From the October 2017 print edition.
If you measure the health of the North American labour market by the most traditional measure, unemployment, things are rosier than rosy.
In August, the Canadian unemployment rate was 6.2 percent, which is the lowest rate since before the financial crisis of 2008-2009. The numbers are even better in the United States: A paltry 4.2 percent of the labour force is out of work. And since the rate peaked at close to 10 percent in 2010, there has been a slow and seemingly secular decline, which is a fancy way of saying that it’s not going to reverse any time soon.
This is a good thing. If you have ever been out of work—and I’ve been in that uncomfortable place at various times in the past—there is nothing worse. There are immediate financial pressures and longer-term worries: Will I ever work again? What is so wrong with me? Being unemployed can be absolutely crushing, so everything else being equal, low unemployment rates are something we should rightfully celebrate. Except there’s something that I have been noticing for some time now, and it is the structural underemployment…not unemployment, but underemployment that I find more than a little bit troubling.
I Googled the following definition of underemployment and have copied it verbatim below.
Underemployment: the condition in which people in a labour force are employed at less than full-time or regular jobs or at jobs inadequate with respect to their training or economic needs. As you can see, there are several different ways of looking at underemployment. It can mean not having as many hours as you would like, or it can mean working at a job that is far below the skills that you possess. And it is on that last definition that I want to focus, because it concerns me the most.
But first a step back in time: when I was growing up in the 1960’s, my family used to subscribe to a magazine called Life. It came out weekly and was famous for its photo-essays. There was one story that for some reason I’ve remembered for close to 50 years, and it was about the alienation of assembly line workers. These folks were enjoying a standard of living that previous generations only dreamt about, but they were bored on the job and ultimately dissatisfied with their lives.
Here’s the reality I’m seeing for so many workers today: They are experiencing a lower standard of living and quality of life than previous generations, and they’re stuck in occupations where they are bored on the job and dissatisfied with their lives. Call it the worst of both possible worlds. An example that seems to symbolize this condition was a young lady I met several years ago at a Christmas party. She had graduated from the University of Toronto with an honours degree in English two years before, and when I met her, she was working in a sandwich shop, making $13 an hour.
There’s nothing wrong with that kind of work. But she didn’t go to school—and a very good school at that—to land that position. Surely she was hoping for a career where the reading and writing skills she honed through four years of essays would be exercised. But the only thing she exercises are the muscles required to slice bread and meat. Then some months ago, I ran into an MBA grad from Rotman who was selling cars. An honourable profession, but did he really need to spend two years of his life and $100,000 in cold, hard cash to follow that career path?
Okay. So let’s accept that underemployment is a problem. And I would argue that it’s a far more difficult one to deal with than old-fashioned unemployment, particularly if it’s cyclical unemployment. If society’s resources aren’t being fully utilized, then the Central Bank lowers interest rates and the federal government spends more or taxes less. Economic activity is stimulated, more people get working, and the unemployment rate falls. Yes, the unemployment rate is falling, but it doesn’t mean that those who are working aren’t underemployed. It is possible that all of a country’s taxi drivers are formally trained as engineers.
It seems to me that technology is “dumbing down” a wide variety of occupations. Which means that there are lower barriers to entry than once existed, which means that those who are working are less able to demand high wages than they previously could. The logical reaction to those who want to compete in the labour force is to get more training, which increases the supply of skilled workers, which leads to lower wages…and it leads to a large cohort of skilled educated people who are ultimately stuck doing lower-value added work, meaning that they will be forever underemployed.