Section 3: Feature article

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What does the Pension Satellite Account tell about Canada’s pension system?

by Philip Cross ¹  and Joe Wilkinson

Statistics Canada initiated the creation of a Pension Satellite Account ²  (PSA) to fully articulate the total wealth position of pensions at the beginning of each year (the stock); the inflows of contributions and income earned into these different plans; the outflow of withdrawals; and the revaluation of pension assets during the year to arrive at the wealth position at the end of each year. ³  The flows can be cumulated over time to calculate the contribution of each component to the change in the overall stock of pension assets. These data are provided separately for three major categories of retirement schemes: government social security plans, employer-sponsored pension plans, and individual retirement savings plans.

This paper looks at the recent growth and size of pension funds and how governments, employers and individuals have changed their pension investment behaviour in response to recent events such as higher contribution limits, the lifting of restrictions on the foreign content of some types of pension funds and the volatility of asset prices (notably the stock market) over the past decade. It then examines how pension assets fit into the overall balance sheet of households, and how that has influenced household investment, saving and spending.

Overview

At the end of 2008, there were $1.8 trillion in pension assets, down from $2.1 trillion in 2007 but nearly four times greater than the holdings of $0.5 trillion in 1990. The PSA gives a complete breakdown of the $1.6 trillion growth in pension assets between 1990 and 2007 (the stock of pension assets are available to 2008, and the flows to 2007). The $1.0 trillion earned in investment income from pension assets accounted for the bulk of the increase (Table 3.1). Contributions of $1.4 trillion narrowly exceeded the $1.3 trillion in withdrawals, for a net inflow of $0.1 trillion. There was a net gain of $0.5 trillion from the revaluation of asset values (which include capital gains and losses on asset values), before last year’s financial losses.

Assets in employer-sponsored pension plans rose over three-fold from $302 billion in 1990 to $1,064 billion in 2008. Employer-sponsored plans relied on investment income for three-quarters of their growth and revaluations for the rest, as withdrawals exceeded contributions on balance between 1990 and 2007. Despite a doubling of contributions since 2002, employer-sponsored plans saw withdrawals still equal to contributions in 2007 and had the largest net excess of withdrawals over contributions between 1990 and 2007 (totalling $60 billion).

Individual registered savings plans (RSPs) grew from $157 billion in 1990 to $631 billion in 2008. Individual RSPs had the most diversified sources of growth, with higher net contributions, investment income and revaluations. They were the only major component of pensions where contributions exceeded withdrawals for the period 1990 through 2007, with a net inflow of $167 billion, accounting for about one-fourth of its total asset growth. Investment income earned in individual RSP accounts contributed just under half (48% or $286 billion) of growth up to 2007, and revaluations the remaining 27% or $161 billion.

Social security assets nearly tripled from $55 billion in 1990 to $140 billion in 2008. The increase was dominated by investment income, which totalled $88 billion from 1990 to 2007. Revaluations added a further $30 billion, particularly after 2000 when the CPP changed its investment strategy. Withdrawals exceeded contributions on balance by $15 billion between 1990 and 2007. However, all of this outflow occurred in the 1990s. The net outflow of withdrawals from social security was sharply reversed after an increase in contribution rates late in the 1990s, and contributions exceeded withdrawals by nearly $10 billion in recent years. ⁴ 

Looking at all pension accounts combined, the annual inflow of contributions increased from $36 billion in 1990 to $133 billion in 2007. Annual contributions rose the most for employer-sponsored plans and social security between 1990 and 2007. However, withdrawals (excluding Old Age Security payments) grew almost in lock-step with contributions, accelerating from $33 billion a year in 1990 to $120 billion in 2007, rising the most for employer-sponsored plans. As well, investment income rose on overall pension investments in every year up to 2008, averaging $57.7 billion a year, despite fluctuations in the yield of some financial assets (such as the drop in interest rates in the 1990s as inflation slowed). Annual investment income rose the most for employer-sponsored plans, while they fell for social security (from $5.6 billion in 1990 to $5.4 billion in 2007, mostly due to declines in the 1990s). Revaluations were the most volatile component of asset growth from 1990 to 2007, rising $29 billion a year on average before the sharp drop during last year’s financial turmoil.

