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The Bank of Canada’s top MP said the country is likely to emerge from the pandemic with lower prospects for potential growth and permanent scarring of the workforce, and that conventional wisdom must be challenged to find solutions.
In a speech Thursday, Senior Deputy Governor Carolyn Wilkins reiterated that potential output from central bank projects will be 3% lower by the end of 2022 than pre-pandemic forecasts, with weak capital investment accounting for most of the reduced potential. He said policymakers and businesses will need to think outside the box to find solutions.
“The pandemic has damaged the potential for Canada, and other countries around the world, to generate sustainable economic activity,” Wilkins said via webcast to the Munk School of Global Affairs and Public Policy. “We need to aim higher to help companies create good jobs and to make high debt loads more manageable.”
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Investments in sectors such as education, infrastructure, technology and the ecology of the economy would help the potential growth of the product, Wilkins said, adding that education improves social mobility and skills of the workforce.
Other examples of policies that promote both social and economic goals are childcare, which increases female participation in the workforce, and government wage subsidies, which help keep the link between employer and employee intact.
“How exactly these are designed, however, is the subject of much debate.” Wilkins said, whose last day at the bank will be December 9th. He will retire from his position as senior vice governor after nearly seven years.
The lower profile for potential production means a significantly reduced ability to generate goods, services and income on a sustainable basis, Wilkins said. “And many of those scars could become permanent without deliberate action on the part of all of us.”
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