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Canadian Labour Congress

Canadian Labour Congress. Department of Social and Economic Policy Andrew Jackson, Senior Economist ajackson@clc-ctc.ca. Labour Market Policies for Social Inclusion Presentation to the Welfare to Work National Forum November 17, 2003. Social Inclusion is About:.

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Canadian Labour Congress

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  1. Canadian Labour Congress Department of Social and Economic Policy Andrew Jackson, Senior Economist ajackson@clc-ctc.ca

  2. Labour Market Policies for Social InclusionPresentation to theWelfare to Work National Forum November 17, 2003

  3. Social Inclusion is About: • Development of individual talents, capacities, and capabilities • Active participation in society • Broad equality of ‘life chances’ • Real equality of opportunity

  4. Social Inclusion and theLabour Market • Goal: ‘Good Jobs in Good Workplaces’ • Two key dimensions: • A living wage / adequate income • Opportunities for self-development

  5. The ‘New Architecture’ of Social Policy • Goal: social inclusion through paid work vs. ‘dependency’ • Yes … but, there is critical need for: • adequate income supports (e.g., PWDs) • facilitative macro-economic context • full social recognition of household responsibilties (child and elder care; ‘social’ working hours)

  6. Precarious Work • Achilles heel of ‘inclusion through work’ • Best defined as high combined risk of unemployment, low pay, lack of developmental opportunities • Leads to high risk of continuing relative low income, especially for single households and other ‘high-risk’ groups

  7. Precarious Forms of Work • Temporary jobs: 13% of jobs in 2002 – up about two percentage points from 1989 • ‘Own account’ self-employment: 9.8% of employment in 2002 from 7.2% in 1989 (stable since 1997)

  8. Precarious Forms of Work(continued) • Part-time: 18.7% in 2002 from 16.8% in 1989 (stable since 1997); not necessarily precarious, but 1 in 3 part-timers want full-time jobs; wages and benefits lag full-time; limited control of hours • Many full-time / ‘permanent’ jobs are precarious as well

  9. Unemployment Risk • Risk of long-term adult unemployment and labour market exclusion is low, but short-term unemployment is common • Annual incidence in 1990s – up to 25% to 33% of families – up to 1 in 6 adults

  10. Unemployment Risk(continued) • Today – unemployment rate of 8%; average duration, 18 weeks; annual incidence about 1 in 8 • Risk concentrated on young adults, recent immigrants, PWDs, ‘near elderly,’ persons with less than high school, college (four times the risk of university graduates)

  11. Low Pay:Incidence of Low Pay: 2002<2/3 median = <$10.23/hr • All – 25.3% (vs. 25.0% in 1997) • Men – 19.4% (unchanged) • Women – 31.5% (vs. 31.1% in 1997) • Age 25-54 – 16.0% (unchanged) • Age 55+ – 19.8% (vs. 19.2% in 1997) • Part-time – 57.0% (vs. 53.9% in 1997) • Low relative hourly pay has persisted despite falling unemployment

  12. Hourly Wages ofWomen and Men

  13. Precarious Work and Poverty • 2002 pre-tax LICO (large city): one person: $18,841; four persons: $35,455 • Full-year, full-time job at $10/hour = $20,000 single; $40,000 two earners • Minimum wages in 2002: $5.71 to $8.00/hour

  14. Precarious Work and Poverty(continued) • Families / singles with full-year, full-time jobs at minimum wage, plus child and tax benefits, fall below pre-tax LICO in almost all jurisdictions (Battle, 2003)

  15. Precarious Jobs:Not the Answer to Poverty and ‘Dependency’ • Women Lone Parents 1993-1998 (Kapsalis): ‘just’ 20% lived in poverty all six years, but 60% of all women lone parents were in poverty at least once over six years

  16. Precarious Jobs:Not the Answer to Poverty and ‘Dependency’(continued) • 45% of women lone parents in poverty in 1998 had some earnings in year: employed an average of 33.8 weeks at an average hourly wage of $8.13 per hour; 40% unemployed at least once in year

