Harry&Tonto
2015-03-05 21:21:11 UTC
BusinessView: Mar 05, 2015
Canadian job quality sinks to record low - low-paying jobs becoming the
norm: CIBC
Further interest rate cuts not likely the cure
TORONTO, March 5, 2015 /CNW/ - Job quality in Canada is now at a record
low and showing little sign it will turn around in the near future,
finds CIBC's latest Canadian Employment Quality Index.
The index, which measures the quality of employment from a compensation
perspective, shows declines in all measures and indicates the drop in
Canadian job quality is more structural than cyclical in nature and
likely can't be reversed by monetary policy.
"The Bank of Canada continues to warn us that the headline unemployment
rate is not as rosy as perceived and, in fact, according to the Bank's
new and improved measure of labour market activity, labour slack is
still significant," says Benjamin Tal, deputy chief economist and author
of CIBC's Employment Quality Index.
"In many ways, the Bank has a point. Our measure of employment quality
is now at a record low—suggesting that the composition of employment is
sub-optimal. But a closer examination of the trajectories of our index's
sub-components suggests that the Bank's prescribed remedy of low and
lower interest rates might not cure what ails the labour market."
The CIBC Canadian Employment Quality Index (EQI), measure three key areas:
the distribution of part-time vs. full-time jobs;
self-employment vs. paid employment;
and the compensation ranking of full-time paid employment jobs in
more than 100 industry groups
Mr. Tal notes that the since the late 1980s, the number of part-time
jobs has risen much faster than the number of full-time jobs, which is
often seen as the
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
most important measure of employment quality.
"The damage caused to full-time employment during each recession was, in
many ways, permanent. That is, full-time job creation was unable to
accelerate fast enough during the recovery to recover lost ground. The
good news is that for the past year, the number of full-time jobs rose
twice as fast as the number of part-time jobs—a factor that worked to
offset some of the recent softening in our index."
The Index shows a similar trend in the ratio of paid- to self-employed
Canadians. The number of self-employed workers has been on a steeper
incline over the past 25 years and the last year grew at a rate four
times faster than the number of paid-employees. The index rates
self-employment to be of lower quality, simply due to the fact that, on
average, it pays less than salaried positions.
The third main factor measured by the Index is the compensation ranking
of full-time paid employment jobs in more than 100 industry groups and,
here again, the numbers are not encouraging.
"While full-time paid-employment jobs are on average of higher quality
than part-time and self-employment jobs, not all full-time
paid-employment jobs were created equal," says Mr. Tal. "The number of
low-paying full-time jobs has risen faster than the number of mid-paying
jobs, which in turn, has risen faster than the number of high-paying jobs.
"Over the year ending January 2015, the job creation gap between low and
high-paying jobs has widened with the number of low-paying full-time
paid positions rising twice as fast as the number of high-paying jobs.
Those trajectories are largely behind the softening in our measure of
employment quality over the past two decades."
The report notes that job quality in Alberta has already taken a hit,
falling by three per cent during the year ending December 2014.
Saskatchewan and Manitoba have seen the similar declines with Ontario
falling by four per cent.
British Columbia, Atlantic Canada and Quebec have bucked the trend and
seen quality increase over the period.
"The long-term trends of our quality components suggest that the decline
in employment quality in Canada is more structural than cyclical," adds
Mr. Tal. "That is, the slow growth in the number of high-paying jobs
might reflect a growing labour market mismatch. And the signal that we
are getting from the wage mechanism is consistent with that observation.
Over the past decade, wages in high-paying sectors rose almost twice as
fast as wages in low-paying sectors.
"In other words, the fastest growing segment of the labour market is
also the one with the weakest bargaining power. That works to weaken the
link between labour market performance and aggregate wage gains. Low or
lower interest rates will do little to close that gap."
