Deputy Minister of Finance, Michael Horgan, spoke to a group of students, faculty and community members on October 1. The lecture was part of the Economics Department’s Harry Kitchen lecture series that has hosted the financial expertise of Thomas J. Courchene of Queen’s Institute of Intergovernmental Relations, Don Drummond of TD Canada Trust, Robin Boadway of Queen’s University, and Kevin Page, Parliamentary Budget Officer. Host Torben Drewes mentioned that: “Our goal has been to bring in economists with experience in policy development” as a way to bridge the gap between academic economic theory and the applications of said theory.
Minister Horgan, before becoming Deputy Finance Minister in 2009, began his federal public service in 1978, working as an Energy Economist in the Department of Finance. He took a break from public service to do his post-graduate work at Queen’s and Princeton. Upon his return to public service, he became president of the Atlantic Canada Opportunities Agency (ACOA). In 2001, he served for a time as the Finance Deputy of Canada for the G7/G20. After that he was Deputy Minister of Indian and Northern Affairs, and in 2008 he served as the Executive Director of the International Monetary Fund(IMF).
His talk was entitled “Canada’s Economic and Fiscal Outlook” and began by explaining about the global recession in 2007 and its impact on Canada compared to other OCED (Organization for Economic Co-operation and Development) countries. He cited the media as creating the picture that Canada came out of the recession fiscally strong, when in fact there were countries that did better than Canada. In general, Canada did “better than most.”
The recession translated into increased employment in full-time jobs in the private sector. Canada has recovered all of the lost jobs represented by the recession as well as gained more, something which the USA has yet to do. The “inflation targeting regime” and the Bank of Canada’s ability to “aggressively lower interest rates” are among the reasons Horgan pointed to as a marker of Canada’s “strong and stable banking system,” during the recession. Other reasons have more to do with policy making. The government’s “well targeted” stimulus measures as well as “expenditure restraint measures”. The latter includes limiting growth in defence spending and international aid as well as eliminating severance for retired public servants. The stimulus spending is starting to stop, so Horgan acknowledges that Canada has not yet come out of the recession unscathed.
When it comes to external measures that affect Canada’s economy, Horgan mentioned that “European economies [are] in need of some structural reform” and that “this is our number one concern for the moment.” Apparently the United States is a concern as well since we are such strong trading partners.
One area where the United States is surpassing Canada economically is in Household debt-to-income levels (Canada’s is at 33%). Horgan speculated that this could be that since interest and mortgage rates were so low, that Canadians took advantage of that and raised their debt.
Another area that Canada is ailing in is our “poor performance in respect to labour productivity.” The rapidly aging population will certainly see the employment rate fall, jobs will be harder to get, and this will increase labour productivity. “We have a skills mix-match problem” says Horgan, and a “low proportion of graduates in sciences.”
The key to improving labour productivity is paying attention to classically underrepresented groups in the workforce such as Aboriginal workers, immigrant workers, “Less-Skilled” workers (workers with a high school education), youth workers and older workers. Horgan asks about the poor productivity of this “cohort” of immigrant workers (who have traditionally integrated well into the workforce): “Are there barriers in Canada’s economy that cause this?” When it comes to Aboriginal workers, the fastest growing population in Canada, “the problem is that the educational attainment of Aboriginal people is way less than the educational attainment of other populations.”
Michael Horgan is “an economist by training, public servant by career.” He was the guest of Trent University’s Economics Department as a part of their Harry Kitchen lecture series. The series focuses on economic policy makers in Canada.