Canadian job market has split in two in the coronavirus crisis

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The coronavirus has been anything but an equal-opportunity job destroyer.

Women, particularly those with lower-paid jobs in the service sector, bore the brunt of initial earnings and employment losses as the retail sector shut down in March, giving rise to the notion of a she-cession.

But the latest monthly Labour Force Survey from Statistics Canada is showing a much different divide in the job market, even as broad national unemployment rockets up at an unprecedented rate. The Canadian jobs market has split into two; on one side, hourly paid workers of both genders that are feeling most of the economic pain; on the other, salaried workers that are largely insulated from the employment downturn.

“That’s the demarcation,” said Mikal Skuterud, a University of Waterloo economics professor who analyzed the Statscan data.

That divide is important not just for understanding the nature of the current downturn, but even more so in charting a path for recovery, Prof. Skuterud and other economists say.

Hourly workers have experienced a precipitous drop in hours worked, as the chart below indicates. Women are most affected, with a 39.5-per-cent drop in hours worked between mid-February and mid-April (a figure that includes both job losses and reductions in shifts). But men paid by the hour are nearly as badly off. That group experienced a 35.1-per-cent drop in hours worked between February and April, reflecting in part the gearing down of construction and manufacturing in late March and early April.

But Canadians with salaried jobs live in a much different world. For salaried women, hours worked have dropped by just 12.5 per cent, with much of that decline coming from seasonal patterns that recur each year. The same is true for salaried men, who saw hours worked fall a mere 10 per cent; again, much of that drop can be attributed to seasonal factors.

The split between hourly and salaried workers has important implications for the direction of Canada’s economic recovery, starting with how quickly consumer spending rebounds later this year.

Stephen Brown, senior Canada economist at Capital Economics, said the national savings rate is set to soar to 11 per cent in the second quarter, from 3 per cent in the first quarter. But that steep increase in savings is not likely to result in a later splurge by consumers, he said. That’s because those who are doing the saving – those relatively well-off salaried workers – are much less likely to spend their extra cash.

Another constraining factor, Mr. Brown said, is the pace at which service businesses will reopen and what their capacity will be under continuing public health restrictions. A simple example: Restaurants that need to space out customers to meet physical-distancing requirements will be able to seat fewer people.

However, a much bigger constraint looms for recovery in the jobs market: the availability of safe child care, made more pressing with schools remaining closed in most provinces.

The resumption of construction work, landscaping and other male-dominated jobs should start reducing the number of unemployed hourly paid men this month, said Armine Yalnizyan, an economist and Atkinson fellow on the future of workers.

But Ms. Yalnizyan said women who have lost their jobs, or otherwise had their hours of work reduced, face the additional complexity of needing to ensure adequate and safe care for children. “There isn’t the same path out for women," she said.

Consumer spending could be significantly weakened if women aren’t able to return to work, thereby reducing household income, Ms. Yalnizyan said, adding that Ottawa’s recovery plan will need to focus on dismantling that barrier.

For the moment, the federal government appears to be resurrecting plans from past recessions. Infrastructure Minister Catherine McKenna has said Ottawa is looking for shovel-ready infrastructure projects, a traditional approach for governments looking to stimulate economic activity.

But Ms. Yalnizyan said that kind of spending is ill-suited to the current economic downturn, since it will not help women return to work and any employment gains for men won’t offset their absence. “It doesn’t matter how many shovel-ready infrastructure projects you put into place. The numbers don’t work.”

Ms. Yalnizyan said a different kind of stimulus is needed: social infrastructure spending, with an initial focus on child care. That could mean more child-care workers employed directly by government, and higher subsidies for parents. Such an approach would also mean higher training standards and higher wages for child-care workers.

Services will also be needed in coming years as the ratio of retirees to employed Canadians grows, increasing the economic imperative for women to be in the work force, she noted.

But for the next few months, the need for improvements to child care is crucial, Ms. Yalnizyan said. “There will be no recovery without women going back.”

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