[Series] Even in this time of austerity, bold investments are needed to break with the status quo and ensure the long-term health of Canada’s economy.
This is the first article in a two-part series on understanding alternative scenarios for the future of employment and the Canadian economy. In April, Deloitte and the Human Resources Professionals Association (HRPA) released a report entitled CanadaWorks 2025. Through discussions with 50 notable academics, CEOs, Chairs, ex-Ministers, and economists, the report outlined three alternative – but plausible – future scenarios for Canada, setting the foundations for a broader public-policy debate on what Canada needs to do to remain economically competitive.
As the recent election in France signals another shift in the European austerity debate, Canada has entered its own round of fiscal conservatism, characterized by a discourse that is polarized rather than nuanced. Lost is the notion that fiscal prudence in some domains need not be mutually exclusive from selective and bold investment in other areas.
The best business and financial managers know that real long-term growth comes only through clear vision and measured risk. What calculated risks are Canadian governments willing to take to invest in a prosperous future? Looking to position Canada for success in 15 years will require a balance between the two polar positions in the austerity debate, and the courage to distinguish between genuine investment in the future and politically expedient spending for today.
Canada’s long-term future is rarely debated as part of the public discourse. This is in part because we are buoyed by high commodity prices, low unemployment, and relative stability. Yet, Canada is at an inflection point. Whether by design or by an accident of history, Canadians are, for the most part, currently prosperous. On the horizon, however, there are warning signs that, if ignored, could result in a “lost decade” of declining growth and lost opportunity. The governor of the Bank of Canada, Mark Carney, recently alluded to record levels of debt, slow income gains, and tepid export growth as signs of a new era of stagnating economic progress.
Such warnings assume that Canada will lag in productivity, output, and innovation. However, if these assumptions are challenged, an entirely different decade may be awaiting our firms and workers: We could, as the Deloitte-HRPA report suggests, see a Canada that resembles a “strong and robust” “northern tiger.”
This is precisely what Deloitte and the HRPA partnered to examine. Through research and interviews, we sought to define alternative (but ultimately plausible) scenarios for the future of the Canadian economy, and, in doing so, to develop public-policy recommendations that position Canada for success.
In order for Canada to become a “northern tiger” (with a strong, diverse economy), we need public- and private-sector leadership capable of navigating beyond the status quo. Our research demonstrated that maintaining the status quo would leave Canada on a potentially dangerous course. Imagining a scenario where global recovery flounders, we examined what Canada’s lost decade would look like for our economy and its firms. While it would be markedly different from the Japanese experience (which popularized the phrase “lost decade”), it would have one key similarity – a jarring halt to the conventional wisdom around the inevitability of economic progress.
Through our research and interviews, it became clear that some Canadian influencers view a lost decade as a distinct possibility. They envision a future where GDP growth hovers at one per cent, and where, for the first time, we see jobs without skilled people to fill them, and people without the skills to fill jobs. Structural unemployment would be driven by an immigration system that continues to put the brakes on the potential of new Canadians, failing to balance the economic drag of a rapidly aging population and an education system that is ill-equipped to prepare the graduates that our labour market demands. Additionally, in this dark future, chronic underinvestment in machinery and equipment, a lack of availability of risk capital, and insufficient support for innovation would leave Canadian firms struggling with continued low productivity.
Some of our interviewees believed this to be too dark a depiction of the future, pointing to the buffer that our natural-resources sector provides. Our argument is that such a resources boom may represent jobless growth. Mining, oil, and gas extraction offer well-paid jobs, but few of them: Today, those sectors employ fewer than 200,000 Canadians. Even if the industry tripled in size by 2025, it would still represent less than three to four per cent of all the jobs in the country. In other words, while Canada’s GDP might rise due to sustainable increases in the price of oil, the resulting wealth (as seen in buoyant stocks and healthy RRSPs) would mask the many underlying workplace and equity challenges present in the economy, a scenario we call “unsustainable prosperity.”
So what is to be done? If Canada is to avoid these two scenarios and be more than a staples economy of hewers of wood and drawers of water and oil, we need to make some fundamental changes such as bold investments in education and immigration policy. The second part in this series will be dedicated to examining the need for these investments in detail. The challenge is that many of these investments will come with a heavy price tag when government leaders are locked in a period of fiscal austerity.
However, it is misleading to suggest that austerity-focused governments avoid large investments. At the risk of wading into a separate debate, it is important to recognize that we spend vast multi-year sums on national defence in this country. To take just a few examples, could similar sums of money not be invested to modernize the Canadian K-12 classroom and build a 21st-century curriculum to teach children the basics of business and technology? Could we not invest more seriously in immigrant credentialization and training or targeted upgrades to our crumbling infrastructure to improve labour mobility?
Though our thesis may differ from the recently released Drummond report on Ontario’s fiscal challenges, the spirit of its recommendations are aligned. As Don Drummond, chair of the commission on public-service reform, argues, “across the board” austerity plans can be damaging. His report states that, “Higher priority should be assigned to programs and activities that invest in the future as opposed to those that serve the current status quo. This is never easy, the status quo has plenty of advocates; the future does not.” It is time we think critically about the investments we need to make as a country to ensure a positive future for the Canadian workplace.
Photo courtesy of Reuters.