, it is important that we get the incentives right for those working in government to encourage and facilitate the drive in the private sector towards higher productivity and innovation. but we should also have the right incentives for the private sector to work towards enhancing the public good and the productivity of collective action by governments. the problem is that the private and the public sectors too often act as if they are completely different worlds. so, the difficulty and the challenge is for both to more fully recognize the symbiotic nature of their relationship and thus the importance of interaction and cross - fertilization. the bottom line here is that, as a society, we cannot afford to have the private and the public sectors operating as two solitudes. individuals and businesses need a well - functioning public sector to ensure, first, the efficient operation of markets and, second, the cost - effective provision of public goods. at the same time, the public sector has a responsibility to understand how individuals and businesses work in order to provide the appropriate framework for the efficient functioning of markets. while this applies to all parts of the public sector, it is perhaps most critical for those of us ( including the bank of canada ) who are responsible for the economic and financial framework within which businesses and individuals operate. wright, r. 2001. “ nonzero : the logic of human destiny. ” random house. heath, j. 2001. “ the efficient society : why canada is as close to utopia as it gets. ” viking canada. a moment ago, i talked about the symbiotic relationship between the public and private sectors. nowhere is that relationship more important than in the development of human capital through education, training, and learning - by - doing. what i want to explore here is how the public and private sectors can interact to enhance the development of the “ economic ” capital of individuals. by “ economic ” capital i mean the ability of individuals to contribute more productively at work - as employees or entrepreneurs - or in their personal lives, as managers of their own economic and financial affairs. to frame this issue in economists ’ terms, if we are looking to increase our output of goods and services, to become more productive, and to improve our well - being as a nation, we need to augment our investment in physical capital. but, as technology becomes more complex and the global environment more competitive, it is equally, if not more, important that we also augment our investment in human capital. this primarily means improving the

carolyn wilkins : minding the labour gap remarks by ms carolyn wilkins, senior deputy governor of the bank of canada, to the ottawa economics association, ottawa, ontario, 10 february 2015. * * * accompanying charts can be found at the end of the speech. i would like to thank stephen murchison and eric santor for their help in preparing this speech. introduction thank you for the invitation. it ’ s a real pleasure to be here with my colleagues in ottawa. as economists and policymakers, we are keenly aware of the continuing challenges facing the global economy. even though canada has had its share of setbacks over the last few years, we are fortunate to have been on a relatively steady growth path, with low and stable inflation. at least part of the credit has to go to sound economic and financial policies, as well as the prudent behaviour of our financial institutions. the u. s economy has been gathering strength and we have seen growth in canada become more broadly based. but the canadian economy is still operating below its potential, and the sharp drop in oil prices is a setback. that is why the bank of canada lowered the policy rate a couple of weeks ago. what i ’ d like to do today is walk you through the bank ’ s assessment of how much room the economy has to grow and why we ’ re minding the labour gap. i ’ ll then talk about how lower oil prices will affect this picture, both domestically and globally. and finally, i ’ ll explain what all of this means for monetary policy. the divine coincidence you won ’ t be surprised when i say, as a central banker, that my objective is to achieve low, stable and predictable inflation. and so my interest in assessing the capacity of the canadian economy is related to that goal. of course, the 2 per cent inflation target is a means – it ’ s not the end. it is the best contribution monetary policy can make to the economic and financial well - being of canada. and achieving the inflation target is consistent with closing the output gap and attaining full employment in a typical business cycle. among economists, this is known as the “ divine coincidence. ” 1 this business cycle has been far from typical. it spans a particularly destructive recession. companies discarded unneeded capital and eliminated jobs. many closed their doors for good. we know that a large number of firms in canada simply disappeared, and with them, so did significant physical capital. but people are not like capital