Chapter 19 The impact of precarious employment on financial security in retirement

Problems with the definition of non-standard employment
Recent trends in non-standard employment in Canada
Low earnings in precarious jobs
The special concerns of women
Racialized workers and other groups
Union membership
The duration of non-standard employment
Pension coverage for contingent workers
The difficulty of saving for retirement
Public pension programs and contingent workers
Contingent workers and the Canada pension plan
Further research
Bibliography

Labor markets in many industrialized countries have experienced dramatic changes over the past couple of decades. Under the pressure of globalization, technological developments, policy changes and other forces, the nature of paid employment for many of today's workers is now very different from that of previous generations. For many people, the expectation is no longer that of finding full-time work with a single employer and spending a lifetime in that job until being able to retire with a good pension. Those kinds of jobs were once considered "standard." Most people in the paid work force were employed in such jobs. Since the late 1970s, however, more and more jobs no longer fit that pattern. Some are short-term, temporary jobs, others are contract work, part-time and casual jobs. Many workers hold multiple jobs as a way of making ends meet. Others have become self-employed, working for their own account without employees.

Because they do not fit the pattern of "standard" jobs, these different work arrangements are often referred to as "non-standard" jobs. Non-standard work arrangements tend to be poorly paid. Working conditions are often uncertain and there may be little or no job security. Workers may be expected to work at home or to be on call when an employer needs them. Employment standards legislation may not apply and workers in these jobs are generally not eligible for pensions and other benefits. For obvious reasons, researchers now describe these jobs as "precarious employment." Workers in precarious jobs are also referred to as "contingent workers" whose employment is contingent upon the fluctuating demands of employers in the market economy. All told, about 35% of all employment in Canada in 2003 consisted of these "non-standard" work arrangements (Table 19.1).

Of course, not all workers in non-standard employment have "precarious" jobs. Some temporary workers may have high earnings for brief periods of time. Some permanent part-time workers may have relatively secure jobs, perhaps with benefits. Some high-income professionals are counted among the self-employed, although they are likely to be the exception and are not typical of this group (Statistics Canada 1997).

In terms of preparing for financial security in retirement, workers in precarious jobs are clearly among the most vulnerable in the labor market. Because they generally do not have an ongoing relationship with a particular employer, they usually are not covered by workplace pension plans.¹ But financial security in retirement depends on more than simply belonging to a workplace pension plan. Many workers in "standard employment" are not covered by these plans either - although they may have access to other types of employer-sponsored retirement saving programs such as group RRSPs. However, workers in precarious jobs face additional challenges. Their uncertain and fluctuating earnings may make it difficult for them to save for their own retirement. Although they are covered by the Canada/Quebec Pension Plan, these plans provide only a basic pension in relation to the contributor's earnings, and high mandatory contribution levels may be burdensome for workers with low or intermittent earnings. Workers in some types of non-standard jobs must pay double contributions, described below, to obtain coverage. Immigrants who are members of visible minority groups may be particularly disadvantaged. They may be more likely to be in precarious jobs as well as having fewer years in Canada in which to build up pension entitlements and retirement savings.

Recent studies have documented the economic vulnerability of workers in non-standard jobs. Both part-time and self-employed workers have, on average, a greater incidence of low earnings. They may also be at risk because they are less likely to be unionized. Individuals who work only part-year tend to have a greater incidence of low earnings. Young workers and workers with low levels of education are also subject to low pay (Chaykowski 2005).

In this chapter, we will look at the characteristics of precarious employment in Canada and consider the implications for the future financial security of those employed in this type of work when they reach retirement age.

Problems with the definition of non-standard employment

While non-standard work arrangements have often been defined as any kind of job that differs from the norm of a full-time, full-year permanent job, it is clear that categories of non-standard work may overlap. For example, a temporary worker may be employed full-time; a part-time worker may be a permanent employee working for a full year for the same employer; a person holding multiple jobs may have some part-time, some full-time and some temporary work. Measuring the extent of non-standard employment then becomes problematic, unless overlapping categories can be eliminated.

The most common measure used in Canada consists of four categories: part-time employment (less than 30 hours a week at the person's main job); temporary employment - including term or contract work, seasonal, causal, temporary agency jobs and all other jobs with a specific pre-determined end date; self-employment without employees (own-account self-employment); and multiple jobholding (Cranford, Vosko and Zukewich 2003). Self-employed workers who employ paid help are generally excluded from the definition.

