by Danny Parys
Sound the alarm! Bank of Canada officials say Canada is in a productivity emergency and according to Statistics Canada it’s getting worse.
That’s because labour productivity declined by 1 per cent in the second quarter of 2025. The sharpest decrease since 2022.
Though this should come as no surprise. Labour productivity has declined in 6 of the last 8 quarters.
The productivity emergency has become so pervasive, that the often-cited solutions are starting to sound trite: Lower taxes, foster competition, reduce barriers to trade (ouch!)
Instead, like a young Ernest Hemingway, Canadians should look to Italy for inspiration.
Specifically, the Emilia-Romagna region.
That’s because this area of Northern Italy has long been a hot bed for Worker Cooperatives, non-traditional corporate structures where employees have decision-making power and a share in the profits.
Boasting over 5000 active co-ops, that account for approximately 1/3rd of regional economic output, the results speak for themselves. The region has a GDP per capita over 12 per cent higher than the EU average and nearly 20 per cent higher than the rest of Italy.
And though the Emilia-Romagna region is unique, the productivity of co-op workers isn’t.
Indeed, study after study shows that cooperative workers exhibit higher productivity levels than their non-cooperative counterparts.
That’s because, unsurprisingly, participatory decision-making tends to boost engagement, leading to higher effort and less absenteeism from workers.
Cooperatives also tend to focus on long-term stability over short-term profit. Looking beyond the next quarter often leads to more reinvestment and innovation in the business. The Emilia-Romagna region, for example, leads Italy in innovation competitiveness.
And when workers take a more active role in governance, job security becomes a priority.
This long-term focus means that in times of economic difficulty, co-ops are less likely to lay off employees, and jobs are kept local.
Strong efforts to reduce turnover and layoffs ensures that skills and experience are retained in the organization. A sharp contrast from the morale damaging downsizing efforts of traditional firms.
Co-ops are also great partners within local supply chains and foster strong relationships with local suppliers, leading to better coordination and market responsiveness.
But in Canada, co-ops continue to play a marginal role in the national economy.
Instead, the country is plagued by a troubling trend towards consolidation and a small group of oligopolies, in telecom, food retail, and banking, that enjoy little competition. While this model is good for investors, these big players lack incentive to do anything to increase innovation, customer satisfaction, or productivity.
So, if co-operatives, and other non-traditional governance models are so successful, why aren’t there more of them?
For starters, there is a chronic lack of awareness. In business schools and chambers of commerce, cooperatives are rarely discussed.
And for existing businesses looking to convert to cooperatives, many employees don’t feel like they have the training necessary to take a seat in the boardroom. Premature imposter syndrome can prevent frontline workers from cooperative conversion.
Financing can also be a problem. While many entrepreneurs looking to exit their businesses want to keep ownership local, and protect their employees, many owners are swayed by the simple financial terms from Private Equity companies or strategic buyers.
But these challenges aren’t insurmountable. Education, governance training, and financing support can help lead the way to more cooperative conversion.
And now is the perfect time, as 76% of small and medium sized business owners look to exit their business within the next decade.
If Canada wants to put an end to the productivity emergency, supporting worker cooperatives, and other non-traditional governance structures, must be a key part of the strategy.
If not, we should get used to the sound of the alarm ringing.