Insecurity in The Labour Market: The Case of Canada Since The Second World War⁰

Michael R. Smith

Department of Sociology
McGill University
smith@sociology.lan.mcgill.ca

Canadian Journal of Sociology 24, 2 (1999): 193-224

Abstract
Theories of Employment Insecurity
How to Test a Theory of Employment Insecurity
Has Employment Insecurity in Postwar Canada Increased?
Conclusion
Notes
References

Even more importantly, the spread of high performance workplaces in their present forms would only result in much more widespread structural unemployment for the majority of the potential workforce in all advanced industrial societies.

The withering of paid work is a far more profound problem than most opinion leaders are yet prepared to admit publicly. The most visible aspect of subemployment, structural unemployment, has become so extensive and chronic that governments are increasingly compelled to declare it a “national catastrophe”, as the premier of Quebec did last year ..... (Livingstone, 1996a: 19; emphasis in original).¹

The reticence of “opinion leaders” to “admit publicly” that there is a “profound problem” in the world of work has certainly not been replicated in the academic literature, the popular press, or in journals of opinion. There is a large volume of writing identifying symptoms of “withered” work.² These include increases in the rate of unemployment (in aggregate, or for a component of the labour force), in the proportion of employment that is part time, in the amount of work on temporary contracts — so called precarious work, and in the amount of self- employment (e.g. Betcherman, 1995). Together, it is argued, these symptoms of a “withering of paid work” reflect a marked increase in employment insecurity for which, as it happens, there is an abundance of potential explanations.

In this paper I argue that, while evidence exists that lends itself to the conclusion that employment insecurity has tended to increase, the character of that evidence belies the certainty with which both a trend is asserted, and the trend is connected to one of the several potential explanations. This is because: a) discussions that connect the trend in some indicator of employment insecurity to one or another explanation of the phenomenon are unsatisfactorily vague with respect to the time path of the incidence of the insecurity implied by the theory; b) there is a lack of precision in specifying what employment insecurity might mean; and c) where a theory is purportedly tested the issue of the time period to which the test applies is often left inappropriately vague. In light of these concerns, in the last part of the paper I reexamine evidence on the issue of trends in employment insecurity. I argue that while it is clear that the level of employment insecurity has risen and fallen during the postwar period a conclusion that there has been a secular decline in employment security that might usefully be labelled a “withering of paid work” is, at best, not proven, but, more likely, simply wrong.

In what follows I am concerned with kinds of theories rather than particular theories. But, to set the following discussion in context, it is worth very briefly outlining each theory. In doing so I want to exhaustively list processes that might produce an increase in the level of employment insecurity. Consequently, the sources cited are not solely Canadian ones. Note, finally, that I focus on the objective bases of employment insecurity rather than on perceptions of the phenomenon. This is both for reasons of space and because perceptions are likely to be influenced not only by changes in objective conditions but also by variations in media interest in the phenomenon.³


Theories of Employment Insecurity

The explanations can be classified, according to the kind of factor that each emphasises, into four broad categories: technology, the internationalization of capital, demographic change, and government policies. Most of these broad kinds of explanation exist in several forms.

1. Technology
i) Technical change in manufacturing and extractive industries displaces labour to the service sector which, on the whole, provides less secure employment (e.g. Ashton, 1986: 90; Ashton, Maguire and Spilsbury 1990: 113; Lash and Urry, 1987: 5).⁴

ii) Technical change has always had a labour saving bias. Information technology extends that bias from extractive and manufacturing industries to the service sector. This means that there is no longer an area of the economy that can absorb those who are displaced (e.g. Aronowitz and DiFazio, 1994; 1996; Dunkerley, 1996; Rifkin, 1995).

iii) Information technology and improved communications make possible changes to the location and organization of work. Smaller organizations and home working are more widely feasible. These provide less stable employment in the sense that, in smaller organizations, there is less room for the sequence of promotions on which careers may be built, and home work normally involves a more fragile contractual status (Francis, 1986: 154–158).

iv) New technology mandated a reorganization of production — smaller units, more flexible work arrangements, less hierarchy. But, in North America these changes could not be effectively carried through in part because of union resistance but, above all, because American business avoided risk and sought to make money through takeovers rather than through managing production (Marchak, 1991: 71–73, 88–89). Consequently, jobs moved offshore (to Japan and the so-called Asian Tigers) and employment security in North America collapsed.

2. The internationalization of capital

i) The weight of trade in economies like Canada’s has increased. Wages and conditions of employment are under pressure in both export industries and in domestic industries subject to import competition (Wood, 1994). In Canada, this process has been linked to the liberalization of trade with the United States (e.g. Warnock, 1988: 178–189). But the argument is general. Trade has been liberalized across the capitalist world and the cumulative effect has been to increase employment insecurity (e.g., Palley, 1994: 38–39).⁵

ii) There has been a shift from multinational companies with a strong national base to transnational companies with no national base. This accentuates the tendency for companies to shift jobs around the world and, it is claimed, has led to an export of jobs that has increased employment insecurity (Burman, 1988: 11–12; Pekkarinen, Phojola, and Rowthorn, 1992: 16–17).

iii) Financial capital moves very rapidly around the world. As a result, governments can be rather promptly punished for measures not conforming to the preferences of international financial institutions. Policies that offend international capital cause a decline in their country’s exchange rate. In protecting the currency, interest rates have to be pushed up. Confronted with this situation governments are compelled to move the security of employment to a markedly lower point on their political agenda (Pekkarinen, 1992: 334).

