White Paper

With the potential of precarious work to limit consumer willingness to spend, delay family formation and create too much uncertainty in the labour force, governments are paying close attention to these issues in Canada and abroad. Further, they are looking at a number of tools to address these issues, including changes to labour legislation and improvements in safety nets. But how widespread are employment risks and insecurities, and is it getting worse over time? In this Commentary, we look at the common meanings of precarious work in academic and policy research finding that various meanings help bring attention to employment arrangements with elevated insecurity. We examine trends in non-standard work in Canada and find that the overall prevalence of non-standard work has stabilized over the last couple of decades after growing sharply in the early 1990s. Non-standard work tends to be more insecure than “traditional” jobs, so its persistence over time and, in particular, increases in the prevalence of temporary employment – with large concentrations in health, education, and food services sectors, among others – prompts a deeper investigation. Many forces contribute to the creation of non-standard work. They include factors such as business desires for flexibility – often associated with globalization and technological change – but also worker preferences, which play a major role. In our view, the complexity behind causes of non-standard job creation, and the lessons from some international attempts to address specific areas of concerns through blunt legislative tools, militates in favour of looking to options that bolster the safety net. We think that although reviews of labour laws and their enforcement may lead to constructive discussions and new ideas to improve enforcement, interventions to shape employment arrangements with legislation pose the greatest risks of stymying job creation. In this Commentary, we present a list of options to reduce the income-related vulnerabilities and uncertainties faced by many non-standard workers. These include reducing gaps in health coverage, improving Employment Insurance (EI) eligibility, boosting access to social programs, and ensuring uptake of programs that improve access to education and skills training programs for workers. All of these options should help policymakers design the social safety net in ways that mitigates common risks in non-standard work, while supporting labour market dynamism.

We propose a novel method that infers the employment effect of a minimum wage increase by comparing the number of excess jobs paying at or slightly above the new minimum wage to the missing jobs paying below it. To implement our approach, we estimate the effect of the minimum wage on the frequency distribution of hourly wages using 138 prominent state-level minimum wage changes between 1979 and 2016. We find that the overall number of low-wage jobs remained essentially unchanged over five years following the increase. At the same time, the direct effect of the minimum wage on average earnings was amplified by modest wage spillovers at the bottom of the wage distribution. Our estimates by detailed demographic groups show that the lack of job loss is not explained by labor-labor substitution at the bottom of the wage distribution. We also find no evidence of disemployment when we consider higher levels of minimum wages. However, we do find some evidence of reduced employment in tradable sectors. In contrast to our bunching-based estimates, we show that some conventional studies can produce misleading inference due to spurious changes in employment higher up in the wage distribution.

We live in an age of paradox. Systems using artificial intelligence match or surpass human level performance in more and more domains, leveraging rapid advances in other technologies and driving soaring stock prices. Yet measured productivity growth has declined by half over the past decade, and real income has stagnated since the late 1990s for a majority of Americans. We describe four potential explanations for this clash of expectations and statistics: false hopes, mismeasurement, redistribution, and implementation lags. While a case can be made for each, we argue that lags have likely been the biggest contributor to the paradox. The most impressive capabilities of AI, particularly those based on machine learning, have not yet diffused widely. More importantly, like other general-purpose technologies, their full effects won’t be realized until waves of complementary innovations are developed and implemented. The required adjustment costs, organizational changes, and new skills can be modeled as a kind of intangible capital. A portion of the value of this intangible capital is already reflected in the market value of firms. However, going forward, national statistics could fail to measure the full benefits of the new technologies and some may even have the wrong sign.

Skilled trades workers – ranging from electricians to carpenters to welders – are a crucial component of the Canadian labour force. However, many employers report that there are shortages of skilled workers in these occupations. Federal and provincial governments have targeted many grant and tax credit programs to encourage workers to become apprentices in the skilled trades. However, myriad provincial regulations that limit how many apprentices firms may hire are stymieing these efforts and limiting apprenticeship opportunities. Provinces regulate whether workers must complete a certified apprenticeship in order to legally work in an occupation, as well as the length of apprenticeship terms. This Commentary finds that strict provincial regulations on the rate at which firms may hire apprentices, which is relative to the number of certified workers they employ, reduce the number of people who work in a trade. Furthermore, the trades in provinces with the strictest regulations on hiring have lower levels of young workers while workers who manage to find work in these trades have higher incomes, suggesting that these regulations are acting as barriers to entry. Governments have set these regulations in order to protect workers and the general public by encouraging workers to gain the proper training in skilled trades. However, entry restrictions are not the best means by which to regulate the quality and safety of work for all trades. Instead of regulating the rate of apprentice entry, governments should focus on regulating the quality of work and safety standards when appropriate. In other words, instead of regulating inputs governments should shift the focus of trades’ regulation to outputs. With recent moves by the federal government to encourage workers to enter the trades, it is now up to the provinces to eliminate antiquated and harmful regulations on apprenticeship.

