Good afternoon. I thank the committee for inviting me to speak today on behalf of the Centre for the Study of Living Standards.
Our organization researches trends in living standards and their determinants. We advocate policies which we think will improve the quality of life of Canadians.
We believe that economic growth is essential to improving aggregate well-being. Unfortunately, economic growth has been slowing in Canada. Between 1961 and 2000, Canada's real GDP grew at a rate of about 3.7% annually. From 2000 to 2014, it grew at a rate of only 2.3%. Over the next two decades, we project that growth will proceed at an average rate of just 1.6%, based on Canada's dismal productivity performance in recent history and slowing employment growth as the population ages.
It is critical to raise labour productivity and employment in Canada if we are to maintain the growth in our standard of living to which we have become accustomed.
Last September, the Centre for the Study of Living Standards released a report offering a series of recommendations for governments to promote economic growth in Canada. I will briefly discuss the three central themes of our proposed growth agenda.
First, growth should be inclusive. By this we mean that living standards should rise for all Canadians and not only for a select few. Governments should take action to ensure that as the cake gets larger, everybody gets a bigger slice. We believe that inclusivity is not only a desirable policy goal, but also a potential driver of growth.
Segments of the population which are currently underutilized in the labour market represent opportunities to increase output. In particular, the government can take action to remove barriers to the successful economic participation of women, older workers, aboriginal people, persons with disabilities, and recent immigrants.
For example, policies such as boosting the flexibility of parental leave, subsidizing child care expenditures, neutral taxation of second income earners, and encouraging young women to pursue careers in science, technology, engineering, and mathematics could raise female employment rates. Similarly, attacking the social issues plaguing aboriginal communities, closing the aboriginal education gap, and assisting firms in engaging the aboriginal workforce would strengthen aboriginal labour market performance.
Our second theme is that growth should be environmentally sustainable. Economic growth is important, but we shouldn't forget that it is a means to an end, and not the end itself. We must satisfy our material desires in a way that protects our environment for future generations.
Fortunately, there are green ways to achieve growth. We endorse Canada's Ecofiscal Commission's recommendations for introducing carbon pricing throughout Canada. Substituting taxes on fossil fuel consumption for growth-retarding corporate and personal income taxes would promote economic activity while simultaneously addressing an obvious market failure.
The budget should offer incentives for Canadian firms to develop and adopt green technologies, and support the development of emerging green technology manufacturing industries in Canada. Investments should be made in green infrastructure projects, such as clean energy generation, interprovincial energy grids, public transit, and waste-water treatment facilities.
Our third theme is that the government should take on a more active role in the economy.
Over the last several decades, governments in Canada have implemented a series of market-oriented reforms. Barriers to trade have been reduced, regulations slashed, tax rates on capital and corporate income lowered, and government ownership reduced. Most economists agreed that these reforms would generate economic growth in Canada, but the results have been disappointing. This is not to say that the reforms were ineffective, or that similar efforts along these lines are not worth pursuing. In fact, we endorse further market-oriented reforms, particularly with regard to improving taxation and lowering internal and external barriers to trade.
However, the weak growth in recent years suggests that it's insufficient for the government to create a level playing field and passively wait for growth to happen. To foster growth, the government may need to augment markets by supporting individuals and firms in making optimal decisions. For example, the government has an important role to play in providing timely, accurate, and high-quality labour market information to students, workers, and firms.
The government can also serve a mentorship role to small and medium-sized businesses by providing advice on investment and technological adoption, or by assisting businesses in navigating complex international trade rules, and securing deals with foreign firms and clients.
In conclusion, encouraging growth which is inclusive and sustainable should be a priority for the 2016 budget. I thank all of you who are present for your attention and look forward to any questions you may have.