Jobs for life? Maybe it's not a thing of the past after all
New CIBC report finds Canada's job market increasingly stable with workers staying employed longer than ever before
TORONTO, June 18, 2014 /CNW/ - Job stability in Canada, which was projected to be a thing of the past, is stronger than it ever has been with those holding a job with the same employer for five years or longer sitting at a record high, finds a new report from CIBC World Markets.
The CIBC report found that there is a near-record high 60 per cent chance that Canadians with stay with an employer after completing their first year on the job with the retention rate hitting nearly 95 per cent for those having five or more years at a company.
"This stable and boring job market is the complete opposite of what was envisioned not too long ago," says CIBC Deputy Chief Economist Benjamin Tal, who coauthored the report with CIBC economist, Nick Exarhos. "The job market of the "new economy" was supposed to permanently alter employer-employee relationships and workers were seen as becoming increasingly disposable, with the implication that job stability would tumble."
But he finds that the opposite is happening, driven by the changing needs of employers in the country that has seen vacancy rates rise without a corresponding decrease in unemployment.
"Rising survival rates between years of employment and increased stability makes sense in a world where there is a low supply of newly unemployed—and presumably still qualified—individuals. The situation today keeps employers motivated to keep workers they have. At the same time, a large overhang of long-term unemployed reduces the motivation of lower skill employees to branch out."
Looking closer at the unemployed in Canada shows a diverging pattern between those with in-demand skills and those without. The share of those unemployed for roughly three months or less has been approaching cycle and all-time lows recently. On the other hand, the number of those who have been unemployed for 27 weeks and longer remains at elevated levels. The authors conclude that this means the sticky unemployment rate of the past couple of years is largely due to stagnation in long-term unemployment as opposed to an increase in the number of newly unemployed.
"The abnormal relationship between recent vacancy rates and unemployment suggests that large swaths of those unemployed are not what employers are seeking," says Mr. Tal. "A discontinuity between the types of workers desired and those that are available in the ranks of the unemployed would explain how a growing number of unfilled vacancies could co-exist with a higher level of unemployed—and potentially unemployable—individuals."
And for those individuals who have been unemployed for longer stretches, the trend of people staying in their jobs longer makes it even more difficult to find a vacancy they are qualified to fill.
He notes that, unlike past recoveries, this one has also seen stronger pay increases amongst higher paid professions relative to others. Canadians with higher levels of relevant education and training—who are unlikely to be those stuck in unemployment—have more bargaining power than those who are engaged in less remunerative professions.
These changes are taking place at the same time that an aging Canadian workforce has driven a decrease in the country's labour market participation rate. Canadians 55 and over have seen their share of the country's working age population climb nearly 4 per cent since 2008, with those 25-54 falling by roughly 2.5 per cent over the same time. An overall aging population has driven this change but this understates a deeper deterioration as working Canadians 55 and over are rapidly reducing their level of job-market engagement. Since 2007, the number of older self-employed individuals has risen much faster than in any other age group, seeing their share in total self-employment rise strongly.
Mr. Tal notes that Canadians have to go a little higher these days to climb over the employment bar with an aging population shrinking the workforce coupled with a growing skills mismatch. "But the current environment also suggests that once that higher bar is cleared, a career featuring higher stability lies ahead."
The CIBC job market report is available at: http://research.cibcwm.com/economic_public/download/feature1.pdf
The complete CIBC World Markets report is available at: http://research.cibcwm.com/economic_public/download/eijun14.pdf
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