In a recent address, Tiff Macklem, the Governor of the Bank of Canada, highlighted the potential dangers posed by artificial intelligence (AI) on youth employment during a talk titled ‘Structural Change — Canada at a Crossroads’. He outlined how the rise of AI, coupled with shifting trade dynamics with the United States and a slowdown in population growth, is reshaping the Canadian economic landscape.
AI: A Double-Edged Sword for Employment
Macklem described AI as a “transformative technology” that could enhance productivity and elevate living standards. However, he also cautioned that this innovation might lead to a decline in entry-level job opportunities, particularly for young people. “We may be seeing some early evidence that AI is reducing the number of entry-level jobs in certain occupations,” he stated. While there is a growing demand for workers with AI-related skills, the flip side could be increased youth unemployment. Distinguishing the effects of AI from broader trade and demographic changes is complex, Macklem noted.
Trade Relations and Economic Adjustments
Another major point of concern for Macklem is the evolving trade relationship between Canada and the United States, particularly as protectionist measures have begun to take hold. With the anniversary of U.S. tariff threats approaching, Macklem observed that Canadian businesses have started to shift supply chains, with a noted decrease in imports from the U.S. and a corresponding rise in goods from other nations. However, he remarked that while businesses are adjusting, they have yet to identify many new clients outside of the United States.
Demographic Changes and Economic Forecasts
The Bank of Canada also faces challenges stemming from declining population growth, exacerbated by reduced fertility rates and immigration levels. Macklem warned that these trends are likely to hinder GDP growth, stating, “That means fewer new consumers and workers in the economy, which lowers our economic potential.” He forecasts a modest GDP growth of 1.25 per cent over the next two years, with only slight increases in household spending and business investment. As a result, businesses are expected to exercise caution in their hiring practices during this period.
“Some things are clear,” Macklem concluded. “The United States has rejected open trade, population growth has slowed, and AI will change the marketplace. When the economic landscape changes, Canadian businesses need to adjust.”
Why it Matters
Macklem’s insights underscore a pivotal moment for Canada’s economy, as the interplay of technological advancement, demographic shifts, and trade relations could have lasting implications. As AI continues to evolve, the challenge will be to harness its benefits while mitigating its potential to exacerbate unemployment among young Canadians. This delicate balance is crucial for ensuring sustainable economic growth and fostering a workforce equipped for the future.