3. Demographic change

i) There is an age-specific demand for labour. In any given economy there is a more-or- less finite number of entry-level jobs that are suitable for young workers. In a number of publications Easterlin (e.g. 1968, 1987) assessed the likely effects of changes in fertility that produced marked fluctuations over time in the numbers of candidates for entry-level jobs. In the late 1960s the arrival of the very large baby boom cohort both increased insecurity for the new arrivals and disrupted the labour market more generally (Burman, 1988:12; Foot, 1996).

ii) The proportion of women in the labour force has increased substantially. Women are more likely than men to leave the labour force for a period of time, and subsequently reenter it. For reasons that are not entirely clear, Block (1990: 10–11) claims that this pattern has spread to male employees as well. It might be argued that the availability of large numbers of potential female employees willing to tolerate jobs with less standard career-like characteristics puts pressure on the conditions of work of males, including the degree of security they have previously been able to command. In addition, because of the size of the pool of potential employees willing to accept such conditions it probably makes it easier for employers to change the terms and conditions of employment to increase the flexibility that they have with respect to hours of work and hiring and firing and, in so doing, to render employment less secure.

4. Government Policy

Government policy, it is argued, has shifted markedly to the right. Deflation has undermined organized labour (Ashton, 1986: 36–37). There has been legislation to weaken trade unions and deregulate labour markets (Panitch and Swartz, 1988; Ashton, Maguire and Spilsbury, 1990: 103). Privatisation, deregulation, and government downsizing have exposed a larger proportion of the labour force to the effects of product market competition (e.g. Pitsula and Rasmussen, 1990). In addition, and as another symptom of the move to the right, the Bank of Canada has adopted policies that have increased unemployment. By (excessively) protecting the external and internal value of the Canadian dollar, over a long period, the Bank forced up interest rates and, as a result, increased employment insecurity (e.g. Fortin, 1994, 1996).

There is, then, no shortage of reasons for thinking that the insecurity of employment in Canada, and elsewhere, has increased. But the presentation of reasons for increased employment insecurity is often unencumbered by any evidence whatsoever. Where evidence is bundled with one or another of the reasons listed above it often proves, on closer inspection, to be less robust than the accompanying text claims.

To illustrate this point, consider Jeremy Rifkin’s (1995) recent publishing tour de force on technology and employment in the United States. I treat it as an example of both a genre and a conclusion of a kind that appears to be widespread among sociologists (see Aronowitz and DiFazio, 1994, 1996; Dunkerley, 1996; Moore, 1996; Wallace, 1989: 374–376).⁶ The book contains two sorts of evidence. First, there is a brief history of technology and employment beginning in the 1920s and culminating in recent examples of the integration of computers into production and distribution. The point of this history seems to be that the job-destroying character of new technology would have been evident earlier, had it not been for the discovery of mass-marketing and, later, for job creation by the Federal government (the New Deal, then expansion of the defence industries). Second, there are examples of labour-saving technology across a range of economic sectors, the introduction of which has sometimes displaced employees. It should be clear, however, that Rifkin deploys nothing remotely like a method that might lend plausibility to the claim that technological innovations herald The End of Work. That many examples can be found of the elimination of jobs by new technology says nothing about the net effects of technology on employment. To assess net effects would require considering not only the jobs eliminated by a new technology but also those created by it. New technologies must be manufactured and maintained. Furthermore, when capital goods are improve, under most circumstances, there will be reductions in cost and price that will free up income and, in turn, displace demand to other goods (see Peitchinis, 1983; Stoneman 1983; Katsoulacos, 1986; Vivarelli, 1995). Rifkin’s larger claims have no serious warrant in the data he presents.

The issue is a general one. Showing that technology has cost the jobs of some workers, or that international competition has caused a contraction in employment in a particular industry, or that one or another government has taken actions that reduce the contractual protections of a particular group of workers, does not, in itself, constitute evidence of a “withering of paid work”. Livingstone, Rifkin, and others are asserting a macroscopic trend. Citing particular cases of displacement or weakened contractual protections is not suitable evidence for that trend since they may be offset by compensating changes elsewhere in the economy. What, then, is required of tests of claims about the “withering of paid work”?


How to Test a Theory of Employment Insecurity

1. Specify the nature of the theory

Broadly speaking, there are three kinds of theory of employment insecurity: adjustment, hysteretic, and apocalyptic. Consider these in turn.

Suppose an unusually large cohort of young people arrives on the labour market. The existing structure of jobs provides too few entry level positions. The result is an increase in the rate of unemployment within the cohort and in aggregate. But, in response to the overabundance of potentially productive young people, employers may reconsider the configuration of jobs that they offer. At the same time, the young people may reconsider their entry level job expectations. If this happens, over a period of time (perhaps several years), the high rate of unemployment will fall back to customary levels. This is an example of an adjustment theory of employment insecurity. It assumes a shock to the economy that increases employment insecurity but only during a transitional period. Marchak’s (1991) interpretation of what she saw as a failure of the North American economy to adapt to the changed circumstances of the 1970s and 1980s might be similarly classified, unless a permanent incapacity of management to learn from their errors is postulated. If offsetting effects are allowed, with a lag (see, in particular, Vivarelli, 1995), technological unemployment may also be brought down by a process of adjustment.

In contrast, in hysteretic theories the effects of the initial shock persist. Attrition of the skills (or work habits) of employees thrown out of work by the commodity price shocks of the early 1970s, or by the liberalization of trade in the 1980s in Canada and elsewhere, or by a sudden acceleration in the displacement of labour by new technology, may mean that those employees never work again — or, at least, not in jobs that are as good as their previous ones. Hysteresis implies that, in the absence of a shift to a more stimulative macroeconomic policy, a higher level of unemployment and economic insecurity will persist, but not necessarily worsen.⁷

Finally, apocalyptic theories posit a large and continuing deterioration of employment security from which there is no escape within the existing institutional context. Rifkin’s treatment of the effects of technology asserts an irreversible and persistent deterioration in conditions in labour markets unless institutions are redesigned to allow to people very much greater amounts of leisure. Some theories of the effects of free trade imply a deterioration in the terms and conditions of employment of those less skilled workers in rich countries whose work can be moved offshore to the third world, where labour costs are much lower. There is no clear end to this deterioration; the process should continue as long as there are countries with very low wages, to which jobs can be exported (see Wood, 1994).

It should be clear that testing a theory of employment insecurity requires specifying which of the three sorts of theory listed above is at issue, since each implies a different pattern of deterioration. Adjustment theories imply that things get worse and then recover. Hysteretic theories imply that things get worse, stabilize at the new level, and fail to get better. Apocalyptic theories imply, quite simply, that things get worse and worse!

