the canada issue
Canada in 2050:
A bigger and better economy?
Predicting what Canada’s economy is going to look like five years from now, let alone decades in the future, is not what you would call an exact science. World events like war, climate change or pandemics can test even the best analysts and forecasters.
However, there is one certainty that economists can count on: Canada will have more people by mid-century, and that will have an impact on our economy.
Angelo Melino of the Department of Economics says population trends show that by 2050, Canada will be home to about 47 million people, with most of the increase coming from immigration.
And, as our population grows, so too will the economy. Melino predicts that economic output will grow at about two per cent annually overall, so by 2050, our economy will probably be about twice as big as it is now.
“That means that the average Canadian will be about 50 per cent better off in terms of their income levels,” says Melino, the Royal Bank Chair in Economics and Public Policy at the University of Toronto.
In what types of jobs will future Canadians be working?
Peter Dungan, adjunct associate professor of business economics, says that to some extent, what Canada’s future economy looks like depends upon the big “if” in the future: world growth and global supply and demand for commodities.
Developing nations in Africa and Latin America, and even India and China, still have a long way to go to achieve fully developed economies, says Dungan, director of the Rotman School of Management’s Policy and Economic Analysis Program. If that development happens quickly, there will be a strong demand for commodities.
“That would tend to push Canada, given its physical endowments, back to where we were maybe a couple of years ago – that is, with a relatively high dollar, and one that in a sense rewards us for digging things out of the ground, or pumping them out of the ground, but less for manufacturing or doing the service adjustments.”
However, if world growth is slower and there are plentiful supplies of commodities elsewhere, Canada may be forced to turn to high-end manufacturing and providing services where we have a competitive advantage, Dungan says.
Melino believes such a shift may already be happening. He predicts there will be fewer jobs in manufacturing and primary production – such as farming and mining, which Canada has always excelled at – and that supply of services will continue to grow as a fraction of the economy in the coming years.
In particular, he expects that health care will be an area of growth.
“It’s just one of those things that people like to have more of as they get wealthier,” he says. “We spend more of our resources on taking care of ourselves, or at least fixing ourselves up after we haven’t been taking care of ourselves.”
Education will also be a growth industry as Canada will produce a more educated workforce that spends more time in school, Melino says.
Both economists agree that how we educate our future workforce is vital to ensuring Canada’s future prosperity.
“Getting the right mix of specific skills and general education is important so that people are able to get jobs and contribute constructively when they come out, but they still have enough generality that in 20 years’ time, when their jobs are finally gone, that they can re-orient themselves elsewhere,” says Dungan.
Longer-term planning is also required so that universities aren’t just responding to short-term corporate needs and churning out graduates with skills that in 10 years are no longer needed, he adds.
Another key to future prosperity, says Melino, is getting “the rules of the game right.” High corporate tax rates dampen investment and innovation, he says, so Canadian governments must provide incentives to innovate and then let people figure out how to make money.
Effective and balanced government regulations are also important, says Dungan, pointing out that Canada still has barriers to inter-provincial trade.
“This is a very specific thing, but some of them are worse than the barriers to inter-country trade in the European Union,” he says. “So little things like that make it easier for business to find its right place in Canada and do things.”
Future governments also have to be well-run and must spend our money wisely on things that we need and want, like education, health, infrastructure and maintaining a civil society, says Melino.
“Those are the things that government can do,” he says. “After that, we have to let things play out.
“People will try to figure out how to take advantage of this – a well-educated population in a well-run, low-taxed environment – to innovate.”