As the effort to roll out COVID-19 vaccines continues to ramp up, the provincial and national economies are in the second half of 2021 expected to slowly but surely begin to recover from the major contraction caused by the pandemic, says ATB Financial’s chief economist.
However, Todd Hirsch, who in January virtually presented his annual outlook and forecast, warned that growth will not benefit everyone equally across the board, with a significant portion of workers likely to be left behind as the wealth disparity gap continues to widen.
“There is going to be a strong recovery for some workers — particularly the knowledge workers, professional occupations, higher income earners. These are the kinds of workers that during the pandemic were working from home,” said Hirsch.
But only about 25-30 per cent of Canada’s workers have the ability to do their jobs from home, of whom many fared better than those in for example the service sector that were more likely to require government assistance, he said.
Government stimulus and income support programs from individuals and businesses have been the source of some heated debates, but those efforts played an important role in helping to somewhat stabilize the faltering economy in the immediate fallout of the lockdowns, he said.
“I think most people recognize that if that government income support had not been there for individuals and for businesses, we would have seen a far bigger contraction in the economy," he said.
Recognizing that people working from home endured stressful challenges, the pandemic was far less disruptive to the incomes and jobs of higher income earners, he said, adding this demographic will recover more quickly.
“We know that the year 2020, Canadian households amassed a record $200 billion in savings — higher than any other year,” he said, citing obvious reasons such as people having fewer trips and recreational expenses like sporting events to spend disposable income on.
“When the economy gradually opens back up, I do think that there is going to be some very strong recovery as a lot of these workers spend some of their savings on enjoying all of those things that we’ve not been able to do during the shutdown,” he said.
“However, there is going to be another non-recovery for other workers,” including food and accommodation, retail, certain parts of the energy industry and health care, as well as construction jobs that can be part time and provide lower incomes.
“These are the workers that really had to depend on income support from government,” he said.
“When those government programs wrap up, some time in 2021, we could find a whole swath of workers who are not able to find work, and they’re finding their government income support coming to an end. And it could push many of them into quite dire circumstances.”
That will present some real challenges when jobs fail to materialize and support programs come to an end. Although the economist did not propose to have an answer, he said the situation cannot be ignored.
“A lot of the problems that we’re seeing around the world is because of a disparity of income and opportunity,” he said.
“This was already building across the developed world and across OECD (Organisation for Economic Co-operation and Development) countries pre-COVID.”
In some countries like the U.S., that wealth gap has grown particularly wide, but it has also widened in Canada — a trend the pandemic has substantially accelerated, he added.
“And when that disparity grows too wide — when the gap between the haves and the have nots grows too wide — it can lead to some very disruptive economic, social and political outcomes,” he said, suggesting that solutions will be needed.
“Because it will become a problem if it is left unchecked," he said.
