Bank of Canada Governor Tiff Macklem said in a Feb. 5 speech given at Toronto’s Empire Club of Canada that many entry-level jobs may vanish in the coming years as AI disrupts Canada’s labour market.

This is one of the many structural challenges facing Canada in the coming years, Macklem said in his speech focusing on three major structural changes the country is facing:

• a changing trade relationship with the United States;
• slowing population growth; and
• the rapid rise of AI.

“The era of rules-based open trade with the United States is over, the potential of artificial intelligence (AI) looms large, and our demographics are shifting,” Macklem said. “The impact of these forces on the Canadian economy will not be a temporary cyclical fluctuation. These are deep structural changes that are transforming the economic landscape. And how Canada responds — which road we take — will define our economic future.”

Canada, he said, has experienced major structural changes before, from the Canada-U.S. Free Trade Agreement in 1989, to “the dawn of a new transformative technology like the internet in the 1990s.”

While Canada has benefited from such changes in the past, Macklem reminded his listeners structural change can also be disruptive, rendering some industries obsolete and displacing some workers. Spillovers from sectors that are restructuring can create cyclical weakness in other parts of the economy, he added.

AI bringing both transformation, uncertainty

“Structural change can also increase uncertainty because it’s hard to know how transformative it will be,” he pointed out. “When the internet emerged in the 1990s, we didn’t know just how valuable the new technology would be or which investments would pay off. Even as the internet proved to be an enormously powerful new technology, the dot-com bust of 2000 was a painful reminder that many new companies could fail.”

Just as the internet transformed Canada and the world’s economies, AI is another similarly transformative technology. It has both the potential to create new paths for economic growth, thereby raising Canadian’s standard of living, while at the same time bringing about changes to Canada's labour market and worker productivity, something the Bank of Canada and the federal government are watching closely.

“So far, it’s too early to see significant AI impacts on productivity or employment in Canada. But we are seeing a few early indicators of change,” he said.

While Canadian companies say their workers are increasingly using AI, “a significant adoption of AI to produce or deliver goods and services remains low. Statistics Canada’s Survey on Business Conditions puts this at 12 per cent of businesses. Our most recent Business Leaders’ Pulse survey yielded broadly similar responses. Only eight per cent of businesses surveyed reported significant AI use in their operations, with another 11 per cent reporting plans to use AI over the next year.”

But the majority of those surveyed said they had either not yet adopted AI or were using the technology infrequently. Thus, while “AI may be expected to boost productivity at some point, it may be a while before we see a significant impact.”

Macklem added that while Canada will see an increased demand for workers with AI skills, the flip side is Canada is likely already seeing AI reducing the number of entry-level jobs in some occupations.

“This may be boosting youth unemployment, although separating the effects of AI from the impact of trade and demographic changes is difficult,” he said. “There are more media reports that professional services companies are cutting back on entry-level positions because AI can do some of the work. And there is some hard evidence that it is getting more difficult to find a job in occupations with a larger proportion of tasks that can be performed by AI.”