Jordan: If I asked you how Canada’s job market is doing, unless you were really up to date on all the latest numbers, you’d probably say, that’s been pretty good. And why wouldn’t you? At least going by the top line takeaways and the headlines that those takeaways drive, it’s mostly been a boom time for Canadian workers.
News clip: A labour shortage the likes of which employers have never seen before.
News clip:As predicted months ago, the shortage of labor force has become an obstacle for over one third of Canadian businesses. I
News clip:t’s a job seeker’s market right now. Across many industries, levels of skill and experience. Recruiters say the war for talent is cutthroat.
News clip:Canada looks to international students to help with the labor shortage. Hundreds of thousands of jobs went unfilled this year, as the unemployment rate flirted with record lows, before settling in just north of 5%.
Jordan: But right now Unemployment is rising. And beyond that, that unemployment rate doesn’t tell the whole story.
If you want a full picture of exactly who’s working and who’s not in this country, How much they’re working, and more importantly, how well they’re paid, and how much power they have. You have to look deeper. There is a narrative here. And yes, there is that one big unemployment number. But underneath that, there is no shortage of examples that can illustrate just how poorly that unemployment rate can accurately portray what it’s like to be a worker looking for work in Canada on the day after Labor Day.
I’m Jordan Heath Rawlings. This is The Big Story. Adam D. K. King is an assistant professor in the Labor Studies program at the University of Manitoba in Winnipeg. He recently published a piece in The Maple that discusses the shortcomings of that top line unemployment number. Hey, Adam. Great to
Adam D.K. King: be
Jordan: with you.
I wanted to begin By asking you about the labor market in general, which we have probably called and many, many people have called tight over the past couple of years, when people use that descriptor, what are the conditions they’re talking about?
Adam D.K. King: Well, generally, they’re talking about a situation where unemployment is low.
That’s really the main indicator that we’re looking at. And if you take a sort of short historical perspective, it’s true that the post pandemic economy did have a relatively tight labor market. Right. But that’s simply because we got used to having higher unemployment through the 90s and afterward. If you take a longer historical view, say back to the end of the Second World War, the labor market that we had post pandemic was relatively similar.
Unemployment hovering between Low by recent historic standards. Additionally, the other measure that people look at is the number of job vacancies. So that is the number of unfilled positions in the economy. People are advertising for a job, but it goes unfilled. And that really spiked after the pandemic as well.
But as I point out in the piece, I think that there is reason to be skeptical about some of those figures.
Jordan: We’ll get into that in just a second. But when we talk about the tight labor market just of the past few years, um, what has that led to, uh, both on the employer’s side, but also on the worker’s side?
Like how has that changed conditions in the labor market?
Adam D.K. King: Well, I mean, I think here you can distinguish two between theory and practice. In theory, a tight labor market is supposed to give advantage to workers, right? If there are fewer people able to take your job, around to take your job, standing in the unemployment line, you might have, you might find it easier to ask for higher wages, right?
It’s supposed to structurally advantage. Workers. That’s the theory. Obviously, if the advantage swings to workers, it swings away from employers, so they may have to concede greater wage increases. Right. If there isn’t that additional slack in the labor market. That’s the theory. In practice, we haven’t seen a ton of that, actually.
Jordan: Hmm.
Adam D.K. King: Average hourly wages went up somewhat after the pandemic, and that certainly troubled some policymakers. Of course, the Central Bank, the Bank of Canada, is very concerned about wage growth. It’s one of the things that they pointed to multiple times as justification for raising interest rates. But really, there hasn’t been all that much movement.
And if you look at, uh, union wage settlements, that is the wages that union members were able to get in bargaining, They went up slightly, but not very much. If you compare them historically to a period where we did have high inflation and the labor movement that is unions were stronger in the 1970s, you saw much, much higher wage increases.
So the tight labor market in theory should give workers, you know, this additional structural power. But in practice, I think post pandemic, it did slightly. But
Jordan: not
Adam D.K. King: very much
Jordan: just to lay the groundwork, because this is kind of important to your piece and the discussion we’re having when we take the top line unemployment number, you know, that gets reported every month.
How do we calculate that exactly? Like what’s the formula?
Adam D.K. King: So in Canada, Statistics Canada does a monthly survey called the Labor Force Survey. And that’s a phone based survey. So they’re surveying a representative sample of Canadians, of workers. And that’s how they’re arriving at their unemployment rate.
