Canadian job quality hits 25 year low: CIBC study

Canadian bank’s report finds that decline is a structural rather than cyclical issue.

0 March 5, 2015
by Andy Blatchford, Canadian Press

12-dec-engineers-wanted-360OTTAWA — Job quality in Canada has dipped to its lowest level in a quarter century, the result of structural problems in the labour market that could prove difficult to reverse, says a new study by CIBC.

The big bank said Thursday its employment quality index, which slipped 1.8 per cent last year, was down 15 per cent since the early 1990s.

The index examines the distribution of full- and part-time positions, the gap between self-employment and the higher-quality jobs for paid employees, and whether full-time jobs were created in low-, medium- or high-paying sectors.

The findings reveal a descending path in labour quality, a gravitational pull the study’s author warned will persist unless it’s addressed.

CIBC deputy chief economist Benjamin Tal believes it’s far from an easy fix, particularly since quality has largely been headed along the same course for decades.

“It’s a structural issue that reflects the fact that there is a significant mismatch between the skill set that is available and the skill set that is needed,” Tal said in an interview.

“So, we have people without jobs and jobs without people.”

Tal’s study found the number of part-time positions climbed much faster compared with the more desirable full-time gigs since the late 1980s. On the bright side, it said the number of full-time jobs increased at twice the speed of part-time jobs over the past year.

However, the damage to full-time work during each recession was largely permanent, the study added.

During roughly the same 25-year period, the number of self-employed jobs, generally considered lower quality because they usually pay less, also rose more quickly than salaried positions. For 2014, CIBC found the number of self-employed positions increased four times faster than paid employment.

By sector, the bank said the number of low-paying positions had increased faster than higher-paid jobs since the early 1990s. More recently, it found wages in high-paying sectors climbed twice as rapidly as those in low-paying industries over the past decade.

Taken together, the longevity of these trends suggest the deterioration in job quality is more of a structural issue than a cyclical one, Tal wrote.

He doubts the sliding value of the dollar will turn things around nor will any Bank of Canada efforts to solve the issue by moving the dial on its primary monetary-policy tool: the key interest rate.

Instead, Tal recommends changes to educational policies to ensure the skills of workers meet the needs of the economy. He said corporations could provide more job training to help develop workers.

Tal also suggested governments act to address underemployment among new immigrants, especially those already trained in specialized fields like health care and engineering.

“We all know the stories of PhDs driving taxis,” Tal said.

He added that a key derivative of declining labour quality is a widening income gap. Workers in low-paying jobs have the weakest bargaining power, leaving them little choice but to compromise on salary, he added.

The Bank of Canada has made repeated warnings in recent months about the state of the job market.

Last month, deputy governor Carolyn Wilkins said in a speech that the economy was about 270,000 jobs short of its full capacity at the end of 2014.

Wilkins pointed to several areas of concern, including how more than one in four part-time workers would prefer full-time jobs.

She also said the participation rate of the country’s prime-age workers — between 25 and 54 years old — fell substantially in 2014 and that the average length of unemployment was 21 weeks, near its height from the recession in 2008-09.

In its January monetary policy report, the Bank of Canada highlighted stubborn problems in the job market, arguing long-term unemployment continued to hover close to its “post-crisis peak.”

The central bank also found the average number of hours worked remained low.

© 2015 The Canadian Press


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