While social security is the smallest part of Canada’s pension system with $140 billion of assets in 2008, it affects the most people. At the end of 2006, 12.3 million people made CPP or QPP contributions, 6.3 million contributed to RRSPs and 5.7 million had a registered pension plan from their job. ⁵  Assets held in employer-based pensions and individual RSPs rose sharply over the past two decades to $1.1 trillion and $0.6 trillion respectively in 2008, driven by higher contributions and revaluations (Figure 3.2). ⁶  Of total pension assets at the end of 2008, social security comprised 7.6%, employer-sponsored plans 58.0% and individual savings plans 34.4%.

Social Security

Social security programs are provided by governments to ensure a basic level of security to retirees. They comprise two main programs: the Canada/Quebec Pension Plans that cover all workers, and Old Age Security that covers all Canadians. However, their funding is quite different.

The Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) are government-sponsored pension plans related to having a job and comprise the largest component of social security in Canada, with Canadians receiving payments of $35.7 billion (versus $32.2 billion from OAS in 2007). Employers and employees contribute equally to these plans, for a total of $43.5 billion in 2007. The CPP and QPP are defined benefit plans in nature; however, employers do not bear risks related to the availability of funds from withdrawals under these plans. These government-established plans are intended to provide workers and their families with limited retirement earnings (as well as some protection against disability and death). It is noteworthy that assets held by these plans are allocated in the Canadian National Accounts to the government sector, and withdrawals represent income transferred to persons.

Old Age Security ⁷  is the second component of social security programs in Canada. It is a transfer payment from government revenues.

The size of social security pension assets has fallen relative to assets held in employer-based and individual pension plans (Figure 3.2), reflecting the rapid growth in employer-sponsored and individual plans. But in absolute terms there was a sharp increase in social security pension assets in the past decade after almost no growth in the 1990s (Figure 3.3). This was due to a hike in CPP and QPP contribution rates starting in 1997 to head off a looming shortfall in what until then had been a pay as you go program (pay as you go implies benefits to retirees were financed largely by contributions from younger cohorts). As well, the CPP was no longer restricted to just investing in government bonds, which boosted its rate of return on average over the past decade. ⁸ 

The overhaul of the Canada and Quebec Pension Plans starting in 1997 reversed a long-term decline in their assets and investment income. ⁹  Between 1991 and 1999, investment income earned by these pension plans fell by 19%, reflecting both an erosion of their asset base as withdrawals exceeded contributions and a lower rate of return on bonds (partly reflecting a lower inflation premium in interest rates; for example, the yield on long-term Canada bonds fell from 10.9% in 1990 to below 6% by the late 1990s).

By 2001, contributions to the CPP and QPP exceeded withdrawals, reflecting the phase-in of higher contribution rates (Figure 3.4). Investment income also rose steadily after 2001. With contribution rates doubling and investment income increasing, the overall assets in social security nearly tripled in the past decade from $55 billion in 1990 to $140 billion in 2008. According to the Chief Actuary of Canada, ¹⁰  this expansion in assets held by the CPP put it on a more secure footing: at its current contribution rate, it is sustainable for the next 75 years.

The CPP and QPP have had different asset and investment income profiles over time. From 1990 to 2001, investment income fell 25% for the CPP and 35% in the QPP. The CPP’s income then grew by 23% until 2007. The QPP’s income rose by 72% between 2001 and 2007. Before 1999, the CPP had virtually no revaluation of its assets, reflecting its restriction to investing only in government bonds. Since 2000, the CPP has come to resemble more the QPP, which always has invested in other assets. Still, the CPP has a lower variability in the value of its investment assets, highlighted by a decline in 2008 of 7.6% versus a 20.8% drop for the QPP.

Despite the widely-publicized changes to social security in the past decade, it is noteworthy that both the largest and the fastest growing parts of pension assets (both in the 1990s and after 2000) were employer-sponsored and individual pension plans.

Employer-sponsored pension funds

Employer-sponsored pension fund assets totalled $1.1 trillion in 2008, making them the largest part of Canada’s pension system and seven times the amount of assets in social security plans. Employer-sponsored plans are established by either employers or unions to provide retirement income to employees. These plans are registered with government tax departments and regulatory authorities. All contributions by employees are income tax deductible. The tax is payable only when pension benefits are received.

