Ending Discrimination

Underemployment is Canada’s Real Labour Market Challenge

March 6, 2014

A Profile of Canada’s Labour Market

Each month, Statistics Canada releases its unemployment rate, and many use it to talk about job creation in Canada. Monthly unemployment rates move up and down, making headlines but revealing little. As work patterns change, with greater use of part-time employees and other forms of precarious labour, the headline unemployment rate becomes less and less useful on its own. The labour force is comprised of far more than simply employed and unemployed workers.

A broader and longer-term analysis, and better labour market indicators are required to give insight into the various ways that workers in Canada responded to the recession and weak economic recovery. This paper takes an in-depth look at the recovery and the current state of the labour market, to highlight current challenges in the way we look at the labour market, and propose alternative indicators that should be part of Statistics Canada’s monthly releases to better inform the public about the real state of the labour market.

Slowing Job Growth

Canada’s labour market recovered the total number of jobs lost during the recession by November 2010, leading to claims of a robust recovery for workers. A closer look shows that job creation has stagnated and hasn’t kept up with population growth among working age adults.

When we set up an index  job level at 100 prior to each of the last three recessions—as shown in Graph 1—we find that although the most recent recession had the most rapid loss of jobs, employment losses were relatively shallow and employment returned to pre-recession levels earlier than prior recessions. Nearly five years out, however, it’s a different story. Growth in employment now lies somewhere between the previous two recessions, mirroring the long, slow recovery path following the 1990’s recession.

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The employment rate, that is the proportion of the working age (15-64) population employed shown in the Graph 2, has recovered only half-way to its pre-recession peak. This indicator also shows employment growth has completely stalled over the past year and half.

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The jobs that have been recovered are disproportionately part-time and precarious. As seen in Table 1, part-time jobs grew at twice the rate of full-time jobs (5.9% vs 3.3%), and account for 40% of the job growth between 2008 and 2013—even though part-time positions only make up one out of five jobs (19%) in the labour market. All of the growth in part time jobs was among underemployed part time workers, meaning those who want more hours of work.

Unemployment rate has stalled and does not tell us the full story

Nearly five years after the end of the 2008-2009 recession, Canada’s headline unemployment rate has remained fixed at 7.2% (December 2013), a level first reached mid-2011. But rather than a static group of individuals, large numbers of workers flow in and out of unemployment each month. Recessions affect these flows in various ways, for example fewer people quit their job or decide to enter the labour market when the job market looks dismal. Following a recession, there is usually an increase in the number of workers that are unemployed for extended periods of time.

The proportion of workers who were unemployed for over 12 months rose dramatically following the prolonged 1990—1992 recession (Graph 3), accounting for over 15% of unemployed workers five years after the recession was officially over.

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The rise in long term unemployment was not as dramatic following the 2008-2009 recession, but remains a concern at 12% of all unemployed workers, double the pre-recession level.

Underemployment is larger than Unemployment

Underemployment can be thought of as the unmet need for paid employment. For example, a person may be unable to find full-time work, but manages to find part-time work. There is still an unmet need for more hours of work, even though this person is no longer counted as unemployed. A person may want a job, and be actively seeking work, but they are not immediately available. Alternatively, a person may wish to work, but has given up searching, and possibly even engaged in unpaid activities such as care work. In each of these cases, usually grouped together as marginal labour force attachment, there is still an unmet need for paid employment.

Statistics measuring these concepts are used by Statistics Canada to generate supplementary unemployment rates, labelled R5 through R8. Unfortunately, these supplementary unemployment rates are more restrictive than the current international standard1. This affects who gets counted as underemployed.

Download the report here.
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