In 1994, the 25-member Organization for Economic Cooperation and Development (OECD) reported that the unemployed across its industrialized member nations totalled an estimated 35 million. Also in 1994, for the first time, the powerful Group of Seven (G-7) industrial nations (Canada is a member of both the OECD and the G-7) held a special summit meeting in Detroit to discuss one topic only: unemployment.
Canada, of course, hovering close to a double-digit unemployment rate, is desperately looking for answers to the same jobless crisis that is sweeping the rest of the world. The problem here started growing at the end of World War II. In every decade since then, unemployment figures have risen, from 4.2% in the 1950s to an average of 10.5% in the 1990s. The stretches of joblessness for workers are also lengthening and the quality of jobs available is deteriorating. More and more of them are of the "McJob" variety -- boring, low skill, low pay, repetitive work such as slinging hamburgers or sweeping floors.
If you're out of a job you don't much care what kind of unemployment you're suffering from, but analysts tell us there are three types. They are called frictional, structural, and cyclical. Understanding which is which may help those who are trying to solve unemployment problems.
Frictional unemployment refers to people who are temporarily out of work because they are changing jobs or are employed in seasonal operations such as fishing or logging. A certain amount of frictional unemployment may be a good thing. In a growing, dynamic economy there will always be people between jobs looking for new opportunities to get ahead. That is why there will never be zero unemployment. A Canadian unemployment rate of three to four percent could probably be considered "full employment."
Structural unemployment is like a disease which strikes the human body for a specific reason. It occurs when:
* people don't have the necessary skills;
* people don't live where jobs are available;
* natural disasters (the 1995 earthquake in Kobe, Japan), or other developments (Ukraine's Chernobyl nuclear power station disaster in 1986) have affected the industry people work in, or;
* the companies for which people work are not competitive with foreign producers.
Each of these conditions will need time and money to fix. Workers will need training, retraining, or sometimes relocation. Industries will need restructuring to allow them to compete internationally.
Just as the economy goes through cycles of boom and bust, unemployment rides the same roller coaster. The cyclical unemployment rate dips as the economic growth rate climbs. It climbs as the economy slides downhill toward recession. Governments can help to get the cyclically unemployed back to work by getting consumers to spend, thereby starting a new cycle of economic growth. Low interest rates, low inflation, and tax breaks for businesses are some common tools they use.
The jobless auto worker probably wouldn't be interested in whether he is a victim of structural or cyclical unemployment, but it's important for the minister responsible for employment policy to know. Without the right information, the government could work feverishly to solve the wrong problem. Gathering the necessary information is often difficult, however. Is the unemployed auto worker twiddling his thumbs at home because car sales are down (cyclical) or because people are buying cars from more competitive car makers structural)?
Western democracies usually have policies for dealing with all three of the above types of unemployment. In Canada. the federal Unemployment Insurance (UI) program ha been for many years a key against the suffering caused by joblessness. UI began modestly in 1940, offering benefits as a temporary crutch to people who would normally be working. Since then, it has grown to a money-hungry monster, and while doing so its original purpose as one-time, short-term income support has become blurred. Many workers now look at UI as simply an extension of the welfare system. About 80% of claimants are repeat users each year, and large numbers, especially of those in resource industries such as mining or fishing, make regular use of UI. Almost half of all recipients have claimed it five times or more, and in Atlantic Canada 30 have filed more than 10 claims.
For many years, Ottawa, employers, and employees funded UI. Now, only employers and employees contribute, with employers putting more into the pot. Ottawa, however, still sets the rules and distributes the benefits. Under the heavy government hand, these rules are being toughened all the time. In 1994, saying that UI is "killing jobs and destroying the incentive to work," Human Resources Minister Lloyd Axworthy raised the minimum period the claimant must work to qualify for benefits from 10 to 12 weeks. The previous Conservative government had already ruled that anyone who left a job without good reason or was fired for misconduct wouldn't qualify for payouts. The benefits themselves were cut from 60% to 57% of the applicant's earnings. Contribution levels have been raised more than once. Yet, these changes are only a foretaste of what lies ahead. In his 1995 budget, federal Finance Minister Paul Martin said further reforms will shift money from paying benefits to funding literacy and job training programs. The emphasis is changing from having workers dependent on government cheques to making people employable. All this Mr. Axworthy will have to accomplish with less, cutting the UI program by a further 10%.
As the UI program changes direction, both federal and provincial governments are looking for other ways to provide income needs along with training or retraining for the jobs coming up in the labour market. In the information age, knowledge is seen by everybody as the key to employment. Statistics Canada figures bear this out. In a study covering the period December 1990 to December 1992, when employment fell by 0.8%, it found that the number of university graduates who found work grew by 13.3%. At the same time, employment for those with less than a high school diploma fell by 13.2%.
Provincial governments look at figures such as these and recognize the need to upgrade the skill levels of their workforces. At least three provinces are trying new retraining ideas for getting their residents back to work.
Of these, probably Premier Frank McKenna's plan for New Brunswick, called N.B. Works, is the most innovative. N.B. Works is giving people on welfare a chance to make a fresh start. The $177-million pilot project, jointly funded by Ottawa and the province, takes participants off welfare and gives them jobs for 20 weeks in schools, hospitals, or perhaps public utilities. That qualifies them for 156 weeks of training benefits. A second program offers $15 million to provide income support for single mothers who have left welfare for low-paying jobs. Without the income supplement they couldn't afford child-care and transportation expenses.