As of 2008, 5.9 million Canadians were members in more than 19,000 registered pension plans. ¹¹  Their assets are dominated (77%) by trusteed pension plans, both public and private. Membership was slightly larger in the private than the public sector, although assets in public sector plans were twice as large as the private sector. ¹²  Pension plans also can be administered through insurance company contracts, which operate in much the same manner as trusteed pension plans (small companies often purchase these contracts as the pay-out mechanism for their trusteed pension plan, leaving the administration to insurance companies). Other parts of employer-sponsored plans include government consolidated revenue agreements ¹³  (which are unfunded pension liabilities governments owe to its workers) and deferred profit sharing plans (Table 3.2). Most of the following analysis focuses on trusteed pension plans (TPPs).

The fastest growing segment of trusteed pension plans has been in the public sector. In 1990, public sector plans had assets of $111.1 billion, versus $88.3 billion in the private sector. By 2008, public sector assets had increased five-fold to $555.7 billion, over twice the size of the $248.7 billion in trusteed private sector plans.

There are a number of reasons why public sector pension plans have grown faster than private sector plans. Contributions in the public sector totalled $203.7 billion from 1990 to 2007, $68 billion (or 49%) more than in the private sector. Some of this rapid growth reflected the creation of funds to finance pensions for public servants, which reduced the unfunded liability of governments. Conversely, the privatization of some public companies led to the reallocation of some public sector pension assets to the private sector. Meanwhile, withdrawals from public sector plans rose only $37.2 billion more than in private plans, leaving net contributions to public plans $31 billion more than in the private sector from 1990 to 2007. Investments by public sector funds yielded $261.2 billion in income from 1990 to 2007, nearly double the private sector’s $134.9 billion (partly reflecting that assets in the public sector were nearly twice as large). Finally, revaluations in the public sector added $277 billion, more than twice the $125 billion in the private sector.

One notable feature of both public and private sector trusteed pension plans is that withdrawals often exceed contributions. Contributions to public sector pension plans fell between 1993 and 2000, in line with lower employment in governments. As well, contributions fell because of contribution holidays when funds were deemed to have more assets than required to meet future pay-outs during the stock market boom late in the 1990s. Contributions nearly tripled between 2002 and 2007, partly because of more employees as well as governments topping-up under-funded plans. The growth of withdrawals from public sector pension funds slowed slightly after the 1990s, partly as incentives for early retirement offered during government downsizing were withdrawn. Since 2005, contributions have exceeded withdrawals (Figure 3.5).

The growth of private sector trusteed pension plan assets decelerated markedly in the past decade. After more than doubling from $88.3 billion in assets in 1990 to $196.8 billion in 1999, growth slowed to 26% in the period ending in 2008, when assets totalled $248.7 billion.

The slowdown in asset growth in private sector pension plans in the past decade reflects the negative impact of revaluations on private pension plan assets since 1999 (revaluations include capital gains and losses ¹⁴  ). In the 1990s, these revaluations added an average of 5.5% a year to these assets (matching growth in public sector plans). Growth in the 2000s slowed to an average of 2.2% a year even before the drop in stock market prices in 2008 (while growth in the public sector growth was 3.8% from 2000 to 2007). Revaluations during the stock market crash in 2001 and 2002 erased $26.5 billion from private sector pension assets, which is when the gap between public and private sector assets began to widen rapidly, doubling to its current level of 124%. As well, revaluations in private sector funds fell $6 billion in 2007 even as public sector plans and individuals RSPs sustained growth. A drop in revaluations due to financial market losses in 2008 implies slower growth when this data becomes available (Figure 3.6).

Private sector pension funds rely more on revaluations to maintain asset growth than most other types of pension funds. This component also shows the most variability in the value of their assets (the standard deviation of revaluations as a percent of assets was the largest of all the different types of pension funds).

The other flows did not contribute to the slowdown in private pension assets in the 2000s. Withdrawals were stable at an average annual rate of 9% in the 1990s and 10% so far in the 2000s (despite a spike after 2006, which coincided with a surge in the number of people turning 60, the average retirement age) ¹⁵  . And investment income and contributions both accelerated after 1999.

Contributions have increased sharply in recent years as private pensions strived to remain fully funded (Figure 3.7). Contributions rose from between $5 and $6 billion a year through most of the 1990s to $11 billion in 2003, partly to make up for the stock market’s drop in 2001 and 2002 which helped shave nearly $26.5 billion off the assets of private pension plans. Since 2003, contributions have risen steadily, to $15 billion a year in 2006 and 2007. Despite the recent increase in contributions to private plans, they remained less than withdrawals ($14.1 billion versus $19.0 billion in 2007).

