April Labour Force Survey Preview: Canadian Employment Growth Tilted Towards Mid- and Higher-Paying Jobs
Professional, business, and administrative-related occupations have led job growth in recent years
The Canadian economy might be adding jobs, but there’s an obvious question: are they “good” jobs? One way to answer that is by looking at whether the types of jobs being added are ones that generally pay well. To find out, we’ve grouped Canadian occupations into low-, mid-, and high-paying jobs based on their 2018 average hourly wages in the Labour Force Survey (LFS) and tracked how employment in each tier has evolved.
Since early 2015, Canadian job growth has been decidedly tilted toward mid-, and even more so, higher-paying roles. During the 12 months ending March 2019, the number of Canadians working in high-paying occupations was up 11.1% from the start of 2015, more than twice the pace of the 5.3% increase in overall employment. Employment in mid-wage occupations climbed 7.5% during this period, while lower-paying roles fell 1.0%, partly reflecting a decline in 2016. Job growth over the past year has been strongest among mid-wage occupations, although the other two tiers also posted gains.
Faster growth of high-paying roles reflects strong employment gains across several different types of professional occupations, including business and finance, health, and the natural and applied sciences. Certain middle management occupations also grew quickly. Meanwhile, supervisor and administrative roles in business and finance helped drive growth of mid-paying jobs. By contrast, slower growth of lower-paying positions was due to flat or declining employment in several service occupations, as well as manual labour roles in manufacturing and natural resources.
Wages of lower-paying jobs keeping up
While the gradual shift to higher-paying, more stable occupations is on the whole a positive trend, one concern is that those who work in lower-wage occupations might be left behind. However, average hourly wages for lower-paying occupations rose 9.6% between January 2015 and March 2019, slightly faster than the 8.0% and 8.8% growth for mid-wage and high-wage roles over the same period. This faster pace of wage growth indicates that opportunities for these positions have fared better than their relatively weak employment numbers would suggest.
Faster wage growth of lower-paying jobs has been especially pronounced during the past two years. Minimum wage hikes, such as the one in Ontario at the start of 2018, have contributed to these gains. Nevertheless, hourly earnings of workers in low-wage occupations had already started to rise in mid-2017 as the broader Canadian job market was improving.
Changing job mix not currently affecting the pace of wage growth
The overall pace of wage growth is driven by both changing wages of individual jobs and shifts in the mix of jobs in the economy. If high-paying jobs are growing while lower-paying ones shrink, average earnings will rise, even if the wages in each tier don’t.
We can determine to what extent recent wage growth reflects either higher pay for specific jobs or shifts in the job mix by keeping the employment shares of the three occupation wage-tiers fixed when tracking the evolution of wages. This analysis indicates that the pace of wage growth in recent months primarily reflects changes in earnings of jobs in each of the separate wage tiers. Holding each wage tier’s employment share constant, hourly wages rose 2.5% in March from a year earlier, compared with 2.4% wage growth headlined in the LFS. This pace is a bit higher than recent growth of other wage indicators tracked by the Bank of Canada.
The shift in Canadian employment toward higher paying roles may not have been a big factor pushing wages up over the past year, but it has been at other points in recent years. Between the third quarter of 2015 and the first quarter of 2016, wage growth averaged a solid 3.2%, according to the LFS, even though the broader labour market was still adjusting to the fall in oil prices. However much of that strength reflected a jump in the share of higher-paying jobs, while mid- and low-paying jobs struggled. Holding the share of jobs by wage tier constant, pay growth decelerated during this period, averaging a less-impressive 2.2%. A similar, though less dramatic, trend was evident in the first half of 2018.
When this Friday’s LFS numbers are released, commentators will focus on the job-growth number headlined in the report. However it’s important to consider the kinds of jobs driving growth. In this regard, developments in recent years have been positive. Higher paying occupations have grown at twice the rate of the overall labour market since 2015.
Tracking employment by wage tiers can also be useful for monitoring wage growth. While it’s been less an issue lately, the shift to higher-paying roles in recent years has boosted reported wage growth even during periods when the overall labour market has been weak. Given wage growth is a key barometer of labour market strength, it’s important to recognize when it is shifts in the occupation mix that are driving changes average hourly earnings.
To analyze job growth by occupation wage-tier, we grouped Canadian occupations into low-, mid-, and high-paying jobs based on their 2018 average hourly wages in the Labour Force Survey (LFS) using a quantile process. Since monthly employment data by occupation is not seasonally adjusted, we focus primarily on the 12-month moving average levels of employment and wages by wage-tier, indexed to January 2015.
To analyze the impact of changes in the occupation mix on average hourly wage growth (non-seasonally adjusted), we calculate the weighted average of hourly wages by having the pay of each tier evolve as they did, but keeping each tier’s share of employment fixed at their March 2018 levels.