A simplified way of estimating the number of workers in non-standard jobs is to add together all part-time workers, full-time temporary, full-time multiple jobholders and own-account self-employed. The part-time category includes temporary, casual, multiple jobholders and others all of whom worked less than 30 hours a week at their main job. On this basis 35% of employment in Canada in 2003 could be considered non-standard (see Table 19.1). However, researchers have argued that this rather broad definition of non-standard work does not provide a clear picture of the insecurity associated with certain types of non-standard work arrangements (Cranford, Vosko and Zukewich 2003).

In their extensive work on precarious employment, Cranford, Vosko, and Zukewich develop a new typology of mutually exclusive forms of employment as a way of better understanding the heterogeneity inherent in the broad definition of non-standard employment. The result is six categories of employment that do not overlap. Employees are divided into full-time permanent; full-time temporary, part-time permanent and part-time temporary. The self-employed are divided into those who are employers and those who work for their own account (Cranford, Vosko and Zukewich 2003). These authors argue that a better understanding of the nature and extent of precarious jobs necessitates moving away from grouping situations that are united only by their difference from the standard employment relationship.

Recent trends in non-standard employment in Canada

The percentage of Canadian workers employed in non-standard work arrangements increased quite significantly during the early 1990s. Between 1989 and 1994, the percentage of the workforce aged 15 and over engaged in at least one of part-time work, temporary work, own-account self-employment, or multiple job-holding grew from 28% to 34% (Cranford, Vosko and Zukewich 2003). In the past few years, the percentage of those employed in non-standard work has remained fairly constant, hovering around 34% to 35% (Table 19.1).

However, stabilization of non-standard work arrangements over the latter half of the 1990s may mask growing insecurity for some groups of workers in certain types of non-standard jobs. Cranford, Vosko and Zukewich note that the relatively more precarious forms of non-standard work - temporary jobs (Table 19.2) and own-account self-employment - became more prevalent during this time. In fact, they also argue there is income and occupational polarization among permanent full-time employees, suggesting this form of employment is also becoming more precarious in the context of broader labor market restructuring (Luxton and Corman 2001, Cranford, Vosko and Zukewich 2003, Saunders 2003).

Low earnings in precarious jobs

Many workers in precarious jobs have low earnings making it difficult for them to save for their own retirement through such vehicles as RRSPs. Total average earnings of part-time workers, of course, will be lower than those of people who work full-time. But average hourly earnings of part-time workers are also lower than those of full-time workers. For example, women who worked part-time in the private sector in 2003, earned an average $11.10 an hour, compared with an average of $15.40 an hour for women who worked full-time in the private sector (Jackson 2004a).

Temporary jobs are also generally less well paid than permanent ones and offer fewer employee benefits. In 2003, temporary workers earned 16% less per hour than their permanent counterparts, or $16.69 versus $19.98. Of the four types of temporary employees, contract employees showed the smallest gap, earning an average of 8% less than their permanent counterparts in 2003. Seasonal, casual and others, and those using employment agencies earned 28%, 24% and 40% less respectively (Galarneau 2005). (It should be noted that these data refer to temporary employees aged 25 to 54 and do not include own-account self-employed individuals.)

Data from the Survey of Labor and Income Dynamics for 2001 show average hourly earnings of standard jobs at $18.89, while non-standard jobs averaged $13.17 an hour.² Own-account self-employed earned an average of $16.99 an hour, full-time temporary workers averaged $13.65 an hour, part-time temporary workers averaged $11.58 an hour, and permanent part-time workers averaged $13.20 an hour (Kapsalis and Tourigny 2004).

Of course, not all self-employed individuals have low earnings. Some highly paid professionals, such as physicians and management consultants are included in this category. However, a greater percentage of the self-employed work in lower-paying service and artistic occupations, - for example as child care workers, barbers and hairdressers (Statistics Canada 1997). Detailed studies indicate a high degree of polarization in the earnings of the self-employed, who tend to make either small or large amounts of money. As well, the wage gap between women and men who are self-employed is greater than that between women and men who are employees. Average earnings of own-account self-employed men in 1995 were $27,200 - almost double the $14,800 average earnings of own-account self-employed women. Because so many self-employed earn relatively low amounts, their median earnings are much lower than their average earnings. In 1995, the median earnings of the self-employed were 68.5% of those of paid workers (Statistics Canada 1997). Overall, the incidence of low earnings among the self-employed is much greater than among employees. For example the proportion of full-year full-time self-employed workers with low earnings in 2000 was 42% compared with 11% for full-year full-time employees (Chaykowski 2005).