Firms are shifting away from conventional pension plans. One change is from defined benefit (DB) to defined contribution (DC). A defined benefit plan specifies a level of retirement benefits paid out of fund contributions or assets. Large defined benefit plans fall under legislation requiring that the fund be managed by an independent trustee and that actuarial evaluations are done regularly. If the pension is sponsored by the employer, actuarial surpluses are generally run down by contribution holidays for the employer, while deficits are made up by large lump sum contributions to the plan. Contributions in a defined contribution plan are paid into an individual account for each member, which are then invested and benefits are paid depending on how the investment fund performs. One type of the latter is group registered retirement savings plans (RRSPs), which are allocated in the pension satellite account to individual RSPs. A group RRSP is simply a collection of individual accounts set up through an employer that leaves workers to decide whether to participate and, if so, how much to contribute. So some of the recent growth of individual RSPs represents a shift in DC plans that used to be allocated to employer-sponsored plans to group RRSPs allocated to individual RSPs.

Defined benefit plans hold a significantly larger share of the assets of Canadian employer- sponsored plans than their share of employees who are members of all pension plans in Canada, partly because DB plans were dominant for years and hence have had longer to accumulate assets than DC plans. Conversely, defined contribution plans hold a smaller share of the assets of Canadian employer-sponsored plans relative to their share of employees who participate in Canadian pension plans.

Individual registered savings plans

Individual registered savings plan (RSPs) contributions are voluntary and tax-sheltered until withdrawal. Assets in these plans (especially RRSPs) have grown significantly, starting in 1991 when higher contribution limits led to a doubling of contributions between 1990 and 1995. Contributions rose in the 2000s, but not as fast as withdrawals, a reversal from the 1990s. Most of the increase in individual RSP assets this decade came from the revaluation of assets, especially during the stock market boom from 2003 to 2007 which added over $50 billion a year to these pension assets. Investment income also grew by 72% after 1999.

Canadians increased individual contributions in response to their approaching retirement from $27 billion in 2002 to $34 billion in 2007. However, contributions to individual RSPs did not accelerate as much over the past decade as social security or employer-sponsored pension plans. Contributions to individual RSPs rose 20% between 1999 and 2007, while they more than doubled for social security and employer-sponsored plans. This slower growth occurred despite a large increase in allowable contributions phased-in after 2002 (although unused contribution space for RRSPs can be carried forward indefinitely, reducing the urgency to contribute).

This increase in contribution limits (and the lifting of foreign investment restrictions in 2005) did not provoke the same surge in contributions seen after 1991. Contributions doubled in the 1990s but since then growth slowed to 20%. Looking at contributions to individual RSPs as a share of disposable income shows a rise from 2.5% in 1990 to 5.1% in 1996 and then a slow decline to 3.8% in 2007. This slowdown occurred despite the aging of the population over the last two decades. Some of the smaller response of contributions may reflect the large gains in revaluations as the stock market surged between 2003 and 2007. Looking at net contributions and revaluations together shows an acceleration between the 1990s and the 2000s, suggesting households did not feel the need to contribute to plans that were growing rapidly anyway because of capital gains.

Contributions to individual RSPs have consistently exceeded withdrawals (Figure 3.8). However, the gap between the two has narrowed, as withdrawals rose by 80% since 1999 versus the 20% gain in contributions. Instead, the rapid growth of assets from 2002 to 2007 has been sustained by large capital gains, averaging $52.6 billion a year in the four years before markets turned down in 2008 (the exact impact on RRSP assets values will not be available until next year’s update).

Since 1999, pension assets in individual RSPs have grown faster than private sector pension plans (6.5% versus 3.4% a year thru 2008). The faster growth of investments in individual retirement savings plans relative to private sector trusteed pension plans after 2000 also may reflect Canadians responding to the slowdown in assets held by employer-sponsored pension funds (as noted, the growth of group RRSPs reinforces this result). This is consistent with a study that finds that retirees who do not benefit from registered pension plans on average appear to find alternatives to produce the same level of income, including working later in life and generating more rental, interest and dividend income. ¹⁶ 

Where do TPPs invest?

Trusteed pension plans (both in the public and private sectors) shifted to foreign investments after restrictions were lifted in 2002. In the five years before 2002, foreign investments held by TPPs rose 51% (Figure 3.9). In the next five years they rose 93%. The increase was dampened by the appreciation of the exchange rate, which lowered the Canadian dollar value of foreign investments. These investments fell 19% in value in 2008.