Now, the first thing to distinguish about this is that there are particular criteria in order to qualify as unemployed. You need to be actively looking for work. That’s the first thing. So that right there, that leaves out a large number of people. If you’re not actively looking for work, or if you haven’t looked for work in the reference period of the survey, that is the week that they’re talking about when they ask you that question, you’re not counted among the unemployed.
So that leaves out a large number of people. And there are other scholars and people who, who track labor market trends, who report what they consider to be more accurate figures for unemployment, which includes what they call discouraged workers. There’s also the additional problem of not just thinking about strict unemployment, but labor underutilization.
So in that case, you would be including people who are working part time, but involuntarily they’d prefer to have full time hours, but they can’t get them. Right. Or they would prefer to be working or even looking for work if they had the proper supports to do so. So for example, they can’t find child care, so they’re not looking for work.
Or they need a retraining program, but they can’t afford it or they can’t get access to it. So there’s all these additional hurdles, essentially, that prevent some people from entering the labor market. And again, if they don’t meet the criteria for being counted as unemployed, they go uncounted. Then there’s the additional problem of underemployment generally.
So not just people who are working part time involuntarily, but people who are just unable to get enough hours. Maybe they’re classed as full time, maybe they’re in a contract, maybe they’re in a temporary layoff. So when you really start to take all of these additional folks into account, labor underutilization is always significantly higher than the headline unemployment rate.
Jordan: Can you give us an example of where it would typically track compared to the unemployment rate?
Adam D.K. King: It’s hard to pin it down exactly in the United States where they do, frankly, a better job of officially counting this. They have two unemployment rates there, the U3 and the U6. The U6, that is the more encompassing unemployment rate, is typically a few percentage points higher.
But again, there are actually people who even criticize that and say it’s not inclusive enough. Here in Canada, the Union Unifor, which is the largest private sector union in Canada, they do a nice little companion to the labor force survey every month. They track underutilization and underemployment, and in the last edition of that, I think they put Uh, those figures around the 8 to 10 percent range, and that’s at a time when the official unemployment rate is 6.
4%.
Jordan: Speaking of the American market, because a lot of this is at play there as well, uh, there is a recent report, I gather, and you talk about this in your piece, um, from McKinsey about this labor market, and more importantly, I guess, uh, there are a couple of economists that have kind of taken this apart based on a couple of things that we’re seeing in the market right now.
Can you kind of walk us through what, what we might be missing? Missing when we look at that unemployment rate.
Adam D.K. King: Yes. So this McKinsey report that you reference is a, is a report that’s really. Quite dire in its predictions about our current labor shortage and the potential for that labor shortage to be a persistent long term problem.
And I would say that that report is quite representative, really, of the employer perspective post pandemic, right? There has been a lot of concern among employers about a so called labor shortage. And really, I think that boils down to they temporarily were in a situation where instead of workers scrambling for jobs, they were.
Uh, having to incentivize a little bit to encourage workers. So, and that doesn’t usually sit well with many employers, but the problem, of course, with this port is that it’s taking a quite temporary. And relatively modest shortage and projecting it in ways that are quite speculative. I mean, they hinge this largely on the fact that we have an aging labor force, labor force participation among older workers is actually significant heights.
It’s, it’s higher than it was pre pandemic. So the idea that we’ve had a mass exodus or that there’s going to be this, you unsolvable shortage of workers coming up, I don’t think necessarily tracks with. With reality, the other problem is that they, the way that they’re measuring this shortage is somewhat problematic.
They’re using not just unemployment figures, but job vacancies, something that I mentioned before, and there’s evidence to suggest that job vacancy data is not terribly accurate. And the reason for that is that employers have gotten very savvy with essentially using the Internet, the costs involved in creating a job posting.
for listening. Are very low relative to what they used to be before we were all digital.
Jordan: Right.
Adam D.K. King: So tracking job vacancies assumes that all of those postings are actually legitimate postings that employers intend to fill. And that might not always be the case. Some employers have strategic decisions for creating postings, sometimes just to intimidate the workers that they have from asking for more.
Jordan: Is that why they would post jobs that they don’t intend to fill? What are those kind of strategic decisions that could go into it? Yeah.
Adam D.K. King: Well, I’ll say an employer is in bargaining or say an employer has a bunch of current employment contracts that are up for renewal might be advantageous for them in the moment to create some additional postings to, uh, you know, strike a little fear in those that they’re about to negotiate wages or salaries with.
