Memory of the camps.

148 Pages·1993·7.66 MB·English

by  OECD

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OECD
ECONOMIC SURVEYS
CANADA
ORGANISATION FORECONOMIC CO-OPERATION AND DEVELOPMENT
PursuanttoArticle 1 oftheConventionsigned inParison 14th
December1960,andwhichcameintoforceon30thSeptember1961,the
Organisation for Economic Co-operation and Development (OECD)
shallpromotepoliciesdesigned:
to achieve the highest sustainable economic growth and
employment and a rising standard of living in Member
countries,whilemaintainingfinancialstability,and thusto
contributetothedevelopmentoftheworldeconomy;
to contribute to sound economic expansion in Memberas
well as non-membercountries in theprocessofeconomic
development;and
to contribute to the expansion of world trade on a
multilateral, non-discriminatory basis in accordance with
internationalobligations.
The original Member countries of the OECD are Austria,
Belgium,Canada,Denmark,France,Germany,Greece,Iceland,Ireland,
Italy,Luxembourg,theNetherlands,Norway,Portugal,Spain,Sweden,
Switzerland,Turkey,theUnitedKingdom andtheUnited States. The
followingcountriesbecameMemberssubsequentlythroughaccessionat
the dates indicated hereafter: Japan (28thApril 1964), Finland (28th
January 1969),Australia(7thJune 1971)andNewZealand(29thMay
1973). TheCommissionoftheEuropeanCommunitiestakespartinthe
workoftheOECD(Article 13oftheOECD Convention).Yugoslavia
takespartinsomeoftheworkoftheOECD(agreementof28thOctober
1961).
Publiéégalementen français.
©OECD1991
Applicationsforpermissiontoreproduceortranslate
allorpartofthispublicationshouldbemadeto:
HeadofPublicationsService,OECD
2,rueAndré-Pascal,75775 PARISCEDEX 16,France
Table of contents
Introduction 9
I. The recession and expected recovery 11
Overview 11
Declining capacity utilisation 13
Downward adjustment of domestic demand 15
Sharply rising unemployment 21
Persistent inflationary pressures 23
Narrowing external deficit 27
Recessions compared 32
Short-term prospects 37
II. Economic policies 42
The strategy 42
Tight monetary conditions 45
Fiscal consolidation 50
Structural policies and the medium-term outlook 57
III. Labour market performance and policy 64
Labour-market performance: an international comparison 65
Determinants of the "natural" rate of unemployment 80
Labour-market policies 94
IV. Conclusions 102
Notes and references 1 10
Bibliography 1 15
Annexes
1. Labour-market performance and policy: additional information 117
II. Chronology of main economic events 122
Statistical and structural annexes 127
Tables
Text
1. Demand and output 14
2. Labour supply and demand 21
3. Wages, prices and profits 24
4. Balance of payments 30
5. Short-term outlook 40
6. Indicators of the fiscal-monetary policy mix 44
7. Growth of money and credit 47
8. Federal budget: projections and outcomes 51
9. General government accounts 55
10. Medium-term projections 62
1 1. Phillips curve parameters and estimated real wage rigidity 73
12. Unemployment trends: rates, incidence and duration 75
13. Recent estimates of the NAIRU in Canada 80
14. Unemployment by regions 86
15. Estimates of provincial NAIRUs 88
16. Unemployment benefits in Canada and the United States 90
17. Government expenditure on labour market programmes 96
Annexes
Al. Structure of unemployment-insurance benefits, before
and after the reform 1 18
A2. Unemployment-insurance benefits: evaluation of changes by
province, 1990 119
A3. Number of benefit recipients affected by changes in the
unemployment-insurance system 120
A4. Realiocation of unemployment-insurance benefits by age groups 120
A5. Estimates of the NAIRU in Canada 121
Statistical annex
Selected background statistics 129
A. Gross national product and expenditure 130
B. Industrial production, employment and other business indicators 132
C. Prices, wages and finance 134
D. Balance of payments 136
Structural annex
E. Public sector 137
F. Financial markets 138
G. Labour market indicators 139
H. Production structure and performance indicators 140
Diagrams
Text
1. Key aspects of economic activity 12
2. Contributions to GDP growth 16
3. Sources of household consumption growth 17
4. Business investment intentions 19
5. Inventory/sales ratio 20
6. Inflation and its components 26
7. Major components of the current balance 27
8. Canada's relative cyclical position and terms of trade 28
9. Export trends and international competitiveness 31
10. Recessions compared 34
11. Short-term indicators 38
12. Interest rate developments 49
13. General government revenue and expenditure 54
14. Indicators of fiscal policy 56
15. The "misery index" 66
16. Sacrifice ratios 68
17. Unemployment rates at full capacity utilisation 69
18. Change in unemployment rates between cyclical peaks 70
19. Unemployment and changes in prices and compensation 71
20. Labour market rigidity and the rate of unemployment 74