Percentage Change in EQI by Province
Q4-2013 vs. Q4-2014
Province % Change
BC 6.59
Atlantic Canada 2.75
Quebec 1.99
Alberta (3.02)
Man/Sask (3.17)
Ontario (4.01)
The complete CIBC World Markets report is available at:
http://research.cibcwm.com/economic_public/download/eqi_20150305.pdf [3]
Canadian job quality sinks to record low - low-paying jobs becoming the
norm: CIBC
Further interest rate cuts not likely the cure
TORONTO, March 5, 2015 /CNW/ - Job quality in Canada is now at a record
low and showing little sign it will turn around in the near future,
finds CIBC's latest Canadian Employment Quality Index.
The index, which measures the quality of employment from a compensation
perspective, shows declines in all measures and indicates the drop in
Canadian job quality is more structural than cyclical in nature and
likely can't be reversed by monetary policy.
"The Bank of Canada continues to warn us that the headline unemployment
rate is not as rosy as perceived and, in fact, according to the Bank's
new and improved measure of labour market activity, labour slack is
still significant," says Benjamin Tal, deputy chief economist and author
of CIBC's Employment Quality Index.
"In many ways, the Bank has a point. Our measure of employment quality
is now at a record low—suggesting that the composition of employment is
sub-optimal. But a closer examination of the trajectories of our index's
sub-components suggests that the Bank's prescribed remedy of low and
lower interest rates might not cure what ails the labour market."
The CIBC Canadian Employment Quality Index (EQI), measure three key areas:
the distribution of part-time vs. full-time jobs;
self-employment vs. paid employment;
and the compensation ranking of full-time paid employment jobs in
more than 100 industry groups
Mr. Tal notes that the since the late 1980s, the number of part-time
jobs has risen much faster than the number of full-time jobs, which is
often seen as the
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
most important measure of employment quality.
"The damage caused to full-time employment during each recession was, in
many ways, permanent. That is, full-time job creation was unable to
accelerate fast enough during the recovery to recover lost ground. The
good news is that for the past year, the number of full-time jobs rose
twice as fast as the number of part-time jobs—a factor that worked to
offset some of the recent softening in our index."
The Index shows a similar trend in the ratio of paid- to self-employed
Canadians. The number of self-employed workers has been on a steeper
incline over the past 25 years and the last year grew at a rate four
times faster than the number of paid-employees. The index rates
self-employment to be of lower quality, simply due to the fact that, on
average, it pays less than salaried positions.
The third main factor measured by the Index is the compensation ranking
of full-time paid employment jobs in more than 100 industry groups and,
here again, the numbers are not encouraging.
"While full-time paid-employment jobs are on average of higher quality
than part-time and self-employment jobs, not all full-time
paid-employment jobs were created equal," says Mr. Tal. "The number of
low-paying full-time jobs has risen faster than the number of mid-paying
jobs, which in turn, has risen faster than the number of high-paying jobs.
"Over the year ending January 2015, the job creation gap between low and
high-paying jobs has widened with the number of low-paying full-time
paid positions rising twice as fast as the number of high-paying jobs.
Those trajectories are largely behind the softening in our measure of
employment quality over the past two decades."
The report notes that job quality in Alberta has already taken a hit,
falling by three per cent during the year ending December 2014.
Saskatchewan and Manitoba have seen the similar declines with Ontario
falling by four per cent.
British Columbia, Atlantic Canada and Quebec have bucked the trend and
seen quality increase over the period.
"The long-term trends of our quality components suggest that the decline
in employment quality in Canada is more structural than cyclical," adds
Mr. Tal. "That is, the slow growth in the number of high-paying jobs
might reflect a growing labour market mismatch. And the signal that we
are getting from the wage mechanism is consistent with that observation.
Over the past decade, wages in high-paying sectors rose almost twice as
fast as wages in low-paying sectors.
"In other words, the fastest growing segment of the labour market is
also the one with the weakest bargaining power. That works to weaken the
link between labour market performance and aggregate wage gains. Low or
lower interest rates will do little to close that gap."
Percentage Change in EQI by Province
Q4-2013 vs. Q4-2014
Province % Change
BC 6.59
Atlantic Canada 2.75
Quebec 1.99
Alberta (3.02)
Man/Sask (3.17)
Ontario (4.01)
The complete CIBC World Markets report is available at:
http://research.cibcwm.com/economic_public/download/eqi_20150305.pdf [3]