and R&D spending and university
graduates need to increase. I’m all for that to improve productivity.
about this work ethic then?
I think it partly comes from a mis-informed
understanding of the productivity gap issue.
I think it is fed by a lifestyle that we all
choose to live here in this incredibly beautiful patch
of the world. I
also think that people can work hard and reach their
milestones better in BC, because they don’t want to be
in the office on the weekend missing a chance to enjoy
in Lotusland, in the tech industry, it’s a perception
thing that we don’t work as hard.
I think a study of productivity in the high tech
industry would show that we get the job done in the
hours that we need.
Then we could use that study to counter the mis-perceptions
and show them that an efficient workforce can wear
sandals, play the guitar and find the time enjoy the
Premier’s Tech Council Gets Real
– I am very pleased that the PTC is being headed up by
Jim Mutter, founder of Jalaam and former Fasken
Martineau lawyer for tech companies in town.
Jim is a good listener, a great relationship
builder and stands a very good chance of getting the
right information about the industry and its needs in
front of the policy makers in Victoria.
I also think that Jim has his eyes wide-open as
to the realities of the political process.
We need some of the folks that have been in the
background, quietly observing and experiencing the
growth of the technology industry to approach Jim with
their ideas instead of the windbags like myself who
everyone has heard already.
What Do You Think? Talk
Back To Brent Holliday
Something Ventured is a bi-weekly column designed
to supplement the T-Net British Columbia web site with
some timely, relevant and possibly irreverent insight
into the industry. I hope to share some of the
perspective and trends that I see in my role as a VC.
The column is always followed by feedback (if its
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