Levels of "precarious" employment – or work that has a greater degree of uncertainty – are higher than before the 2008-2009 recession, but about at the same level as in the mid-2000s, a new paper says.
Toronto-Dominion Bank has developed a new "precarious employment index" that includes measures such as involuntary part-time employment and self-employment (as a share of total employment), and the rate of underemployment, relative to the overall jobless rate.
Broadly, it defines precarious work as "having an outsized level of uncertainty, whether in terms of pay, ongoing employment, scheduling, or other dimensions." This could include job instability, as measured by separation rates or temp work, unpredictable incomes, which could be reflected in self-employment, and a lack of predictability in scheduling.
"The empirical evidence shows that precarious employment is currently higher than it was before the 2008 recession," noted economists Brian DePratto and Randall Bartlett. "However, the good news is that the trend is declining and the level of the index stands at roughly the same level as in 2006."
A key question, the TD economists said, "is whether the decline will be maintained, and data limitations prevent us from concluding definitively that the improvement we're seeing has staying power."
The outlook for precarious employment is mixed, they say. They see overall levels remaining "elevated" over the next two years, with improvements beginning only in late 2017 as the rate of temporary employment starts to drop. There will be regional differences with oil-producing provinces likely to see increasing levels of such work. And it notes that this type of employment tends to be related to the business cycle.
Job quality and precarious work has been a subject of much recent debate. CIBC's measure of job quality shows an ebbing quality of work, while other economists say much of the shift in the labour market is due to an aging population, or that some people are moving into part-time work and self-employment of their own volition. The Bank of Canada says slack in the labour market is greater than the jobless rate suggests, with still-elevated levels of involuntary part-time work and long-term joblessness.
The TD index doesn't capture everything, such as the erosion of pension and benefits plans, and whether scheduling has become more erratic. Self-employment data are lacking, so it's hard to know how many people are moving into it out of choice, rather than necessity, and it's tough to pinpoint their earnings.
Precarious work is "negative for the Canadian economy," the authors say. A lack of income security erodes consumer confidence, lowers tax revenue and is very stressful for those experiencing it.
"The trend is toward falling precarious employment, as the labour market continues to heal along with the economy," they wrote. "That said, there remains a persistent gap between the earnings of Canadians with 'good jobs' and those that are precariously employed."
As of last year, about 85 per cent of Canadians were permanently employed. Though this share fell during the recession, this change was "marginal." The big change has been among young people. Those aged 15 to 24 "are more likely to work on a temporary basis today than at any other point since the data began being collected in 1997."
The share of older workers in temp employment has also grown.
Temp workers typically earn less than those in permanent jobs. An example the report cites: someone working 40 hours a week for 50 weeks last year would have earned $11,600 more on average as a permanent employee than as a temporary one.
Part-time employment has ebbed from its recent recessionary peak, "although it remains elevated relative to pre-recession levels." Women typically account for about 70 per cent of part-time work. One concern is that the female labour participation rate among those aged 25 to 54 has been falling.
Most people who work part-time do so because they want to. But the share of involuntary part-time employment grew during the recession and "has yet to meaningfully decline."
Sectors that have more full-time work also tend to have higher average wages. Another example of the split in earnings: someone working a 40-hour week 50 weeks per year at the average full-time wage would earn $18,000 more than someone working the same number of hours spread across multiple part-time jobs.
Unionized workers still tend to earn more than their non-unionized counterparts, with a 22-per-cent premium last year. Still, unionization rates have been declining with a greater share of workers employed outside of collective bargaining agreements. One trend – as seen in the auto sector – is toward a duel-wage structure that means recent hires are on a lower pay scale than workers with more seniority. In the long term as people retire, there will be "a larger share of the unionized labour force on the lower scale, reducing the average wage received." At the same time, automation and new technology are reducing the need for workers.
Elsewhere, more people in services and the retail sector, such as hotel workers, are unionizing, which will slow the declining rate of unionization. But they tend to be lower-wage workers, which suggests that the overall union wage premium will be lower.
Uncertainty about retirement is another aspect that can make employment more precarious. Registered pension plans help provide certainty by ensuring workers will have a steady income in retirement. "The longer-term trend within Canada has been a decline in the share of the working population covered by these plans," the report said.
The share of defined-benefit plans fell from more than 90 per cent of coverage to about 71 per cent between 1992 and 2013. By the measure of retirement benefits, "it would appear that employment has become more precarious with time."
Comparable stats only go back to 1997, so it's hard to discern how trends compare with the 1970s and 1980s and before that. The index shows a drop in precarious employment between 1997 and 2000 (when the economy was growing and the jobless rate falling). Levels were fairly stable between 2001 and 2006 but jumped in the recession. Precarious employment is now "falling in Canada, but remains elevated."