Canadian Labour Congress

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Canadian Labour Congress

• Department of Social and Economic Policy
• Andrew Jackson, Senior Economist
• ajackson_at_clc-ctc.ca

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Labour Market Policies for Social Inclusion
Presentation to theWelfare to Work National
Forum November 17, 2003
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Social Inclusion is About

• Development of individual talents, capacities,
  and capabilities
• Active participation in society
• Broad equality of life chances
• Real equality of opportunity

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Social Inclusion and theLabour Market

• Goal Good Jobs in Good Workplaces
• Two key dimensions
• A living wage / adequate income
• Opportunities for self-development

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The New Architecture of Social Policy

• Goal social inclusion through paid work vs.
  dependency
• Yes but, there is critical need for
• adequate income supports (e.g., PWDs)
• facilitative macro-economic context
• full social recognition of household
  responsibilties (child and elder care social
  working hours)

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Precarious Work

• Achilles heel of inclusion through work
• Best defined as high combined risk of
  unemployment, low pay, lack of developmental
  opportunities
• Leads to high risk of continuing relative low
  income, especially for single households and
  other high-risk groups

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Precarious Forms of Work

• Temporary jobs 13 of jobs in 2002 up about
  two percentage points from 1989
• Own account self-employment 9.8 of employment
  in 2002 from 7.2 in 1989 (stable since 1997)

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Precarious Forms of Work(continued)

• Part-time 18.7 in 2002 from 16.8 in 1989
  (stable since 1997) not necessarily precarious,
  but 1 in 3 part-timers want full-time jobs wages
  and benefits lag full-time limited control of
  hours
• Many full-time / permanent jobs are precarious
  as well

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Unemployment Risk

• Risk of long-term adult unemployment and labour
  market exclusion is low, but short-term
  unemployment is common
• Annual incidence in 1990s up to 25 to 33 of
  families up to 1 in 6 adults

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Unemployment Risk(continued)

• Today unemployment rate of 8 average
  duration, 18 weeks annual incidence about 1 in 8
• Risk concentrated on young adults, recent
  immigrants, PWDs, near elderly, persons with
  less than high school, college (four times the
  risk of university graduates)

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Low PayIncidence of Low Pay 2002lt2/3 median
lt10.23/hr

• All 25.3 (vs. 25.0 in 1997)
• Men 19.4 (unchanged)
• Women 31.5 (vs. 31.1 in 1997)
• Age 25-54 16.0 (unchanged)
• Age 55 19.8 (vs. 19.2 in 1997)
• Part-time 57.0 (vs. 53.9 in 1997)
• Low relative hourly pay has persisted despite
  falling unemployment

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Hourly Wages ofWomen and Men
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Precarious Work and Poverty

• 2002 pre-tax LICO (large city) one person
  18,841 four persons 35,455
• Full-year, full-time job at 10/hour 20,000
  single 40,000 two earners
• Minimum wages in 2002 5.71 to 8.00/hour

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Precarious Work and Poverty(continued)

• Families / singles with full-year, full-time jobs
  at minimum wage, plus child and tax benefits,
  fall below pre-tax LICO in almost all
  jurisdictions (Battle, 2003)

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Precarious JobsNot the Answer to Poverty and
Dependency

• Women Lone Parents 1993-1998 (Kapsalis) just
  20 lived in poverty all six years, but 60 of
  all women lone parents were in poverty at least
  once over six years

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Precarious JobsNot the Answer to Poverty and
Dependency (continued)

• 45 of women lone parents in poverty in 1998 had
  some earnings in year employed an average of
  33.8 weeks at an average hourly wage of 8.13 per
  hour 40 unemployed at least once in year

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Precarious JobsNot the Answer to Poverty and
Dependency (continued)

• Half of women lone parents on SA exit after two
  years, mainly because of job / more hours /
  higher pay, but many return
• Welfare Exits 1992-1999 (Frenette and Picot)
  only 9 left completely (t plus 2) and 58 of
  leavers ltLICO

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Low-Wage JobsTraps or Ladders to Opportunity?

