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Job quality in Canada declining on all fronts, CIBC index shows

Job quality in Canada has sunk to its lowest level in more than two decades, analysis released Thursday says.

An employment quality index, compiled by CIBC which tracks part-time versus full-time work, paid versus self-employment and compensation trends, has fallen to its lowest level on record, according to a report by Benjamin Tal, the bank’s deputy chief economist. Data for the index go back to 1989.

The findings may confirm what many Canadians already sense: that the country’s jobs market is not as robust as it once was. The job-quality index shows declines in all measures. It comes as the Bank of Canada has repeatedly said that there is still slack in the labour market, and that the jobs market is softer than the headline unemployment rate suggests.

The composition of employment is “sub-optimal,” Mr. Tal wrote.

The index’s first measure tracks the distribution of part-time and full-time jobs. Since the late 1980s, the number of part-time positions has risen “much faster” than that of full-time jobs, Mr. Tal said.

“The damage caused to full-time employment during each recession was, in many ways, permanent,” he noted. “That is, full-time job creation was unable to accelerate fast enough during the recovery to recover lost ground.”

Over the past year, however, some of this reversed as the number of full-time jobs rose twice as fast as the number of part-time jobs.

Self-employment is the second key measure of job quality, as economists tend to view it as less stable and, on average, lower paying than salaried employment. 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 bank said.

The third main factor the index tracks is the compensation ranking of full-time paid employment jobs in about 100 industry groups. This too, shows a weakening.

Full-time paid-employment work is generally of higher quality than part-time and self-employment jobs, but “not all full-time paid-employment jobs were created equally,” said 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.”

That has been the case over much of the past two decades. Moreover, in the past year “the job creation gap between low and high-paying jobs has widened,” with low-paying full-time paid positions rising at twice the pace of high-paying jobs.

Job quality deteriorated in Alberta, along with Saskatchewan, Manitoba and Ontario last year. It improved in British Columbia, Atlantic Canada and in Quebec.

The drop in job quality is more structural than cyclical in nature and likely can’t be reversed by monetary policy, Mr. Tal added.

The Bank of Canada “continues to warn us that the headline unemployment rate is not as rosy as perceived and…[that] labour slack is still significant,” he said. But “the bank’s prescribed remedy of low and lower interest rates might not cure what ails the labour market.”

The central bank cut its key lending in January, citing the negative impact of lower oil prices on the economy. It stood pat this week, though some economists believe another rate cut could come in the coming months.

Slow growth in the number of high-paying jobs might reflect a “growing labour market mismatch,” Mr. Tal said. Wages may also be signalling this, he noted, as wages in high-paying sectors rose almost twice as fast in the past decade 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,” he said. “Low or lower interest rates will do little to close that gap.”

CIBC’s is not the only index to show softness in the labour market. The central bank’s measure of labour market indicators shows slack, while Toronto-Dominion Bank’s index, last month, showed that many variables in the jobs market – including hours worked and the participation rate – are weaker than the unemployment rate would suggest.

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