  17. Precarious Jobs:Not the Answer to Poverty and ‘Dependency’(continued) • Half of women lone parents on SA exit after two years, mainly because of job / more hours / higher pay, but many return • Welfare Exits 1992-1999 (Frenette and Picot): only 9% left completely (t plus 2) and 58% of leavers <LICO

  18. Low-Wage Jobs:Traps or Ladders to Opportunity? • Key research question: limited longitudinal analysis • Beach, Finnie and Gray (2003) Evidence is for significant widening of ‘life-cycle’ earnings differentials due to interaction of low pay and unemployment (and concentrated labour market risks)

  19. Low-Wage Jobs:Traps or Ladders to Opportunity?(continued) • HRDC Self-Sufficiency (income supplementation) Project for lone parents: • 28% vs. 18% of control group in full-time jobs in Year 3, but • ‘the effects of SSP on employment, welfare use and income were small after parents were no longer eligible for the supplement’ (Final Report)

  20. Low-Wage Jobs:Traps or Ladders to Opportunity?(continued) • (continued): • in Year 6, the SA rate was the same, the employment rate of both groups was the same (42%), and average monthly earnings of participants were only marginally higher ($496 vs. $488) • ‘program group members gained considerable work experience’ but no long-term labour market payoff

  21. Labour Market Dynamics of Growing Family Income Inequality • Family incomes have become much more unequal: 1989 – 2001 (structural trend) • Market income share of top quintile: 42.4% to 45.6%

  22. Labour Market Dynamics of Growing Family Income Inequality(continued) • Final income share of top quintile: 36.9% to 39.2% • Top has grown away from both the middle and the bottom; taxes and transfers still equalize, but pushing against the tide

  23. Labour Market Dynamics of Growing Family Income Inequality(continued) • Poverty (post-tax LICO) has increased among working-age adults (persons aged 18-64: 9.3% to 10.6%), but not children (11.5% to 11.4%) because of transfers • Long-term implications for inclusion?

  24. Precarious Jobs vs. Developmental Jobs • Precarious work not just about unemployment and low pay • Low level of development of skills and capacities at work (‘dead-end’ jobs) • Limited access to formal training plus low skills utilization; just 30% of workforce, mainly ‘core workers,’ receive employer training

  25. Precarious Jobs vs. Developmental Jobs(continued) • Exclusion from ‘internal’ labour markets • Boring, monotonous, routinized work: 1 in 3 men and almost half of women have very low level of job control • Atrophy of current skills (numeracy, literacy, credentials) among young adults, new immigrants

  26. Policy ‘Solutions’ • Current Approach: • inclusion through work via ‘sticks’ (EI and welfare ‘reform’ reinforce dependency on wages) • ‘Make Work Pay’ via ‘carrots’ (Income Supplementation: CCTB, NCB for Working Families)

  27. Policy ‘Solutions’(continued) • Current Approach (continued): • income supplements have a role and some impact, but should ANY wage be subsidized? • training and lifelong learning in the new knowledge-based economy: rhetoric vs. reality • what about LABOUR MARKET policy?

  28. Living Wages:Creating a Wage Floor • Canada is a low-wage country (especially for women) • All other advanced industrial countries except US have higher wage floors / a more compressed distribution of earnings

  29. Living Wages:Creating a Wage Floor(continued) • Low pay (<2/3 national median for FT) = 23.7% in Canada vs. 5.2% in Sweden vs. 13.3% in Germany (for women: 34.3% vs. 8.4% vs 25.4%) • In Sweden, restaurant, hotel, retail workers (mainly women) earn 90% of average manufacturing wage vs. 60% in Canada

  30. Key Arguments for aWage Floor / Living Wage • Recognizes primary onus is on the Job Market to provide income security (at least for single persons working full-time, full-year) • Gives more resources to state to supplement FAMILY incomes; provide employment supports / training, etc.