It is sometimes suggested that it is difficult to consider permanent low-earnings employment as more attractive than temporary high-earnings employment. However, from the point of view of financial security in retirement, high earnings from temporary employment offer no guarantee of future financial security - particularly if the temporary employment is intermittent, part-time or part-year. For example, temporary workers will not have the opportunity of joining a workplace pension plan if the employer where they work temporarily has one. They are generally not eligible for other types of benefit coverage either. Permanent full-time workers, or even permanent part-time workers with low earnings may be able to join a pension plan if the employer has one. They may also be eligible for other benefits, such as extended health and disability coverage. Perhaps more important, permanent workers will be covered by the Canada Pension Plan, even if they have low earnings - unless they earn less than the Year's Basic Exemption, currently set at $3,500. While employers hiring temporary workers generally must contribute to the CPP on their behalf, workers who have periods of temporary earnings, even if these were brief high-earning periods, may be disadvantaged at retirement because CPP retirement pensions are based on average annual earnings over the individual's contributory period.³

Some researchers have suggested that low earnings of workers in non-standard work arrangements may not indicate financial vulnerability, since many of these workers may be in family situations where a higher-earning spouse or partner is able to support them. However, there is no guarantee that a higher-earning spouse will provide for the retirement income of the lower-earning spouse. In addition, given the increasing instability of spousal relationships, the higher-earning spouse or partner may not even be around to support the lower-earning spouse in old age. Since is it most often women who are employed in lower-paying non-standard work arrangements, such arguments undermine women's equality and the push towards economic autonomy for women. They imply women must continue to depend on a spouse or partner for financial support in retirement.

The undesirability of such an approach is evident in the fact that once women are left on their own in old age, they are very likely to be poor. Only 6.3% of couples aged 65 or older lived in low-income in 2001, but 45.6% of unattached women aged 65 or older in that year had incomes below Statistics Canada's before-tax Low-Income Cut-Off (LICO) (National Council of Welfare 2004).⁴ Even after income taxes, credits and deductions are taken into account, 18% of unattached women aged 65 or older were considered low-income according to the after-tax LICO. By 2002, that percentage had edged up to 19.5%. In the same year, 14.4% of unattached men aged 65 or older were considered low income (Statistics Canada 2004a).

Other scholars have examined the economic vulnerability of workers in non-standard jobs independent of their economic family. For example, Richard Chaykowski argues economic vulnerability, generated in the labor market, ought to be evaluated in its own right, independently of whether such vulnerability is compensated for by the economic well-being of others in the same family unit. The relevant issue says Chaykowski, is whether individuals experience economic vulnerability - not families. As well, he notes, since the composition and structure of families is now much more dynamic than it has been in previous decades, policies aimed at alleviating economic vulnerability that attach to families, or that evaluate well-being in a family context, may not adequately account for shifting family circumstances of individuals over time (Chaykowski 2005).

The special concerns of women

Women are much more likely than men to be employed in precarious jobs (Table 19.3 and 19.4). That will have an important bearing on their plans for retirement, their ability to save, the likelihood of their belonging to a workplace pension plan, and their financial security as they grow old. In 2003, for example, when women accounted for 47% of total employment in Canada, they were 55% of total non-standard employment (Table 19.1). More than 40% of women's compared with about 30% of men's jobs in 2003 were considered "non-standard" (Table 19.1). In 1989, 35% of employed women compared with 22% of employed men had a non-standard employment relationship (Townson 2003). Researchers have noted that since women comprise a sizeable component of non-standard work, vulnerability in the labor market exhibits significant gender dimensions. Chaykowski points out that vulnerability issues intersect with existing policies in the labor market and in workplaces. He says it is clear that many workers are vulnerable and that "our current policy regimes are inadequate to help them improve their conditions of work." (Chaykowski 2005)

That such a high percentage of women workers are employed in non-standard work arrangements raises serious concerns about their financial security in retirement. Policy makers have long been concerned about high rates of poverty among older women. When the National Pensions Conference was held in 1981, addressing the poverty of older women was one of only four issues on the agenda for discussion. At that time, 72% of unattached women aged 65 or older had incomes below Statistics Canada's before-tax Low-Income Cut-Off (LICO). Many of these women did not have pensions in their own right because they had not worked outside their homes. Most were widows who were not entitled to a surviving spouse pension from their deceased spouse's workplace pension plan. During the 1980s, a number of measures were introduced in an attempt to address the situation of older women. But observers also suggested that as more and more women entered paid employment, women would be able to accumulate pensions in their own names and poverty rates among older unattached women would decline.

Poverty rates of this particular demographic group have indeed gone down, largely thanks to the maturing of the CPP/QPP. But a very high percentage of older women on their own still have low incomes, as noted above.