• Key research question limited longitudinal
  analysis
• Beach, Finnie and Gray (2003) Evidence is for
  significant widening of life-cycle earnings
  differentials due to interaction of low pay and
  unemployment (and concentrated labour market
  risks)

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Low-Wage JobsTraps or Ladders to
Opportunity?(continued)

• HRDC Self-Sufficiency (income supplementation)
  Project for lone parents
• 28 vs. 18 of control group in full-time jobs in
  Year 3, but
• the effects of SSP on employment, welfare use
  and income were small after parents were no
  longer eligible for the supplement (Final
  Report)

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Low-Wage JobsTraps or Ladders to
Opportunity?(continued)

• (continued)
• in Year 6, the SA rate was the same, the
  employment rate of both groups was the same
  (42), and average monthly earnings of
  participants were only marginally higher (496
  vs. 488)
• program group members gained considerable work
  experience but no long-term labour market payoff

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Labour Market Dynamics of Growing Family Income
Inequality

• Family incomes have become much more unequal
  1989 2001 (structural trend)
• Market income share of top quintile 42.4 to
  45.6

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Labour Market Dynamics of Growing Family Income
Inequality(continued)

• Final income share of top quintile 36.9 to
  39.2
• Top has grown away from both the middle and the
  bottom taxes and transfers still equalize, but
  pushing against the tide

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Labour Market Dynamics of Growing Family Income
Inequality(continued)

• Poverty (post-tax LICO) has increased among
  working-age adults (persons aged 18-64 9.3 to
  10.6), but not children (11.5 to 11.4) because
  of transfers
• Long-term implications for inclusion?

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Precarious Jobs vs. Developmental Jobs

• Precarious work not just about unemployment and
  low pay
• Low level of development of skills and capacities
  at work (dead-end jobs)
• Limited access to formal training plus low skills
  utilization just 30 of workforce, mainly core
  workers, receive employer training

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Precarious Jobs vs. Developmental Jobs(continued)

• Exclusion from internal labour markets
• Boring, monotonous, routinized work
• 1 in 3 men and almost half of women have very
  low level of job control
• Atrophy of current skills (numeracy, literacy,
  credentials) among young adults, new immigrants

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Policy Solutions

• Current Approach
• inclusion through work via sticks (EI and
  welfare reform reinforce dependency on wages)
• Make Work Pay via carrots (Income
  Supplementation CCTB, NCB for Working Families)

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Policy Solutions(continued)

• Current Approach (continued)
• income supplements have a role and some impact,
  but should ANY wage be subsidized?
• training and lifelong learning in the new
  knowledge-based economy rhetoric vs. reality
• what about LABOUR MARKET policy?

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Living WagesCreating a Wage Floor

• Canada is a low-wage country (especially for
  women)
• All other advanced industrial countries except US
  have higher wage floors / a more compressed
  distribution of earnings

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Living WagesCreating a Wage Floor (continued)

• Low pay (lt2/3 national median for FT) 23.7 in
  Canada vs. 5.2 in Sweden vs. 13.3 in Germany
  (for women 34.3 vs. 8.4 vs 25.4)
• In Sweden, restaurant, hotel, retail workers
  (mainly women) earn 90 of average manufacturing
  wage vs. 60 in Canada

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Key Arguments for aWage Floor / Living Wage

• Recognizes primary onus is on the Job Market to
  provide income security (at least for single
  persons working full-time, full-year)
• Gives more resources to state to supplement
  FAMILY incomes provide employment supports /
  training, etc.

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Key Arguments for aWage Floor / Living
Wage(continued)

• Protects responsible employers from unfair
  competition
• Provides strong work incentives
• Lowers income inequality and poverty

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What About Job Loss?

