Insight: Untapped potential — Creating a better future for service workers

Ongoing research at the Martin Prosperity Institute continues to focus on the plight of the Service Class, or those in routine-service work. Recently, we partnered with the Institute for Competitiveness & Prosperity (ICP), who share a space with us at the Rotman School of Management. Together, we tackled the issue of precarious employment, which is gaining increasing traction in the media and with the public. This is our second joint project with ICP and it builds on Ontario in the Creative Age, which detailed some ways to help improve routine-service occupations, which currently make up 45 percent of the Toronto CMA workforce. From this, we developed the Ontario in the Creative Age series, which documented the Rise of the Service Class, profiled Service Class Prosperity in Ontario, and presented some ways for low wage service workers to move into higher paying jobs. Our recently released report Untapped potential: Creating a better future for service workers sheds light on this mounting problem and provides a comprehensive set of public policy and business solutions. If these recommendations are implemented, they could have positive, wide-reaching implications that not only alleviate precarious employment facing Service Class workers but everyone working in the Toronto region and even across Ontario.

In the report we defined precarious employment as individuals employed in temporary or part time jobs (often both) earning wages below the Low Income Cut-Off, which was $23,647 in 2012. Precarious employment is not new and we at the Martin Prosperity Institute have examined this problem across Canada. The report focused on the Toronto CMA in analysing how Service Class workers experience precarity within a city region. Toronto has the most educated Service Class in the country and as a result, this group of workers have immense potential to increase the productivity of their corporations, generating significant economic benefits.

We analyzed data from Statistics Canada to find that the number of individuals employed in the Service Class who were considered most precariously employed are increasing at a faster rate than non-precarious workers and the overall Service Class labour force growth between 2001 and 2012. According to Exhibit 1, the share of Service Class workers who work part time in temporary contracts and earn at or below LICO increased by 33.1 percent between the two periods. This growth far outpaces the 17.6 percent increase in non-precarious workers or even the overall Service Class, which grew 18.5 percent.

Exhibit 1: Toronto CMA, 2001-2012 – Number of precarious and non-precarious routine-service workers

Exhibit 1: Number of Precarious and Non-precarious service workers

Similarly, Exhibit 2 reveals that the number of Service Class workers who are most precariously employed increased from 65,000 to 87,000 and that all dimensions of precarious employment (temporary, part time, and at or below LICO) increased during the same time period.

Exhibit 2: Toronto CMA 2001 and 2012 – Percent of routine-service workers for each dimension of precarious employment

Exhibit 2: Percent of routine-service workers for each dimension of precarious employment

Women, youth between the ages of 15 and 24, and immigrants, most of whom are often highly educated in the Service Class disproportionately experience the negative effects of precarious employment. Some of the reasons for this are embedded in the way Service Class jobs are designed: low-skill, routine, low autonomy work that is often done during irregular working hours. As a result, these positions offer low wages. Unfortunately, the design of Service Class jobs generates few barriers to entry and exit, attracting many youth, women and immigrants into service work. For example, women who have childcare obligations, youth in full-time studies, an immigrant to Canada looking for an entry into the local labour market are more likely to seek employment in the Service Class.

As a result, Service Class workers are more likely to hold more than one position to compensate for the lack of income from a single employer and are less likely to have access to employer provided benefits such as a pension or dental care. There are also a plethora of health issues that plague these workers not only as a result of their working conditions but also the lack of disposable income to pay for a higher standard of healthcare, beyond OHIP.

While these findings are troubling, the report presents numerous solutions to these problems that would benefit the general public along with different stakeholders from business owners to policy makers. But in order to alleviate precarious employment, governments and businesses must make concerted efforts independently, and at times together, to increase the creative intensity of service jobs and to help those who are willing and skilled move into higher-paying positions within the Service Class or the Creative Class.

Governments must work to decrease the occupational mismatch, which occurs when labour is in oversupply or shortage because workers are not matched correctly to their jobs. Often this occurs when workers are not in jobs that in their field of training or they are overeducated for the jobs they hold. Immigrants are particularly at risk because most of their educational accreditations are not recognized in Canada. Governments must work to decrease barriers to reaccreditation or recognition.

Education is another area in which changes must be made to improve precarious employment within Toronto. For example, College education in Ontario and beyond must be expanded along with advancing vocational education as it should be a viable and productive choice for students, which could contribute to better labour market outcomes. More Service Class occupations could also be licensed, creating a more ‘professionalized’ group of workers.

The paper also focused on how businesses can help solve precarious employment. More than ever, academic and business leaders are calling on companies to change the way that they view their employees. Businesses should focus on the long term potential and professional development of their Service Class employees because employee growth and corporate profits are not mutually exclusive or a zero-sum game. Instead, both can be achieved because service workers have a direct impact on productivity and innovation improvements in any business.

This Insight has provided an overview of the precarious employment problem in the Toronto CMA. While the situation is at times dire, we are hopeful that solving precarious employment is possible. A better quality of life and working conditions are fruitful not only for workers but to the economy in Toronto and Ontario as well but it requires great political and corporate will. We hope that our politicians and business leaders can work towards creating a better future for service workers.

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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.