Since the early 1980s, there has been a dramatic increase in women's involvement in paid employment. By 2004, more than 82% of Canadian women in their prime childbearing years (25 to 44) were in the paid work force, and 80% of women aged 45 to 54 were in the paid work force. But although there have been remarkable increases in the percentage of women in paid employment, the financial security of women in old age is still at risk. While women have entered paid employment in ever-increasing numbers, they are now increasingly employed in precarious jobs that offer no benefits and no way of providing for their future financial security. In 1989, for example, 35% of employed women were working in non-standard jobs.⁵ By 1999, that percentage had risen to 41%. In the same period, the percentage of employed men in non-standard work arrangements rose from 22% in 1989 to 29% in 1999 (Statistics Canada 2000). Since 1999, the percentage of both employed women and men in non-standard work arrangements has remained relatively steady (Table 19.1).

While it might be argued that women have always been over-represented in non-standard jobs, a closer examination of the data indicates some significant trends. For example, between 1976 and 2004, women represented a fairly steady 69% to 70% of part-time employment. But during the same period, their representation in self-employment increased from 26.3% to 34.2%, while women as a percentage of multiple jobholders increased from 41.8% in 1987 to 54.8% in 2004 (Statistics Canada 2000, 2004d and 2005).

Racialized workers and other groups

Anecdotal evidence seems to suggest workers from certain groups such as immigrants, visible minorities⁶ and Aboriginal persons, are more likely to be employed in non-standard work arrangements than are other workers. Some researchers suggest racial minority workers and those of low economic class may have limited bargaining power and knowledge of their rights and are easily relegated into insecure, poorly paid jobs with no career mobility (Zeytinoglu 2000).

Unfortunately, employment data from Statistics Canada's Labor Force Survey, which is the main source of data on non-standard work arrangements, do not allow for a detailed breakdown by these demographic groups. Data from the 1996 Census seem to indicate that visible minority and Aboriginal women in paid employment are less likely than other women to be employed in some types of non-standard work arrangements, such as part-time work - although they may be less likely than other women to be in paid work at all (Townson 2003). Aboriginal women, for example, are much less likely than their non-Aboriginal counterparts to be part of the paid workforce. Only 41% of Aboriginal women aged 15 and over were employed in 1996, compared with 53% of non-Aboriginal women. In 1996, about 30% of Aboriginal women with jobs worked part-time - about the same figure as for non-Aboriginal women. However, Aboriginal women are heavily concentrated in low-paying occupations traditionally held by women (Statistics Canada 2000).

More recent data from the Survey of Labor and Income Dynamics (SLID) appear to confirm these findings. Using their four employment categories of part-time temporary, part-time permanent, full-time temporary and full-time permanent, Cranford, Vosko and Zukewich found that in 2000, 72% of visible minority men, compared with 73% of non-visible minority men who were employed were in permanent full-time jobs. But 63% of visible minority women, compared with 56% of non-visible minority women in paid employment held permanent full-time jobs in that year - the rest were in some form of non-standard work arrangement. While 17% of employed women from visible minority groups held permanent part-time jobs in 2000, 21% of employed women who were not visible minorities were in permanent part-time employment (Cranford, Vosko and Zukewich 2003).

These researchers note there are considerable differences among people of colour and between people of colour and white employees (those aged 15 to 64). Black and South Asian employees are less likely than white employees to have full-time permanent wage work. However, Chinese and Filipino employees are more likely than white employees to have full-time permanent work, South Asian employees are substantially more likely to be in full-time temporary wage work than all the other groups, while Black employees are substantially more likely than the other groups to be in part-time permanent wage work. West Asian and North African employees have a greater proportion than all the other groups in part-time temporary wage work and the proportions of South Asian and Filipinos in this most precarious form of wage work are slightly higher than those of white employees (Cranford, Vosko and Zukewich 2003).

Union membership

Being covered by a workplace pension plan is closely associated with membership of a trade union. In 1999, for example, almost 80% of workers in unionized jobs had pension plan coverage, compared with only 27% in non-unionized jobs. In addition, union density increases with firm size and pension coverage also increases with the size of the firm (Akyeampong 2002). Pension coverage of unionized workers ranged from 70% in firms with less than 20 employees to 85% in firms with 100 or more (Table 19.5).

However, only 36% of workers employed in permanent jobs in 2003 belonged to a union⁷ (Galarneau 2005). Workers employed in non-standard work arrangements are less likely to be union members than other workers are. Most own-account self-employed workers are almost certainly not union members. As well, many self-employed workers are excluded from coverage under collective bargaining law and employment standards legislation (Fudge, Tucker and Vosko 2000). While some self-employed people working for their own account may be able to ally themselves with other individuals in a similar situation and purchase a private group contract for pensions or other benefits, such arrangements are not common. However, some self-employed workers in certain occupations, such as theatrical and artistic jobs, have been able to form their own unions.

