Can artificial intelligence solve Canada’s productivity crisis?

AI is being held up as a panacea, but adoption may be easier said than done

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Is artificial intelligence the solution to Canada’s productivity woes? That’s a question that has been widely discussed since concerns about the country’s lagging per capita output were thrust into the spotlight in May by Bank of Canada senior deputy governor Carolyn Rogers, who declared that things had reached “emergency” levels and required the attention of policymakers.

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Since then, proposed solutions have varied from better investments in job retraining, better regulatory and tax certainty for businesses and more competition across a range of industries.

But accelerating the adoption of AI, which appears poised to become one of the most transformative technologies of our time, has been among the most promising and popular proposals. In a report in May, TD Bank estimated that generative AI could add as much as eight per cent to Canada’s GDP over the next 10 years, if widely adopted throughout the economy.

A recent study from the Conference Board of Canada estimated that generative AI has the potential to boost GDP by nearly two per cent, before new categories of products and services were taken into account. It also found that three quarters of those businesses that have already adopted AI into their business models said it made them more competitive.

“We have this generational opportunity right now and it’s really a call to action,” said Alain Francq, director of innovation and technology at the Conference Board of Canada. “I think the bells are ringing right now, that we have to find our place in the AI world.”

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The potential benefits of AI are hard to argue with. Generative AI can streamline tasks and automate content generating processes. Google LLC estimates that generative AI could save the average worker 100 hours per year.

Nick Romano, chief executive and co-founder of Deeplite, a Toronto-based AI company whose clients consist mainly of semiconductor companies, said using his AI agent helps him save time with his own business. Translating complicated research at his firm into internal marketing materials now takes no time at all.

Reasons to be skeptical

“What would have taken weeks between marketing and the research team going back and forth, I can do that in a morning now,” Romano said. “By just feeding the information into my AI agents.”

On a larger scale, there are companies such as Daisy Intelligence, a Toronto-based AI company that helps retail clients and the insurance industry find cost savings and fraud, using a reinforcement learning AI system.

“In retail, we are able to a grow a retailer’s total company sales by five per cent,” said Gary Saarenvirta, Daisy’s chief executive and founder. “Our largest client is a $30-billion revenue client, using AI we have been able to grow their sales north of $1 billion a year.”

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At the same time, there are reasons to be skeptical that the widespread adoption of AI will be an easy fix.

Despite being home to the world’s most eminent AI researchers, Canada currently sits below its peers in the rate of AI adoption among businesses.

A Statistics Canada report in February found that just one in 10 businesses plan to use generative AI.  Among our peers in the Organisation for Economic Co-operation and Development (OECD), Canada ranks in the mid-pack.

Companies face a range of challenges when it comes to AI adoption, some of which may depend on the company size. While small businesses face resources issues, bigger companies face issues with integrating the technology on a mass-scale.

“Based on the data, it’s usually large companies that have the greatest challenges in adopting new technologies,” said Patrick Gill, senior director of the Business Data Lab at the Canadian Chamber of Commerce. “Think about the change management involved when you’re trying to get large workforces to try a new app.”

Hesitancy to adopt AI could also be thanks to distrust among Canadians. A global IPSOS poll published last year shows Canadians are more nervous about the adoption of AI than their global peers, ranking 29th out of 31 countries when it comes to the belief that the technology has more benefits than drawbacks.

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Skittish Canadians

That skittishness is not necessarily unfounded, Francq said.

“One of the primary challenges is concerns around data privacy and security,” he said. “AI is very much about trust, and trust and data cut across everything from security to data analytics to privacy to ethics.”

Another worry tied to the adoption of AI is the potential for job disruption.

Future Skills Centre, a research institute founded by the Government of Canada’s Future Skills Program, predicts 22 per cent of jobs are at high risk of being automated.

Saarenvirta acknowledges the impact his services have on the people working at companies he partners with.

“My experience, every client we do it at, we get violent pushback from the people who want nothing to do with it because they see the writing on the wall,” he said. “Not that our goal is to replace people, I don’t want to do any such thing, that’s just a reality of the technology.”

Romano thinks AI adoption will have a direct impact on certain jobs but will open doors for new types of jobs.

“If you’re in a role where it’s a highly repetitive manual process that has been screaming for automation for a while, there will be vulnerabilities,” Romano said. “But education is one of the primary gaps we have here. People aren’t afraid of it, they just have no idea how to use it, and how to benefit from it.”

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Francq thinks this disruption will only re-emphasize the need for serious investments in skills training.

“You can have the greatest ideas, the greatest technology, even the greatest government framework for adopting AI,” Francq said. “But unless you have the workforce of the future to implement it and adopt it and apply it, you’ll be dead in the water.”

Until all those boxes can be ticked off, Canada’s productivity rate may continue to face challenges.

The Bank of Canada says the country lags in investments for intellectual property, machinery and equipment and skills training for a growing labour force.

Canada is the second-least productive country in the G7, with productivity growth of just 0.9 per cent in the last 10 years, according to the Canadian Chamber of Commerce.

“The last 10 of 12 consecutive quarters we’ve actually seen productivity decline, our productivity levels haven’t been this bad since the 1990s recession,” Gill said. “We’re now in a situation where you’ve got our central bankers, not known to be alarmists, calling this an emergency situation.”

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The International Monetary fund predicts Canada’s GDP per capita for 2024 will grow by 1.4 per cent, compared to 2.1 per cent for the United-States.

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Without incorporating artificial intelligence, the country may have trouble reversing those trends.

“Firms and other organizations that are innovative or that figure out how to innovate and adopt emerging technologies will be more competitive and will position themselves for growth in the future,” Francq said.

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