21. Employment and labour force growth 76
22. Participation rates 77
23. Productivity and employment growth 79
24. Population growth, net immigration and unemployment rates 83
25. Real labour costs and productivity 84
26. Minimum wages in Canada and the United States 89
27. The Beveridge curve 92
BASICSTATISTICSOFCANADA
THELAND
Area(thousandsq.km) 9976 Populationofmajorcities,including
Agriculturalarea(1990,aspercent metropolitanareas(thousands)
oftotalarea) 6.4 Montréal 2943
Toronto 3502
THEPEOPLE
Population(1.1.1991) 26833000 Civilianlabourforce(1990) 13681000
Numberofinhabitantspersq.km 2.7 Employmentagriculture(1990) 428000
Population,annualnetnatural Immigration(annualaverage1986-1990) 163400
increase(average1986-1990) 192000 Averageannualincreaseincivilian
Naturalincreaserateper1000 labourforce(1986-1990,percent) 1.8
inhabitants(average1986-1990) 7.4
PRODUCTION
GDPin1990(millionsofCanadiandollars) 671577 Originofgrossdomesticproduct
GDPperhead(Canadiandollars) 25028 (1990,percentoftotal,1986prices):
Grotsfixedinvestment(privateandpublic) Agricultural,forestryandfishing 2.9
perhead(Canadiandollars) 5313 Miningandquarrying 3.9
Grossfixedinvestment(privateandpublic) Manufacturing 17.9
aspercentofGDP 21.2 Construction 6.6
Nonbusinesssector 17.8
Other 50.9
THEGOVERNMENT
Governmentcurrentexpenditureongoods CompositionofParliament House
andservices(1990,aspercent (July1991): of Senate
ofGDP) 19.6 (numberofseats) Commons
Governmentgrossfixedcapitalformation
(1990,aspercentofGDP) 2.5
FederalGovernmentcurrentrevenue ProgressiveConservative 159 54
(1990,aspercentofGDP) 18.9 Liberal 81 50
Federaldirectandguaranteeddebt(1990, NewDemocratic 44
percentofcurrentexpenditure) 208.4 BlocQuébécois 8
Independent 2
Reform 1
FOREIGNTRADE
Exports(1990) Imports(1990)
Exportsofgoodsandservices,asper Importsofgoodsandservices,asper
centofGDP 25.2 centofGDP 24.8
Mainexports(percentofcommodityexports): Mainimports(percentofcommodityimports):
Wheat 2.3 Industrialmaterials 18.1
Naturalgas 2.2 Motorvehiclesandparts 22.5
Lumberandsawmillproducts 4.5 Producers'equipment 31.4
Pulpandpaper 9.8 Consumergoods 11.7
Non-organicmetalsandminerals 13.1 Mainsuppliers(percent
Motorvehiclesandparts 23.2 ofcommodityimports):
Othermanufacturedgoods 23.9 UnitedStates 68.7
Maincustomers(percentof UnitedKingdom 3.6
commodityexports): OtherEuropeanEconomicCommunity 7.3
UnitedStates 75.5
UnitedKingdom 2.4
OtherEEC 5
THECURRENCY
Monetaryunit: Canadiandollar CurrencyunitperUSdollar,
averageofdailyfigures:
Year1990 1.167
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
ThisSurvey isbasedon theSecretariat'sstudyprepa¬
redfor the annual review ofCanada by the Economic
andDevelopmentReviewCommitteeon2July1991.
After revisions in the light ofdiscussions during the
review, final approval ofthe Surveyforpublication was
givenbytheCommitteeon12July1991.
The previous Survey of Canada was issued in
September1990.
Introduction
The Canadian economy has been in recession since the second quarter of
1990. Led by weakening domestic demand in response to tight monetary
conditions necessitated by persistent inflationary pressures, the downturn
gathered momentum when the U.S. economy also dipped into recession. In
the twelve months to the first quarter of 1991, real GDP dropped by 23/4 per
cent, compared with a declineof43/4per cent over thefirst year ofthe 1981-82
contraction. The unemployment rate rose by more than 3 percentage points
from a cyclical low in March 1990, to reach 10'/2 per cent of the labour force
in March and again in June 1991. With activity in Canada falling relative to
that in major trading-partner countries, the external deficit narrowed to 3 per
cent of GDP in the second half of 1990. After inflation eased somewhat in
1990, the consumer price index rose by 2'/2percentagepoints in January 1991,
partially due to the introduction of a broadly-based consumption tax, and its
twelve-month increase has remained at 61/» per cent since February. Given the
upswing projected for the United States and the easing in domestic monetary
conditions, the Canadian economy is expected to stage a moderate recovery in
the second halfofthe year, with output growth reaching that ofpotential only
in the course of 1992. The large slack in product and labour markets should
make for a marked decline in inflation over the next eighteen months. Recent
trends and the short-term outlook are discussed in detail in Part I of the
Survey.
In view of persistent wage pressures and the inflationary threats stem¬
ming from the temporary rise in oil prices and the price-level effects of tax
changes, the authorities have seen to it that the endogenous easing of mone¬
tary conditions during the downturn is proceeding gradually. Differentials
between Canadian and U.S. interest rates, though narrowing, have remained
large, and the Canadian dollar has tended to appreciate somewhat. To reaf-