The Recession Effect Varies by Occupational Class

It is not unusual for conflicting assessments of the labour market to come from different sources in a similar time period. This is mostly due to the metrics used in competing analyses and their interpretation. Often, what happens is that it is reported that the unemployment rate is decreasing – which is viewed as a positive sign — when what is really happening is that people are leaving the labour force (and become “not in the labour force”). These individuals are commonly referred to as “discouraged workers”, and contribute to what is called “hidden unemployment.” This form of unemployment refers to the unemployment of potential workers that is not reflected in official unemployment statistics, and occurs as a result of the way the statistics are collected.

For this common reason, it is imperative to evaluate whether an observed decrease in unemployment rates coincide with an increase in those who are recorded as being not in the labour force. Further, the recession may have been harder on some jobs more than others. In this way, it could be less productive to evaluate the post-recession labour force as an aggregate. This is because analysis of the entire labour force could obscure the degree and effect of the recession on particular segments of the labour force. Truly, it may be unreasonable — if not irresponsible — to assume that the entire labour force has uniformly weathered the economic crisis.

To investigate how the recession has affected the Canadian labour force as organized by Richard
Florida’s occupational typology (2002), the Martin Prosperity Institute has broken down labour force statistics into four occupational groups: the creative class, the service class, the working class, and the fishing, farming, and forestry class. This characterization is a useful way to think about the economy, because it classifies workers based on the type of work that they are paid to do, rather than simply their educational qualifications or industry placement. Re-organizing the labour force into these categories enables us to test the resiliency of each occupational group against the others in order to determine what the most and least vulnerable occupational group in Canada has been after a significant economic shock.

Results

We find that the creative class is the least sensitive to large-scale economic shocks; maintaining the highest levels of employment of all the occupational classes from 2008-2010 and the lowest rates of unemployment (purple). The lowest, and most volatile, employment levels are for the working and farming, fishing and forestry Classes (blue and green, respectively). These two groups see the largest changes in unemployment levels that are also very sensitive to seasonal variations. Finally, the service class essentially comes in “second place” behind the creative class in terms of resiliency. Service workers decreased the proportion of workers who were not in the labour force (2008-2009). This could be the result of more hiring of part time/precarious work in the wake of the recession (a trend that has been well documented in the literature).

Employment in Canada by occupational class, 2008-2010

Employment in Canada by occupational class, 2008-2010

Both the creative and service classes have stable, high employment levels (CC 95-97% and SC 93-96%). These two classes also have slight seasonal variations during the summer months. The working and forestry, fishing, and farming classes are much more variable and thus comparatively more susceptible to general economic conditions. Both of these occupational groups have less employed during the winter months (seasonal).

Unemployment in Canada by occupational class, 2008-2010

Unemployment in Canada by occupational class, 2008-2010

Exhibit 2 essentially shows the inverse relationship of the previous exhibit. We speculate that unemployed members of the working and fishing, farming, and forestry classes may or may not still be collecting EI benefits. Whether they are or are not collecting, they need to be in the “unemployed” category to do so (and not be “Not in the Labour Force”). These two classes demonstrate the largest range in unemployment rates (FFF 6-16% and WC 6-13%). Conversely, the creative and service classes have smaller and lower unemployment ranges (CC 2-5% and SC 4-7%).

Not in the labour force in Canada by occupational class, 2008-2010

Not in the labour force in Canada by occupational class, 2008-2010

Individuals who are not in the labour force are unable to collect Employment Insurance (EI) benefits from the state. The values in this chart are correlated with unemployment levels: when unemployment increases, the number of individuals who are not in the labour force also increases. Similarly, when unemployment levels decrease (and employment levels increase), the number of individuals in who are measured as not being in the labour force decreases. The fishing, farming, and forestry group sees the greatest variation (a clear result of seasonality) and of the three dominant occupational classes (creative, service, and working), service workers show the highest proportion of those who are not in the labour force. The creative class has the lowest levels.

Part of the reason for this observed different between the working and service classes in this graph have to do with the inherent precarity of service work. Service workers are more likely to endure episodes of not working. Because working class members have better job tenure and access to benefits, they are more likely to quality for EI programs. Since service workers tend to work part-time and with variable hours, it is harder for them to meet the qualifications of this program. This reality makes them more likely to exit the labour force after a period of unemployment.

NOTE: This graph only shows individuals who had an identified occupation in the previous month surveyed. This information allows us to group respondents into the occupational classes. For this reason, the exhibit excludes persons who are measured as being “not in the labour force” but do not have a previous occupation documented. These individuals may have exited the labour force for some period of time and therefore do not have a previously held occupation that is identifiable through the Labour Force Survey dataset.

Conclusion

These figures offer a snapshot of how the recession has affected each occupational class. When discussing a measured increase or decrease in the unemployment rate, it is vital to remain aware of the potential for discouraged workers and of their significance when interpreting reports on the labour market. As you encounter subsequent assessments of the Canadian labour force in the wake of the recession, it is important to consider all aspects of the labour force before making judgments about the nature and quality of work in Canada.

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The Martin Prosperity Institute at the University of Toronto’s Rotman School of Management is the world’s leading think-tank on the role of sub-national factors—location, place and city-regions—in global economic prosperity. We take an integrated view of prosperity, looking beyond economic measures to include the importance of quality of place and the development of people’s creative potential.