What Ottawa Can and Can’t Do About the Slow-Growth Recovery: C.D. Howe Institute

Press Release –

July 30, 2014 – The Canadian economy continues to face serious macroeconomic challenges, the most important of which is addressing the burden of a slow-growth recovery, according to a report from the C.D. Howe Institute. In “What Now? Addressing the Burden of Canada’s Slow-Growth Recovery”, McGill University economist Christopher Ragan calls for Canadian policy makers to accept the likelihood of a continued slow-growth recovery over the next few years and to address its associated burdens.

“The slow pace of the global economic recovery means that a significant rebound in Canadian private demand is unlikely in the near future,” states 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.”

To meet these challenges, Ragan calls for policy makers to focus less on the standard tools of conventional macroeconomic stabilization – monetary and fiscal policies – and to instead turn their attention to labour-market policies that could alleviate the economic burdens of a slow- growth economy, such as:

• A program of temporary unemployment assistance that would provide unemployed workers with financial support that is repaid after a few years, possibly contingent on their 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.
• Improving labour-market training so that workers displaced from one sector or region can more effectively make the transition to a new position.

“These policies would focus on addressing the burden of Canada’s slow-growth recovery, which falls mostly on unemployed and underemployed Canadians,” concludes Ragan. “Policy makers need to emphasize the importance of addressing these challenges that have faced Canada since the onset of the global financial crisis, and will continue to face over the next few years.”

The C. D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. It is Canada’s trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review. It is considered by many to be Canada’s most influential think tank.

For the report go to: http://www.cdhowe.org/what-now-addressing-the-burden-of-canadas-slow-growth-recovery/26995

For more information contact: Christopher Ragan, Associate Professor, Department of Economics, McGill University; or Daniel Schwanen, Vice President, Research, C.D. Howe Institute 416-865-1904; E-mail: amcbrien@cdhowe.org.