U.S. Markets open in 6 hrs 23 mins

Quality of full-time employment in Canada on the decline: CIBC

The Canadian labour market may be pumping out jobs, but a new report says most of those are of a lower quality. (Getty)

As Canada’s unemployment rate drops to record lows, the quality of the jobs being added to the labour market is on the decline, according to a new report from CIBC Capital Markets.

The report, written by CIBC economist Benjamin Tal, also said the labour market gains are doing little to boost Canada’s productive capacity.

“Real GDP growth, while expected to improve during the year, is not remotely close to where it should be given the headline employment numbers,” Tal wrote in the July 4 report.

“The longterm correlation between job creation and income growth in Canada is on a downward trajectory... This disconnect can be explained, at least in part, by the continued weakness of employment quality in Canada.”

CIBC’s index looking at the quality of employment in Canada fell 1.4 per cent during the 12-month period ending May 2019. However, Tal says that the softening of employment quality was not because of a jump in part-time or self-employment jobs. In fact, he says “the opposite is the case.” Full-time employment increased faster than part-time, accounting for 81 per cent of all jobs created.

It’s the quality of those full-time jobs that has been declining.

“The number of low-paying, full-time jobs rose very strongly relative to mid-paying jobs, with the weakest performance seen among high-paying industries,” Tal wrote.

“The worsening composition of the compensation sub-index reflects strong growth rates in relatively low-paying sectors such as food services, accommodation, personal services, administration and personal care, as well as non-store retailing.”

According to the report, the share of workers paid below average wages has increased to just under 61 per cent in 2018. At the same time, the supply of high-paying jobs is not rising at a fast enough pace to meet growing demand.

“Regardless of how you measure it, by occupation, by industry and more directly by income, the overall quality of employment in Canada is on the decline,” Tal wrote.

“Simply put, all other things being equal, lower employment quality means that the labour market must run faster to stay in the same place since we need relatively more workers to generate the same increase in income.”

Yahoo Finance Canada

Download the Yahoo Finance app, available for Apple and Android.