Labor market: the mystery of low wage growth

The labor force is scarce and the Canadian economy continues to create jobs. Yet wages are not increasing as much as you would expect. The explanation may be on the side of the rise in part-time jobs.

“The increase in part-time jobs has been almost two times higher than that of full-time jobs over the past year,” says Benoit Durocher, Senior Economist at Desjardins.

The total number of hours worked does not increase as much as one might think and productivity also does not, he says, which explains why wages increase little.

Given the direct relationship between productivity and wages, “low productivity should continue to limit wage growth in the coming months,” says Benoit Durocher.

Since the beginning of 2019, in January and February, the Canadian economy has created more than 100,000 jobs and the unemployment rate is at historically low levels.

The job market continues to flourish in Canada, indicating that the economy is still able to create jobs, despite the labor shortage.

“We create jobs anyway. It is as if there is still a pool of workers available, especially among young people and students. ”

These young people often work part-time, resulting in significant growth in part-time jobs. “The number of hours worked for jobs from 1 to 14 hours per week has increased 8.2% over the past year, while jobs 35 hours or more a week are down 0.3%. ”

In addition, the increase in part-time jobs and slower growth in the total number of hours worked is also a sign of economic slowdown, the economist said.

A paradox

Canada’s sluggish wage growth persists despite a strong economy, which worries many economists, starting with Bank of Canada Governor Stephen Poloz, who is trying to understand why.

“It’s a paradox,” agrees Benoit Durocher, because the theory is that the scarcity of manpower leads to an increase in the cost of labor, that is, wages.

Labor shortages are not only felt in Quebec, but also in Canada’s major provinces such as British Columbia and Ontario.

We will know today if the Canadian labor market has maintained its momentum in the first quarter of 2019, with the results of the Statistics Canada Monthly Survey for the month of March.

Regardless of the March results, Canada’s recent record of job creation is exceptional, according to the Desjardins economist, who forecasts a negative balance sheet and the loss of 12,000 jobs.

Jobs created in Canada / Quebec

• January: 66,800 / 16,000

• February: 55 900/14 900

• Unemployment rate: 5.8% / 5.3%

Source: Statistics Canada