Domestically, TPP assets shifted from bonds to stocks. Between 1997 and 2002, pension assets held in stocks rose 6% (including declines in 2001 and 2002) while bonds grew by 12%. In the next five years, stocks expanded by 51% and bonds by 31%. Pension assets held in stocks fell 39% in 2008, reflecting both lower prices and a reallocation from stocks to other assets, while bonds fell only 1.6%.

The impact of pension assets on balance sheets and savings

The large changes since 1990 in pension assets held by households led to several notable changes in household balance sheets. Before 1990, households were content to invest mostly in conventional deposits and bonds. Since then, their focus has shifted to pension and stock funds (Figure 3.10). In fact, the growth of these assets also outstripped housing assets since 1990 (although the level of assets in real estate remains slightly higher than household pension assets). The share of household pension funds in total financial assets rose from 25% in 1980 to 33% in 1990 and 36% in 2007. The increase was led by trusteed pension plans (both public and private) and individual RSPs.

Led by pension assets, total household financial assets have more than tripled from $1.2 trillion in 1990 to just over $4.0 trillion in 2007. Household holdings of financial assets remained slightly larger than investment in non-financial assets, notably housing. While the housing market has surged in recent years, this follows several years of sluggish conditions in the mid-1990s. Overall, households had $6.9 trillion in total assets (financial and non-financial) at the end of 2008, with 39.4% in housing and 24.5% in pension assets (excluding social security).

Increased withdrawals from pension plans help explain the trend to a lower personal savings rate in recent years. Already, personal saving excluding pension plan saving has been negative for the last two decades, declining steadily to almost a $200 billion drop in 2006 and 2007 (Figure 3.11). Negative savings would imply that households are increasing their liabilities (such as mortgage debt) at a faster rate than their assets. Since 2000, Canadian households have increased their financial liabilities faster than their assets, suggesting some of this increased debt or lower accumulation of financial assets has been used to finance spending.

The shift in the composition of household wealth to real estate and pension assets was encouraged by the tax-deferred or exempt status of many of these investments. The primary residence of households is tax exempt when sold, implying that most homes (the largest part of household assets) are sheltered from taxes. Meanwhile, since the early 1990s savings in pension plans more than accounted for all personal savings, and most do not pay tax until withdrawal. This shift in savings to money held in pension plans may reflect a rational response to tax incentives. It also reflects the steady aging of the population: since consumption by retirees is counted in personal expenditure, but it is financed by running down pension assets rather than current income, the aging of the population inevitably leads to a lower or even negative saving rate. Income taxes also will rise more than personal income would imply as withdrawals from tax-exempt pension assets increase.

Conclusion

There have been several notable shifts since 1990 in the structure of pension assets in Canada. Assets have nearly quadrupled, mostly due to higher investment income. Contributions rose steadily from 1990 to 2007, but barely kept up with the increase in withdrawals as the population aged rapidly. Revaluations accounted for about one-third of overall asset growth up to 2007.

Social security has shown the fastest growth after its reform in the late 1990s, although it remains the smallest part of total pension assets. Trusteed pension plans were still the largest segment of pensions, sustained by rapid growth in the public sector. Private sector pension plans have posted the smallest growth in assets since 1999, despite increasing contributions, as withdrawals kept pace with contributions and gains from revaluations slowed. Individual RSPs have not made up for this slower growth in the private sector, even before taking into account the large losses from the global financial turmoil in 2008, as contributions to these plans slowed from their rapid gains in the 1990s.

Households appear to take a macro view of their pension system. When contributions rise sharply in one area, such as the CPP and QPP late in the 1990s, they slow elsewhere. And when pension assets are growing rapidly due to capital gains, contributions slowed. These changes in the portfolio of pension flows and assets are summarized succinctly in the Pension Satellite Account.

2. Canada’s employment downturn October 2008 to October 2009

by J.Gilmore ¹⁷  and S. Larochelle-Côté

In October 2008, employment levels were at an all-time high and unemployment rates were near historic lows. However, a sudden downturn in the world economy caused widespread employment losses in Canada’s labour market. One year after the beginning of the downturn, employment in Canada was down 400,000, for a loss of 2.3%. The large majority of losses (-357,000) took place in the first five months of the downturn.

