Part-time, low-paid jobs dominate new hiring
A report by economist Benjamin Tal of CIBC is pointing to a disturbing trend in the labour market: the jobs that have been created in the last six months are not very good ones.
Tal calls employment quality since the beginning of the recession “counter-cyclical.” During the first six months of the downturn, the quality of employment did not fall. Many, many jobs were being lost, but they were spread across the spectrum: full-time and part-time, well-paid and poorly paid. He credits this with helping to stabilize total labour income over the period (in fact, real salaries grew slightly).
But, in the most recent six months, employment quality has “nose-dived.” The CIBC's employment quality index fell by only 0.2 per cent in the months from October 2008 to March 2009 while 356,000 jobs were lost. From March to September 2009, the index fell by 3.8 per cent while employment grew modestly. The reason is that the growth in employment has come in part-time work and self-employment; full-time employment has dropped. The new jobs provide fewer hours and do not pay as well as the ones they replaced. Real wages have fallen by 0.7 per cent.
In past recessions, it has been typical that hiring has started out tentatively: hours of work for existing employees increases. Companies take new employees on part-time first and increase their hours and wages as demand improves. Self-employment looks less promising than working for the man, and it declines. Eventually, the labour force, and its employers, ends up looking much as they did before.
But will it be the same this time? Now that growth is returning, as tentative as it currently is, what will the new economy look like?
Some sectors — pulp and paper, for instance — will never be the same again. The demand for newsprint is just not there. Others — petroleum and base metals come to mind —seem to be coming through well. Southern Ontario has been spared the structural changes in previous recessions that created the Rust Belt in the United States, at least partially due to an advantageous exchange rate. No so this time.
