Canada's surge in part-time employment isn't necessarily a sign of a broken labour market. Rather, economists say, it may be a symptom of longer-term shifts in the dynamics of the country's work force – including its aging demographics.
"The narrowing gap between male and female [workforce] participation rates, as well as the shift to an aging population in Canada, may work to increase the prominence of part-time hiring in the future," said Toronto-Dominion Bank economists Randall Bartlett and Derek Burleton in a research report published Thursday.
Concern over the prevalence of part-time hiring has grown in recent months, as the country's employment data have shown not only slow growth in job creation generally, but disproportionate growth in part-time positions over full-time employment, which is generally higher paying and considered preferable. Earlier this month, this phenomenon grabbed headlines, when Statistics Canada reported that the Canadian economy added 60,000 part-time jobs in July – but lost 18,000 full-time jobs.
Part-time jobs have accounted for 75 per cent of employment growth in Canada over the past year, far above their typical 20-per-cent share of the total workforce. But Mr. Bartlett and Mr. Burleton noted that the ratio of full- and part-time jobs in Canada's workforce has vacillated around a fairly stable 80-20 split for most of the past two decades, and suggested that the spurt in part-time employment this year may merely be a re-balancing, after an oversized dose of full-time job creation through 2012 and the first half of 2013.
Nevertheless, they said, there are good reasons to think that Canada may be tilting increasingly toward part-time work – and more by choice than by necessity.
There are two key factors at play.
First, women's proportion of the prime-age (25-to-54) workforce has been growing since the 1970s, and women continue to close the gap with men in terms of participation rate. Since women have consistently accounted for 70 per cent of part-time employment for the past two decades, their growing share of the labour market implies more part-time employment.
"There is a strong correlation between the change in the female participation rate and the change in the share of part-time employment in total employment," the economists said, noting that both female participation and the part-time share of the total labour market surged dramatically though the 1970s and 1980s.
Second, Canada's population aged 65 and over has grown by nearly 1 million in the past five years alone, as the huge baby-boomer demographic rolls into this age group in increasing numbers. Along with this has come a surge in workforce participation rates among older workers, many of whom prefer semi-retirement. Workers over 65 now make up about 8 per cent of all part-time workers, double their share of a decade ago, Mr. Bartlett and Mr. Burleton said. This has already been an important driver of part-time employment growth since the recession – and with much of the boomer cohort still to reach age 65, it could be a huge factor fuelling part-time growth in the next decade.
Certainly, it's a concern that now nearly 1 million part-time workers are so-called "involuntary" part-timers (i.e. they say they would rather have a full-time job). This implies that Canada's labour market still has a fair bit of slack left in it that can't be seen in the overall unemployment numbers (although Mr. Bartlett and Mr. Burleton note that the number of involuntary part-timers has been quite stable for the past three years now).
The drift toward part-time work may also be a key factor in Canada's current tepid wage growth, which is a big reason why economic forecasters at the Bank of Canada remain cool on inflation expectations: Average hourly wages for part-time work in Canada is a whopping 33 per cent below that of full-time work, and has been growing more slowly.
But Pavilion Global Markets strategist Pierre Lapointe has suggested that to the extent that this is a "structural" shift of the workforce toward part-time, the labour market may have actually recovered better from the recession than many experts have been assuming. For central bankers, that could mean that inflation-fuelling wage pressures are closer than the numbers would typically imply. This is going to be a tricky variable for them to read as the recovery and the demographics evolve in parallel; it certainly adds a dynamic element to economic forecasting and monetary policy not just this year, but for several years to come.