More Canadians could have trouble weathering future economic downturns than in the past due to a steady decline in job quality over the last 20 years, finds a new report by CIBC Capital Markets.
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“Is the quality of employment in Canada on the decline? We think so,” says Benjamin Tal, Deputy Chief Economist, CIBC Capital Markets, who authored the report, On The Quality of Employment in Canada. “The share of low-paying jobs in Canada has been on the rise in the past two decades and might provide some insights on the ability of workers, in aggregate, to absorb future economic shocks.”
Mr. Tal looked solely at wages in his analysis, using unpublished data from Statistics Canada.
The report finds that the share of Canadians making less than the average wage each year has crept up to nearly 61 per cent from about 58 per cent over the last 20 years. The average wage today is about $25 an hour.
“Lower quality employment might help explain the sluggish growth in personal income,” Mr. Tal says.
The report digs deeper to rule out demographic issues that can skew job quality trends, in particular, the declining share of young Canadians and the rising share of older Canadians. For Canadians in their prime working years (age 25 to 54 years), 53 per cent make less than the average wage today, up 3 per cent from 20 years ago.
“The story is the same: The share of lower-paying jobs has been on the rise,” Mr. Tal says.
Interestingly, the most significant increase in the below-average paying jobs category occurred among those in the wage range of between 50 per cent and 100 per cent of the average wage in a given year. That group has seen its number rise by close to two million since 1997. No less than 6.7 million workers fall into that wage category.
The report also looks at wage growth by wage percentile and found further evidence of a widening income gap.
“The good news is that those at the lowest end of the wage spectrum are seeing relatively healthy wage gains – not due to bargaining power but mostly due to policy changes regarding minimum wages,” Mr. Tal says. “But the group closer to the middle of the wage spectrum has seen sub-par growth.”
Mr. Tal also examined three alternative proxies of job quality, part-time and full-time paid-employment and self-employment.
The share of Canadians working in part-time employment made an “unmistakeable jump” to 20 per cent during the 2009 recession from its more-consistent 18 per cent level in the previous decade, the report notes. Mr. Tal highlights that the share of part-time workers has yet to return to pre-recession levels, sitting currently at 19.5 per cent.
The report says that from a full-cycle perspective, the rise in part-time employment probably reflects some demographic forces as the majority of this increase was among workers above the age of 55.
“However, the fact that half of the increase in part-timers among that age group accrued during the recession suggests that beyond pure demographics, there is an element of fragility here,” Mr. Tal says.
CIBC is a leading Canadian-based global financial institution with 11 million personal banking and business clients and three major business units – Retail and Business Banking, Wealth Management and Capital Markets. CIBC Capital Markets provides integrated global markets products and services, investment banking advisory services, corporate banking, and top-ranked research to corporate, government and institutional clients around the world. Visit www.cibccm.com for more information on CIBC and CIBC Capital Markets. News releases are available at www.cibc.com/ca/media-centre/.
SOURCE CIBC – Economic Research