2. Specify what constitutes employment insecurity

We cannot say anything about trends in employment insecurity unless we are clear on what we mean by the term. We know that some occupations provide greater security than others. Being a tenured professor in a university has been, on the whole, rather secure. Being a waitress in a tourist-oriented restaurant is usually much less so. Other things being equal, a fall in the proportion of university professors in the labour force and a corresponding rise in the proportion of waitresses implies an increase in the amount of employment insecurity. But the issue is not straightforward. Consider the following possible indicators of insecurity.

i) Shorter rather than longer employment durations.
ii) Involuntary separations from employment rather than employee initiated separations.
iii) Involuntary part time as opposed to full time or voluntary part time work.
iv) A lack of institutional protections against dismissal.
v) Separations (whether voluntary or involuntary) that are followed by long periods without work, before another job is found.

What do these distinct indicators share in common? Most fundamentally, they are all likely to be associated with unpredictability of income. People who lose their jobs and do not find another one, who have no option but to shift between a series of short tenure employments, or who are forced to settle for a part time job when they have been seeking a permanent one, have to live with income uncertainty that is likely to limit their capacity to plan their lives. The main socially harmful effect associated with new, less secure, forms of work is that they make it difficult for people to forecast their future income and, as a result, to build stable lives.

What is important here is that the fact of being laid off need not imply unpredictability of income. In the construction industry, for example, employees are often laid off after a particular construction project is completed. An employee may move directly to another job on another project. But construction work tends not to come in a smooth flow — particularly in Canada, where severe winter weather reduces construction activity. Consequently, a construction worker may experience several weeks of unemployment between jobs. But that aspect of the industry is known when people move into construction occupations. As long as those interruptions remain more-or-less within the expected range, it makes no sense to treat them as examples of employment insecurity. They are simply standard operating practices in the industry, expected by a person who enters employment in it. Similarly, some paper mills in Canada deal with inventory accumulation by closing down all or parts of a plant for periods of a few weeks to a month or so. But, until relatively recently, the laid-off workers have almost always been recalled. These sorts of shut downs are common in the Canadian industry, expected, and do not, as a matter of fact, seem to constitute a major issue (Smith et al., 1995).

All this is to say that unemployment need not necessarily indicate employment insecurity. Whether it does so depends on its effect on the predictability of income.

3. Specify the time period to which the test applies

The three types of explanation that I outlined earlier imply different patterns of change in employment security over time. Apocalyptic theories imply a progressive worsening. Adjustment theories imply a worsening followed by recovery. Hysteretic theories imply a worsening followed by stabilization at a new, lower, level of employment security. Simply observing a change in some indicator of employment security (“Over the last ten years more than 3 million white collar jobs were eliminated in the United States.” Rifkin, 1995: 9), in itself, tells us nothing. To mean anything it has to be related to the time pattern implied by the explanation at issue (an apocalyptic one in Rifkin’s case) and some reason has to be given why the beginning and end date are pertinent to the explanation.

Since they tend to be cyclical, interpretations of economic series that fail to take into account the points in the business cycle of the start and end of the series can be particularly misleading. The base point problem is well known. Nonetheless it is surprisingly frequently neglected in writings on employment security. Rifkin’s treatment is marred throughout by this problem. Allen and Henry (1996: 65) claim “an increasing shift from public to private sector firms” in the provision of services and cite as evidence a study by Rees and Fielder (1992) that, it turns out, examines data on cleaning and catering (rather than services as a whole) for the 1981–1987 period! Allen and Henry go on to describe some interesting ethnographic research. But drawing conclusions about a trend from seven years of data for which the first data point comes in the middle of a major recession and the last at approximately the peak of the subsequent period of growth is probably not reasonable.

While, in principle, the data series used should coincide with what is implied by the theory at issue, in practice, it is usually necessary to make do with the data available, for the time period it is available. Shifting from a permanent job with an employer to contractual work as a consultant, as some laid off managers have done over the last decade or so, would constitute an increase in insecurity. But we have little aggregate information directly bearing on this sort of employment status, and none (as far as I know) covering a time period of any length. We do have information on the rate of unemployment. In practice, that is the measure that is very frequently referred to in analyses making claims about trends in employment insecurity.


Has Employment Insecurity in Postwar Canada Increased?

Making a judgment on this is made difficult by the unavailability of suitable data. This is a problem for those who have asserted an increase in employment security. It is also a problem for me. In what follows I make use of the data that is relevant, for the time periods for which it is available. This greatly complicates the process of drawing conclusions about changes in employment insecurity over time. In fact, we have better data on the last decade or so than on previous periods. Consequently information for more recent periods features prominently in what follows. Nonetheless, I regard the entire postwar period as relevant for the purposes of this paper.

Several indicators suggest that the amount of insecurity in Canada has increased. These are summarized in Table 1.

3. Most of the labour force does not belong to trade unions. Over the postwar period, and particularly since the 1970s, changes to the law have tended to increase the employment security of the non union labour force. Human rights codes have provided the possibility for some of those dismissed to claim discrimination of some sort or other. In the Federal and Quebec jurisdictions statutes have been changed to allow those dismissed to demand that the employer show just cause for the dismissal, with the issue being settled by either arbitrators or labour commissioners, and with the possibility of either damages or reinstatement. Precedents under both the common law and the civil code have tended to extend the grounds under which those dismissed can demand damages, with some rather inconclusive examination of the possibility of legally imposed reinstatement.¹⁴ All this is to say that the contractual protections to all employees have tended to expand over the postwar period.

This should not be construed to imply that it has become impossible to fire someone in Canada. If sales go down employees can still be laid off. What it does imply is that the potential costs of doing so for cause have been increased. On the one hand, employers who want to be in a position to fire an employee for inadequate performance without a risk of a costly law suit have to invest in a system of record keeping in order to be in a position to defend their decision. On the other hand, an employer may refrain from dismissing employees because of the risk of a lawsuit. This is not to say that all employers are likely to have modified their behaviour in response to changes in the law. Those with a reputation to protect, and/or with sufficiently deep pockets to make a lawsuit worthwhile, are most likely to have significantly done so.

