The Role of Productivity in Long-Term Economic and Fiscal Projections for the Canadian Provinces and Territories, 2014-2038

This article presents long-term projections for labour productivity and labour supply growth for the provinces and the territories for the 2014-2038 period, and discusses their implications for budgetary balance at the provincial/territorial level. We find that under our realistic assumptions, most provinces and territories will not be able to meet the test of balancing revenue growth with growth in public spending without either raising taxes or cutting program spending. Given the relative distaste for higher taxes and spending cuts, provincial/territorial governments in Canada must find ways to boost productivity and labour supply growth, and hence revenue growth, to maintain fiscal balance to 2038.