Along with these initiatives, the New Brunswick government has lengthened the school year by three weeks, set up more than 270 literacy classrooms, and started several stay-in-school projects. While success is still too early to call, New Brunswick's jobless rate showed the smallest increase of any province at the depth of the recent recession, rising only from 11.8 to 12.5%. At the same time, Ontario's unemployment rate doubled.
Newfoundland, with an official unemployment rate of 20%, is the worst off of Canada's provinces. With its main industry, the fishery, floating belly up, "the Rock" desperately needs a plan; Premier Clyde Wells has come up with one. In 1994, he proposed converting the $2 billion worth of existing federal and provincial income-support payments into a guaranteed annual income. Newfoundlanders would have to work 20 weeks instead of 12 to collect UI benefits, and the benefits would last only 35 weeks instead of 40. The money saved by this would pay for a guaranteed annual income of $9,000 for a family of two unemployed adults and two children. As family income climbed beyond $15,000 guaranteed payments would decrease and would disappear at the $42,500 level. The UI money saved would also pay for an educational supplement to encourage job retraining.
Ontario's approach is to offer employers an incentive to hire and train new staff. The government pays companies about $5,000 to cover the cost of hiring and training each new employee under this program. Called jobs Ontario, the plan has been highly praised by employers and workers who have benefitted. Critics, however, say the skills taught are often too specific to the needs of the company and can't be transferred to other businesses. Others point to large grants going to firms such as food or janitorial service agencies that create low-skilled jobs. The criticism is that such businesses are using the program to cut the cost of hiring workers they would hire anyway. The price tag on this program is $1 billion, and its goal has been to create 100,000 new jobs.
Who should control job-training programs, Ottawa or the provinces? Constitutionally, the federal government has the authority to do so, but the provinces, led by Quebec, are demanding more and more say over regional programs. They argue that they are closer to the special employment problems of their local economies than Ottawa and better able to judge the job market and the skills which should be taught.
The result is that we have no unified, national job-training strategy. Instead, there is a mish-mash of literally thousands of different roads to learning available to the bewildered job seeker. Job training may be delivered by community colleges, private agencies, or by hundreds of community-based groups which may specialize in aiding immigrants or people with disabilities.
Ottawa, as it does in New Brunswick and Newfoundland, is contributing the lion's share of the funding for job training. It will likely go on doing so with the changing direction of UI from income support to retraining.
In recent years, Ottawa has been spending close to $4 billion a year on various learning for earning projects. No one is sure how much the provinces spend; one estimate puts it at $1.2 billion each year, but that may be too low. To bring a little order to the job-training scene, most provinces have three-year deals with Ottawa called Labour Force Development agreements to coordinate spending most of the money.
Industry, helped by government financing (the jobs Ontario plan is an example), does a certain amount of job creation and retraining. An outstanding example of this is the program jointly operated by the Canadian steel industry and the Canadian branch of the United Steelworkers of America and largely financed by the federal government. Set up more than seven years ago, this is the first union-management venture in Canada to deal with job losses from new technology and plant closings. By 1994, it had assisted 13,500 displaced workers in upgrading their skills and could claim a job-placement rate of between 80 and 90%. It bases its success on three features: Local involvement rather than remote control; counselling by peers; and training to meet specific, identified needs in the job market.
Although knowledge is the key that may open the door to a job, changes in some government policies might oil the hinges a little. While reforming some of the following policies would be highly controversial, it's been suggested that they act as brakes on job creation: minimum wage laws, pay equity between men and women, restrictive labour laws, payroll taxes, economic regulations, and high tax rates in general.
Altogether, the crisis of unemployment looms large in the new world economy. It cries urgently for solution but no miracle cure is in sight. In Canada, as elsewhere, the shift from manufacturing to service sector jobs has absorbed some of the losses from plant closings, but even there the market is close to capacity and the jobs available often of low quality. As the OECD and the Group of Seven seem to be pointing out, joblessness will be a major challenge of the 21st century.
1. With fewer people able to fill the world's demands for goods and services, some labour experts are suggesting a shorter working day or a four-day week. Jon Grant, an advisor to Human Resources Minister Lloyd Axworthy recruited from business, proposes instead a sabbatical year (leave from a job) every five years. The time could be spent relaxing or in an education program and the cost would be shared 50-50 between employer and worker. Compare these options for reducing working time in a class discussion.
2. Germany has a highly effective but expensive apprentice program which almost guarantees a job to those who complete it. Sweden is helping long-term jobless people with innovative work programs. Using your library or another source, write a brief report on one of these two countries.
3. Spend a period or more discussing career options in your class, how you hope to achieve them, and your realistic chance of finding employment in the field you choose.
4. Debate the following: "Resolved that it is the responsibility of individuals, not governments, to take care of their own post secondary education."
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|Title Annotation:||New Economy - Unemployment; Canada|
|Author:||White, Charles A.|
|Publication:||Canada and the World Backgrounder|
|Date:||Mar 1, 1995|
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