While the recession affected the country broadly, some Canadians were impacted more than others, particularly youth, men, and those employed in manufacturing, construction, natural resources and in transportation and warehousing. Despite these losses, modest gains were seen among those aged 55 and over and for those working in real estate and leasing; information, culture and recreation; and health care and social assistance.

As employment levels have fallen during this 12-month period, unemployment has increased. In October 2008, the unemployment rate in Canada was 6.3%; by October 2009, it had risen to 8.6%.

This report provides a more detailed review of the impacts of the downturn on Canada’s labour market over the past 12 months, since the employment peak of October 2008, and contrasts it with previous downturns.

While the initial employment decline was sharp, an employment plateau came earlier than in previous downturns

Employment declined much faster in the early months of the current downturn in comparison with the first few months of the downturns in 1981 and 1990 (Figure 3.12). Five months after October 2008, employment had fallen by 2.1%, while after five months in both 1981 and 1990, it had declined by 0.8% and 0.6% respectively. However, the decline after nine months was the same as the other two recessions.

Over the last seven months, however, employment levels have been relatively stable, with some months with modest gains, others with some losses, and others with little change. Employment losses for the previous two downturns, however, continued for 17 months in 1981-82 and for 11 months in 1990-91, when after six months of growth, it was then followed by another seven months of declines.

Canada-US comparison

In the United States, employment peaked in December 2007 and has declined steadily since. Over this nearly two-year time period, the U.S. unemployment rate for those aged 16 and over doubled, from 4.9% in December 2007 to 10.2% in October 2009. The rise in the unemployment rate has been less pronounced in Canada. The comparable Canadian unemployment rate for those aged 16 and over rose from 5.2% in December 2007 to 7.7% in October 2009, a 2.5 percentage-point increase.

Almost all of the increase in the comparable Canadian unemployment rate started after October 2008, rising from 5.4% to 7.7% in October 2009 (+2.3 percentage points); over this same period, it rose by 3.6 percentage points in the United States (from 6.6% to 10.2%). In the first 12 months of the previous two downturns, Canada’s unemployment rate rose more rapidly than that of the Americans (+3.7 percentage points vs. +2.1 in 1981/82 and +2.4 vs. +1.3 in 1990/91).

Employment in manufacturing fell for the 12-month period, particularly in the first five months

During the 12 months of the current downturn so far, employment in manufacturing had the largest decline of all industries (-218,000). In the first five months, manufacturing employment fell by 134,000, followed by construction (-99,000); retail and wholesale trade (-47,000); educational services (-34,000); public administration and transportation and warehousing (-28,000 each). Not every industry was in decline during these first five months, however; some modest employment gains took place for those in health care and social assistance (+30,000) and “other services” (+17,000).

However, in the next seven months, manufacturing and transportation and warehousing employment continued to fall (-83,000 and -23,000, respectively), while the other industries which had employment losses in the first five months (construction, trade, educational services and public administration) experienced either modest gains or unchanged employment levels over this seven-month span.

The decline of manufacturing employment is not a new story; it has been falling since late 2002. What is new is that this current downturn has accelerated the pace of the employment decline (Figure 3.13). Factory employment has fallen by 573,000 since November 2002, with more than one-third of the decline accounted for from October 2008 to October 2009.

The employment declines in manufacturing since October 2008 have been widespread. Manufacturers with notable declines in employment over the 12-month period included fabricated metal products; transportation equipment manufacturing; paper and printing; and furniture and related manufacturing.

Not every industry had employment losses over this 12-month period. Modest employment gains took place in finance, insurance, real estate and leasing; information, culture and recreation; and health care and social assistance. During the first 12 months of the previous two downturns, health care and social assistance also experienced modest employment gains, while the other two industries either experienced employment declines or slower growth compared with the current 12-month period.

Private employees suffered heavy employment losses while self-employment increased

Employees in the private sector, in the public sector, and in self-employment have not been equally affected by employment losses. During the first five months, main-job employment among both private sector and public sector employees fell at roughly the same pace, while self-employment remained stable (Figure 3.14).

In the seven months since, however, self-employment increased and the number of public sector employees remained relatively stable. By contrast, the number of private sector employees continued to fall, as manufacturing, construction, and transportation and warehousing continued to shrink. In all, the number of employees in the private sector fell by 449,000 since October 2008, compared to a decline of 55,000 among public employees and an increase of 104,000 in self-employment.

The first 12 months of the previous two downturns showed very similar results: heavy losses for private sector employees; modest losses among public sector employees; and modest growth among self-employment.