4. One of the pieces of evidence — presented in an abbreviated form in Table 1 — that is consistent with claims of increasing employment insecurity is the (erratic) rise in the mean duration of unemployment since the beginning of the 1980s. This warrants closer inspection. There is a problem with the measure. The Canadian unemployment rate is calculated on the basis of a monthly labour force survey. It is the average unemployment rate across the twelve monthly surveys. This has two interesting implications. First, when people are asked how long they have been without a job and looking for work — that is, unemployed — many of those responding will not have completed their spell of unemployment (in the jargon, the observations are right censored). This tends to lead to an underestimate of unemployment durations. Second, however, someone unemployed for more than one month has a higher probability of appearing in a survey in the course of the year than someone who has been unemployed for only a month. This produces an overrepresentation of longer duration unemployed respondents in the sample and an overestimate of the average duration of unemployment of individuals in the Canadian labour force. In general, these two countervailing forces do not offset each other.¹⁵ There have been estimates of the relative magnitudes of these effects and they indicate that, most of the time, the overrepresentation of long duration individuals has a larger effect than does right censoring of data (see Corak and Heisz 1995a, Corak and Heisz 1995b).

Moreover, the magnitude of the error varies over time, depending on whether, and at what rate of change, unemployment is rising (which tends to shorten average reported spells) or falling (which tends to lengthen them). Corak (1996) has adjusted the available data to produce an estimate of the duration of completed spells of unemployment. He reports an average duration during the recession of the beginning of the 1990s that was about the same (20 weeks) as it was during the recession of the beginning of the 1980s. There was, nonetheless, an important change: the dispersal of durations increased from the early 1980s to the early 1990s, because the average duration for a relatively small proportion of the unemployed increased considerably (see also Corak, 1991: 69–73). What this indicates is that a group of people lost their jobs in the late 1980s and early 1990s who were distinctly ill-equipped to find new ones. Mean unemployment durations increase with age. There was an overrepresentation of older employees within this group.

What is the implication of this for trends in employment insecurity? Clearly, the insecurity of a part of the population increased substantially in the early 1990s. They were at risk of both losing their jobs and of having great difficulty finding another one. But this was and remains a quite small part of the labour force.¹⁶ The most vulnerable were over 45 (Corak and Heisz 1995b: 14). Their experience was certainly not typical. Nor does it indicate a permanent change in the degree of insecurity of employment of those over 45. This rise is, in fact, consistent with an adjustment interpretation of the process identified by Marchak, whereby the competitive problems of a set of North American industries were dealt with by management through downsizing — with the effect of making the industry once again competitive and restoring the previous degree of employment security to those remaining in it.¹⁷

5. Part of the institutional context for unemployment is the system of unemployment insurance (UI). It has several pertinent characteristics.¹⁸ It has evolved over the postwar period from a restrictive programme through the 1960s, to a much more generous one in the 1970s and 80s. In the 1990s it has become more restrictive again (Sargent, 1996). A central feature of the program — that persists into the 1990s — has been regionally extended benefits. Eligibility requirements and benefit rights vary depending on the rate of unemployment in the region of the unemployed person. People who quit their jobs remained eligible for benefit until a change in the law in 1993 (C–113).

The effects of the unemployment insurance system on labour market behaviour have been the focus of lively debate for a number of years.¹⁹ Until relatively recently, tests for effects were largely confined to time series regressions with some policy effect introduced through, for example, putting a policy change dummy variable into the estimating equation. Due to the technical problems of time series regressions this approach has produced an entirely inconclusive set of results (Myatt, 1996a).²⁰ But in the last decade or so new data sets have been developed that allow a more detailed understanding of the mechanisms associated with unemployment in Canada. Given this institutional context, what did these analyses find?

i) There has been a very substantial amount of repeat usage of the UI system. Of UI recipients in 1989, 50% of males and 30% of females had claimed UI five or more times since 1971 (Corak, 1993a).
ii) The probability of an additional claim increases with consecutive claims: that is, the probability of a second claim is higher than the probability for a first claim, the probability of a third claim is higher than the probability of a second claim, and so on (Corak, 1993a; Lemieux and MacLeod, 1995: 26–27). This has meant that repeat use of UI has increased over time.²¹

iii) The duration of a claim tends to increase with consecutive claims. This effect is largest for women, among whom the average duration doubled from the first to the second claim in the period analysed (Corak, 1993b).
iv) The duration of employment tends to coincide with the average provincial variable employment requirements to qualify for UI (Christofides and McKenna, 1995). That is to say, provinces with higher variable employment requirements have higher employment durations and provinces with lower variable employment requirements have lower average employment durations (in the 1986–90 period). This remains true after the addition of a standard range of controls. Correspondingly, again after controls, in the 1988–1989 period the probability of moving out of employment is predicted by the average provincial variable employment requirements (Christofides and McKenna, 1996).

v) Job terminations for seasonal workers tend to cluster at, or shortly after, the point at which benefits will fill the rest of the 52 week year.²² Note that the source of this clustering of terminations was layoffs rather than quits. Green and Sargent (1995: 46) conclude that this “may suggest a somewhat sophisticated use of the UI system in selecting the termination dates of some jobs ... seasonal layoffs and quits do not occur just when an individual qualifies for UI, but rather at later points where relevant maximum entitlement points are reached.”

vi) There was rapid growth in employment in the second half of the 1980s. However, this growth was disproportionately concentrated among jobs not covered by unemployment insurance. Thus, while total employment grew by 5% from 1986 to 1990, insured jobs grew by 2.4%, with the two categories of uninsured jobs growing by much more — part time jobs (less than 15 hours per week) by 12% and the number of self employed workers by 18% (Lin, 1995a).

vii) Among high frequency unemployment insurance claimants, men, and residents in Atlantic Canada and Quebec are disproportionately present, as are employees in logging, fishing, forestry, quarrying, construction and some manufacturing industries — in particular wood, food preparation, and tobacco (Wesa, 1995; Corak and Pyper, 1995).

