The Hilton family harvest wheat for their farm near Langdon, Alta, on Sept. 15, 2020.Todd Korol/The Globe and Mail
What was Canada’s most common job at the time of Confederation? Farmer.
The 1861 census says 343,000 people, or 41 per cent of the work force, were farmers. And that was probably an undercount, missing the unpaid work of wives and children, or any part-time farm work from the country’s 211,000 “labourers including lumbermen.”
Fast forward a century and a half. Canada’s economy has more than 20 million jobs, but just 257,000 are in agriculture. Farming has gone from the main occupation to barely 1 per cent of the labour force, and falling. Yet the country’s wheat harvest in 2022 was more than 40 times larger than the harvest of 1860.
What did that? Technology.
Which brings us to the hopes and fears for what is expected to be the next big transformative technology: artificial intelligence.
AI could do for the economy what the internal combustion engine, machinery, pesticides, irrigation and new growing techniques once did for agriculture – sparking higher productivity, causing gross domestic product to grow faster and leaving everyone better off. That’s the optimistic story about AI.
Or we could end up in a less rosy future, where AI still sparks higher productivity and greater wealth, yet most of us end up worse off.
Let’s start with the optimistic scenario.
A recent study from Goldman Sachs finds that AI could trigger a 1.5-per-cent annual increase in productivity over a 10-year period, leading to a US$7-trillion jump in global GDP.
It’s not implausible. Since the Industrial Revolution, we’ve been inventing more and more ways to replace human (and animal) labour. A single farmer with a combine harvester can do the work of dozens of 19th-century workers. That’s how an economy can grow faster than the population – something that didn’t really happen before the Industrial Revolution – and how living standards rise.
Two centuries of gains from machines and computers eliminated millions of jobs – don’t advise your child to pursue a career in, say, digging ditches by hand. But it also created even more new jobs and types of work, including new professions.
A recent study of the U.S. labour market published by the National Bureau of Economic Research finds that most new jobs over the last 80 years have come from new classifications – everything from “engineers of computer applications,” a title first measured by the U.S. census in 1970, to “conference planner,” introduced in 1990. Most managers once had a secretary, who took dictation and typed up letters. Then computers came along. The number of jobs in the economy kept right on rising.
That’s the history of creative destruction and economic growth through new, labour-saving technologies. Some kinds of work are eliminated; new kinds of work are created. Output increases and the average person ends up better off.
It’s a positive story, and it’s how the AI revolution might go.
But some more recent economic history offers a different story, pointing to the possibility of a less rosy future.
Since the 1980s, the developed world has experienced a widening gap between economic growth and median incomes. The two had long marched upward in lockstep: GDP growth boomed in the decades after the Second World War, and wages boomed along with it. In fact, pay from middle-income and low-income jobs often rose faster than those at the top end, leading to lower inequality and a narrowing gap between rich and poor.
But a few decades ago, things started to change. There’s been what the Organisation for Economic Co-operation and Development (OECD) describes as a “decoupling of labour productivity growth from real labour income growth.” The result is a “decline in the labour income share” in most wealthy countries, especially the United States.
In plain English, GDP in most rich countries has grown faster than wages. The issue isn’t job loss; it’s job quality – and pay. Jobs are plentiful, but a lot are low wage.
That’s one of the possible results of the AI revolution: inequality on steroids.
Imagine AI delivering a hefty boost to productivity and GDP growth, just as Goldman Sachs hopes, with more wealth being created – but with less and less of it going to workers. More of it would instead go to capital – the companies and shareholders creating and using AI – along with highly-educated workers and managers.
My bet is on this less-than-ideal scenario: higher economic growth paired with higher inequality.
Fortunately, we know what to do about that. Don’t try to stop the benefits of creative destruction; do strengthen the social safety net so that everyone shares in the wealth and nobody is left behind. Make economic growth a win-win rather than a zero-sum game.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
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