Aggregate Demand and Employment
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Aggregate Demand and Employment

International Perspectives

Edited by Brian K. MacLean, Hassan Bougrine and Louis-Philippe Rochon

With an emphasis on developments during and after the Great Recession, and paying due attention to the impacts of austerity policies, the chapters assembled for this book explain that high growth of aggregate demand is as essential as ever for achieving full employment and rising living standards. Written by distinguished Keynesian and Post-Keynesian economists from diverse national backgrounds, the book tackles critical theoretical and empirical issues to illuminate the economic experiences both of large geographic regions such as Europe, Latin America, and Africa, as well as specific national economies including the USA, Japan, India, and Canada.
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Chapter 7: Full employment in Canada in the early 21st century

Lars Osberg


A national unemployment rate of 6.3 per cent in 2017 or 5.8 per cent in 2018 is only ‘low’ compared to what Canadians have got used to. Between 1946 and 1975, Canada’s unemployment rate averaged 4.7 per cent and since then the labour force has become much better educated and considerably older, which should have reduced the unemployment rate significantly. This chapter asks what ‘full employment’ would look like in Canada in the early 21st century, how we might we get there and why we might want to. It begins by discussing why ‘full employment’ became a policy priority of government in Canada after 1946, but then disappeared after 1980 – collateral damage in Canada’s successful war on inflation. It then addresses the political economy context created by the 30-year stagnation of earnings produced by that policy decision. Recent econometric evidence on the possibility that lower unemployment might cause inflation is discussed. The long-term costs of inadequate labour demand and the available macroeconomic policy tools that could produce full employment are then surveyed. The chapter concludes that full employment can and should be reinstated as a major policy objective of Canadian governments.

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