In Focus
November 28, 2016
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ECONOMICS
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Avery Shenfeld
(416) 594-7356
[email protected]
Benjamin Tal
(416) 956-3698
[email protected]
Andrew Grantham
(416) 956-3219
[email protected]
Royce Mendes
(416) 594-7354
[email protected]
Nick Exarhos
(416) 956-6527
[email protected]
On The Quality of Employment in Canada
by Benjamin Tal
Is the quality of employment in Canada
in decline? We think so. By looking at the
distribution of part-time vs. full-time jobs;
self-employment vs. paid-employment;
and the compensation of full-time paidemployment jobs in more than 100 industry
groups, we observe a slow but steady
deterioration.
during the recession. That rate rose from
18% to 20% during the recessionary peak.
But at the current 19.3%, that share is still
elevated. The contributing factor here was
the jump in part-time jobs during the year
ending October 2016, with part-time jobs
accounting for no less than 90% of all jobs
created.
For the purpose of this analysis, we used
a very narrow definition of quality—one
that focuses solely on compensation. We
also looked at a more direct measure of
compensation by using untabulated data
from Statistics Canada and reached the
same conclusion. The share of low-paying
jobs in Canada has been on the rise in the
past two decades.
From a full-cycle perspective, the rise in
part-time employment probably reflects
some demographic forces. As illustrated
in Chart 2, 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.
Part-Time Jobs on the Rise
We include self-employment here simply
because of the fact that, on average,
Chart 1
Share of Part-Time Employment Has Risen
Since the Recession
Chart 2
Most of the Increase in Part-Time Jobs Was
Among Age 55+
20.5%
Part-Time as a Share of
Total Employment
3-month moving avg
20.0%
Y/Y Growth (Oct 2016)
140
•
70
120
%
50
80
40
18.5%
60
30
18.0%
40
20
17.5%
20
10
0
97 00 03 06 09 12 15
Growth in Part-Time Employment by Age
(Jul 2007-Oct 2016)
60
19.0%
17.0%
CIBC Capital Markets
'000
100
19.5%
https://economics.cibccm.
com/
Self-Employment Remains Stable
Chart 1 tells the tale. There was an
unmistakable jump in the share of parttimers in the Canadian labour market
Part-Time
Full-Time
During
recession
0
15+
15-24
Source: Statistics Canada, CIBC
PO Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada
25-54
55+
Source: Statistics Canada, CIBC
M5J 2S8
•
Bloomberg @ CIBC
•
(416) 594-7000
CIBC Capital Markets
In Focus—November 28, 2016
self-employed people earn less than paid-employees.
From this narrow perspective, a higher share of selfemployment generally implies lower employment
quality. As clearly illustrated in Chart 3, that share
has been relatively stable over the past decade with a
short-lived increase in “forced” self-employment during
the recession. The relative stability of the share of selfemployment is a bit of a surprise as many observers
expected a surge in technology-driven entrepreneurial
activity. In fact, over the past year, paid-employment rose
four times faster than self-employment.
jobs in many service industries, as well as in retail and
wholesale trade, have traditionally had the lowest level
of compensation.
Chart 4 provides information on that trend and the
message is clear. The compensation distribution of fulltime paid-employment has worsened over the past
decade with the number of jobs in lower-paying industries
rising faster. Note that the past years have seen a bit of
a reversal of that trend, with the growth in the number
of jobs in high-paying industries, in fact, outpacing the
growth seen among lower-paying industries.
Full-Time Paid-Employment
An Alternative and A More Direct Measure Tells the
Same Story
Now, consider a hypothetical situation in which all
jobs created in Canada in the past year were full-time
paid-employment. That would clearly be a positive
development from a quality standpoint. But this
improvement in quality can be easily offset if the
distribution of full-time jobs in the economy during the
year has shifted from high-paying jobs to low-paying
jobs. The presence and persistence of wage differentials
between industries is a regular phenomenon in a mature
economy. This can result, in part, from the normal
functioning of a competitive labour market, reflecting
such factors as skill differentials as well as contractual
agreements between employers and workers.
The three measures used above are basically proxies for
compensation-based job quality. But they are far from
perfect. A proxy is a proxy. Regardless of how we finetune the data, we might have a situation in which growth
in self-employment can come from the higher-end of the
pay-scale of that category. In that case, we underestimate
overall quality of employment. Alternatively, growth in
full-time paid-employment can come from low-paying
jobs in high-paying sectors—biasing our measure upward.
In addition, given that our focus is on the long-term
trajectory of quality, those measures cannot capture
some important demographic forces that might influence
aggregate quality measures. For example, the declining
share of young Canadians in the labour force (Chart 5)
might work to increase the overall quality since young
workers, on average, earn less. That is obviously a shortcoming of such a measure.
