Income Polarization in Toronto - The Three Cities study

[lead82]

These are all good maps showing the problem. This is a global problem and Toronto is not unique. I have yet to read anything concrete about how to solve this. I personally don't think it is solvable with our current economic system. Those that succeed do so by understanding that certain skills are valued more and result in higher income and stable jobs. Other skills are no longer valued and people are left with precarious work and no job stability. Lots of people also don't understand risk. There is a race by the middle and lower classes to catch up with the Jones. People are leveraged to the hilt and if someone looses their job or falls ill then poverty can be right around the corner.

Government can only do so much to encourage people. I think the best thing that can be done is to construct affordable transit to make it easy to get around and to help those struggling to find jobs a program to help retrain for in demand skills.

 

[DarnDirtyApe]

People forget that Toronto is not a closed loop - thousands of immigrants (and refugees) move here every year, many without the job skills necessary to succeed in a modern economy. At the same time, other people are leaving Toronto for the 905 and elsewhere. The only countries that manage to maintain high income levels and low inequality tend to be small, homogeneous, low immigration countries with strong social programs and a culture where there is a stigma against staying on social assistance your whole life.

 

[nrb]

That might influence why the problem is so bad in Toronto in particular but it's not really relevant to the underlying issues. Growth of low paying non-unionized service work, decline of unionized manufacturing positions, and the rise of a tax and welfare system that favors the wealthy has nothing to do with immigration.

 

[DarnDirtyApe]

Sure it does - that service work is only low paying because there is a huge oversupply of unskilled workers. Reduce growth in the unskilled labour force and you will find that wages will naturally creep up as employers have to pay more to stop employees from jumping to other jobs. Or, those jobs will disappear because the value of the work is less than the market rate for labour.

There's nothing about our tax and welfare system that favours the wealthy, other than that the government limits itself to taking 50%. The problem is that there are too many people with no job skills for a modern economy.

 

[lead82]

I agree. There are lots of unemployed people but it is difficult to find good people for certain roles and professions. The economy is different now. We can't go back to unionized manufacturing jobs. It's never coming back. Those jobs are now in low cost jurisdictions where cost of labour is dirt cheap. Canada needs to specialize if it wants to compete in manufacturing. The new economy is about services and trade. These are the skills most in demand. There is a need for good developers in IT but enrolment in IT is down. We have lots of teachers but few jobs, yet enrolment in teachers college is up.

The universities are spitting out graduates that don't have skills the market needs. Part of it is deregulation but another part is his notion that was tonight about following your dreams and do what you want. That's all great in theory but in practice what you love to do may not be valuable to the economy and won't generate enoug income to survive. Sometimes ones passions need to stay as hobbies. There are only so many professors, journalists and teachers that we need.

 

[nrb]

Sure it does - that service work is only low paying because there is a huge oversupply of unskilled workers. Reduce growth in the unskilled labour force and you will find that wages will naturally creep up as employers have to pay more to stop employees from jumping to other jobs. Or, those jobs will disappear because the value of the work is less than the market rate for labour.

There's nothing about our tax and welfare system that favours the wealthy, other than that the government limits itself to taking 50%. The problem is that there are too many people with no job skills for a modern economy.

What a simplistic viewpoint. Building unions for service workers would rapidly raise wages for this sector and do a lot to combat income inequality.

Nor is your view of our tax system particularly informed.

The idea that there is a "skills mismatch" holds up only insofar as you actually believe that employers are not responsible for training their employees, only the publicly funded education system is. Something that is simply not true, but has been a very successful public relations strategy for corporate human resources development.

 

[James]

I concur with lead82 and DarnDirtyApe. I've said it before (albeit not on this forum) so many times, so many years ago: The world is changing and globalization is no longer just a fancy word we learn in school, it is happening right before our eyes. Never before in history has communication been so easy, quick, fluent and readily available to parties all over the world. Travel is easier than it has ever been. Internet has changed the face of business in ways only imagined in science fiction novels. The world is more connected than ever before. It is inevitable that the division of labour will be spread across not just towns or cities or states (as it has been in the past) but across oceans and continents now.

As lead82 said, the days of the North American economy heavily weighted in the manufacturing sector are over. The U.S., and Canada by extension, need to evolve and keep developing if we want to remain strong economic forces on the global stage. We are no longer just competing for jobs with John Smith down the street, we are competing globally. It is not jobs per se that are spreading out but entire job sectors. Until the wages in other countries increase to the point where outsourcing is no longer financially viable, companies will continue to do so based on pure economics. It is only until an economic balance point is reached when job sectors may begin to migrate back home.

 

[DarnDirtyApe]

What a simplistic viewpoint. Building unions for service workers would rapidly raise wages for this sector and do a lot to combat income inequality.

Nor is your view of our tax system particularly informed.

The idea that there is a "skills mismatch" holds up only insofar as you actually believe that employers are not responsible for training their employees, only the publicly funded education system is. Something that is simply not true, but has been a very successful public relations strategy for corporate human resources development.

