The recession of 2008-2009 hit fast and furiously, with a steep decline in Gross Domestic Product and employment. Since then, both indicators have recovered well, leading some to trumpet Canada’s quick recovery from the recession. But other indicators, such as social assistance caseloads, have not seen the same strong recovery. And still other indicators, while on their way back to pre-recession levels, still reveal worrisome trends.
We know that the recession significantly increased Canada’s poverty levels. But do Canada’s poor now risk being permanently left behind? Our survey of the economic indicators over the past several weeks suggests that the answer is yes.
In fact, Canada is seeing two recovery stories. For those on the lucky side, recovery has meant maintaining employment or finding a new job, and a continued increase in average income greater than the increase in cost of living. For those on the unlucky side, however, recovery is either precarious or non-existent. They are still unemployed or precariously employed, with low wages, inadequate Employment Insurance or social assistance benefits, faced with rising costs for housing, and more likely to be forced to turn to food banks for support.
While the economy has regained the number of jobs lost during the recession, a worrisome shift has taken place from full-time jobs to part-time jobs and from permanent jobs to temporary jobs, increasing the number of Canadians who are precariously employed. Part-time and temporary jobs are both lower-waged on average than full-time and permanent jobs. More Canadians are now involuntarily working part-time than before the recession, finding it difficult to make ends meet on part-time wages. There has also been a shift from jobs in high paying goods industries to jobs in the low paying service industry.
Unemployment remains high, with 1,388,000 Canadians unable to find work in June. The number of discouraged seekers who have stopped looking for work and are no longer counted as unemployed increased 37.8% between October 2008 and October 2010. The number of students also increased 17.3% as people chose to go back to school or stay in school to avoid an unfriendly hiring climate. Young people have been particularly impacted by unemployment, with the youth unemployment rate at 14% in June 2011. However, this is also lower than might be expected, as youth participation in the labour force dropped nearly 3 percentage points over that same period.
The average wages and salaries of Canadians have increased by more than the rate of inflation in the past three years, but at least part of the rising average is due to the loss of low paying jobs. Canadians are also working fewer total hours than they were when the recession began in 2008. In fact, weekly earnings for all demographics except part-time workers increased by less than the rate of inflation between 2010 and 2011. The trends for average income also hide the reality that income losses and gains are not distributed evenly. Evidence from previous recessions reveals that the poor lose more of their income during a recession than the rich, but fail to recover as well as the rich when the recession ends.
Those who lose their jobs need to turn to Employment Insurance, but EI has turned out to be completely inadequate. While at the peak of the recession just over half of the unemployed were receiving benefits, the coverage rate has now declined to 42% of unemployed Canadians in May 2011, below the pre-recession rate. The number of unemployed Canadians not receiving EI has been rising in 2011, despite the fact that unemployment has been falling. Over 500,000 Canadians also exhausted their benefits in 2009 and 2010 without finding new work.
EI also has significant regional disparities, as Ontario, Alberta and British Columbia, the provinces which experienced the greatest job losses during the recession, had the lowest rates of EI coverage during the recession and have subsequently seen a greater fall in EI coverage than in unemployment. The Atlantic provinces, meanwhile, had very high rates of EI coverage despite low increases in unemployment, and have seen very little change in EI coverage following the recession.
As a result of EI’s inadequacies, social assistance caseloads have increased dramatically across the country. In Alberta (46%), Ontario (27.91%) and BC (23.29%), the increases since 2008 have been particularly high, but all 10 provinces have experienced an increase. Quebec is the lone province to have seen a decline in welfare caseloads between 2009 and 2010. The recession’s full impact may not have been experienced yet, as 7 out of 9 provinces with available data witnessed their peak caseload since October 2008 in 2011.
Meanwhile, Canadians who are struggling to make ends meet on the poverty income of EI or social assistance benefits or on the wages of a part-time job have been confronted with rising energy costs and average rents that have increased by more than the rate of inflation.
The increasing strain of precarious or poverty incomes on Canadian households can be seen in rising debt levels and mortgage arrears. The average debt load per household in Canada reached record levels in 2010, rising above $100,000 per household and equaling 150% of disposable income. The number of mortgages that are in arrears by 3 months or more increased by more than 52% during the recession, and is still 49% higher than before the recession began. The number of bankruptcies has fallen in 2010 and into 2011, but the number of consumer proposals – alternative arrangements to pay debt – increased 21% between the third quarter of 2009 and the third quarter of 2010.
Perhaps the best indicator of the ongoing economic strain felt by those Canadians who are being left behind is food bank use, which reached record levels in 2010. The number of food bank users increased 28% between 2008 and 2010, completely wiping out the gains of the previous five years.
Without intentional action on the part of Canadian governments, these Canadians who are on the unlucky side of the economic picture will not experience the benefits of recovery. We know that the recession significantly increased poverty in Canada, which had been at a record low in 2007. Since the recession the situation has not gotten any better for poor Canadians. We need deliberate action to reduce poverty and unemployment in Canada. Without a poverty elimination strategy, we will simply see the poverty rate continue to rise and fall along with the economic cycle, without making any progress towards eliminating poverty.
The good news is that action on poverty will bring economic growth. The Department of Finance estimates that a $1 billion investment in low income Canadians will create a $1.7 billion boost to GDP. This is greater than the return on almost any other investment. We can’t afford to leave any Canadians behind if we want a good news recovery story for Canada.