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Bank of Canada Governor Stephen Poloz has talked a lot lately about the economy reaching a “sweet spot.”

Companies are running flat out and can’t produce more without adding workers or new capacity. Unemployment, now at 5.8 per cent, hasn’t been this low since 1974.

So life is pretty good, right?

It could be a whole lot better, according to labour economist Lars Osberg, a professor at Dalhousie University. Canadians suffer from “historical amnesia” when it comes to unemployment, he says. The country is still a long way from full employment, and the jobless rate is still much higher than it’s been for much of the postwar period, he argues in a recent paper. Between 1946 and 1975, unemployment averaged 4.7 per cent, and only briefly spiked above 6 per cent.

We’ve lived with higher unemployment for so long that many Canadians don’t know what a truly healthy job market looks like, Prof. Osberg says.

“Full employment can and should be reinstated as a major policy objective of Canadian governments,” he writes in his paper, Full Employment in Canada in the early 21stCentury.

This past week, Prof. Osberg joined 60 other economists in signing a letter to Finance Minister Bill Morneau, urging him to add the objective of “full and productive employment” to a new “multi-goal” mandate for the Bank of Canada that would also include price stability and protecting the value of the Canadian dollar.

Right now, the Bank of Canada has a single focus – keeping inflation at or near a 2-per-cent target. And it adjusts its key interest rate to keep prices stable. The mandate is renewable every five years under an agreement with the federal government that expires in 2021.

Prof. Osberg laments that the central bank’s successful control of inflation has produced stagnant wages, higher income inequality and heightened job insecurity.

Even Mr. Poloz would probably acknowledge that life could be better for workers. The Bank of Canada’s April monetary policy report says there is still some “slack” in the labour market. Wage gains remain relatively subdued, the youth jobless rate is high and the share of people who have been out of work for a long time remains above historic norms, according to the report.

Full employment is a laudable goal. It would create more opportunity for youth, disadvantaged minorities and new immigrants.

A decade of low interest rates and government deficit spending in Canada has already helped drive unemployment down to 5.8 per cent from nearly 9 per cent in 2009.

So why not go even further? The downside is that the tools available to drive unemployment lower could produce a host of unintended and unwanted consequences. The risk of higher inflation is only one of them.

Keeping interest rates artificially low acts as a tax on savers, particularly those on fixed incomes. Low rates fuel excessive borrowing at a time when household debt is already at a record high. Easy money also drives up the cost of homes, pricing younger buyers out of the market.

Another way to lower unemployment is by governments spending more. But fiscal stimulus also has its problems. To make a significant dent in the jobless rate, governments would have to either tax a lot more or add to their already hefty debt loads. The latter, in particular, shifts the burden of helping today’s unemployed to future generations.

In the end, achieving full employment may be less important than how we get there, argues Avery Shenfeld, chief economist at CIBC World Markets Inc.

“Full employment is a mark of success, [but] not all full employment equilibria are the same,” he pointed out in a research document last week. “The mix of spending that has taken us to this point, and how it’s been financed, leaves much to be desired, as does the nature of the jobs being created.”

The jobless rate has been driven lower by debt-financed consumption and housing, Mr. Shenfeld points out. Largely missing, however, has been an expansion of the export economy, which tends to generate more and better-paying jobs.

The goal, he says, should not be achieving full employment, but rather making Canada an attractive place for trade-oriented businesses to put down roots, which in turn will create good jobs.

That’s a different kind of sweet spot.