If you force wages for low-income workers higher (through legislation or unionization) then business owners will seek out alternatives to that labour as a way to increase the productivity of the workers that do stay employed. For example, there's now a machine that can make a hamburger with no human interaction, starting with the raw ingredients. Restaurants are using iPads and automated ordering kiosks to reduce or eliminate the need for servers. Eventually, businesses will either move elsewhere or close down and the only jobs left will be those that have no choice but to locate in your area.

I do agree that the "skills mismatch" is something of a red herring - that issue is more about relative career success on an individual level than it is about the macro level job market. From the perspective of a hiring manager, you will always choose to hire the person who is most qualified. If there's nobody qualified, you will hire someone and train them. Most employers who talk about the "skills mismatch" are just unwilling to pay market wages.

EDIT: Actually, I take it back - there is a skills mismatch in Toronto, or rather a language skills deficiency. Too many immigrants can't communicate well in English, either verbally or in writing. I've interviewed dozens of people and this is by far the most common problem. That being said, we've never had to leave a position unfilled - it's just a question of how much to compromise.

 

[James]

It's not getting easier...

http://www.cbc.ca/m/touch/business/story/1.2982891

Job quality in Canada at 25-year low, says CIBC

Part-time and low-wage work on the rise, and the problem is getting worse

CBC News

Posted:Mar 05, 2015 12:04 PM ET
Last Updated:Mar 05, 2015 12:04 PM ET

Not happy in your job? Feel like you can’t get ahead. A new study by CIBC Economics says you may have ample reason.

CIBC says its index of Canadian employment quality is at a 25-year low, and nothing the Bank of Canada can do to adjust interest rates is likely to fix the situation.

In fact, its job quality index has been trending down for the past 25 years and is 10 per cent below its level in the 1990s, the CIBC report said.

That means more people are working part-time instead of full-time, more people are self-employed instead of having secure employment and more are in low-wage jobs than at any time in the last 25 years, says CIBC economist Benjamin Tal.

"The damage caused to full-time employment during each recession was, in many ways, permanent. That is, full-time job creation was unable to accelerate fast enough during the recovery to recover lost ground,” Tal said in a release.

10 years as a part-timer
At a CBC Toronto town hall called Just-in-Time Jobs held earlier this week, one participant described finding her first full-time employment at age 31, after 10 years of working part-time or on contract.

She said she doesn’t know how the Canadian economy can grow, when people her age are making so little money that their lunch is a tin of tuna.

"If we have a whole army of people who are buying lunches in a can, we’re not going to stimulate the economy and create the kind of jobs that would enable people to make a decent living," said Wayne Lewchuk, a McMaster University professor who has researched precarious employment.

Lewchuk was part of a panel that debated why barely half of working adults in the Greater Toronto and Hamilton area have full-time, permanent jobs with benefits and some degree of security.

"I think it’s important to understand that Canada's a rich country – the GDP per capita keeps going up, the problem is that we’re not sharing that wealth at all equitably. In many ways, we’ve gone back to 1920s mentality," he said.

More low-wage jobs
CIBC found in its study that self-employment is on the rise, with 1.6 per cent more self-employed people in January 2015 than a year earlier, while more secure employment was up just 0.5 per cent.

And the full-time jobs that were created tended to be a lower quality with lower pay, it found.

"Over the year ending January 2015, the job creation gap between low and high-paying jobs has widened with the number of low-paying full-time paid positions rising twice as fast as the number of high-paying jobs,” Tal said.

He pointed to the weak bargaining power of people in low-wage and part-time jobs and said they have little prospect of wage gains that might outstrip inflation.

CIBC’s index is based on Statistics Canada figures about job growth and distribution, as well as research into income in 100 industry groups.

Tal said the long-term trend to declining job quality indicates the problem is structural and cannot be fixed by juicing the economy with lower interest rates.

Dealing with temp agency
Acsana Fernando, one of the participants at the Just-in-Time Jobs Town Hall, said she works three 16-hour days in a row at a group home on Friday, Saturday and Sunday to support her family. She is employed by a temp agency, and when she asked to work directly for the group home, was told she would lose all seniority and would have to start with just four hours a week.

“Why can’t we have decent jobs? Why do we have to have a temp agency?” she asked.

Panelist Deena Ladd, a co-ordinator at the Worker’s Action Centre, said employers take advantage of the precarious labour market to force difficult conditions on workers.

“Partly right now with the labour market, a lot of people are afraid to speak out about violations of rights on the job, because it will mean losing that job,” she said.

People have to pay the bills and take care of their family, so they put up with it, Ladd said.

“Most workplaces are using temp agencies and putting workers in the worst shifts – on the weekend that no one wants and also paying them to do the same work as someone else but with no benefits,” she added.