• Bargained wage floors of continental Europe (80
  collective bargaining coverage) compress and
  redistribute wages and set sectoral / regional
  wage standard, but do not raise total wage bill

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What About Job Loss?(continued)

• Many countries with high wage floors / low
  earnings inequality have been good economic
  performers in 1990s (Denmark, Netherlands)
• Denmark and Sweden have highest employment rates
  in OECD (75) low unemployment rates (5)
  despite high wage floors (and generous
  unemployment benefits)

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Do Legislated MinimumWages Cost Jobs?

• Minimum wage is second-best solution but
  private sector unionization in Canada is below
  20, less than 10 in low wage private services
• In theory, some low productivity workers will
  lose jobs if minimum wage is too high

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Do Legislated MinimumWages Cost Jobs? (continued)

• In practice, job impacts on adults are minimal
  (OECD, 1998 Employment Outlook) and income gains
  outweigh any small loss of hours
• Why?
• minimum wages set at reasonable levels
• minimum wages reduce training / recruitment costs
  and boost productivity via lower turnover

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Do We Have to Choose Between Low Wage Jobs and No
Jobs?

• There is more than one labour market and social
  model on offer
• What can we learn from social democratic
  countries?
• Wage floors generalized across non-traded sectors
  raise productivity and promote high road
  completion

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Do We Have to Choose Between Low Wage Jobs and No
Jobs?(continued)

• Especially important in low-wage private consumer
  services
• High social spending limits growth of low wage
  services jobs (especially for women) by promoting
  higher skill jobs in public and social services /
  limiting private services consumption

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Do We Have to Choose Between Low Wage Jobs and No
Jobs?(continued)

• Ratio of private to public sector jobs 6 to 1 in
  US 4 to 1 in Canada 2.51 in Sweden / Denmark
• One in six Canadians work in retail trade /
  restaurants / hotels vs. one in ten in Sweden /
  Denmark

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Do We Have to Choose Between Low Wage Jobs and No
Jobs?(continued)

• Real investment in skills public education
  accessible PSE worker training can raise
  productivity in what would be low-wage sectors
• Public expenditure on training 0.17 GDP in
  Canada vs. 0.30 Sweden vs. 0.85 Denmark
• Co-operation in the workplace can boost
  productivity

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Social Dimensions of Productivity

• A worker will be more or less productive,
  co-operative and innovative depending on how he
  or she is treated whether the wage is seen as
  fair in relation to the demands of the job
  whether the worker gets equal pay for work of
  equal value whether training is provided
  whether grievances can be voiced. In short, what
  the worker delivers is contingent on the terms of
  employment, working conditions, the work
  environment, collective representation, and due
  process.
• (Werner
  Sengenberger, ILO)

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More than One Way

• No consistent link from liberal labour market
  and social model to high and rising employment
  and productivity
• Yes, the US did well in 1990s, but so did, e.g.,
  Denmark, Netherlands
• Scandinavian countries have very high employment
  rates / high wage floors / low levels of poverty
  and inequality

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More than One Way(continued)

• Average annual growth of labour productivity in
  business sector, 1995-2002
• US 1.6
• Canada 1.5
• Sweden 1.7
• Denmark 1.8
• Social democratic labour market and social model
  boosts efficiency and not just equity

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How to Move Forward in Canada

• A federal minimum wage as a step to a national
  minimum wage? A benchmark for employers, unions,
  communities, provinces?
• Level could be considered by a Commission (as in
  UK) to balance poverty reduction, social
  inclusion and employment goals

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How to Move Forward in Canada(continued)

• 10/hr. 2/3 median LICO for single
• Facilitate broader-based collective bargaining in
  low wage sectors

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Towards a Right to Training

• Need for a second chance and wider access for
  precarious workers
• Need to create a training and skills development
  culture in the workplace
• Part of solution training leaves under EI on
  model of apprenticeship training / EI premium
  rebates for employer training effort

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Conclusions

• The Labour Market and Social Inclusion

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Canadian Labour Congress2841 Riverside
DriveOttawa, ON K1V 8X7(613)
521-3400www.clc-ctc.ca