Social programs in Canada are rooted in a 1960s concept of the labour market: we need to redesign them so they support current and future workers.
If Canada’s Finance Minister tabled a federal budget announce this year a new comprehensive strategy of tax cuts and grants to support farriers, telegraph operators and typesetters, the media and public would be dumbfounded. Why introduce 1920s-era policies in 2017 to support jobs that have all but disappeared as a result of technological innovations?
As absurd as this scenario sounds, in recent decades Canada’s social architecture has slowly been drifting toward this kind of disconnect between policy design and practical reality. This is because of our failure to adapt our social programs to changes in the economy and the labour market. Technological advancements will only widen further the gaps between what programs such as employment insurance, health care and child care were meant to do and what they’re actually doing (or more importantly, not doing) for Canadians. As disruptions continue to throw business models, regulatory frameworks and workers into uncertain trajectories with unknown landings, we need to consider how we can prepare for an increasingly turbulent future.
The Mowat Centre explored these issues in a recent research report and identified some longer term drivers of the new economy, including the following:
- An increase in income inequality that has left many workers with flat wages and seen wealth accumulate in the hands of a small number of Canadians. According to the OECD, between 1981 and 2010 Canada’s top 1 percent of earners accounted for 37 percent of the country’s overall income growth – a gain exceeded only by the United States among OECD member countries.
- A growth in precarious employment that is leaving more workers in part time, temporary, contract or self-employed positions and with few or no benefits. According to a 2015 study by the United Way and McMaster University, precarious work has increased by 50 percent over the past 20 years in the Greater Toronto and Hamilton Area.
- Advanced robotics systems are becoming cheaper and more effective every year, and the full-time, well-paying jobs with benefits that have disappeared are unlikely to return to Canada’s manufacturing heartland. A 2015 analysis by the Boston Consulting Group found that in the US human spot welders earn US$25 an hour, while the operating cost of a robot is US$8 an hour to do the same job, and this cost is likely to drop to US$2 within 15 years.
- Declining unionization rates in Canada (from 37.6 percent in 1981 to 28.8 percent in 2014) also mean that the power imbalance between corporations and individual workers is likely to widen in the coming years. As more jobs get unbundled into contracts, projects and tasks, workers are increasingly left to fend for themselves when it comes to bargaining for higher wages and access to benefits.
On top of these factors is the recent emergence of the “gig” economy – in which people are engaged in multiple short-term, informal work arrangements – as well as rapid advances in automation and artificial intelligence, which could make over 40 percent of Canada’s workforce redundant within two decades. In sum, the labour market already has changed dramatically over the past 60 years, and it may change as much or more over the next 20. Many routine jobs, both cognitive and manual – from sales and administrative positions to roles in the transportation, manufacturing and natural resource sectors – are at high risk of being automated.
What do these trends mean for Canada’s social programs, many of which are rooted in a 1960s conception of the economy and labour force? Here are some of the indicators of stress in the system:
- Fewer unemployed Canadians receive regular employment insurance benefits: the proportion has declined from 82 percent in 1978 to only 39 percent in 2015;
- More workers are without benefits: in 2013, over 80 percent of precarious workers in Ontario did not have access to benefits such as vision, dental, drug and life insurance.
- Monthly child care costs exceed rents in many cities. This is compounded by severe shortages of daycare spaces: there are regulated spaces for only 22 percent of children under age five.
- The shortage of affordable housing has meant that 20 percent of Canadian renters spend more than half of their income on shelter (data from 2011).
Perhaps of most concern is the pace of change and disruption in society. It took 130 years for agricultural workers to decline from 48 percent of the workforce to less than 2 percent, sufficient time for workers to be absorbed into other sectors and for policy frameworks to be recalibrated. But many of the 500,000 Canadians who drive for a living could see their jobs disappear in five to ten years, because of autonomous vehicles. Cities across the country have struggled mightily to update their regulations to catch up with Uber’s aggressive incursion into the taxi market. Yet just as they are completing that task, the playing field might be completely upended again with the introduction of driverless cars. This will have profound implications for retraining unemployed workers and across a number of other policy spheres, such as city planning and insurance.
Politicians and policy-makers who may be accustomed to working through these issues at a steady, if somewhat slow pace, now face uncertainty as to what exactly is going to happen next and when it is going to happen. In order for them to be able to respond adequately, there needs to be a complex systems-level rethink, and the process might not be smooth.
We propose here several policy options that could serve to make Canada’s social architecture more resilient, supportive and nimble in a rapidly changing world.
- Clarify independent contractor classifications and explore options for additional protections for “gig economy” workers.
- Step up enforcement of employment standards legislation and increase public awareness of employers’ obligations.
- Review social assistance programs to reduce punitive clawbacks that could discourage recipients from seeking employment, and reduce asset limits that could drive people into a cycle of poverty.
New government investments should focus on increasing the scope of some of Canada’s core social programs and policies. These include introducing universal pharmacare and increasing affordable child care and housing. Leveraging some of the billions of dollars already spent on procurement by the Canadian public sector to drive fairer labour practices could, if designed appropriately, benefit young people and others who have been disproportionately impacted by the increase in the rate of precarious work.
Over the longer term, governments could also consider large-scale, transformational ideas to tackle the new world of work, such as a basic income (in 2017 Ontario will begin a pilot program to test this idea) and portable benefits or work-sharing schemes, modelled on Germany’s Kurzarbeit system. Governments should also encourage private sector training schemes that encourage workers to adapt to new technologies and operating environments. In the United States, AT&T, recognizing that technology could soon make one-third of its workforce redundant, offers its employees up to $8,000 a year toward tuition for degrees and online courses, and roughly half of the company’s workforce have taken it up. Tax rebates or co-sponsorships could give smaller enterprises an incentive to consider training programs.
In the face of more frequent and sudden dislocations of jobs — indeed entire sectors — we need to look ahead and contemplate how Canada’s social architecture can best be redesigned so they support current and future workers in the coming years. Our record in adjusting to labour market changes has been inconsistent. For example, the increased participation of women in the labour force was not accompanied by more generous child care and parental leave policies. And employment standards frameworks have not kept pace with the increase in precarious work.
During Canada’s 150th anniversary celebrations there will be a great deal of discussion about new, exciting ideas that will advance the country’s prosperity and well-being. But we must not lose sight of the less exciting but vital work of tending to our social architecture and recrafting it, so it becomes more resilient and agile in the face of new economic, technological and labour market realities. Canadians are already feeling the effects of programs and policies that are ill-suited to their day-to-day realities. Many more people could soon be joining them. To be able to address these challenges there needs to be meaningful engagement on the part of the private sector and other stakeholders, as well as sustained political will and bureaucratic ingenuity.
This article is part of the The Changing Nature of Work special feature.
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