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Oct 28, 2016

An era of precarious employment calls for a new social architecture

October 28, 2016

Recently, Finance Minister Bill Morneau and Prime Minister Justin Trudeau elicited strong reactions by suggesting Canadians need to get used to precarious employment because it’s the new normal. But the reality could be much worse.

Canada’s economy and labour market are in the middle of a tectonic shift. Current trends, such as precarious employment and income inequality, are leaving more workers in part-time, temporary positions with few benefits and low wages. Job precariousness has increased 50 per cent over the past 20 years, and Canada’s top 1 per cent captured 37 per cent of overall income growth between 1981 and 2012.

Accelerating these trends is a technological revolution that, while bringing choice and convenience to consumers, is also automating a range of industries, from office administration to manufacturing, and unbundling full-time jobs into smaller, less well-paying tasks. Millions of Canadians could be at risk of losing their jobs to automation and artificial intelligence in coming years, and many others will find themselves juggling multiple short-term gigs to make ends meet.

The question, then, is what can governments do? One option is to hope existing programs and policies are up to the challenge of supporting workers. That doesn’t appear to be the case. Canada’s employment insurance scheme is based on an outdated conception of the labour market when most workers held full-time, permanent jobs. In 2016, only 39 per cent of unemployed Canadians are eligible for EI, compared with 82 per cent in 1978. Ineligibility for EI also means being frozen out of a range of skills and training programs, a particular challenge for new labour market entrants such as young people and newcomers to Canada.

To take another example, recent enhancements to the Canada Pension Plan will do nothing to supplement the retirement income of many workers engaged in precarious employment who cannot contribute to the CPP. Again, when it comes to health care, the provision of drug coverage and access to mental health services through extended health benefits is typically tied to a 1960s assumption of secure, full-time employment – more than 80 per cent of jobs classified as precarious in Ontario don’t receive these types of benefits. The story in child care and affordable housing is similar – demand outstripping the available affordable supply.

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There is another option. Governments could quickly start moving to redesign Canada’s social architecture to recognize this new era of “job churn” as Mr. Morneau described it. A forthcoming Mowat Centre report outlines a number of transformative and tactical approaches, ranging from the introduction of universal childcare and a national pharmacare program, to ramping up investments in affordable housing. These choices will be expensive, but the alternative – a growing number of Canadians without benefits or access to services – will be even more costly in the long run.

Canada should also look abroad to learn from other jurisdictions with more responsive approaches to labour market policy. For example, Denmark’s “flexicurity” model promotes fluid entry and exit into jobs by providing flexible rules around hiring and firing, up to 90 per cent income replacement for unemployed workers, and high levels of investment in skills and training support. The Danish model provides a nimbler, more supportive and less bureaucratic response than Canada’s existing EI and training system, and is more relevant to the realities of today’s jobs – quick switches between positions, the need for adequate benefits between jobs and the ability to upgrade or train for new skills effectively.

Other options policy makers should consider include ramping up enforcement of existing employment standards legislation to crack down on firms misclassifying employees as independent contractors, the introduction of portable benefits for “gig economy” workers and the development of a national skills strategy that mobilizes the public and private sectors to align their efforts on training and education.

The economic uncertainty and fear that technological changes such as automation will unleash on Canadians up and down the income ladder means that we may soon see a broad section of the population solidly behind renewed social programs. This will afford governments and political parties a window to consider transformational changes across the policy spectrum. Mr. Morneau and Mr. Trudeau should seize this opportunity to reshape Canada’s policies and programs to be more resilient, generous and helpful to Canadians facing a new and uncertain world of work.

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Release Date

October 28, 2016


The Globe and Mail


Sunil Johal
Jordann Thirgood

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