With few exceptions, most industries have maintained
a fairly stable relative compensation position over the
years. Primary industries such as logging, mining along
with sectors such as transportation and electronics enjoy
relatively high levels of compensation. In comparison,
Chart 3
Chart 4
Self-Employment—Stable
Full-Time Paid-Employees
Self-Employment as a Share of
Total Employment
160
18.0%
3-month moving avg
140
17.5%
120
17.0%
100
16.5%
Index Jan 2003=100
Y/Y Growth (Oct 2016)
125
'000
115
15.5%
60
105
15.0%
40
100
20
95
0
13.5%
97 00 03 06 09 12 15
1.0
110
80
14.0%
y/y % chg
120
16.0%
14.5%
3-month moving avg
October 2016
1.5
SelfEmployed
0.5
03 05 07 09 11 13 15
Low-Paying Sectors
High-Paying Sectors
PaidEmployed
Source: Statistics Canada, CIBC
0.0
Low-Paying
Sectors
High-Paying
Sectors
Source: Statistics Canada, CIBC
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CIBC Capital Markets
In Focus—November 28, 2016
Chart 5
Share of Young Canadians in Employment
is Falling
Chart 7
Share of Low-Paying Jobs—Rising
Share of Below Average Wage Jobs
Employment
Share of Age 15-24 vs 15+
61%
30%
60%
25%
59%
20%
58%
15%
10%
57%
5%
56%
0%
55%
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Source: Statistics Canada, CIBC
Source: Statistics Canada, CIBC
To overcome those difficulties, we used a direct measure
of compensation by utilizing special unpublished Statistics
Canada tabulations aimed at measuring employment
growth by income brackets. Chart 6 illustrates the payspectrum of full-time and part-time workers by percentile.
Chart 8 opens up the hood a bit, and interestingly, we
find that the most significant increase in the below
average paying jobs segment occurred in the second
wage range of between 50% and 100% of average
wage in any given year. That group has seen its number
rising by close to two million since 1997. No less than 6.7
million workers fall into that wage category.
We then calculated the share of jobs that earn below the
average wage in a given year. By using the average of
each year as the base, we avoid inflationary biases due
to workers migrating from one wage bracket to another.
As illustrated in Chart 7, the share of workers who are
paid below the average wage has risen over the years to
just under 61% in 2015. That trend is consistent with a
widening wage gap symptomatic of deteriorating labour
market quality.
Now, what about the demographic issue? As illustrated
in Chart 5, the declining share of young Canadians in
the labour market can bias our direct measure upward.
At the same time, the rising share of older Canadians
that are less engaged in the labour market can bias the
measure downward. Chart 9 overcomes that problem by
focusing on the age group between 25 to 54. The story
Chart 6
Chart 8
Average Hourly Earnings by Percentile
Job Growth by Wage Category
2015 annual average, current dollars
1997-2015
$50
2500
$45
$40
2000
Full-time
$35
Part-time
$30
$'000
1500
$25
1000
$20
$15
500
$10
$5
0
$0
P10
P20
P30
P40
P50
P60
P70
P80
<50% of avg
wage
P90
50-100% of avg
wage
100-150% of
avg wage
>150% of avg
wage
Source: Statistics Canada, CIBC
Source: Statistics Canada, CIBC
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CIBC Capital Markets
In Focus—November 28, 2016
Chart 9
Share of Low-Paying Jobs Among
Prime-Age Workers
Wage Growth by Wage Percentile
Below Average Wage Jobs
(Age 25-54)
3.9%
1997-2015
Annual Average
4.0%
3.5%
53%
3.7%
52%
3.5%
51%
3.3%
50%
3.1%
49%
2.9%
1.0%
48%
2.7%
0.5%
2.5%
0.0%
3.0%
2.5%
2.0%
1.5%
P10
P20
P30
P40
P50
P60
P70
P80
P90
47%
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
2010-2015
Annual Average
P10
P20
P30
P40
P50
P60
P70
P80
P90
54%
Chart 10
Source: Statistics Canada, CIBC
Source: Statistics Canada, CIBC
is the same: The share of lower-paying jobs has been on
the rise.
What are the implications of these findings? It is
important to note that those measures are not the
“ultimate” reading of job quality. Different measures
of quality such as job satisfaction or work environment
might lead to different conclusions. Neither does the
decline in employment quality over the past two decades
mean that we have turned into a nation of “hamburger
flippers”.
So there is a higher concentration of job creation in lowerpaying jobs. What about wage growth? A closer look at
Chart 10 suggests that the gap is not closing via the wage
mechanism. 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. But the
group closer to the middle of the wage spectrum have
seen sub-par growth throughout the entire cycle (Chart
10, left) and more recently (Chart, 10 right).
Rather, it suggests that the distribution of employment
in Canada is not as favourable as it used to be, looking
strictly at compensation. Lower quality employment might
help to explain the sluggish growth in personal income
in the past two decades and might provide some insights
on the ability of workers, in aggregate, to absorb future
economic shocks.
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