Economy

Could the AI revolution jump-start economic growth, yet make you poorer?

Published

1 year ago

June 22, 2023

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.

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Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

Published

2 days ago

October 21, 2024

Anne Joseph

OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

Published

6 days ago

October 17, 2024

Anne Joseph

OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

Published

7 days ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

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