How automation will impact Canada’s labour market is unknown, but we must consider whether we can handle future shocks.
Anxiety about labour shortages due to population aging, which prevailed in the mid-2000s, has been replaced by anxiety about automation. Concerns that new waves of technological changes, fuelled by advances in robotics and artificial intelligence, will lead to massive unemployment have been expressed in recent years. These concerns are not new. Every wave of technological change has led to concerns about technological unemployment.
What does the past tell us on this issue? The data tell us that despite important labour-saving technological changes, the percentage of working-age people who are employed has not fallen since the early 1950s in Canada. Furthermore, the percentage who are employed full time (30 hours or more per week) is very similar to what it was during the mid-1970s.
But the types of jobs have changed markedly. Many manufacturing jobs, which used to be held by relatively less educated workers, have been destroyed. Part-time jobs have become more prevalent. Among full-time workers, temporary employment has risen, especially for young workers. The percentage of employees covered by a pension plan has fallen overall: there has been an increase in coverage by defined-contribution plans, but it is more than offset by the decline in coverage by defined-benefit plans.
Despite numerous changes in the economic environment, layoff rates have not trended upward. However, the adjustment costs associated with worker reallocation and rising productivity have been borne disproportionately by displaced workers, especially long-tenure workers (those who have been with their employer for several years). This small group of displaced workers has consistently experienced substantial and persistent earnings losses.
Recently, Canada’s less educated workers have fared better than their US counterparts, largely because of the oil boom and the better performance of the Canadian construction sector. But the labour market outcomes ― both in employment rates and in wages ― of less educated workers have generally trended downward since the early 1980s. All of these changes took place in a period when income inequality has risen.
An important lesson from the past is that predicting the future using previous trends is a dangerous exercise. If we had asked a group of economists in the late 1990s to identify which sectors would drive employment growth during the 2000s, many would probably have pointed to information and communications technologies and knowledge-based industries. As it turned out, the construction and resource sectors were the main drivers of employment growth in Canada during the 2000s.
One of the few certainties is that in the future, the Canadian economy will be subject to shocks. Any prediction of the magnitude and nature of these shocks has a large margin of error. For example, while we know that new waves of automation will destroy a certain number of jobs, the actual extent of job destruction is, to a large extent, unknown. Likewise, the degree to which new technological advances will lead to the creation of new products that will increase labour demand is largely unknown. This uncertainty about the Canadian labour market of the coming years raises a number of important questions.
First, to what extent, if any, should the education system and assistance measures for training be modified to increase individuals’ adaptability to shocks? Is our education system fostering the development of problem-solving skills sufficiently? Is the ability to learn how to learn, a key ingredient of workers’ ability to respond to shocks, being developed enough?
Second, is our portfolio of assistance measures for the retraining of working-age adults adequate? Currently, only a minority of displaced workers attend post-secondary education. This might be because a relatively large proportion of them find new jobs shortly after losing their jobs. However, some of them might also face constraints accessing post-secondary education or other types of training.
Third, to what extent, if any, should Canada’s safety net be modified or enhanced to assist future displaced workers — and if adjustments should be made, how? In most cases, EI benefits last at most one year. But we know that the earnings losses of many displaced workers extend to five years. Some researchers have proposed wage insurance for high-tenure displaced workers. But little experimentation has been done with such a scheme.
Fourth, will more broad-based measures such as universal basic income be needed to assist people who are not employed? If so, what are the pros and cons of such a transfer program?
The first two questions are related to improving workers’ adaptability and resilience to shocks. But in an environment where new waves of automation will emerge, the question of whether and how governments can stimulate job creation will again become a critical issue.
All of these questions are important when business goes “as usual.” But here’s a prediction: they will become even more important if labour-saving technological changes accelerate.
The views expressed in this article are those of the author, and not of Statistics Canada.
This article is part of the special feature Inclusive Growth in an Age of Disruption
Do you have something to say about the article you just read? Be part of the Policy Options discussion, and send in your own submission. Here is a link on how to do it. | Souhaitez-vous réagir à cet article ? Joignez-vous aux débats d’Options politiques et soumettez-nous votre texte en suivant ces directives.