Politicians and business leaders are touting AI as the fix for Canada’s sluggish productivity growth, and some firms rolling it out are already claiming tangible returns. To capitalize on the technology, however, many more companies must break the habit of underinvesting in the tools and training workers need. 

Canada failed to take full advantage of the industrial revolution ushered in by computers and the internet, former Bank of Canada governor Stephen Poloz told an audience of executives in the fall. To make up ground, “by far the biggest potential move for Canada is to fully embrace AI.”

That will require many firms to change their approach. Take robots, which can be operated and maintained by human staff rather than simply replacing them. Canadian installations of automated machines in factories actually fell last year, and the country lags other manufacturing economies when it comes to adopting the technology.

Magna International is an exception. The Aurora, Ont.-based auto parts maker plans to make about US$1.5 billion in capital investments this year. “My job is basically productivity,” said Todd Deaville, vice-president of advanced manufacturing innovation. 

The firm’s employees are used to working alongside robots, and it has developed procedures to ensure new machines are integrated smoothly and generate real returns, Deaville claimed. For example, Magna recently installed an AI vision system that can identify parts, perform inspections and guide the automated arms that handle them. The technology has boosted productivity on the assembly line, and will let the firm put its existing robots to work on other tasks, according to Deaville. 

Magna works with a range of staff to bring new technology into its facilities. “We’ve got PhDs in AI working with controls engineers and shop-floor, material-handling people,” Deaville said. In addition to in-house training, the firm sometimes sets up programs at local colleges and universities to teach workers specific skills. 

At Toronto-headquartered Manulife, the automation is digital rather than physical. The insurance giant has rolled out an in-house AI copilot to all its employees, and recently gave the system new language capabilities. “We operate in many Asian countries, so translation is an everyday activity,” said global chief AI officer Jodie Wallis.

Manulife also has 70 other AI applications for specific tasks like summarizing conversations in call centres, generating sales emails or assessing the security standards of potential software suppliers. 

Staff have used the AI modules in Manulife’s learning management system tens of thousands of times, Wallis said. The firm also runs “prompt-a-thons,” sessions where her staff work with teams to identify specific tasks for which they could use the AI copilot tool. 

Manulife soon plans to let employees build their own AI agents, automated assistants that can go out and do tasks themselves rather than just answering questions from humans. AI is developing so quickly that Manulife has set itself short timelines to launch new tools, train staff and change its internal processes. “Nothing is longer than 12 weeks, and it has to be done all at once,” said Wallis.

A lack of corporate capital investment and skills gaps in the labour force have also contributed to Canada’s productivity challenges. “Workers have to work more with fewer tools, and are expected to produce more in order to continue our economic growth,” said Mawakina Bafale, a research officer at the C.D. Howe Institute. 

The think tank estimates that Canadian companies invested just 55 cents in new capital per worker for each dollar spent by U.S. firms. The Canadian figure also trailed the average of other OECD countries. The gap is even larger for technology investments like machinery and equipment, and intellectual property products including software.

Skills shortages accounted for about seven per cent of Canada’s productivity gap with the U.S. between 2018 and 2023, according to an August 2024 report from the Conference Board of Canada and the Future Skills Centre (FSC). Canadians typically score well on literacy, numeracy, problem-solving, communication and collaboration, but the country doesn’t have enough people who specialize in health care, trades and technical occupations. 

People already in work have a harder time getting guidance on what training to take to boost their careers than those in the education or unemployment system, said Noel Baldwin, executive director of the FSC. “We’re not a particularly strong lifelong learning society.”

The FSC’s surveys suggest that this is because many workers in Canada don’t feel they have the time or money to acquire new skills. The 2019 federal budget established a new program that gave workers a tax credit for the cost of training and let them collect employment insurance while they learn, but uptake has been low. The finance department estimates the credit will cost it $290 million this year. That’s about half the $587 million annually that Ottawa had set aside.

Baldwin and Bafale said that Canada’s large number of small firms contributes to the problem of low spending on capital and training, as many can’t afford it.

Bafale called for policymakers to remove regulatory barriers that discourage companies from committing to new plants and projects, and for Ottawa to expand a measure that lets businesses write off investments sooner. If policymakers and firms don’t adapt to disruptions like AI, “we run the risk of falling even further behind, and also of losing talent,” Bafale said.