Part-time workers are also unlikely to be union members. Among part-time employees in the private sector, only about 13% belong to a union. About 21% of full-time employees in the private sector are union members. Part-time workers in the public sector are much more likely to be unionized - for example, 73% of women and 56% of men employed part-time are union members (Jackson 2004a). But only 20% of part-time workers are employed in the public sector.

Almost all temporary workers employed through a temporary help agency are non-unionized, as are 74% of seasonal workers. But 41% of contract workers and 45% of casual or other temporary workers are union members (Galarneau 2005).

The duration of non-standard employment

For some workers, a non-standard work arrangement may represent a short-term situation. For example, students may work part-time while completing their education; older workers may ease into retirement by accepting casual work or becoming own-account self-employed. According to recent study, in 2001, 27% of non-standard workers were aged 16 to 24 and 15% were 55 to 69. The corresponding estimates for workers holding standard jobs were 10% and 9% (Kapsalis and Tourigny 2004).

Women may work part-time while their children are young. For example, in 2003, about 38% of women aged 25 to 44 - which might be considered the main childbearing years - who were employed part-time said they were working part-time because they were caring for children or had other personal or family responsibilities. It is perhaps an indication of the current state of the labor market, however, that almost 33% of women aged 25 to 44 who were employed part-time in 2003 said they were working part-time because they could not find full-time work (Statistics Canada 2004d). In fact, the incidence of involuntary part-time work for women in this age group has increased in recent years from 29.8% of total part-time work in 1999 to 32.7% in 2003 (Townson 2004).

Where people hold a precarious job for a relatively short period, there may be little impact on their eventual financial security in retirement. For example, part-time employment while a student may eventually lead to full-time employment once education is finished, where membership of a workplace pension plan or ability to accumulate retirement savings is more likely. Older workers who switch to some form of non-standard work as part of their retirement transition may use additional earnings to supplement a pension. But workers who spend long periods of paid employment in precarious jobs with low wages and no benefits may find their financial security in retirement is seriously compromised.

While the extent of non-standard work arrangements at any particular point in time has been reasonably well documented, there is little information about the duration of non-standard employment. However, one recent study indicates that for some groups, non-standard work arrangements persist for significant periods of time. In fact, according to the authors of this study, "some individuals find themselves involuntarily working in some form of non-standard employment for years." Based on data from the Survey of Labor and Income Dynamics (SLID) from 1999 to 2001, Kapsalis and Tourigny (2004) suggest that once engaged in non-standard employment, the majority of workers remain in such jobs for an extended period of time. More than half (54%) of the five million people in non-standard jobs in 1999 maintained this form of employment throughout the following two years. An additional 9% were non-standard workers in 1999 and 2001, but not in the interim year.

In contrast, only 17% of those in non-standard jobs in 1999 were engaged in standard employment the following year, while 12% were not working at all. However by 2001, 23% of those who were non-standard workers two years earlier had obtained standard employment, while 14% were not working (Kapsalis and Tourigny 2004).

Pension coverage for contingent workers

Pension coverage is particularly problematic for contingent workers. Participation in a workplace pension plan is generally restricted to paid workers having an employer-employee relationship. By definition, most contingent workers are therefore excluded. Temporary or contract workers, for example, do not have the opportunity to join the employer's pension plan. Setting up a workplace pension plan is not an option for self-employed workers who work for their own account - although in some cases a number of individual self-employed people may be able to form a group and arrange some kind of pension coverage.

In the past, employers have often used pension plans as an essential part of the employee compensation package and a way to attract and retain permanent and long-term full-time employees. However, those objectives do not apply to contingent workers. Few non-standard workers have a pension plan at work. According to data from Statistics Canada's General Social Survey, only 24% of those in non-standard jobs in 1994 had a pension plan, compared with 27% in 1989. Comparable figures for employees in "standard" jobs were 56% in 1994 and 60% in 1989 (Townson 2000).

Part-time workers who have an ongoing relationship with a particular employer have a better chance of coverage under a workplace pension plan. Policy makers have made efforts to improve pension coverage for this group of contingent workers and pension standards legislation in all Canadian jurisdictions now requires an employer having a workplace pension plan for full-time workers to give part-time employees the option of joining the plan. But in many cases, it is up to the part-time worker to make the decision - even in situations where membership of the pension plan is mandatory for full-time employees. Part-time workers are often offered cash in lieu of benefits and it is hardly surprising, given their low earnings that many prefer to take the cash instead of contributing to the pension plan. The additional income may then simply be used to finance day-to-day expenses rather than set aside for retirement.