viii) In 1990 a legislative deadlock between the House of Commons and the Senate had the effect of suspending the 10 week UI qualifying requirement, and extending it to 14 weeks in those regions where it had formerly been 10 weeks. During the period of the inadvertent change in qualifying period the likelihood of shifting out of employment at 10 weeks fell, and the likelihood of shifting out at 14 weeks, and a bit beyond 14 weeks, rose (Green and Riddell, 1995). Note that the shift occurred for layoffs rather than quits.

ix) After controls for personal (age, sex, education, language, etc.) and job (whether unionized, whether the job involved a pension) characteristics, neither receiving UI nor having been enrolled in a government training program increased the probability of interprovincial migration to take a job (Lin, 1995b).

x) Using the panel study of unemployed Canadians, Crémieux et al. (1995a) found that recipients of UI spent no more hours in job search than did non recipients. Repeat users of UI seemed to deploy less effort to find a job.
xi) In 1993 the UI program was modified. The replacement rate was reduced from 60% to 57% and (with limited exceptions) benefits for those who quit were eliminated (Bill C–113). This, however, had no effect on the total number of people qualifying for UI. What seems to have happened is that quits were reclassified as dismissals (Kuhn, 1995: 26).

What do these results tell us? First, they suggest quite strongly that within the labour market there is a close adaptation to the dispositions of the unemployment insurance regime. Some jobs terminate at or shortly after the qualification period. When the qualification period was inadvertently extended in 1990 job durations shifted too. Having received UI increases the likelihood that it will be received again and lengthens the average duration of benefits. Second, the unemployment insurance system seems not to improve the efficiency of the labour market — in the sense that recipients show no signs of using the time made available to increase their job search efforts or of being any more likely to move to take a job elsewhere. Third, and most important for this paper, there is evidence of a substantial symbiosis between the unemployment system and industries that have an interest in laying-off labour.

This point is worth elaboration. When information became available that unemployment insurance claims disproportionately originated within particular industries and, within those industries, from particular employers, there were policy proposals (involving experience rating) that would have had the effect of making repeat employer-initiated use of the UI system more expensive. That unions, including the Canadian Auto Workers union, vigorously opposed such changes is not surprising. A bit more surprising was that the changes were equally vigorously opposed by the automobile manufacturers.²³ Car sales are cyclical. Firms also have to close down from time to time to retool. The availability of a reasonably generous UI system means that it has not been necessary for the managements of the automobile firms in Canada to negotiate pay protections that they have been obliged to negotiate in the United States. Seasonal industries (forest products, construction, tourism) are able to retain the labour forces that they need (with a suitable distribution of skills) because their employees can cycle out of work, into unemployment insurance. These industries are often located in areas with shorter qualifying periods. Crémieux et al (1995b: 22–23) interpret their search results as follows.²⁴

La question qui se pose ici est celle de l’exogénéité de la catégorie des emplois saisonniers et temporaires par rapport à la nature du programme d’assurance-chômage. Ainsi, se pourrait-il que l’existence même de nombreux emplois saisonniers soit à mettre au compte des prestations de prolongations fondées sur le taux de chômage régional, qui permettent aux employeurs de garder des travailleurs qu’ils n’emploient que pour une courte durée chaque année. Dans ce cas, il ne serait pas justifié de rejeter sur les travailleurs la responsabilité de la faiblesse de leur intensité de recherche, puisqu’ils ne peuvent qu’attendre d’être rappelés à la fin de leur période d’inactivité. Il se pourrait que ce soient plutôt les entreprises qui exploitent le programme d’assurance-chômage et que les travailleurs réagissent passivement aux choix permis par elles.

They go on to say that “Il est également possible que les travailleurs et les entreprises se concertent activement pour exploiter le programme d’assurance-chômage.” The implication of all this is that the industrial structure of Canada is to some degree endogenous to the unemployment insurance system. Seasonal and temporary work is more common than it would otherwise be because a larger number of firms can make money in industries providing those sorts of jobs than would be the case were UI not available at the levels and in the forms (regionally extended benefits) that it has been for most of the period since 1971. This in turn implies that the degree of insecurity implied by the unemployment rate and by the fact of seasonal employment is overstated, because the pattern of employment and layoff is both predictable and fully understood by those subject to it.²⁵

But this is a statement about the level of the unemployment rate. Might the incentives of the UI system have contributed to the shift to generally higher unemployment rates in the 1980s (after the effect of the economic expansion of the mid 1980s is netted out)?²⁶ The answer appears to be yes. Card and Riddell (1996; see also Card and Riddell, 1993) have closely examined the relative trends in the rates of unemployment in Canada and the United States. Until 1981 the Canadian rate tracked the U.S. rate fairly closely. After 1981 they diverged — the Canadian rate settled in at about two percentage points higher than the U.S. rate. Card and Riddell’s analysis suggests that the divergence was largely based in the differential behaviour in the two countries of groups likely to be employed in jobs with more turnover — young males and both young and adult females. From 1982 to 1990 in Canada, people within each of these categories were increasingly likely to report that they were unemployed rather than out of the labour force. At the same time, the duration of job search increased. This finding — that refers to a change from the 1970s to the 1980s — is consistent with a process in which the unemployment insurance system (prior to the recent changes to the program) decreased the likelihood that people would respond to job loss by withdrawing from the labour force (which happened more frequently in the less generous U.S. context) and lengthened the period during which they reported that they were searching for jobs.

