CIBC Deputy Chief Economist Benjamin Tal is warning the Canadian economy will face a tough road in the years ahead, as a combination of lower-for-longer oil prices and the impact of Donald Trump’s presidency cap economic expansion. In an interview on BNN, Tal said the lower loonie won’t be enough to drive competitiveness in the face of Trump’s economic promises.
“I’m very concerned about the manufacturing sector under Trump in Canada because [U.S. manufacturers] are going to enjoy significant tax cuts,” he said. “They are not going to pay anything for carbon – we are going to pay for carbon, we are not going to have tax cuts. Clearly the issue is significant and you will see many Canadian companies losing their competitive edge relative to their American counterparts.”
Tal’s comments come as the Bank of Canada Business Outlook Survey shows senior managers expect to benefit from economic expansion in the U.S. under the new U.S. President. The survey conducted in mid-November and December found that while some executives were worried about the danger of increased American protectionism, most managers expected stronger sales and job growth in the coming year.
While hiring is likely to increase in the short term, Canada’s labor market faces long-term challenges that will be exacerbated with a major disconnect in the types of workers Canada has, and the type of workers Canada needs, says Tal.
“The job market in Canada is a tale of two markets: you have people without jobs and you jobs without people. We have a major mismatch in this market,” he said. “Some companies are looking for people, they simply cannot find them, simply because of the fact they do not have the skillset needed.”
Tal said the bifurcated job market will lead to further income inequality, as the limited supply of high-tech workers drives up wages among those with skills suited to the new economy.
“Clearly, we have an issue: this is something that will continue. The quality of employment in Canada is going down: we need to change it,” he said.
Tal identified the oft-overlooked college route for high school graduates as an area Canada could prioritize in order to narrow the skills gap.
“Break the negative stigma associated with colleges: college, clearly, is the solution.” he said. “We need an umbrella type of degree, colleges and universities working together as opposed to fighting each other.”
Tal expressed frustration with the pace of legislative action, and said urgent action is needed to get skills training up to speed.
“It will take very long, but we have to start,” he said. “I don’t think we’re doing a good job here: I think that we’re talking about it, we’re studying it, but we are not doing it.”