As well, the legislative requirement to include part-time workers in the pension plan only applies where the employer has a pension plan for full-time employees. There is no legislative requirement that employers establish workplace pension plans for their employees, whether full-time or part-time. Many women employed in part-time jobs work in service occupations and retail trade where pension coverage is likely to be the exception (Townson 2000).

Eligibility criteria for part-time workers to join the pension plan are established by provincial and federal pension regulators and are generally determined by earnings over a period of time. In British Columbia, for example, employees who have earned at least 35% of the Canada Pension Plan Year's Maximum Pensionable Earnings (YMPE) for at least two years must be allowed to join the pension plan if there is one. (The YMPE changes each year in relation to the average wage. For 2005, it is set at $41,100.) In some jurisdictions, hours of work are also taken into account in determining if a part-time employee must be allowed to join the pension plan. These requirements many screen out many part-time workers from pension coverage. For example, 35% of the YMPE in 2005 would be $14,385, but many part-time workers earn far less than this.

Unfortunately, there is no information about what percentage of part-time workers are covered by an occupational pension plan,⁸ but pension coverage of workers generally has been declining over the past decade or so. In 2002, for example, only 39.2% of women in paid employment were members of a workplace pension plan, compared with 41.9% who had such coverage in 1993 (Statistics Canada 2004c).

The difficulty of saving for retirement

Registered Retirement Savings Plans (RRSPs) were specifically designed to allow those without occupational pensions to set aside their own funds for retirement, deferring tax until the funds are withdrawn. But low wages and uncertain working conditions may make it very difficult for workers in precarious jobs to provide for their financial security in retirement in this way. A temporary worker, for example, may not have continuous employment during the year; a worker on contract may be uncertain when she will next find further work when a particular contract ends. Earnings of part-time workers may be too low to allow for personal retirement savings at all.

In effect, contingent workers who may have no occupational pension plan through their employment are often unable to compensate for the fact by setting aside their own savings for retirement. While some may manage to set aside funds in an RRSP, contingent workers may use RRSPs as a way of providing a financial cushion to tide them over when they are between jobs. Savings in an RRSP may be cashed in at any time and used for any purpose as long as the amount withdrawn is declared as income in the year of the withdrawal. While the amount would then be subject to tax, a contingent worker with low earnings in a particular year may find her tax liability for the RRSP withdrawal will be minimal. In fact, many people do withdraw funds from RRSPs prior to retirement, particularly in years of poor economic conditions (Frenken 2003).

Only a very small percentage of workers with earnings of less than $20,000 a year contribute to RRSPs. For example, in the six-year period from 1993 to 1999, almost 69% of women aged 25 to 64 who filed a tax return each year and who had annual incomes of less than $20,000 (in constant 1999 dollars) had not contributed to an RRSP in any of the six years (Statistics Canada 2001).

Public pension programs and contingent workers

Given the lack of coverage of workplace pension plans and the difficulty of accumulating private savings for retirement, public pension programs are particularly important for those who spend periods of their paid employment in non-standard work arrangements.

Public pension programs cover almost all contingent workers, but the benefits are relatively low. Old Age Security (OAS) provides a flat-rate benefit at age 65 to all Canadians who meet the residency requirements and does not depend on a history of paid employment. But the maximum monthly benefit in early 2005 was about $470. (Pro-rated benefits are available for those who have not lived in Canada long enough to qualify for the maximum). Income-tested Guaranteed Income Supplement (GIS) benefits are payable to low-income seniors, with a maximum monthly benefit in early 2005 of $560 for a single individual and $365 for each spouse of a senior couple. (For married couples and common law partners, the amount of GIS benefits depends on the joint income of the couple).

These two programs provide a basic guaranteed income for seniors and are intended mainly as an anti-poverty program for those who have few other sources of income in retirement. While they would be important for those whose paid employment included long periods in precarious jobs, OAS and GIS combined provide only a poverty-level income.

Contingent workers and the Canada pension plan

Virtually all contingent workers will eventually receive benefits from the earnings-related Canada Pension Plan (or Quebec Pension Plan in Quebec).⁹ As long as they earn more than $3,500 a year, contingent workers are included in the Canada Pension Plan. This amount, known as the Year's Basic Exemption (YBE) is exempt from CPP contributions. Workers who earn more than this do not have to contribute on the first $3,500 of earnings, although their retirement pension will be based on all earnings from the first dollar up to the established maximum. Self-employed workers must pay both the employer and employee CPP contributions amounting to 9.9% of covered earnings. Multiple jobholders with low earnings may be able to obtain CPP coverage, but only if they pay both employer and employee contributions themselves.

