Quality of Work in Canada

CIBC looks at the creation of part-time versus full-time jobs and sees growth for part-time work is greater

May 12, 2015
by Michael Hlinka

From the April 2015 print edition

According to CIBC World Markets, the quality of work in this country is at a 25-year low. They base this assertion on several different metrics, including the distribution between part-time and full-time employment, the split between self-employment and paid employment, and the sectorial composition of full-time employment. Let’s take these one at a time.

CIBC looks at the creation of part-time versus full-time jobs over the past 17 years, and sees that the growth rate for part-time work is much greater. Generally, full-time is preferable to part-time. Paid employees, on average, make more money than the self-employed and in many cases, people only opt for self-employment when they can’t find someone to hire them. Finally, the number of low paying jobs (composition) is increasing more rapidly than the number of high-paying jobs.

Very important—and correctly—CIBC identifies these trends, given that they’ve been tracked since 1988, as “more structural” than cyclical. Which means that even if the economy would recover from its doldrums over the next few months, these downtrends would likely continue. And while the report from CIBC provides information about what has been going on, it doesn’t address the whys behind it…and that’s where I come in!

But first, let’s step back and understand what leads to “quality” work in the first place. It’s the value-added component. I’m a huge sports fan and I think we can learn a lot by comparing the wages enjoyed by members of the local football team, the Toronto Argonauts, and the local hockey team, the Toronto Maple Leafs.

For the upcoming season, the salary cap for the 56 players for the Argos is just a tad over CN$5 million. There are three members of the Leafs—Phil Kessel, Dion Phaneuf, and Joffrey Lupul—who will individually make more than US$5 million this season. Kessel alone will earn more than double the entire Argonaut team in 2015. And it’s not that he’s that much better an athlete than the average football player. My guess is that if we figured out some fair way to compare Kessel with the 56 Argo football players, he’d be better than some and worse than others. The reason why Phil Kessel makes so much more is because the revenues of the Toronto Maple Leafs dwarf the revenues of the Toronto Argonauts, and players like Kessel are the beneficiaries.

This is important. Typically, when you hear politicians talking about the economy, you hear the phrase “job creation”. You don’t hear the phrase “wealth creation”,  which is the only thing that really matters.

Quick question: you have the choice of working 40 hours a week at $10 an hour or working ten hours a week and making $40 an hour. Which sounds better? The answer is self-evident. OK, now let’s think about the only way this trade-off could come about. It must be that in the former case you’re adding relatively low value while in the latter you’re adding a ton of it. To extend the CFL/NHL analogy: at $10 an hour, you’re the anonymous special teams player from the unheralded university program while in the second case, you’re the star NHLer.

I would agree that sports is a very unique industry, but there is a lesson we can draw from it. In short: high value-added leads to great jobs and high wages. Yet it still begs the question: how to lure those jobs to Canada?

If there would be one pairing of policy that would unquestionably lead to that result, high-paying, high value-added jobs, it would be to immediately slash taxes on corporate profits to zero while simultaneously preventing employers in this country from gaming the system by bringing in workers from abroad to depress wages.

The country of Ireland gave us an example of how enlightened tax policy can transform an economy. When I was in university (which was the decade of the 1970s) it was one of Europe’s economic basket cases. That turned around pretty much on a dime in the 1990’s after Ireland greatly reduced tax rates on corporate profits. In short order, its standard of living exceeded England’s as the businesses of the future flooded across its borders. We would see something even more dramatic in Canada, given our proximity to the US, still the biggest market in the world for many goods and services.

Yet at the same time, to protect the interests of domestic workers, we can’t allow temporary worker programs to continue. It would be up to individual Canadians to get the training they need—either part-time or full-time—to exploit the opportunities that would spring up all over the country. And, as surely as day follows night, the “structural” trend that CIBC sees would quickly reverse itself.