Canada Must Manage Harmful Effects of Automation, Wilkins SaysBy
Canada should manage the potential negative distributive impacts of a coming wave of automation that will ultimately boost national productivity, the Bank of Canada’s second-highest ranking official said.
In a Toronto speech meant to tout the benefits of adopting new technologies such as artificial intelligence, Senior Deputy Governor Carolyn Wilkins spent much of the time discussing the need to keep income inequality from worsening.
“If we seek out and embrace new technologies while successfully managing their harmful side effects, we will create inclusive prosperity,” Wilkins said in a speech entitled ‘Blame it on the Machines?’
“That means proactively managing the transition period and the longer-term implications of the distributions of incomes,” she said.
The speech is in line with recent efforts by Bank of Canada to highlight the country’s historic ability to adjust to deep economic changes, amid a growing wariness in many countries to globalization and technology. At the same time, some of the distributive issues that were once an afterthought at the central bank are becoming more prominent.
“While gains in productivity will increase the size of the pie, there is no guarantee that these gains will be evenly distributed,” Wilkins said, adding the central bank itself doesn’t have the tools to address these issues.
“This is the purview of governments, who can use tools such as taxation and transfers to address these issues.”
Wilkins outlined how distributional outcomes could impact the transmission of monetary policy. Low income individuals are more sensitive to interest rates, for example.
“An increase in income dispersion, then, could alter the channels through which monetary policy actions affect the economy,” she said.