  31. Key Arguments for aWage Floor / Living Wage(continued) • Protects responsible employers from unfair competition • Provides strong work incentives • Lowers income inequality and poverty

  32. What About Job Loss? • Bargained wage floors of continental Europe (80% collective bargaining coverage) compress and redistribute wages and set sectoral / regional wage standard, but do not raise total wage bill

  33. What About Job Loss?(continued) • Many countries with high wage floors / low earnings inequality have been good economic performers in 1990s (Denmark, Netherlands) • Denmark and Sweden have highest employment rates in OECD (75%); low unemployment rates (5%) ‘despite’ high wage floors (and ‘generous’ unemployment benefits)

  34. Do Legislated MinimumWages Cost Jobs? • Minimum wage is second-best solution – but private sector unionization in Canada is below 20%, less than 10% in low wage private services • In theory, some low productivity workers will lose jobs if minimum wage is too high

  35. Do Legislated MinimumWages Cost Jobs? (continued) • In practice, job impacts on adults are minimal (OECD, 1998 Employment Outlook) and income gains outweigh any small loss of hours • Why? … • minimum wages set at reasonable levels • minimum wages reduce training / recruitment costs and boost productivity via lower turnover

  36. Do We Have to Choose Between Low Wage Jobs and No Jobs? • There is more than one labour market and social model on offer • What can we learn from social democratic countries? • Wage floors generalized across non-traded sectors raise productivity and promote ‘high road’ completion

  37. Do We Have to Choose Between Low Wage Jobs and No Jobs?(continued) • Especially important in low-wage private consumer services • High social spending limits growth of low wage services jobs (especially for women) by promoting higher skill jobs in public and social services / limiting private services consumption

  38. Do We Have to Choose Between Low Wage Jobs and No Jobs?(continued) • Ratio of private to public sector jobs: 6 to 1 in US; 4 to 1 in Canada; 2.5:1 in Sweden / Denmark • One in six Canadians work in retail trade / restaurants / hotels vs. one in ten in Sweden / Denmark

  39. Do We Have to Choose Between Low Wage Jobs and No Jobs?(continued) • Real investment in skills – public education; accessible PSE; worker training – can raise productivity in what would be low-wage sectors • Public expenditure on training – 0.17% GDP in Canada vs. 0.30% Sweden vs. 0.85% Denmark • Co-operation in the workplace can boost productivity

  40. Social Dimensions of Productivity • “A worker will be more or less productive, co-operative and innovative depending on how he or she is treated: whether the wage is seen as fair in relation to the demands of the job; whether the worker gets equal pay for work of equal value; whether training is provided; whether grievances can be voiced. In short, what the worker delivers is contingent on the terms of employment, working conditions, the work environment, collective representation, and due process.” (Werner Sengenberger, ILO)

  41. More than One Way • No consistent link from ‘liberal’ labour market and social model to high and rising employment and productivity • Yes, the US did well in 1990s, but so did, e.g., Denmark, Netherlands • Scandinavian countries have very high employment rates / high wage floors / low levels of poverty and inequality

  42. More than One Way(continued) • Average annual growth of labour productivity in business sector, 1995-2002: • US: 1.6% • Canada: 1.5% • Sweden: 1.7% • Denmark: 1.8% • Social democratic labour market and social model boosts efficiency and not just equity

  43. How to Move Forward in Canada • A federal minimum wage as a step to a national minimum wage? A benchmark for employers, unions, communities, provinces? • Level could be considered by a Commission (as in UK) to balance poverty reduction, social inclusion and employment goals

  44. How to Move Forward in Canada(continued) • $10/hr. = 2/3 median = LICO for single • Facilitate broader-based collective bargaining in low wage sectors

  45. Towards a Right to Training • Need for a ‘second chance’ and wider access for precarious workers • Need to create a training and skills development culture in the workplace • Part of solution: training leaves under EI on model of apprenticeship training / EI premium rebates for employer training effort

  46. Conclusions • The Labour Market and Social Inclusion

  47. Canadian Labour Congress2841 Riverside DriveOttawa, ON K1V 8X7(613) 521-3400www.clc-ctc.ca

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