Notice that no claim is being made here with respect to the relative desirability of the approaches to the problem of Canada and the U.S. The issue is simply, can the incentives provided by the UI system account for some of the shift to higher rates of unemployment in Canada in the 1980s? The case for answering yes is, I believe, strong. This is important because the rise in the average rate of unemployment is the most readily available indicator of increasing insecurity of employment.²⁷

6. Despite the role it plays in the withering-of-paid-work thesis the increase in the proportion of employees who reported that they had temporary work in fact only increased modestly from 1989 to 1994 (Krahn, 1995). It should be noted, besides, that these years were not equivalent points in the business cycle, which complicates the interpretation of the change that did take place. Nor is there evidence of expansion in the use of temporary help services from the late 1980s through the early 1990s (Hamdani, 1996). But suppose we could observe a marked increase in the proportion of temporary employment over some long period, would that necessarily indicate an increase in the precariousness of employment? The simple answer is no! For, as Segal and Sullivan (1997) point out, what is at issue is the alternative to temporary contracts. Those laid off from ostensibly permanent jobs are likely to be ill-equipped to move rapidly to alternate employment. Contrast this with the situation of those allocated to jobs by temporary help agencies, the increasing presence of which has been seen as an indication of a rise in employment insecurity. The one thing that temporary help agencies are likely to do well is promptly move those on their books between jobs. After all, that is how they maximize their incomes. In other words, while the client of a temporary help agency might prefer permanent employment that is stable, the real alternative may be ostensibly permanent employment that is distinctly unstable. In comparison to this, transfers between jobs through a temporary help agency may constitute an improvement.

7. The OECD (1996) recently presented an analysis of levels and trends in employment insecurity. The data on trends in Canada reveals the following.

i) The average tenure with employers was longer in 1995 than it had been in 1980, 1985, or 1990.

ii) The retention rate — that is to say, the percentage of employees who had been with their current employers for five or more years was higher in the 1990 to 1995 period than it had been in either 1980 to 1985 or 1985 to 1990. Consistent with the discussion above, however, there was some evidence of a reduction in the retention rate among those 45 and older. Perhaps surprisingly, given the broad thrust of the large volume of literature on deindustrialization, the retention rate of blue collar employees increased over the period.

iii) The rate of turnover between the first and second year of employment shows no trend from 1980 to 1995.
The interpretation of these results is not straightforward. They indicate either no trend in employment duration or, where there is a trend, a slight lengthening. But lengthening employment durations could be produced by layoffs governed by last-in-first-out provisions, or by a failure to replace those who retire. The issue of layoffs is, however, addressed in the Report. Layoffs as a percentage of employment was almost constant (in fact, fell slightly) from the trough of the 1980s to the 1990s. Overall, the OECD results suggest no trend in employment insecurity in Canada from 1980 to 1995.

8. Finally, consider the case of employment in the public sector. Part of the so-called neoconservative agenda is public sector downsizing and privatisation of a range of government services. Several comments on this are possible. Since 1988, employment in the public sector as a whole, including government business enterprises (crown corporations), has remained more or less constant. Employment in crown corporations, however, has fallen somewhat, whether through privatisation or through reductions in employment of the sort that have occurred in some private businesses. The question then is, does privatisation increase job insecurity? The answer to this is not nearly as clear as some have suggested. In a comparative study of privatisations around the world Megginson, Nash and Van Randenborgh (1994) found that, considering the three years prior to and after the privatisation, on average, there had been a net increase in employment. We also know of instances of privatisations in Canada where unions managed to retain successor rights (see Thompson, 1995: 172–174). Presumably there are also cases where they have lost them, but those seem less evident.

However, distinctly conservative governments in Alberta and Ontario, and less distinctly conservative governments in the rest of the country, do seem to have a strong current commitment to budget-cutting. Government employees have good reason to be anxious. But this set of government policy preferences has a specific origin: Canadian governments accumulated deficits of magnitudes that, compared to the size of the Canadian economy, exceeded those of most of the rest of the Western world. Insofar as this produces layoffs this source of employment insecurity, then, is not clearly related to technology, globalization or, strictly speaking, a new right agenda. It originates in the difficulties involved in coming to grips with an untenable deficit situation. Related to this has been the policy of the Bank of Canada in maintaining — until recently — relatively high interest rates. Higher interest rates have probably increased the rate of unemployment. While there is considerable dispute over this, the Bank of Canada’s claim is that those rates were mandated by international financial markets, given the level of debt in Canada. Alternative views on the appropriateness of the policy judgments of the Bank of Canada are possible (for highly critical views, see Osberg and Fortin, 1996). But it does seem to be the case that, as Canadian government debt falls to more internationally normal levels, government spending and employment have stabilized, and may well rise again.²⁸


Conclusion

Livingstone felt confident enough that paid work was “withering” that he treated increasing employment insecurity as a given in his paper, and went on to discuss solutions to the problem. He is not alone in this confidence. The existence of multiple explanations for the phenomenon of increasingly precarious employment — technology, international competition in product and capital markets, demography, and reactionary governments — seems to have been sufficient to persuade significant numbers of sociologists and commentators that the matter is settled. It is worth emphasising at this point that this interpretation is important because it has consequence. Consider a recent report from the Conseil supérieur de l’éducation, a body that is supposed to advise the Quebec Minister of Education, and is presided over by the sociologist Céline Saint-Pierre. One of its recommendations urged modifications to the schooling system to take into account the likelihood that, it argued, a significant proportion of young people will never find stable jobs. Consequently, curriculum should be to some degree oriented to the preparation of young people for workless lives (involving, for example, volunteer work)!²⁹ There is at least some possibility that people of influence might take the “withering of work” interpretation seriously, and use it to construct policy.

But the material reviewed in this paper provides warrant for an attitude towards this interpretation that is located somewhere between reticence and outright rejection. The precise conclusion depends on how the theory is specified. Indeed, one of the main problems with much of the literature on employment insecurity is its vagueness with respect to the character of the theory being proposed. In practice, this allows evidence to be cited indiscriminately to support a “withering of paid work” interpretation. Rifkin provides the most egregious example of this. But he is by no means unique.

I distinguished between three kinds of account of changes in the level of employment security: adjustment, hysteretic, and apocalyptic. It is surely incontestable that employment insecurity has from time to time increased in the postwar period during periods of adjustment. Examples would include the following: the effects of changes in the size of the cohort of young workers entering the labour force, broadly associated with the baby boom and its subsequent echoes; the sequel to the commodity price shocks of the 1970s; and the change in the situation of some public employees as Canadian governments in the 1990s attempted to come to grips with the deficits that they had accumulated. Another example might be the changes in the practices of several industries during the 1980s in response to a combination of technological change and increased foreign competition.