The CPP is an income replacement program. Retirement pensions are designed to replace 25% of a worker's average annual lifetime earnings (after adjustment for inflation) up to the specified maximum. To the extent that workers who have spent time in non-standard jobs had low earnings, their CPP benefits will reflect this - although special provisions allow them to exclude a number of years of low earnings as well as years when they had a child under the age of seven from the average earnings calculation on which the pension is based.

Everyone in the paid work force - whether part-time or full-time, employee or self-employed - must contribute to the CPP. For 2005, employees contribute 4.95% of earnings between the YBE and the YMPE (that is between $3,500 and $41,100 at 2005 rates) which is matched by an employer contribution of the same amount. Self-employed persons must contribute both the employer and employee share, or 9.9% of covered earnings. (Covered earnings are equal to $37,600, or $41,100 - $3,500.) In recognition that having to make double contributions may be onerous for self-employed people, special provisions permit a self-employed person to claim the employer share as a business expense. In addition, individuals may claim a tax credit for the amounts they contribute to the CPP.

Contract workers and some temporary workers would generally have to contribute to the CPP as if they were self-employed. In some cases, employers contribute to the CPP on behalf of temporary workers they hire. Most part-time workers - assuming they earn more than $3,500 a year - are also covered by the plan. However, multiple jobholders may find they earn less than the YBE in any particular job, while total earnings from all jobs may exceed that limit. In this case, they are allowed to make up the contributions, based on total earnings, when they file their tax returns. But they are required to contribute at the self-employed rate. In other words, while their various employers would not have to contribute to the CPP on their behalf, multiple jobholders are faced with making double contributions at tax time if they want to be included in the plan.

Benefits from the CPP are based on average earnings over the contributor's working life, defined as the years between age 18 and age 65 or the point between age 60 and 70 at which the pension is claimed. But all contributors may exclude up to 15% of that time when they may have had little or no earnings. In addition, a parent may exclude years when she or he had a child under the age of seven. These features are known as "drop-out" provisions because they allow people to drop out these years from the calculation of average earnings on which their pension will be based. The 15% general drop-out provision may be helpful to contingent workers who spent relatively short periods in non-standard work arrangements during a lifetime of paid employment. As well, women who had to accept non-standard work arrangements while their children were young may be able to exclude those years of lower earnings under the child rearing drop out, thus minimizing the impact on their CPP retirement pension.

But there is no comparable dropout provision for those workers - mainly women - who withdraw from paid employment to care for older family members or adult family members with disabilities. In such cases, these years of little or no earnings would have to be included in the average earnings on which the retirement pension would be based, resulting in a lower pension than would otherwise be payable. There is not much information about the percentage of women whose paid work is affected by these unpaid family responsibilities. Nor do we have much information about how paid employment may be affected or for how long. We do know, however, that attending to family responsibilities is a key reason why women tend to retire from paid employment earlier than men do (Monette 1996).

In 2005, the maximum CPP retirement pension was $828.75 a month. But the average monthly CPP retirement pension being paid to women who were new retirees in June 2005 was only $333.76, compared with an average $527.04 being paid to newly retired men. Low benefits being paid to women retirees, of course, reflect both low earnings over a lifetime of paid employment and also the fact that many women probably did not have continuous paid employment throughout their adult lives. Long periods spent in precarious jobs may also have been a factor.

Further research

A number of researchers are now working in the field of precarious employment and vulnerable workers, but much more work is needed. According to Ron Saunders, director of the Canadian Policy Research Network's (CPRN) Work Network, "we need to understand to what extent low paid work is concentrated among recent immigrants, Aboriginals, and disabled people. How strongly is it associated with low educational attainment, or with long-term unemployment? To what extent do adult workers remain in low paid jobs for long periods? Can we find ways to help vulnerable workers reduce the economic risks facing them, while also promoting productivity and competitiveness?" (Saunders 2003). CPRN has launched a series of studies to help fill these knowledge gaps. Other researchers are also tackling some of these questions.

From the point of view of financial security in retirement, however, there still is little information about the impact of periods of precarious employment. To a large extent, the key questions can only be answered by longitudinal data, which unfortunately is still relatively limited.

Bibliography

Akyeampong, Ernest B. 2002. "Unionization and fringe benefits." Perspectives on Labour and Income. 14, 3, Autumn. Statistics Canada Catalogue no. 75-001-XPE.

Chaykowski, Richard P. 2005. Non-standard Work and Economic Vulnerability. Defining Vulnerability in the Labour Market Series - No. 2. Ottawa. Canadian Policy Research Networks.

