carolyn wilkins : at the crossroads - innovation and inclusive growth remarks by ms carolyn wilkins, senior deputy governor of the bank of canada, at the g7 symposium on innovation and inclusive growth, montebello, quebec, 8 february 2018. * * * ooh, standin'at the crossroad, tried to flag a ride ooh - ee, i tried to flag a ride didn't nobody seem to know me, babe, everybody pass me by “ cross road blues ” by robert johnson, 1936 introduction welcome to canada — and to a snowy montebello. this day is dedicated to a discussion about innovation and inclusive growth. it is great to have so many experts with us today. thank you. we know that technological advances are key to improving an economy ’ s potential to grow. they have raised living standards in g7 countries and across the globe, and have helped lift more than one billion people around the world out of extreme poverty since the second world war. 1 the current wave of innovation — digitalization and automation — promises to raise trend growth in the economy even more. however, as we are discussing today, technological advances can leave people behind. it is perhaps only in the last decade or so that mainstream macroeconomists have sharpened their focus on how income distribution may affect long - term growth and macro dynamics. there is compelling evidence that innovation has been an important reason behind rising income inequality in advanced economies in recent decades. 2 research also finds that rising inequality can result in weaker and less - stable macroeconomic outcomes. this places us, as policymakers, at a crossroads. do we choose to stay on the same road and repeat the past? or do we apply fresh thinking to policy and choose a new road where innovation delivers even stronger and more - inclusive growth? this is the challenge that the g7 countries have set for themselves for 2018. canada is proud to lead the g7 ’ s work this year to better understand the issues so that we can set priorities for policy. the context we are working in matters. the global economy is enjoying the most robust and synchronous growth we ’ ve seen in close to a decade. businesses and consumers are feeling more confident. yet, we know that many people in advanced economies are also anxious about what digitalization and automation might bring. they are worried about being left behind. for workers in some industries, such as manufacturing, this may seem like old news. for drivers, lawyers, investment advisors and many

you that the digital economy is a promising way to raise trend growth and overall living standards. we cannot be satisfied, though, if some of the potential gains are left on the table, because many people will be left behind and important markets will be virtually uncontestable. it does not have to be this way if we choose a road for policy that effectively manages the 5 / 7 bis central bankers'speeches downsides of innovation without stifling it. of all the areas where we could develop and implement a better strategy, here are my top three : ( i ) develop a dynamic workforce with the skills to match the jobs, and encourage more labour force participation ; ( ii ) keep market power in check, particularly the power that comes from control of consumer data, to encourage competition and limit monopoly profits ; and ( iii ) manage the growing operational risks associated with the digital services that are provided by a concentrated set of firms to systemically important financial institutions. we will need to judge wisely when it is best to use public policy tools to manage risks and when to let private enterprise work its magic. we ’ ll need to work together and in the field to inform these judgments. i am confident that, together, the g7 will show leadership and will build with the private sector a shared sense of responsibility for the future. i would like to thank gurnain k. pasricha, lori rennison and eric santor for their help in preparing this speech. 1 the data for this calculation are taken from m. roser and e. ortiz - ospina, global extreme poverty ( 2018 ). poverty is defined as a consumption level below int $ 1. 90 per day, adjusting for price differences and inflation. 2 see international monetary fund, world economic outlook, chapter 3, “ understanding the downward trend in labor income shares, ” april 2017 ; and g. michaels, a. natraj and j. van reenen, “ has ict polarized skill demand? evidence from eleven countries over twenty - five years, ” review of economics and statistics 96, no. 1 ( march 2014 ) : 60 – 77. 3 according to mckinsey & company, 46 per cent of tasks could be automated in the united states using current technology. in canada, the share is slightly lower ( 42 per cent ). see c. lamb, “ the talented mr. robot : the impact of automation on canada ’ s workforce, ” brookfield institute, june 2016. 4 data