In this report we investigate the effects of vocational education and training (VET) on adult skills and labour market outcomes by using the PIAAC survey. Data comparability across countries, the breath of countries involved, and the almost unique presence of information on assessed skills, training, earnings and employment makes this survey especially valuable to study the different facets of VET as compared to more academic education.

Policymakers’ interest in tax reform has increased dramatically in recent years as a consensus on broadening the tax base and lowering marginal tax rates has emerged. As such base broadening would necessitate curbing or eliminating certain tax expenditures, this paper examines the economic impact of the preferential tax treatment of employee stock ownership plans (ESOPs). Through a comprehensive literature review as well as a new analysis of ESOPs sponsored by S corporations (S ESOPs), this paper demonstrates how ESOPs—and in particular S ESOPs—contribute positively to job creation in the U.S. economy by promoting employee commitment. The existing academic literature confirms that the level of employee commitment is an important driver of firms’ productivity, growth, and job stability. ESOPs have been shown to facilitate firm performance and job stability in large part because they foster loyalty to the company among employees. This evidence of the connection between worker loyalty and firm performance begs the question: how can companies foster employee commitment? One answer is through employee ownership, and one proven way of successfully establishing employee ownership of firms has been through S ESOPs, which are often 100 percent employee owned. S ESOPs foster a workplace culture of participation and commitment. Previous research has shown that, by facilitating employee ownership of firms, S ESOPs can lead to higher wages, greater job stability, and higher retirement plan contributions.

In today’s economy, the demand for skilled workers is greater than ever before—with approximately 80 percent of jobs requiring candidates to have some form of education or training beyond the high school level. However, employers in in-demand industries are not exclusively seeking to hire individuals with four-year degrees. In fact, approximately 53 percent of all jobs in our labor market can be classified as “middle skill,” meaning they require training beyond high school but not a college degree. Even though middle-skill jobs dominate today’s economy, only 43 percent of workers have the training they need to qualify for these positions—leaving many employers without a reliable worker pipeline.

It is a historic time for Canadian labour markets. Interprovincial labour mobility is higher than ever before in the history of this country. This mass movement of Canadians between provinces and territories is just one highly visible and early indicator of an even more historic national trend, a tightening labour market. This demographic phenomenon will present massive challenges and opportunities to Canada as it will to other developed countries. At this pivotal moment in history, policymakers have an opportunity to anticipate and influence the labour market in order to realize optimal outcomes for all Canadians. What is required is a Human Potential Strategy for Canada. This paper reviews one labour market input in great depth, interprovincial labour mobility, and then goes on to discuss broader labour market trends and concerns. Finally, the authors present specific recommendations for action that require the attention of government leaders in the immediate future.

Field-of-study mismatch occurs when workers educated in a particular field work in another. It is conceptually distinct from qualifications or skills mismatch, although a part of qualifications and skills mismatch results from graduates from a particular field having to downgrade to find work in another field. Some studies have identified labour market dynamics related to field-of-study mismatch, but few (if any) have sought to directly understand the interplay between labour supply factors (the types of skills brought to the workplace) and the labour demand factors (the types of skills demanded by employers) in field-of-study mismatch. Using data from the Programme for International Assessment of Adult Competencies’ Survey of Adult Skills (PIAAC), this paper shows that although students may choose to specialise in a particular field, it is not solely up to them to actually work in that field. In accordance with assignment theories, both the degree of saturation of a particular field in the labour market and the level of generic skills of a particular field predict the occurrence of field-of-study mismatch, highlighting that mismatch is the result of both labour supply- and demand-side factors. The paper then evaluates the costs to individuals – in terms of wages, risk of being out of work and job satisfaction. Findings suggest that the costs of field-of-study mismatch may only be high in terms of individual earnings when it is associated to qualification mismatch. For economies, field-of-study mismatch, when associated with qualifications mismatch, can amount to important costs, meriting the attention of policy makers to better aligning course places to skill needs or by encouraging skill transferability across fields.