Jordan: I’m going to ask this very bluntly. You’ve mentioned, uh, U. S. data through this McKinsey, uh, report. Do we have a labor shortage here in Canada? I would say
Adam D.K. King: sectorally, there are labor shortages, right? In general, we have no general labor shortage. There’s absolutely no evidence that the labor market in general is suffering from a shortage of workers.
Quite the contrary. We have a surplus of workers. That is, we have 6. 4 percent of the workforce officially unemployed. And as I indicated before, much larger numbers of people who are not officially accounted. As unemployed. So we have a large surplus of people who are in need of not just work, but meaningful, well remunerated work.
Now that being said, of course, there are sectors of the economy that do have labor shortages and those are proving to be critical and problematic. And the first one of those is everyone I’m sure is aware is the healthcare system, right? The healthcare system is understaffed. It is suffering from a shortage.
And much of that. Has to do with the quality of the jobs or more accurately the deterioration in the quality of those jobs and provincial governments across the country really have been either asleep at the wheel or opposed to doing anything that would improve that situation. Recent reports out of Manitoba where I’m based indicate that the government has really resisted.
Uh, any attempts by unions there to bargain up wages and to improve job recruitment and retention, healthcare workers really, really struggled coming out of the pandemic with burnout and just the general fatigue of working through the pandemic and dealing with a healthcare crisis. And of course, we’ve seen a mass exodus of people because of those conditions.
Jordan: When we talk about the narrative around the labor market, um, where does it come from just in terms of like, listen, I’m, I’m a part of it here on this show. You know, if you had asked me and we’ve done episodes on this, uh, for the past two years, we’ve done episodes on, uh, various organizations like Starbucks unionizing or workers having more power at the bargaining table all because of this.
And, uh, now I’m talking to you and you’re kind of explaining it to me. That wasn’t the case, or maybe it was for a brief period and now it’s over. Um, how did that happen? We thought this was going to be the rise of the worker here.
Adam D.K. King: Well, I think a lot of people thought that, and a lot of people were hopeful that it would be myself included.
And I certainly don’t want to disparage those organizing efforts that did have success post pandemic and really inspired people in Starbucks, of course, was a high profile example of that. And I would imagine that a relatively tighter retail. Labor market helped Starbucks workers to a certain degree that being said, if the tight labor market or the relatively tight labor market post pandemic had really been the boon to workers that we thought it was going to be, we would see that reflected in the union density figures.
But the share of the workforce that’s a member of a union hasn’t budged in Canada. We’re still roughly around 30 percent just as we were pre pandemic. So if it was really going to have this positive effect on union organizing, we would see it show up in the data. The only province where we really see any indication that things have improved is British Columbia.
And that has nothing to do with the tightness of the labor market and everything to do with the fact that they reinstated card check certification and made it much easier for people to join unions. But even there, the growth in union density has been very modest. I think it’ll take some time for that.
That change in labor law to fully flesh itself out.
Jordan: So why do we
Adam D.K. King: keep
Jordan: hearing, uh, this worker shortage narrative then to justify, uh, stuff like, I mean, listen, the big, the big one this week was the government, uh, announcing that it would finally, uh, reduce the temporary foreign worker program. But it was assumed for years that Canada wouldn’t function without all these temporary foreign workers because we had so few workers willing to do these jobs.
Adam D.K. King: Yeah, so I think that there’s a couple of things going on. I mean, the first is, is specific to the post pandemic economy, and that was the rise in inflation. And so you had this spike in inflation, and in response you had the Bank of Canada raising interest rates. And you had to have some sort of public political narrative to justify those rate increases.
As an economy, we become almost addicted to extremely low interest rates. And then all of a sudden you had, you know, 5 percent and up interest rates. So the bank of Canada and monetary policymakers were basically using the playbook that they used in the 1970s and 80s. And part of that was blaming Or at least pointing to the risk of a wage price spiral, that is that workers in response to inflation would bid up their wages and that would cause inflation to spike and there would be this sort of cyclical growth in prices.
We never saw anything like that. In fact, even as inflation was at its height, 6. 8 percent average in 2022. Wages never approached anything like that, including for unionized workers. So that should have given everyone an indication that we’re living in a very different world today than we were in the 1970s and eighties.
