The future has no analogue
What does the future hold? Does it look like Star Trek or Blade Runner? Paradise or dystopia?
From automation, to machine learning and artificial intelligence, to the threat of robots taking all our jobs—the rise of the machine is everywhere.
No surprise here: at the Bank of Canada, we’re working to understand how digitalization affects the economy.
Digitalization is everywhere
Technology transforms the way we live, work and play. We call this “digital disruption.” While no one can predict the future with certainty, we know one thing for sure—digital disruption is here, it’s now and it’s big.
We see it throughout the Canadian economy, driven by both consumers and businesses.
Pervasive—you could argue that the digital economy is the economy.”James Tebrake, Director General of Statistics Canada's Macroeconomic Accounts Branch
No longer confined to our local shopping mall, we buy stuff online from across the country and around the world, tapping into an ever-growing array of goods and services, 24/7.
And for those of you with teenagers at home, you already know that online gaming fees will probably feature in your monthly expenses for the foreseeable future.
You can bet that businesses in Canada and abroad will produce more and better digital goods and services—and that your experience as a digital consumer will only intensify.
More efficient businesses
Automation, artificial intelligence and machine learning increase the productivity of companies. With these, companies can
- make better products and improve their customers’ experiences,
- make products more efficiently and faster, and
- reach new buyers.
Improvements like these are happening now. Check out these current examples:
- farmers use GPS autopilots to drive their tractors;
- robots work on factory floors and in warehouses, “driving” forklifts to move goods and digitally track them from supplier to retailer;
- machine learning offers up suggestions for products or services you may wish to buy; and
- chatbots and “robo-advisers” stand ready to answer your questions when you visit websites.
The potential for these technologies to improve productivity and, ultimately, our standard of living is in its infancy. As firms become better at adopting this technology, their successes will ripple across the economy.
Won’t robots take people’s jobs?
Along with promises of greater prosperity, digitalization raises some fears. There is a lot of concern about the “rise of the robots” and how they could take away people’s jobs.
Some estimate that as many as 40 per cent of jobs in Canada could be automated (fully or in some way). Perhaps not so drastic, but painful for some nonetheless, is how technology has contributed to breaking work down into individual tasks. This change in the way work is done has given way to more short-term jobs and contracting out.
Naturally, we tend to focus on these initial effects. But we also need to be mindful that it takes a long time to fully replace a worker with a robot. There is time for society to adjust. To put it into perspective, there are 25 times more robots in Canada now than there were in 2000. In that same period, the unemployment rate has reached a near 40-year low.
New opportunities are emerging
During that adjustment period, some people will retire and won’t be replaced. Others will change jobs and some will move to different sectors. On top of that, digitalization is creating new kinds of jobs—including some that we haven’t even imagined yet.
These new jobs will help the economy grow. New jobs mean new incomes, which will be spent not just in the digital economy, but also across the whole economy, in traditional areas like tourism and housing.
And in many cases, people are extremely difficult to replace with robots. Take, for example, jobs that involve human interaction—like those in the health care industry.
Other issues to consider
Still, there will no doubt be disruption for some. People whose jobs are affected will need support. Job training and a strong safety net are key.
As digitalization continues to take hold and help shape economic growth, competition issues could become more important, because of the rise of “superstar firms.”
What we’re working on at the Bank
The implications for monetary policy are important: digitalization will affect economic activity, capacity and inflation. As an inflation-targeting central bank, we need to have a clear sight on how the economy may change due to digitalization. That’s why we’re
- working closely with statistics agencies to better measure digital activity in the economy, and
- watching labour market developments closely to learn how jobs are changing.
We’re also becoming more digital so we can do our jobs better. This means improving our forecasts and our understanding of how the economy works.