How the digitalization of the economy is changing the Bank of Canada

Digitalization of the economy is a hot topic these days. Technological change creates new jobs and new opportunities for business. It’s also changing the nature of work and disrupting many industries.

Central banking is no exception.

Digitalization raises a lot of important questions. Here is what is top of mind for the Bank of Canada and for other central banks around the world.

What’s in store for jobs and incomes?

Technological change is not new. Whether it was the steam engine or the World Wide Web, there’s no question that past technological change has helped raise overall living standards around the globe. Since Confederation, Canada’s real income per capita has increased by more than 20 times because we’ve become more productive.

 

While the world has gotten wealthier, the share of income going to workers has declined over the past few decades in many advanced economies. Technological change has spurred structural shifts in labour markets, so workers and firms are now competing in a global marketplace. That likely explains some of the weak wage growth we’ve seen in recent years.

Understanding this is essential for monetary policy because it appears to be changing the relationship between unemployment and inflation.

Today’s innovations — artificial intelligence, machine learning and many others — will benefit scores of workers because they will use the technology to do their jobs better. The Bank of Canada is certainly aiming to harness new technologies in our own operations. But adapting to this changing world will also be challenging for many. And we may see an erosion of jobs in more groups than in the past, such as lawyers and investment advisers. That’s why continuous investment in skills is more important than ever.

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