One of the greatest stories of Canada’s recovery from the COVID-19 recession has been the startling quantity of jobs that the economy has generated. Few would have imagined in the traumatic spring of 2020, when unemployment had soared above 13 per cent, that within two years we’d have the lowest jobless rate in more than half a century.
But perhaps even more remarkable is the surge in the quality of jobs in that labour recovery – if the size of paycheques is any gauge.
Canadian Imperial Bank of Commerce economist Benjamin Tal published a research note last week showing that, as of March, the number of Canadian jobs paying more than $30 an hour had risen more than 8 per cent from prepandemic levels. In contrast, the number of jobs paying less than $30 an hour were down nearly 3 per cent.
This, Mr. Tal argues, is a very big deal indeed. He calls it “a transformation of historic proportions in the composition of the Canadian labour market.”
Thing is, he’s not quite sure why it has happened.
Early in the pandemic, this same sort of phenomenon in the wage distribution numbers was evident, but the cause was not anything to cheer. In April, 2020, employment plunged by two million jobs, yet the average hourly wage actually rose 10 per cent. Pandemic-related business shutdowns disproportionately hit relatively low-wage service jobs, such as retail and restaurant workers, while many higher-income jobs were able to shift fairly seamlessly to work-from-home and were spared from the same widespread layoffs. The result was that the pool of workers who still had their jobs, and/or who were still working full hours, was tilted toward higher incomes.
Economists had assumed that as affected sectors reopened and those lost jobs returned, these numbers would reverse themselves. The gains in the recovery, in both numbers of jobs and hours worked, would be skewed toward the low end of the pay scale, because those were the jobs that would bounce back. So, they expected, a resurgence in employment would be tempered by sluggish average wage growth.
Instead, as Mr. Tal’s data indicate, the employment gains have been tilted to higher-paying positions. It seems that people have come back to better jobs.
Other data indicate that more workers have found jobs that are more to their liking, and that more fully utilize their capacity for work. The involuntary part-time rate – that is, the share of part-time employees who actually want a full-time job – was 15.7 per cent in April, the lowest on record, and more than 10 percentage points lower than the peak in August, 2020.
It could be that the mass layoffs forced by the pandemic created a unique opportunity for workers to pursue work for which they are better qualified. Before the pandemic, the labour market was bogged down by skills mismatches – the pool of available workers didn’t offer the skill set that employers demanded, a phenomenon that weighed on both wages and hiring. The flip side of that was that there were workers who were stuck in jobs that weren’t the best use of their skill set. This was a bigger issue for newer members of the labour force – relatively recent graduates, and new immigrants, groups of workers who were overrepresented in the lower-wage service jobs that temporarily evaporated in the pandemic.
“Maybe, only maybe (and we are speculating here), COVID has created a situation in which previously overqualified workers (university graduates serving coffee) are being welcomed into higher-paying jobs, and have better access to them by working virtually,” Mr. Tal theorized. “This claim needs to be confirmed by careful research.”
It certainly makes sense. Those workers were reluctant to walk away from those low-paying jobs before the pandemic, out of need. But by being separated from those jobs by public-health shutdowns, they had the opportunity to pursue better options, and did just that. Government income supports provided them with a bigger safety net than usual to search for a better fit, and new employment opportunities were created by the changing nature of work in the pandemic.
If that is, indeed, what has been happening, it’s good news not just for workers, but also for the economy as a whole. If the pandemic has allowed skilled workers and high-skill jobs to find each other, the implication is that the labour force will not only be better compensated, it will be more productive.
On the other hand, this transformation puts a serious strain on lower-wage service businesses whose pool of workers has moved on, and moved up, in this recovery. They will have little choice but to increase wages for a shrinking pool of available labour – a pool that has new avenues to more attractive opportunities. Pressures on labour costs in these sectors will find their way into consumer prices. It’s another complication in this already inflation-heavy economic recovery.
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