The governor of the Bank of Canada warns the slower rebound facing women, youth and low-wage workers could pose a threat to a broader economic recovery from the COVID-19 pandemic.
Tiff Macklem says uneven recessions that affect some workers and sectors more than others tend to be longer and leave a larger mark on the labour market.
He notes in a speech to the Canadian Chamber of Commerce that women and young people are more likely now to be permanently laid off from their jobs due to the pandemic.
People permanently laid off take on average twice as long to return to work as people on temporary layoff, Macklem says, risking long-term damage to their jobs prospects and a lasting drag on earnings specifically for youth.
Macklem says the central bank is doing everything it can to support growth and get people back to work.
He adds that getting people back to work is the best way to improve economic outcomes over time, noting that uneven outcomes for some can lead to poorer outcomes for all.
“Striving for equality of opportunity is simply the right thing to do. It’s also good for growth. The loss of jobs for women, youth and low-wage workers is a problem for us all,” reads the text of his speech, provided in advance to journalists.
“If these workers become discouraged and leave the labour force or lose valuable skills over time, their reduced economic participation will lower our potential growth, limiting living standards for everyone.”
The noon-hour speech put more details in the thought process that went into the statement from the bank’s governing council on Wednesday that kept its policy interest rate at 0.25 per cent.
The rate won’t move from near-zero until a recovery is well underway, and inflation sustainably back at the bank’s two-per-cent target. Although Macklem didn’t put a timeline on that in his speech, experts suggest the rate could stay where it is until late 2022 or even into 2023.
He also says that the bank’s bond-buying spree, known as quantitative easing, will be adjusted as required to deliver some monetary stimulus as the economy requires.
Macklem says the bank is watching how the unconventional policy tool affects wealth inequality.
Low price of oil
Low-wage earners and women were among the hardest hit when lockdowns in March and April led to three million job losses, and cut hours for 2.5 million more.
The unemployment rate rocketed to a historic high from a four-decade low.
The country has gained back nearly two million of the jobs lost, but the pace of gains for women, youth, Indigenous people as well as workers from diverse communities have not seen as sharp a rebound.
A global drop in oil prices will continue to hurt the resource sector, Macklem says, which had been an important source of employment in many regions of the country and contributed to boosts in incomes.
“We know that monetary policy is a broad macroeconomic instrument that cannot target specific sectors or workers. But growth and how it is shared are not independent,” Macklem says in the speech.
“The stronger and more durable the recovery, the more opportunity there is for everyone. And the more opportunity there is for everyone, the stronger the recovery, and the more durable is growth.”