Men with lower levels of education were particularly affected

Just like in past downturns, employment losses among young workers have been a consistent feature of the current slump. Since October 2008, employment declined by 10.5% and 6.9% respectively among males and females aged 15 to 24 (Table 3.3). Furthermore, youths experienced employment losses throughout the entire 12 months. Core-working age individuals were less affected, although men in this age group also experienced significant declines (-2.8%).

However, examining changes across education categories is also important as education is often seen as a bulwark against job fluctuations. Core working-age men with high-school education or less experienced heavy employment losses (-5.2%), since many were employed in industries such as manufacturing and construction. Men with high school education or less have also experienced similar losses in the previous two downturns.

Women with high school education also experienced losses (- 3.6%) from October 2008 to October 2009, but to a lesser extent than their male counterparts.

During the first 12 months of the previous two downturns core-working age men (25 to 54) with university degrees experienced employment growth; in this most recent 12-month period, they experienced a small decline. Core-working age women with university degrees, however, had declines between April 1990 to April 1991 and in the most recent 12-month span, principally for those working in services.

Immigrants who landed more recently were affected by the downturn

Even though the overall population of core-working age immigrants who landed within the previous five years declined over the last 12 months (-6.6%), these immigrants were still more affected by the economic downturn than Canadian-born workers, with a much larger share of employment losses (-12.9% vs. -2.2%). The bulk of the losses for these immigrants occurred for those working in the manufacturing industry. Immigrants who landed in Canada more than five years to 10 years earlier, however, experienced smaller losses than the Canadian-born over the 12-month period, and those who landed more than 10 years earlier experienced modest employment gains.

Off-reserve Aboriginal employment also down over this span

Among off-reserve Aboriginal people aged 25 to 54, the pace of employment losses during this 12-month period was double that of the non-Aboriginal population (-4.0% vs. -1.9%). Off-reserve Aboriginals also continue to have generally higher unemployment rates and lower employment rates than non-Aboriginals.

Less full-time employment, more temporary jobs during the 12-month period

Since the start of the downturn, losses in full-time employment were significant (-2.2%), and larger than part-timers (-1.6%). Declines among those with long hours - that is, 40 or 41 or more hours (-4.6% and -4.5%, respectively) were especially important. Conversely, the number of employees with a shorter full-time schedule – between 30 and 34 hours – rose over the period. This decline in long hours and growth in shorter full-time schedules is consistent with changes in hours during the first 12 months of the previous two downturns. Note that these changes may not be exclusively the result of job losses, as they could also be the result of reduced work hours among employed workers.

The number of jobs lost among permanent workers was also noteworthy. From October 2008 to October 2009, the number of permanent employees declined by 3.8%, while the number of temporary employees increased by 0.7%. Therefore, not only did Canadians lose jobs over the past 12 months, but the Canadian labour market became more characterized by increases in jobs with fewer hours and in temporary jobs.

Low-wage earners were most heavily affected

Employees with low earnings also experienced significant employment losses over the period as those earning less than $10 an hour saw the largest decline in employment (-24.8%). The majority of these employees were youths, but nearly one-third were of core working age.

The number of employees who earned $40 or more per hour grew over this same time period. This increase was predominantly among adult women, particularly those working in health care and social assistance; educational services; public administration; and finance, insurance, real estate and leasing.

Employment among families with young children declined

The effect of the downturn was also different across family types (Table 3.5). Youth employment in all families dropped sharply in this downturn. Employment fell by 2.5% among mothers and 2.4% among fathers in two-parent families with at least one child under the age of 18. In the first 12 months of the previous two downturns, it was the fathers of young children who experienced more significant declines in employment than mothers.

Single mothers with younger children were also hit hard by the downturn, with employment down -6.8%. Conversely, single fathers with younger children had an employment gain of 4.6% over the period. These recent changes in employment for both single mothers and single fathers are consistent with what occurred during the first 12 months of the previous two downturns.

Youths aged 15 to 24 in any of these families were heavily affected by the current downturn, noticeably among those aged 15 to 17.

The employment growth seen among individuals in “other economic families” (e.g. adult siblings living together, an older parent living with an older child) was likely influenced by a notable increase in the overall number of individuals in such families over this one-year period. During the first 12 months of the previous two downturns, the number of individuals in “other economic families” also increased, but, contrary to the most recent downturn, their employment levels declined.

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