AI and its Financial Implications on Canada
At the forefront of global technological innovation lies Artificial Intelligence (AI), a key player in ramping up Canada’s financial infrastructure. Rising steadily, the AI market has grown exponentially beyond 184 billion USD worldwide in 2024, and Canada is reaping the profits.
Canada’s Deep Investment into AI
AI has already unlocked potential across various industries, including health, business, and finance. The implementation and commercialization of generative AI in business process automation, supply chain management, and predictive AI can add $180 billion per year to the Canadian economy by 2039 and another $5 billion from creating a new line of cutting-edge Gen AI products and services.
The government is heavily investing in AI startups and research to capitalize on the profit. Canada has invested over $2 billion since 2017 to support AI research and innovation. Prime Minister Justin Trudeau preemptively announced a $2.4 billion package of measures from the upcoming Budget 2024 to secure Canada’s AI advantage and has invested another $100 million in the National Research Council of Canada AI Assist Program to help businesses scale up and deploy new AI solutions. Committing billions of dollars with more to come, the government has staked its money on AI and has stranded Canada in financial pressures, relying on AI to bankroll the debt.
Canada is a worldwide leader in AI as this year, Canada ranked number one among eighty countries in the Center for AI and Digital Policy’s 2024 global report on Artificial Intelligence and Democratic Values. On route to maintaining its strategic position, Trudeau is developing a new $2 billion Canadian AI Sovereign Compute Strategy to catalyze the development of Canadian-owned and located AI infrastructure with front-line computing to attract global AI investment to Canada. The strategy recruits top-tier talent to help Canadian businesses succeed globally.
A productivity boost to menial tasks, AI has enveloped the labour force by replacing humans for numerous jobs and leaving Canadians scrambling for work, doomed for extended periods of unemployment. The government is then compelled to pay for unemployment benefits and social safety nets for displaced workers needing financial support. Employment in AI has increased by one-third in Canada, the highest growth of any sector. AI has dominantly become the new qualification for well-paying jobs, making undertrained Canadians unhirable in a great part of the workforce. The government has mustered $50 million for the Sectoral Workforce Solutions Program for retraining programs to help workers adapt to AI-driven job demands. Coupled with surging social assistance costs, government tax revenues continue to decline due to a lack of income taxes from laid-off workers, widening budget deficits for the government to repair.
AI’s Bounty
In 2022, the Canadian AI sector attracted over $8.6 billion in venture capital, accounting for nearly 30 percent of all venture capital activity in Canada. Since 2019, more than 670 Canadian AI start-ups and 30 Canadian generative AI companies have received at least one investment deal valued at more than $1 million. Climbing in revenue, the Canadian government can sustainably increase corporate taxes from more profitable AI-driven companies and balance the multiple impulsive investments and shortcomings with financial support in the workforce.
What can we expect from AI?
AI is catapulting Canada to its peak of innovation and wealth. Although financial drawbacks will have to be reimbursed to avoid national financial mayhem, it is no obstacle too large for Canada’s revolutionized economy.