When unions did have the structural power to match inflation in their wage settlements and really to push prices higher. We’re in a situation where workers simply don’t have that kind of structural power anymore. Now, some people would say, maybe that’s a good thing because you don’t have the wage price spiral that you had then.
I would say that’s not necessarily a good thing because it just means that workers suffer the most from inflation when it does occur. On the other hand, the labor shortage issue has been taken up by employers to solve their particular problems. They don’t want to have to raise wages to attract workers, so they want government to solve the problem of the so called labor shortage, even if it’s relatively mild.
And so you’ve seen employers advocate very hard for expansions of the Temporary Foreign Worker Program. Now that’s been going on for a long time, um, under the federal liberal government program has expanded exponentially and they’re now dealing with a kind of political crisis. Most of which has very little to do with the labor market, and they’re tightening it up, I think, mostly in response to a push from the right, that is from conservatives and the Pierre Polyev Conservative Party that’s going to make an electoral issue of it.
Jordan: The last thing I want to ask is, given all this, What happens now? I mean, you know, you mentioned that this was, uh, maybe, uh, more hyped up than it should have been, but a sort of temporary, uh, chance for gains in the labor market for workers. Uh, the last couple of unemployment figures I’ve seen, even that top line number that we mentioned, has been climbing.
Uh, interest rates are now going down. Uh, this week, there’ll be another interest rate announcement. Like, is the boom time such as it was? Over like, what are you expecting to see here over the next few months or the next year?
Adam D.K. King: Well, I think it’s important to point out that over the last year we have seen unemployment, that official top line number rise basically a percentage point or a little more.
So that’s bad news. Like I said, it’s probably worse news than we are recognizing because it’s not counting all these other people that are negatively affected. Um, another thing to keep in mind too, is that anytime you see. Unemployment officially rise. There are segments of the labor force that suffer first and worst.
And those tend to be racialized workers. Those tend to be new immigrants, new Canadians. So when we’re thinking about official unemployment, we have to also take into account the ways that it disproportionately affects certain kinds of workers, which is all the more reason to have a truly tight labor market with full employment because it pulls everyone up.
Now, I think over the next little while, what you’re going to see is that Monetary and fiscal policymakers are trying to return us basically to where we were pre pandemic, and I would suggest that’s not really where we want to be if we want an economy that is truly full employment, that offers jobs with good quality and good pay to every worker who wants those.
We need to have something much different than we had pre pandemic.
Jordan: Why don’t you give me, uh, before we close here, like a quick vision of what that would look like if we wanted to, uh, get serious about what we thought we were getting, but now realize we’re not.
Adam D.K. King: Yes, well, first we would need a commitment from government and fiscal policymakers to a tight labor market.
That includes an expansion of public sector jobs in areas of the economy where the private sector refuses to do it. So chief among those should be an expansion of health care to solve the shortage that we have. Second, I think, would be the green energy sector. Right now, we’re essentially hoping that private sector investors will create the jobs that we need to make a clean energy transition.
I don’t think that’s going to happen. That’s going to need to be something that the public sector takes on. So we’ll have that. But also I think we need reforms to our labor law regime that allows more people to join unions. We have a representation gap in this country that is more people would like to be in unions than who are actually in them.
And that’s because the law makes it difficult for workers in particular sectors to join unions, such as those who are in retail trade or food services. lower wage parts of the economy where it’s very difficult to organize a union. So if you had a regime that was encouraging public sector employment, committed to full employment, and supportive of workers joining unions and collectively bargaining, I think you’d be on the road to a much fairer, uh, economy that puts workers first.
Jordan: Adam, thank you so much for this. Uh, really interesting.
Adam D.K. King: Yeah, thank you for having me. It was great.
Jordan: Adam D. K. King of the University of Manitoba in Winnipeg. That was the big story. For more, you can head to TheBigStoryPodcast. ca if you’re rejoining us this week after taking the summer off of news. I don’t blame you, and I am jealous. But welcome back. We’re happy to have you here. We’ve got some exciting things planned for this fall.
And if you have anything you would like us to plan for the fall, You can shoot us a note. The email address is hello at the big story podcast.ca, or you can give us a call. Leave a voicemail at 4 1 6 9 3 5 5 9 3 5. The big story is in every podcast player, and if yours allows you to do it, please leave us a rating.
Even better write out a review. It helps other people find the show, and also it helps us learn what you think of it, which we’re always happy to do. Thanks for listening. I’m Jordan Heath Rawlings. We’ll talk tomorrow.
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