 

[TrickyRicky]

I think one of the main secrets behind "income" inequality that no one really talks about has nothing to do with skills or employment, it has to do with inter-generational philosophy.

What I mean is that income inequality and the wealth gap increases naturally in stable environments because some people have an inter-generational world view. This is different than being family oriented or family-minded. Many people care deeply about family but their families never accrue ever greater wealth and prosperity. Some people really dislike their families but they still work together to accrue ever greater wealth and prosperity within the family.

We like to celebrate lone wolfs who come out of nothing and blaze a new path on their own (largely a myth by the way) but I think that if you look at the overall population most success comes from the inter-generational effect.

Basically, if you are out there on your own (by choice or design) you have an enormous disadvantage in a maturing city region regardless of your talent or the opportunities available to you. This disadvantage increases as a city grows in both time and age.

Hard working people who have no sense of the inter-generational prosperity philosophy will fall more and more behind in this city. New arrivals will have a harder time breaking into the inner circle, although it is still possible.

 

[gabe]

Temp agencies are a huge factor in the growing problem of employment uncertainty. Employers are able to use these companies to get low wage workers who receive no benefits and make minimum wage. The company can send the workers back to the agency without any explanation. The agency can stop sending the workers to jobs without any obligations whatsoever. Ontario works is complicit with the agencies. Are we creating a permanent pool of cheap labour, a class of disposable workers? I think so.

Every temp contract that I ever signed had a clause specifically forbidding me from pursuing full time work with the company I was temping with. I understand the reasoning, in a way, but at the same time, that answer was BS. The temp companies make money for every hour you're working under contract. If you go full time, they're not making money anymore. They have every incentive to keep you under their contract.

 

[DarnDirtyApe]

The flip side is that temp agencies help young people to get their first job so that they can leverage that into full-time work down the road. Our company hires temps for a few of the entry level positions, and quite a few have gone on to be hired full-time within the company. I think there's some sort of minimum period that the person has to work as a temp first, but it's not indefinite indentured servitude. I get the feeling that long run use of temps is more expensive given the agency fee.

 

[spider]

I don't understand why "income polarization" attracts so much attention, as it has been around for quite a while. I would expect a lot less hand wringing from those concerned here and at least a few suggestions to correct the perceived problem.

 

[lead82]

Agreed. In my opinion housing is a huge problem in Canada. Our housing costs is very high compared to income. This applies both to rental cost and purchase costs in the large centres. Lots of money and debt is in housing which is not productive. If people invested more in start ups or new business ventures and innovative ideas our GDP would grow and we would have good new jobs and industries created. Instead we don't compete. Federal government invests too much in primary industry and not enough in secondary and tertiary. Small town Ontario could innovate and provide opportunities for cheap housing and new jobs if there was investment. For example, why not encourage more investment in smaller towns? Build good infrastructure to connect smaller towns to Toronto and the airport to create productive regions. Few immigrants want to move to smaller towns as the live quality is lower. There are fewer amenities and transportation between small towns and Toronto is expensive and draining. Our transportation infrastructure is full and is inhibiting our growth and quality of life.

Canada needs a better brand. We are not known for our products and services outside of oil, gas and wheat, beef. We need to be known for our talent and large global companies or technologies. Waterloo-Toronto is already an IT power house. Why not build on that and encourage companies to go global. We have lots of startups but they are being bought up by US Giants, instead of growing bigger and taking over other companies. Ontario has lots of agriculture and Toronto is a huge food production centre. Why not encourage that and grow globally? Part of the problem is taxation. Many companies stay local and small to take advantage of small business tax rates and credits. Very few if any Canadian companies go global. Global is the new arena. We need new BlackBerry companies and new giant food product companies. It's sad that Tim Hortons got bought out instead of being the buyer. Canadians are timid and the business culture here is not aggressive enough to think outside of the Canadian economy. If we had more global companies started here we would have more head quarters and those provide the best jobs since that's where major decisions are made and the profits are generated.

We need to move away from the branch plant mentality and start focusing on our strengths. Toronto excels in financial services, design, IT , health care and media.

 

[DarnDirtyApe]

I don't understand why "income polarization" attracts so much attention, as it has been around for quite a while. I would expect a lot less hand wringing from those concerned here and at least a few suggestions to correct the perceived problem.

A big part of the modern Canadian identity is that we should be welcome as many immigrants as possible to come here and make a better life for themselves, but the reality that many end up as part of a permanent underclass, and that conflicts with that mythology. People go to the US and think it's weird that all of the maids, busboys and labourers are Latino but don't give it a second thought that all of people in similar positions here are visible minorities. Of course, those people aren't qualified for 'knowledge worker' jobs and never will be, so what else are they to do? As a country we can't afford to have the highest rate of immigration in the world AND pay those people a so-called "fair wage" which assumes a high level of individual productivity.

Unfortunately, most of the people who feel this way are financially and economically illiterate, so they don't even correctly comprehend the problem never mind attempt to come up with a workable solution.