Labour shortage 'a myth'

True unemployment rate more than 12 per cent: CAW economist
||Last Updated: 06/01/2012

Canada faces years of continuing surplus labour supply, not a looming labour shortage, according to Jim Stanford, economist at the Canadian Auto Workers Union (CAW). He appeared before the House of Commons Standing Committee on Finance regarding the federal government's omnibus budget bill, Bill C-38 (which includes changes to Old Age Security and employment insurance programs).

The labour market has recovered only marginally from the worst days of the 2008-09 recession, he said. Since July 2009, when the recession bottomed out, the employment rate (which measures the proportion of working-age Canadians holding a job of any kind) has recovered barely one-fifth of the ground it lost during the downturn.

As of April 2012, the overall (seasonally adjusted) employment rate was 61.9 per cent, far below the pre-recession level of 63.8 per cent, and only 0.6 points higher than the low of 61.3 per cent recorded in the summer of 2009, said Stanford.

"The oft-made claim that Canada's labour market has fully recovered from the recession is blatantly and empirically false," he said. "In fact, the labour market remains almost as weak as during the worst days of the downturn."

The decline in the official unemployment rate mostly reflects a decline in labour force participation, not stronger employment conditions, said Stanford.

Because hundreds of thousands of non-working Canadians are excluded by definition from official unemployment statistics, the standard unemployment rate badly underestimates true unemployment, he said. Actual unemployment — which captures not just those who meet the official definition of unemployment but the decline in labour force participation since the recession, involuntary part-time work and workers waiting for future shifts — is about 2.3 million Canadians or more than 12 per cent, said Stanford.

"Canada continues to experience a condition of severe and chronic underutilization of our labour supply," he said. "It is simply not credible to speak of a 'labour shortage' that somehow constrains our economic growth. This feared labour shortage is a myth invoked to justify painful and unnecessary cuts to important social programs."

Government policies aimed at compelling labour supply (including proposals to defer Old Age Security, cut employment insurance benefits and expand the Temporary Foreign Worker program) are motivated not by a labour shortage but a desire to suppress wages, said Stanford.

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