A falling unemployment rate and steady job creation over the past year look good on the surface. But they mask the fact that most new positions are lower paid than the ones they replaced, a new analysis shows.
In fact, job quality has steadily deteriorated over the past seven months, according to CIBC’s monthly employment quality index released Wednesday.
The index combines information on the distribution of part-time against full-time jobs, self-employment compared with paid employment, and the compensation ranking of full-time paid employment jobs in more than 100 industry groups.
It reveals a double whammy: job quality is worsening just as the pace of job growth in Canada is slowing. The economy is now churning out an average 17,000 new jobs a month for the third quarter compared with 29,000 in the second quarter and 33,000 in the first quarter.
“If you do a very quick glance at the headlines, you would get the impression that quality is improving, because full-time jobs are rising and paid employment is rising,” deputy chief economist Benjamin Tal said in an interview.
“But the fact that it’s full time doesn’t mean that it’s good. In fact, all of the increase in full-time employment was in low-paying jobs on a net basis.
Low-paying jobs are certainly better than no jobs at all. But in the past seven months, “we have been replacing better-paying jobs with lower-paying jobs.”
For example, much job growth has been in food services, gasoline stations, accommodation, general merchandise stores and hospital maintenance, he says.
The headline numbers -- which show Canada’s jobless rate at 7.1 per cent, the lowest since December, 2008, and 344,000 new full-time jobs created in the past year -- “exaggerate the real health of the Canadian labour market,” he added.
This trend will continue for several reasons, he said. For one, the prospects for public-sector employment don’t look great, given budgetary constraints at all levels of government. For another, construction -- a key source of employment growth in the past year -- is slowing as the housing market stagnates. And last, any improvements in manufacturing jobs have been at the low end of the pay scale.
The findings have broader implications for the economy. “If income won’t rise because of the quality and number of jobs, it limits peoples’ ability to spend and save. Therefore consumers can’t be depended upon for this cycle.”
Before this year’s decline, the index was showing a strong rebound for much of last year. At its current reading, the index is about where it was at the eve of the recession.
Job quality varies by region. Alberta and Quebec have seen their employment quality improve since March, while Ontario, British Columbia and Atlantic Canada have seen a slide in overall employment quality.
The number of full-time jobs in high-paying industries fell 0.1 per cent while the number of jobs in low-paying industries rose 2.3 per cent in the past seven months, the research shows. It found the most notable weaknesses were in high-job quality sectors like the federal government, heavy and civil engineering, construction, telecommunications and computer and related manufacturing.