But, whatever personal tragedies are produced by these changes, they certainly cannot be taken as indicators of a “withering of paid work”. They are the sorts of things that happen in a dynamic economy in which markets do not instantly clear. Nor would they warrant the policy response advocated in the recent musings of Quebec’s Conseil supérieur de l’éducation. Much more relevant for the withering-of-paid-work hypothesis are hysteretic or, in particular, apocalyptic accounts of trends in employment security. And there is evidence that is broadly consistent with such interpretations. The rates of unemployment, of involuntary part time employment, and the average (unadjusted) duration of unemployment, have all trended upwards. In some sectors it is possible to document changes in managerial policy that have increased the component in their labour forces of employees with more precarious contractual statuses. What I have argued in this paper is that these facts do not in themselves settle the issue of whether there is an aggregate trend towards increased employment insecurity, producing unstable and unpredictable incomes, of the sort assumed by either hysteretic or apocalyptic accounts.³⁰

There are several reasons for this. First, while it is clear that there are significant numbers of insecure jobs in Canada in the 1990s, that is not a new phenomenon. Agricultural labourers, for instance, were a large component of the labour force in the 1950s and had little employment security. Second, while it is true that the rate of unemployment has been persistently higher since the 1970s there is some evidence that a significant part of that increase was produced by changes in labour force behaviour in response to the incentives of the unemployment insurance system. Added to whatever unemployment was produced by the commodity price shocks of the 1970s and the durable process of restructuring that followed them, the UI system modified the behaviour of both some employers and some employees. Eligibility for unemployment insurance meant that some parts of the Canadian population were less likely to move out of the labour force when job prospects deteriorated — and this shows up very clearly in comparisons with the United States. Insofar as unemployment reflects the incentives of the UI system it will involve predictable changes of income, of the sort that cannot sensibly be identified as indicating employment insecurity. Third, it is true that the standard sources suggest that unemployment durations have lengthened. But those sources are unreliable. Corak’s careful reconsideration of the data led him to the conclusion that the average unemployment duration in 1990 (during a recession) was approximately the same as it had been in 1980 (also during a recession). Moreover, the 1990s average substantially reflected the effects of the very long unemployment durations of a rather small component of the unemployed population, that we have no reason to regard as typical. Fourth, however, the rise in involuntary part time unemployment from the middle of the 1970s to the middle of the 1990s does suggest an increase in employment insecurity. Part of it may be related to the development of an industrial structure that responds to the incentives of the UI system — for example, a tourist industry that is both seasonal and uses large amounts of part time labour. Some of it may be produced by the attempt of employers to avoid the various levies associated with full-time employment — including unemployment insurance contributions (see the paper by Lin, discussed above). Some of it may also have been produced by the side-effects of high interest rates and the relative austerity produced by government deficit reduction.

Still, suppose that this does indicate an increase in employment insecurity for part of the population. It is important to set this against other changes that are consistent with rising employment security within the labour force. Specifically, OECD data shows rising employment durations in Canada. And, over the postwar period as a whole, the legal protections of employees have tended to rise. So, insofar as involuntary part time employment is an indicator of increasing employment insecurity for part of the labour force, in judgments of aggregate trend it must be offset with evidence of rising security for other parts of the labour force.

All of this is to say that the indicators customarily cited as evidence of rising employment insecurity do not settle the issue. They do not even come close to doing so. The level of employment insecurity varies over time. It is likely that the level of employment insecurity reached its minimum postwar level in the mid to late 1960s, when labour markets across the capitalist world were exceedingly tight. That was, of course, a time when the functioning of the world economy was substantially influenced by U.S.-originating expenditures associated with the Vietnam War, combined with some relatively ambitious social programs.³¹ But whether it constitutes the appropriate reference point in subsequent inferences about trends is much more questionable. Since then, the level of employment insecurity is bound to have gone up and down with the level of economic activity. The relevant evidence, taken together, I have argued, is not consistent with either a “withering of paid work” or the policy conclusion that part of the youth population should be educated in preparation for joblessness. In fact, the withering-of-paid-work pronunciamento should, I think, be rejected not only because it is probably wrong, but also because it might possibly be dangerous.

Notes

⁰
An earlier version of this paper was presented at the Cambridge Seminar in Stratification in 1996. Support for the research on which this paper is based has been provided by the Government of Quebec’s Fonds FCAR and the Social Sciences and Humanities Research Council of Canada. I am grateful to Tony Masi, Richard Hamilton, and the anonymous reviewers of the CJS for helpful comments. Any remaining errors are my responsibility. back to text

¹ See also Livingstone (1996b). back to text

² In 1996 the Toronto Star ran a 5 part series on the ‘job crisis’ (Crank, 1996 is the first in the series). The same themes have been addressed in the Gazette of Montreal (e.g. Zacharias, 1996). Magazines appealing to the left have picked up on the concern (e.g. Marsden, 1996). One can be reasonably confident that such citations can be multiplied for both Canada and other countries. back to text

³ For relevant evidence see OECD (1996). For the periods analysed Canada displays neither a trend nor a distinctively high level of perceived insecurity as compared to other OECD countries. back to text

⁴ Note that the same effect would be produced by a shift in demand away from the goods produced by manufacturing to services. This process is, however, rarely identified in sociological writings. For a general discussion of the demand for services see Hirsch (1978). back to text

⁵ For a general, and balanced, treatment of economic integration see Ehrenberg (1994). back to text

⁶ Dunkerley is, in fact, a management consultant. But his book was brought out by a publishing house substantially oriented to an audience of sociologists. back to text

⁷ For a useful brief treatment of the concept of hysteresis see Jones (1995). back to text

⁸ Census of Canada, 1951, Vol. IV, Labour Force: Occupations and Industries, Table 4. back to text

