1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 35
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
Net replacement rates after job loss: employment insurance varies widely across countries
70%
60%
% unemployment income as a
share of disposable household
income before job loss
50%
40%
30%
20%
10%
0%
OECD
Canada
Germany
6 mths
12 mths
24 mths
Japan
U.S.
60 mths
Source: OECD, Scotiabank Economics
Spending on active labour market policies, including training and employment services, averages
only around 0.3% of GDP, with significant variation across countries and mixed evidence on
effectiveness, particularly in periods of rapid technological change. As AI reshapes task demand,
labour market resilience will hinge on the speed and effectiveness of reintegration mechanisms.
Active labour market policy spending: spending on targeted adjustments is limited across
countries
0.6%
0.5%
0.4%
0.3%
0.2%
0.1%
0.0%
OECD
U.S.
Canada
Germany
France
Direct job creation
Employment incentives
Start-up incentives
Training
U.K.
Italy
Japan
Placement and related services
Source: OECD, Scotiabank Economics
Labour market dynamics also carry important fiscal implications given that labour income
remains the backbone of public revenue in advanced economies, accounting for roughly 60% of
government revenues. Early-stage AI adoption, however, tends to shift value creation toward
capital, intangibles, and highly scalable firms, often subject to more favourable tax treatment.
This creates a timing and composition challenge for fiscal policy, as revenues may soften just as
governments face rising demands to fund reskilling, employment support, digital infrastructure,
regulatory oversight, and compute-intensive public services. In the absence of offsetting
measures, deficits could widen before productivity gains are fully reflected in the tax base.
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