All of a sudden, banks are getting very interested in not just the number, but also the quality of new jobs being created—but not for the reasons you might think.
Monthly labour force job growth figures tell us something about the quantity of new jobs created (or lost), but they don’t say anything about the quality of those jobs. Are the new jobs being created decent quality jobs, or are they mostly McCrappy jobs? While in some cases, one person’s trashy job may be another person’s treasure, most people fundamentally agree on the basic elements of what makes a good job.
Pretty much everyone agrees that higher pay jobs are good and lower pay jobs not so good. Non-wage compensation through the workplace in the form of decent pensions and benefits are also very important in addition to the universal social protections of minimum wages, unemployment insurance, public pensions, etc. Job security, permanent work, protection from harassment, excessive work demands, discrimination, unfair dismissal are critical as is having some input and control over work. Most want decent working times and full-time employment, although flexibility can also be important. Also important are work opportunities through advancement, training, new job opportunities and seniority; adequate leave, including paid vacation and sick or family leave and of course safe working conditions.
This list wasn’t developed through idle speculation. These aspects are commonly included in employment and labour standards legislation, are common in collective agreements, rank highly in bargaining surveys of workers, and also factor in measures of decent work developed by the International Labor Organization (ILO). Rates of unionization are also often included both in their own right—because they give workers more influence—but also because they are highly correlated with other indicators of job quality.
Not all these aspects of good jobs can be easily tracked, so employment quality or good jobs indexes typically include just a selection of them. For instance the CIBC’s Employment Quality Index has just three indicators: the growth of full-time high paying jobs, the share of full-time and part-time jobs, and paid employees vs. self-employed. The international JustJobs Index covers opportunities for work, income and equality, employment security, pensions and benefits, gender equality and social dialogue, many of which are also covered in the European Job Quality Index.
Central banks have also recently got into more methodically measuring broader labor market conditions. The US Federal Reserve includes 19 indicators in its Labor Market Conditions Index while the Bank of Canada includes just eight in its new Labour Market Indicator. And, not to be left out, the TD Bank now claims it has developed one labour market indicator to rule them all.
While these indexes all differ in what they include, they’ve all been pointing in the same direction: down.
CIBC’s employment quality index is now at a record low, 15 percent below the early 1990s and down by about 2 percent just in the past year. TD’s index recently showed its widest gulf in job quality since the 2008/9 recession. Canada’s rank on the most recent international JustJobs index dropped to 12th, the lowest in a dozen years and down from the 7th place we were at in 2000. And there’s been little improvement in the Bank of Canada’s Labour Market Indicator in the past few years, even as the unemployment rate has declined.
Some might wonder why central banks are now interested in monitoring job quality. Aren’t they more interested in the financial side of the economy?
Historically there has been some relationship between lower rates of unemployment, higher wages and higher inflation, enough that it had a name: the Phillip’s curve. That relationship has almost entirely broken down. Lower rates of unemployment haven’t resulted in much in the way of wage growth, or a revival of economic demand and economic growth. And without that, there’s little pressure on prices from the demand side. That’s why central banks are keeping interest rates so low for so long. This is why they’re monitoring a broader measure of employment quality and not just quantity. It’s also why other banks are also interested: not because they are necessarily interested in job quality per se, but because they want to know where the Bank of Canada will make its next move on interest rates.
But will keeping interest rates low make any difference? CIBC economist Benjamin Tal says no: “the fastest growing segment of the labour market (low wage workers) is also the one with the weakest bargaining power. This works to weaken the link between labour market performance and aggregate wage gains. Low and lower interest rates will do little to close that gap.”
Monetary policy and low interest rates aren’t working because they’re being stymied by other government policies—spending cuts, wage freezes, contracting out, regressive tax measures, deregulation, etc.—that undermine wages, the power of labour and increase inequality.
And even all the major international economic organizations—the International Monetary Fund, OECD, International Labour Organization, World Bank, and even Standard and Poors—all now agree that we need stronger wage growth and greater equality to achieve stronger economic growth, as long as our governments work in the opposite direction, we’re not going to have much improvement in job quality, or in economic growth.
- Where the new jobs are. The jobs with the highest demand in Canada last year, according to an analysis of Workopolis job listings were cooks, sales representatives and sales clerks, babysitters, truck drivers, marketing and sales managers and hairstylists. The job titles with the largest increase in demand were specialist physicians, economists and personal care workers.
- If I had a million dollars.. I might—or might not—buy myself a house in Toronto. The average price for a detached house topped $1 million in downtown Hogtown (416 area code) in February for the first time ever, up 9 percent from a year ago. Still, sales were up almost 17 per cent. The price for condo declined slightly to $370,000, with sales up 12 percent. Meanwhile the growth in mortgage debt increased total household debt to over $1.82 trillion in January, 165 per cent of household disposable income. The IMF also raised renewed concern over Canada’s housing market and new housing starts dropped to the lowest level since 2009.
- If I had a few billion dollars.. I might buy Ontario Hydro. The Ontario government revealed it’s planning to sell off shares of Hydro One, the province’s public power generating utility and may sell off majority ownership, effectively privatizing it. It makes no financial sense for the province to sell off these public assets when investors will demand much higher returns than Ontario’s borrowing rate, which at less than 3 per cent for 20 years, is close to record lows. The banks and investment dealers also stand to make tens of millions of dollars risk free just for floating the deal. Privatization of public power utilities generally always results in higher rates for the public.
- Alberta disadvantage. Cuts to progressive taxes in Alberta together with a lack of affordable childcare has resulted in an Alberta disadvantage for women in that province and the largest gender gap in Canada, a report by tax expert Kathleen Lahey for the Parkland Institute shows. Public spending and wage cuts will make the situation worse, and increases in sales and commodity prices would make the tax system more inequitable. Instead the province should raise its corporate tax rate, resource royalties and bring back progressive income tax rates. Alberta Premier Jim Prentice was widely criticized for telling Albertans that they are to blame for the province’s deficit.
- Pension performance. The value of assets in workplace pension plans in Canada increased to $1.46 trillion in Canada in the 3rd quarter of last year, up 1.7 per cent from the previous quarter, even as revenues declined. The pension plan for Ontario health care workers, including CUPE members, achieved a return of 17.7 percent in 2014 and is now in a healthy surplus position. The Healthcare of Ontario Pension Plan (HOOPP) made that strong return mostly by investing in long-term government bonds, which increased in value as interest rates declined.
All content: Toby Sanger, Economist, CUPE National. @toby_sanger email@example.com