⁹ For an excellent case study that demonstrates the insecurity in a Quebec town built to exploit local hyroelectric capacity for the purposes of refining aluminium see Igartua (1996). For a more general treatment see also Bowles (1982). For an interesting discussion of options for financing housing and other investments in single industry towns see Williamson (1985: 35–38). back to text

¹⁰ Census of Canada 1951, Volume IV, Labour Force: Occupations and Industries, Table 4. back to text

¹¹ Fragments of evidence on this process in Canada can be gleaned from Foster (1986). back to text

¹² These figures are calculated from Statistics Canada, 71–202. back to text

¹³ For some evidence of the capacity to defend themselves of unions in the public sector see Swimmer and Thompson (1995). back to text

¹⁴ See Innis (1992) and Verge (1991).b ack to text

¹⁵ In his discussion of unemployment duration, Betcherman (1995: 75) ignores this issue. back to text

¹⁶ During the 1980s, between a minimum of 1.4% (in 1980) and a maximum of 3.6% (in 1983) of the labour force were unemployed for 10 to 12 months. back to text

¹⁷ A good example of an industry struggling to come to terms with competitive problems in the 1980s with, as it turns out, considerable success can be found in Birecree’s study of the labour relations policies of the International Paper Company in the United States. back to text

¹⁸ The characteristics of the system for the early period are conveniently summarized in Cousineau (1986). A sense of subsequent changes can be extracted from Green and Sargent (1995), and other publications cited in this section. back to text

¹⁹ For examples of varying views and a references to much of the relevant literature see Green et al. (1994). back to text

²⁰ Nonetheless, using time series regression techniques, Myatt (1996b) himself employs what he considers to be a particularly conservative method for discovering an unemployment insurance effect on provincial unemployment rates and reports a substantial one. His conclusion with respect to provincial differences is that “The single most important cause of increased unemployment rate disparities appears to be UI generosities” (p.S52). back to text

²¹ Another way of presenting the same result is through the construction of a Lorenz curve of UI spells. On the basis of such an analysis Lemieux and MacLeod (1995: 21) report that “31 percent of claimants who had only one spell of UI over the 21–year period accounted for only 8 percent of total spells, 7 percent of claimants with 11 spells or more accounted for 22 percent of total spells”. Their analysis applies to the 1972 to 1992 period. Note that women were excluded from this analysis because of the complication of maternity leave. back to text

²² They do not, it should be clear, cluster at the point at which there is a qualification for benefits. The clustering is “at the point at which individuals qualify for just enough benefits to fill up the rest of the year” (Green and Sargent, 1995: 45). Note that Green and Sargent also found a similar effect for non seasonal jobs, but the magnitude of the effect for these jobs was rather small. back to text

²³This opposition was chronicled in the Canadian press in some detail. For one example see Chamberlain (1994) who reports that “Yves Landry, president of Chrysler Canada Ltd., was among those who told Manley that auto workers need unemployment when plants are shut for model changes.” (D1). Manley was the responsible federal cabinet minister at the time. back to text

²⁴ Crémieux et al. use data from 1993, the year the shift to a substantially greater degree of restrictiveness of the UI system took place. I assume that, whenever the legislation was passed, it would not have begun to substantially affect labour market behaviour until the following year. back to text

²⁵ According to May and Hollett (1995: 80) this understanding extends to calculations with respect to whether or not to stay in school. Since access to jobs in fish plants, and the qualification for UI that has gone with those jobs, is confined to those who have left school, fish plant workers leave school early. Their argument is that, in the absence of UI, the attractiveness of fish plant work would fall greatly and young people in the communities would have been more likely to stay in school. back to text

²⁶ The unemployment rate in Canada peaked in 1982 then fell to about the level of the end of the 1970s in 1987, thereafter rising at the beginning of the 1990s to levels equivalent to those of the beginning of the 1980s. I take it detail on trends on unemployment beyond what is covered in Table 1 are readily available to readers of the Canadian Journal of Sociology. However, a useful graph can be found at the end of Card and Riddell (1996). back to text

²⁷ It remains the case that there is enormous controversy over the magnitudes of effects of the UI system on the unemployment rate (before the system’s liberality was reduced in 1993). To some degree, this is a question of the mechanism through which the UI system might be thought to produce an effect. One such mechanism involves the decision with respect to whether or not to seek employment. By reducing the income difference between work and non work during the period of eligibility, the availability of UI might, it is argued, induce employees to prefer leisure to employment. Phipps (1996) reviews studies of the magnitude of the effect of changes of wages on changes in the willingness to work (the elasticity of the supply of labour) and concludes that they are small. This is not, however, the only mechanism through which UI might influence labour force behaviour. A mechanism emphasised in this paper is through the effect of UI on the structure of jobs offered. Phipps work does not test for that effect. Finally, note that in his presidential address to the Canadian Economics Association Fortin (1996: 768) postulates an effect of UI on the unemployment rate of about one percentage point (using Corak, 1994 as his source). This would be a significant effect — implying an increase of between 10% and 14%, depending on the rate of unemployment at the time. back to text

²⁸ Such a process seems to be underway in Alberta, one of the earliest governments to attempt to come to grips with increasing deficits. The legislative obligation to use budgetary deficits to pay down the accumulated debt was allowed to lapse in 1997, government spending has stabilized, and there is some evidence that it will begin to increase. The policy shifts are documented in consecutive issues of Alberta Report (e.g. Mulawka, 1997; Cosh, 1997; Torrance, 1997). The political preferences of Alberta Report are fairly clear. Still, I assume that, colourful language aside, the interpretation of shifting Alberta politics it presents is not pure fiction. back to text

²⁹ Information on the report can be readily found in des Rivières (1997). For a scathing attack on the report that notes, among other things, that parts of the United States formerly classified as part of the rust belt are currently experiencing labour shortages see Bissonnette (1997). back to text

³⁰ In what follows I do not distinguish these two sorts of account. For an attempt to rigorously test for hysteresis in Canadian unemployment see Jones (1995). He concludes that there appears not to be evidence of hysteresis. back to text

³¹ A discussion of the relevant literature can be found in Smith (1992). back to text


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