Well, it is just about time for Canadians to celebrate and give thanks once more. Not because of Thanksgiving, but because of a strong jobs report that beat market expectations.
Markets, however, are driven by the big-picture numbers, so it’s important to drill down a bit and see what workers are earning.
As of August, average Canadian wage growth had risen at a monthly average of 2.8 per cent, compared to 2.1 per cent for the same period in 2011. At 3.4 per cent year-over-year in September, average hourly earnings were down a bit from August (3.8 per cent), but still grew at a good clip. It is an important statistic: if people earn more they can spend more, no matter what happens anywhere else in the economy or in the world.
So, a solid macro picture but what about the details? What about differences between the earnings of temporary and permanent workers. One standard narrative says more and more Canadians are working in lower-paying short-term jobs, and that the wage gap between their earnings and those of permanent workers is widening. As it turns out, both of these may be urban myths.
If you look at temporary and permanent employees in Canada going back to 1997, the numbers have stayed fairly stable. In September, 2002, about 13 per cent of Canadian workers were designated as ‘temporary’, and thus not covered by the same benefits or job security provisions as permanent employees. In September, 2012: 13 per cent.
Next, I took a look at the earnings of those temporary employees. In September of 2002, a temporary employee made about 76 per cent of what a permanent employee did, on average, which makes sense. Temporary jobs can encompass any skill level or wage, but the category tends to encompass a lot of lower-wage occupations. So fast forward to 2012: temporary workers now make 78 per cent of what permanent workers receive. My guess is that the ‘temporary’ category now includes more professional workers than was the case ten years ago, which is what has sent the percentage a little higher. Either way, however, you cannot make the case that the labour market is made up of more short-term, low-paid workers than was true a decade ago.
So let’s look at one more split in earnings: union vs. non-union jobs – a split that always stirs strong feelings one way or another.
In September, 2002, the non-union worker earned $16.46 an hour, or 80 per cent of what a unionized worker ($20.57) received. Put another way, the unionized worker got 25 per cent more per hour than the non-union worker (not including any differences in benefits). Now let’s look at the most recent data. As of September 2012, the unionized worker earned $27.06 an hour or 21 per cent more than the non-unionized worker, who got $22.34 an hour. Non-unionized workers earned 82.6 per cent of what unionized workers made on an hourly basis.
A lot of numbers to digest, but are they significant?
Higher wages bodes well for consumer spending as the holidays approach. The slight softness in recent growth is probably a positive: Had it bubbled up over 4 per cent, the Bank of Canada might have started fretting about wage inflation and felt compelled to get involved.
As to the split between workers – permanent and temporary, unionized and non-union, I could go on – it is harder to make a definitive statement. Things have not really changed much over the past decade, which is neither good nor bad in itself. Permanent workers make more than temporary workers and unionized workers make more than non-unionized ones – which in no way suggests that making everyone permanent or unionized will make the economic picture any brighter in the long term.
It was a good report today on Canadian jobs – as far as earnings go though, it really depends on your perspective.
Linda Nazareth is the principal of Relentless Economics and senior fellow for economics and population change at the Macdonald Laurier Institute. Visit her at relentlesseconomics.com