Canada faring better than other OECD countries

But recovery may slow with faltering global economy: OECD
||Last Updated: 09/15/2011

The labour market is recovering faster in Canada than in many other OECD (Organisation for Economic Co-operation and Development) countries, according to a report from the organization.

Canada’s unemployment rate (as defined by the International Labour Organization) fell to 7.5 per cent for the second quarter of 2011 from its peak of 8.5 per cent in the third quarter of 2009. Comparatively, the average OECD unemployment rate fell to 8.2 per cent from a peak of 8.8 per cent over the same period. However, there is a risk the recent faltering of the global recovery may temporarily slow the decline in unemployment in Canada back to its pre-crisis level, said the OECD.

Canada is one of the few countries that automatically adjusts unemployment benefit program parameters in response to changing labour market conditions. In addition, temporary extensions for all eligible workers (five weeks) and long-tenured workers (up to 20 weeks) were introduced for claims established for most of 2009 and a good portion of 2010, said OECD.

“These temporary increases in unemployment benefit duration… helped cushion the fall in income for many of the newly unemployed who lost their jobs as a result of the crisis.”

Canada’s long-term unemployment is also among the lowest in the OECD, suggesting job prospects have remained fairly positive for the unemployed, even during the crisis, said the report OECD Employment Outlook 2011.

In the first quarter of 2011, about 13 per cent of the unemployed in Canada had spent more than a year looking for work, compared with close to 35 per cent in the OECD, on average. Despite the recovery, youth and low skilled workers are lagging behind in Canada.

In the first quarter of 2011, the employment rate of youth stood at about 52 per cent, about four percentage points lower than during the first quarter of 2008. While starting from a lower level, the reduction in the youth employment rate, over the same period, was similar for the OECD area as a whole.

Similarly, the employment rate of the low-skilled (without a high-school diploma) was about 44 per cent in the first quarter of 2011 and about five percentage points lower than the first quarter of 2008. This decline in employment rates is about twice as large as that observed for the OECD area.

The 2008-2009 recession may also have exacerbated the wage gap between low and high skilled workers in Canada, said the OECD. In looking at the earnings volatility by educational attainment in the 1990’s and early 2000s, earnings tend to become more unequal between low-educated workers and high-educated workers during a recession.

Where Canada stands out, relative to most OECD countries, is the rise in earnings inequality results from a relative decline in the wages of low-skilled workers compared with high-skilled workers, rather than a sharper fall in hours worked.

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