do more with fewer workers. investing in capital is one way to do it : with more machinery and equipment, workers can produce more. strategic investments can lead to innovation and technological progress that make machines and processes more efficient. better organization can also play an important role. firms can use the pool of workers more effectively, and workers and managers can improve their performance through education and training. with populations aging in advanced economies, the relative importance of various economies will change and so will the tastes and needs of an aging population. this will require structural adjustments. successful businesses will look ahead and see where new markets are developing – both at home and abroad – and where gaps are in terms of products and services. 6 workers will need to adapt to the changing demands for their skills and gain the qualifications necessary to thrive in a new economy. ultimately, this is about being more productive – also a recurring theme for the bank of canada and others. 7 finding the elusive cure for canada ’ s lagging productivity remains a pressing concern, and the demographic challenge makes it even more imperative. to put things in perspective, as much as two - thirds of the average income loss due to the absence of adjustment to aging – the 20 per cent figure i mentioned earlier – could be regained if productivity grew at a rate close to its average over the past 50 years, instead of at the anaemic rate experienced over the past decade. but investing more, to increase capital or to boost productivity, will require other adjustments as well. more resources will need to be put aside to finance these investments. as individuals and families understand the challenges of aging, they may realize how much more savings they will need to maintain their standard of living throughout retirement. in this regard, improving financial literacy can help promote these adjustments, through a better understanding of financial products and the important role of private savings. it will also be crucial to ensure that pension funds, and the financial system more generally, channel these savings into long - term productive investments. mark carney, “ exporting in a post - crisis world ” ( speech to the greater kitchener - waterloo chamber of commerce, waterloo, ontario, 2 april 2012 ). for a literature review, see b. fay and r. dion, “ understanding productivity : a review of recent technical research, ” discussion paper no. 2008 - 3, bank of canada, 2008. see also m. carney, “ the virtue of productivity in a wicked world ” ( speech to the ottawa economics association, ottawa, ontario

, 24 march 2010 ). see also t. macklem, “ canada ’ s competitive imperative : investing in productivity gains ” ( speech to productivity alberta, edmonton, alberta, 1 february 2011 ). bis central bankers ’ speeches some of the adjustments will happen naturally. for instance, shrinking labour input will put upward pressure on wages. higher wages might provide greater incentives for workers to acquire more education and training. scarcity of labour and lower costs of capital might offer greater incentives for firms to invest and increase productivity. but none of these challenges will be resolved magically by themselves and something will definitely have to give. implications for monetary policy it is not the bank of canada ’ s role to determine the extent of adjustments needed from each of us – government or private sector, households or businesses, current or future generations. this depends on our values and goals as a society and this is something that canadians will have to decide on collectively. so what is the bank ’ s role here? monetary policy cannot, of course, directly influence the aging process or its impact on the canadian economy. but monetary policy can facilitate the necessary adjustments to aging by contributing to a stable and predictable economic and financial environment. in this regard, one of the bank of canada ’ s main contributions is to deliver low, stable and predictable inflation. this promotes growth, mitigates economic cycles and protects the purchasing power of money. it makes it easier for consumers and businesses to manage their finances and to plan ahead. the stability of the financial system is also essential. as the painful lessons of other countries have demonstrated in recent years, price stability is no guarantee of financial stability, and a financial crisis can significantly hamper a country ’ s ability to deal with challenges such as an aging population. this is why the bank is contributing to and supporting the g - 20 agenda for financial reform. this is also why canadian authorities, including the bank, will need to remain as vigilant as they have been in the past to the possibility of financial imbalances developing. to maintain price stability and support the adjustments to aging across the economy over time, the bank itself will also have to adjust. that is because demographics affect the way in which we seek to achieve our objectives, most directly in influencing the potential of the economy – the level of activity at which the economy can operate without creating inflationary pressures. monetary policy cannot influence this long - run speed limit. it must obey it. this is why the bank needs to assess, through analysis and