Still Waiting for Recovery: A Look at the Recession's Impact on Income

We know that the recession significantly increased Canada’s poverty levels. But do Canada’s poor now risk being permanently left behind? In this series of blog posts, we’ll explore the economic indicators, updating the research in CPJ’s 2010 report on the recession, Bearing the Brunt. Check back over the next few weeks for new blog posts on each indicator!

The recession’s impact on income has been mixed. On the one hand, average wages and salaries have increased by more than inflation between June 2008, before the recession began, and June 2011. On the other, it’s hard to say how much the increase is due to the disproportionate loss of low paying jobs in the employment losses of early 2009 and the relatively small increase in inflation, compared to an actual increase in workers’ take-home pay.

Similarly, a quick rebound in average disposable incomes compared to previous recessions is a good sign, but as the Centre for the Study of Living Standards has noted, loss in income is never evenly shared but is “highly regressive, with lower and middle income households experiencing much larger percentage losses of income than higher income households.”1 Previous recessions have increased the income gap between poor and rich Canadians as the poor lose more of their income than the rich, but fail to recover as well following the recession.

Changes in average income can mask significant disparities in how well households at different income levels are doing, and unfortunately data on incomes by household and income bracket immediately following the recession will not be available for at least another year.

But here’s what we do know about incomes during the recession and post-recession recovery: because of the sharp spike in unemployment, aggregate salaries and wages in Canada declined in the last quarter of 2008 and the first half of 2009, even before accounting for inflation.2 However, government transfers also kicked into high gear, ensuring that the loss in average disposable income was lower than the loss in wages and salaries. When accounting for inflation, real disposable incomes per household declined 0.5% in 2009, before recovering by the second half of 2010.3

Between June 2008 and June 2009, inflation was negative but average hourly wages for each demographic (young people/older workers, men/women) increased. The following year, average hourly wages increased by more than the rate of inflation for older workers, but not for young workers, age 15-24, who saw only a 0.6% increase. Between June 2010 and June 2011, the increase in average hourly wages for all demographics was below the rate of inflation, meaning the purchasing power of the average worker has actually declined.4 (See Chart One for the Change in Average Hourly Wage by Demographic.)

A similar trend can be seen in the weekly earnings of workers when compared by employment status. The increase in weekly earnings was greater than inflation for full-time workers, and both permanent and temporary workers between June 2009 and June 2010, but weekly earnings for part-time workers actually declined, due in part to the fact that average hours declined for part-time workers. Between June 2010 and June 2011, weekly earnings for all employment statuses increased by less than the rate of inflation, with the exception of part-time employees.5 (See Chart Two for the Change in Average Weekly Earnings by Employment Status.)

As noted yesterday, the recession has accelerated a trend in Canada towards precarious work, including a shift from full-time work to lesser paying part-time work. Another employment trend that has an impact on income is the shift from jobs in goods-producing industries to the service industry. Between October 2008 and June 2011, the number of jobs in goods-producing industries declined from 4,038,000 to 3,819,000, a 5.43% drop. Meanwhile, the number of service jobs increased from 13,167,000 to 13,518,000, a 2.67% increase.6 Service jobs pay far less, on average, than goods producing industries. In April 2011, the last month for which data is available, weekly earnings in goods-producing industries averaged $1,106, while weekly earnings for service industries averaged $823.7

1. 1. Arsenault, Jean‐Francois and Andrew Sharpe, “The Economic Crisis Through the Lens of Economic Well‐Being,” Centre for the Study of Living Standards, August 2009, http://www.csls.ca/reports/csls2009‐6.pdf, p 8.
2. 2. Statistics Canada, “Table 5 Sector accounts - Persons and unincorporated businesses,” National Income and Expenditure Accounts Data Tables, http://www.statcan.gc.ca/pub/13-019-x/2011001/t/tab0005-eng.htm.
3. 3. Roger Sauvé, The Current State of Canadian Family Finances 2010 Report, The Vanier Institute of the Family, February 2011, http://www.vifamily.ca/media/node/783/attachments/familyfinance2010.pdf, p 18.
4. 4. Statistics Canada, “Table 7: Average usual hours and wages of employees by selected characteristics, Canada, unadjusted for seasonality,” in Labour Force Information: June 12-19, 2011; Labour Force Information: June 13-19, 2010; Labour Force Information: June 14-20, 2009; and Labour Force Information: June 15-21, 2008, http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=71-001-X&lang=eng.
5. 5. Ibid.
6. 6. Canadian Economic Observer, Table 5.1-2, “Labour force statistics — Employment by industry,” July 2011 and October 2010 issues, http://www.statcan.gc.ca/pub/11-010-x/2011007/t020-eng.htm.
7. 7. Canadian Economic Observer, Table 5.2-3, “Labour income statistics — Weekly earnings,” July 2011, http://www.statcan.gc.ca/pub/11-010-x/2011007/t023-eng.htm.