Canada wisely using resource riches to feed education

Much ink has been spilled of late on Canada's growing economic divide, as western provinces benefit most from high global prices for commodities like oil and potash, while manufacturers in Ontario and Quebec are hamstrung by the sky-high currency that comes with those.

In Central Canada, some economists worry that a variation of the dreaded "Dutch disease" may be settling in, where the energy-fuelled loonie makes it hard for exporters of anything else to make a go in foreign markets, and threatens to depress employment in many export-dependent industries for years, if not decades.

But the notion that too many of Canada's eggs are being put into the resource basket – laid bare as Ontario Premier Dalton McGuinty and Alberta Premier Alison Redford duked it out over Canada's "petro dollar" and its impact on manufacturers – is hardly black and white. For example, as Economy Lab blogger Stephen Gordon (a Laval University professor) points out, the resource boom from 2002 to 2008 pushed unemployment down across the country, offsetting losses in manufacturing and, before the financial crisis anyway, nudging up wages even in Ontario.

Still, it's clear that over time, the businesses in Central Canada that survive and profit will be the ones that figure out how to piggyback on gains in the resource sector, finding ways to ensure they are part of the resource supply chain and producing goods that are useful to that industry, on top of high-value products for customers around the world.

A crucial component for making this work will be an adaptable, highly educated and highly skilled work force that can adapt quickly to fill a variety of needs.

According to a new study from the Organization for Economic Co-operation and Development, released Monday, Canada is in a better position than most to figure out how to thrive over the long haul because it is one of the few resource-rich nations on the planet where education and skills have not been shortchanged.

Canada, Australia and Norway, the OECD says, outperform the vast majority of oil-producing nations in learning outcomes at schools. In fact, those three countries were the exceptions in a group of 65 that the OECD looked at, which found a "significant negative relationship between the money countries extract from national resources and the knowledge and skills of their school population."

In other words, Canada is among a select group of countries positioned to prosper even some time way down the road, when finite resources like oil start to become less important to the economy.

"Exceptions such as Canada, Australia and Norway, that are rich of natural resources but still score well on PISA (Program for International Student Assessment), have all established deliberate policies of saving these resource rents, and not just consuming them," said Andreas Schleicher, deputy director and special adviser on education to the OECD secretary-general. "Today's learning outcomes at school, in turn, are a powerful predictor for the wealth and social outcomes that countries will reap in the long run."

Countries with few natural resources – like Israel, Finland, Singapore and Japan – have high education scores, the OECD notes, "at least in part because the public at large has understood the country must live by its knowledge and skills and that these depend on the quality of education."

In general, countries where this is the opposite tend to be in the developing world. However, Mr. Schleicher notes that there is a message in the study for struggling developed countries, too, whether they're endowed with resources or not.

"Without sufficient investment in skills, people languish on the margins of society, technological progress does not translate into productivity growth, and countries can no longer compete in an increasingly knowledge-based global economy," he said. "The toxic co-existence of high unemployment and skills shortages in many countries today illustrates that producing more of the same graduates is not the answer."

Indeed, business leaders in Canada argue that a greater national emphasis on skills and training in the so-called "technical trades" – and perhaps a bit less emphasis on liberal-arts degrees that are becoming harder to translate into jobs – is desperately needed. This, they say, could go a long way toward matching the labour needs of resource companies and the employment needs of laid-off factory workers, while ensuring Canada can capitalize on new opportunities in emerging markets.

Meanwhile, Statistics Canada on Monday released a short study on labour productivity that supports the notion Canada has been careful to not approach its resources as a never-ending cash cow that the country can coast on indefinitely. The study found that from 1997 to 2010, gains in productivity were primarily driven by "capital intensity" – investments in plant, machinery and equipment. Nonetheless, Statscan said, every province except British Columbia saw gains come from investments in "human capital," too, which refers to the amount invested in educating workers and boosting their skill sets.