How Ottawa can kick-start the economy

Policymakers must plan for a continued slow-growth recovery over the next few years, says a report from the C.D. Howe Institute.

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“The slow pace of the global economic recovery means that a significant rebound in Canadian private demand is unlikely in the near future,” states McGill University economist Christopher Ragan. He adds that since both “monetary and fiscal policy have limited ability to further stimulate Canadian economic growth, policy makers should recognize the challenges that emanate from a slow-growth recovery; longer unemployment spells, more part-time employment, and increased incidence of long-term unemployment.”

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To meet these challenges, Ragan calls for policymakers to focus less on monetary and fiscal policies and to instead turn their attention to labour market policies, since the unemployed and underemployed are disproportionately affected by economic trouble. These policies could include:

• A program of temporary unemployment assistance that would provide jobless workers with financial support that is repaid after a few years, possibly contingent on income;
• Improving labour mobility across both regions and sectors in order to reduce existing structural unemployment in Canada caused by mismatches between labour demand and supply; and
• Improving labour-market training so that workers displaced from one sector or region can effectively transition to a new position.

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Staff

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