MNI INTERVIEW2: Poloz Sees Productivity Jump Through Pandemic

Global productivity will rise through the pandemic as remote work and digitalization unlock new gains with perhaps half of employees opting for flexible schedules, while governments have more scope to break longstanding barriers to growth, former Bank of Canada Governor Stephen Poloz told MNI.

"There is going to be productivity picked up along the way," Poloz said. "We will have a hybrid outcome for the economy, so on any given day of the week, there could be two-thirds or even as little as half as many people commuting to the office," he said in an interview. "That has really big implications for time saving, personal productivity, company productivity."

The severe Covid recession has been shorter than usual and may foster a more positive job comeback than slumps in 2008 and the 1990s known for "jobless recoveries" or "serial disappointment," Poloz said. The shorter downturn could help limit workers from long bouts of unemployment and a loss of skills known as scarring, he said.

"We didn't get the kind of macro effects that one normally gets in a normal recession, and therefore you don't have to repair those macro effects in order to get back on track," said Poloz, who led Canada's central bank through much of the 2010s until last year and is now a special adviser at the law firm Osler, Hoskin & Harcourt.

AVOIDING JOB LOSSES

There are other reasons for optimism. The recession was deep but concentrated in a few industries, and Canada at least came into the downturn with arguably the strongest economic backdrop in decades, Poloz said.

The pandemic accelerated digitalization and governments must put a lot energy into retraining and support programs for those caught in any K-shaped recovery, he said. Over time rising incomes will boost demand for all skill levels, Poloz suggested. Higher paying jobs in new industries could lift demand for new homes and renovations, and a faster-growing economy would need more workers such as truck drivers, he said, the type of job that might require less retraining.

"It doesn't necessarily mean job loss, it just means productivity and less time achieving it," Poloz said.

Canada faces an election Sept. 20 and Poloz suggested the next government should narrow down hundreds of campaign promises for a focused plan to boost labor force participation and cut red tape, moves that could boost economic growth and avoid tax increases to cover the cost of pandemic debts.

BOOSTING LABOR SUPPLY

"It would be helpful if whoever forms the next government is pretty focused on a handful of big important things. I'm not sure that's likely, there's an awful lot of things on everybody's list," he said.

On Canada's housing squeeze, which has become a headline issue in the election, Poloz said: "You can come up with 10 different ways to tweak the housing or mortgage market, but if none of them addresses the constraints that prevent supply from growing at a pace that at least matches immigration levels, well then your policies have failed."

Plans to create CAD10 a day childcare spaces across Canada is something that should pay for itself by boosting the labor supply, Poloz said, though the implementation will influence how effective it is. Governments should also eliminate different regulations on trade across provinces that make it harder for firms to scale up, and make it easier to switch jobs across regions, he said.

Signs of slower growth potential than past decades means "every decimal point counts bigger," when it comes to boosting the expansion now, he said. "I'm hoping to see a real focus on things that improve labor force participation. Daycare is a really big building block of that."

Such changes even if they only added half a point to Canada's economic growth rate could be enough to avoid tax increases to cover higher government debts, Poloz said. "Wouldn't that be a really cool message to deliver?" he asked.