Productivity Trends in the Coal Mining Industry in Canada

The purpose of this report is to uncover the factors behind what has been a very strong productivity performance from the coal mining industry in Canada over the past four decades. It is found that real price movements have had a substantial impact on productivity growth in the coal mining industry in Canada. The real price of coal increased sharply in the 1970s due to higher demand caused by the oil price shock. This increased the profitability of sites of marginal quality and thereby lead to operations on less productive sites than those in production at that point. This had the effect of lowering the average productivity of the overall industry. However, since the 1970s, the real price of coal has fallen steadily, reversing this effect and hence contributing to the high productivity growth of the 1980s and 1990s. Another factor in this impressive productivity performance, at least in the 1980s, was the gradual closing of underground coal mines and the concentration of production on open surface mines. Surface mines typically have higher levels of labour productivity than underground mines, so this effect reinforced the price effect in increasing the average productivity of the industry. The 1990s saw the computerization of several stages of the production process, from site planning to extraction. Despite having the image of an old-fashioned industry, the coal mining industry in Canada is actually among the most intensive users of advanced technologies, and this certainly appears to have contributed to the industry’s strong productivity performance as well.