CAW Economist Debunks "Myth" of Labour Shortage, Says True Unemployment Rate is Over 12 Per cent

May 31, 2012, 2:30 PM EST


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CAW Economist Jim Stanford testified today that Canada faces years of continuing surplus labour supply, not a looming labour shortage.

Stanford appeared before the House of Commons Standing Committee on Finance regarding the federal government's omnibus budget bill, Bill C-38.

He tabled data showing that Canada's labour market has recovered only marginally from the worst days of the 2008-09 recession. Since July 2009, when the recession bottomed-out, the employment rate (which measures the proportion of working-age Canadians holding a job of any kind) has recovered barely one-fifth of the ground it lost during the downturn.  As of April 2012, the overall (seasonally adjusted) employment rate was 61.9 per cent, still far below the pre-recession level of 63.8 per cent, and only 0.6 points higher than the low of 61.3 per cent recorded in the summer of 2009.

"The oft-made claim that Canada's labour market has fully recovered from the recession is blatantly and empirically false," Stanford said.  "In fact, the labour market remains almost as weak as during the worst days of the downturn."

The decline in the official unemployment rate mostly reflects a decline in labour force participation by Canadians, not stronger employment conditions, he noted.

Because hundreds of thousands of non-working Canadians are excluded by definition from official unemployment statistics, the standard unemployment rate badly underestimates true unemployment, Stanford argued.  He presented the Committee with estimates of actual unemployment, which he pegged at almost 2.3 million Canadians, or over 12 percent (see table).  This captures not just those who meet the official definition of unemployment, but also the decline in labour force participation since the recession, involuntary part-time work, and workers waiting for future shifts.

"Canada continues to experience a condition of severe and chronic underutilization of our labour supply," Stanford said.  "It is simply not credible to speak of a 'labour shortage' that somehow constrains our economic growth.  This feared labour shortage is a myth invoked to justify painful and unnecessary cuts to important social programs."

"Government policies aimed at compelling labour supply (including proposals to defer Old Age Security, cut Employment Insurance benefits, and dramatically expand the Temporary Foreign Worker program) are motivated not by a labour shortage, but by a desire to suppress wages."

The omnibus budget bill would alter over 60 pieces of federal legislation, including major changes to the Old Age Security and Employment Insurance programs.


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