With Canada Day behind us, The Vantage Perspective took a step back to briefly examine six trends, impacts or policy questions arising from the pandemic.
1. Fiscal Constraint No More?
The late 1990s saw fiscal restraint and a focus on balanced budgets, in part as a reaction to a crushing debt load accumulated over the previous twenty years. Deficit spending returned in response to the 2008 global financial crisis. But it was nothing like the federal deficit sparked by unprecedented spending to combat the impacts of the pandemic since early 2020.
As the economy reopens, a rise in inflation is already igniting some concern, perhaps compounded by record-breaking debt levels. The deficit is expected to decline as federal government programs implemented in response to COVID-19 end (many are set to do so in September 2021). But it’s unclear how much of a structural deficit will remain.
With the strong possibility of an election this fall, fiscal responsibility may become a key issue, as the Conservatives seek to differentiate themselves from the Liberals’ heavy spending. But even the Conservatives wouldn’t balance the budget for years if elected. Deficit spending may be here to stay in the medium-term, then, regardless of election outcome.
2. International Trade
In 2020, total Canadian merchandise trade (exports + imports) reported the second-largest decline on record, plummeting by 10.9%. Trade volumes are likely to return to previous levels as the economy recovers, but not as before, given that the pandemic has raised new questions about global supply chain resilience for both Canada and its major trading partners.
Canada’s trade priorities include continued implementation of the Canada-United States-Mexico Agreement (CUSMA) pact, reforms to the World Trade Organization (WTO) to address stresses in the multilateral trading system, and geographical and sectoral trade diversification. But it’s also likely that the list of strategic industries protected by national policies – such as vaccine production – will grow. And Canada, even as it grapples with continued U.S. trade protectionism, will seek to work to build continental supply chains with U.S. and Mexican partners.
3. Post-Pandemic Healthcare
Canada’s long-term care sector underperformed tragically during the pandemic, accounting for eight of every ten deaths due to COVID-19. This figure is double the average OECD percentage, although research published today suggests that Canada may have missed up to two-thirds of the deaths that occurred outside long-term care homes.
Prior to the pandemic, pharmacare was a big-ticket policy issue, or at least aspiration. This likely will be sidelined now in favour of large-scale spending on better seniors care. Canada may want to look to some European countries, where a mix of personalized in-home care and better quality institutionalized care has been a public policy priority for years.
In terms of the broader health care system, and as in the United States, it appears that many more Canadians may have had COVID-19 than reported. As such, ‘long COVID,’ or the observed trend of suffering from health issues over the months (possibly years) following COVID-19 infection, may pose an additional strain on the country’s healthcare system.
4. Changing Workplaces
A May poll by Leger found that four of every five Canadians did not want a return to pre-pandemic work models. A full 35 percent even said they would quit their job if their employer mandated a full return to work. It’s likely that our workspaces will change – the reliance on remote work during the pandemic has reduced the need for physical offices, meaning companies may move to ‘hotelling’ arrangements whereby employees share space during those times when it makes sense to be at the office. Meanwhile, some companies such as Shopify plan to make pandemic-style work arrangements the norm.
5. The Roaring (Twenty)Twenties?
The years following World War One were marked by an economic boom that lasted until the crash of 1929, including modern technology innovations like the radio.
Will it be the same again? The economy is bouncing back strongly, buoyed by strong pent up consumer demand. Technology innovation remains strong, especially in biotech and life sciences – the rapid development of the COVID-19 vaccines were an extraordinary achievement. However, a downbeat mix of an aging population, record debt levels and the high cost of housing (a particular challenge for those in their twenties, thirties and forties who drive much consumer spending) mean that these 2020s may not be like those 1920s.
6. Equity Through Policy?
The pandemic has highlighted, and even exacerbated, the kind of inequality that has long existed in Canada. Women have borne the brunt, having lost jobs in hard-hit service sectors like food services, culture and tourism, while having to juggle the impacts of school closures too. The creation of the Task Force on Women in the Economy and a commitment to a national childcare system should improve equity issues, alongside steps taken by many provinces regarding sick day leave. Still, it is clear that people from different socio-economic backgrounds have experienced different pandemics: immigrants versus native-born Canadians, blue and pink collar workers versus white collar.
The economic divide made deeper by the pandemic will be a focus for all governments – municipal, provincial and federal – in the years to come. But much remains to be determined about what policies are enacted and in what order, especially given high debt levels and broad economic uncertainty.
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