Cranford, Cynthia J., Leah F. Vosko and Nancy Zukewich. 2003. "Precarious employment in the Canadian labour market: A statistical portrait." Just Labour: A Canadian Journal of Work and Society. 3, Fall. Toronto. York University Forum on Precarious Employment. (accessed March 8, 2005).

Fleury, Dominique and Myriam Fortin. 2004. "Canada's working poor." Horizons. 7, 2, December. Ottawa. Policy Research Initiative.

Frenken, Hubert. 2003. "Individual programs - registered retirement savings plans." Chapter 4 in Canada's Retirement Income Programs: A Statistical Overview (1990-2000). Statistics Canada Catalogue no. 74-507-XPE.

Fudge, Judy, Eric Tucker and Leah Vosko. 2002. The Legal Concept of Employment: Marginalizing Workers. Report for the Law Commission of Canada. Ottawa.

Galarneau, Diane. 2005. "Earnings of temporary versus permanent employees." Perspectives on Labour and Income. Online edition. 6, 1, January. Statistics Canada Catalogue no. 75-001-XIE.

Grenon, Lee and Barbara Chun. 1997. "Non-permanent paid work." Perspectives on Labour and Income. 9, 3, Autumn. Statistics Canada Catalogue no. 75-001-XPE.

Heisz, Andrew. 2002. The Evolution of Job Stability in Canada: Trends and Comparison to U.S. Results. Research Paper. Catalogue no. 11F0019MIE2002162. Ottawa. Statistics Canada.

Heisz, A., A. Jackson and G. Picot. 2002. Winners and Losers in the Labour Market of the 1990s. Research Paper. Catalogue no. 11F0019MIE2002184. Ottawa. Statistics Canada.

Jackson, Andrew. 2004a. Gender Inequality and Precarious Work: Exploring the Impact of Unions Through the Gender and Work Database. Research Paper #31. Ottawa. Canadian Labour Congress.

Jackson, Andrew. 2004b. "Precarious jobs and social exclusion: Key issues and new policy directions." Horizons. 7, 2, December. Ottawa. Policy Research Initiative.

Janz, Teresa. 2004a. Low-paid Employment and 'Moving Up' 1996-2001. Income Research Paper Series. Catalogue no. 75F0002MIE2004003. Ottawa. Statistics Canada.

Janz, Teresa. 2004b. Low-paid Employment and Moving Up: A Closer Look at Full-time, Full-year Workers, 1996-2001. Income Research Paper Series. Catalogue no. 75F0002MIE2004009. Ottawa. Statistics Canada.

Kapsalis, Costa and Pierre Tourigny. 2004. "Duration of non-standard employment." Perspectives on Labour and Income. Online edition. 5, 12: December. Statistics Canada Catalogue no. 75-001-XIE.

Law Commission of Canada. 2004. Is Work Working? Work Laws that Do a Better Job. Discussion Paper. Ottawa.

Luxton, M. and J. Corman. 2001. Getting By in Hard Tomes: Gendered Labour at Home and on the Job. Toronto. University of Toronto Press.

Monette. 1996. Canada's Changing Retirement Patterns: Findings from the General Social Survey. Statistics Canada Catalogue no. 89-546-XPE. Ottawa.

Morissette, René. 2002. "Pensions: Immigrants and visible minorities." Perspectives on Labour and Income. 14, 3, Autumn. Statistics Canada Catalogue no. 75-001-XPE.

National Council of Welfare. 2004. Poverty Profile 2001. Ottawa.

Saunders, Ron. 2003. Defining Vulnerability in the Labour Market. Research Paper W/21. Work Network. Ottawa. Canadian Policy Research Networks.

Statistics Canada. 2005. Women in Canada 2005 (forthcoming). Ottawa.

Statistics Canada. 2004a. Income in Canada 2002. Catalogue no. 75-202-XIE. Ottawa.

Statistics Canada. 2004b. Labour Force Characteristics by Age and Sex. (accessed March 19, 2005).

Statistics Canada. 2004c. Pension Plans in Canada, January 1, 2003. Catalogue no. 13F00026MIE2004001. Ottawa.

Statistics Canada. 2004d. Women in Canada: Work Chapter Updates. Catalogue no. 89F0133XIE. Ottawa.

Statistics Canada. 2003a. Earnings of Canadians: Making a Living in the New Economy. 2001 Census: Analysis series. Catalogue no. 96F0030XIE2001013. Ottawa.

Statistics Canada. 2003b. Canada's Retirement Income Programs: A Statistical Overview (1990-2000). Catalogue no. 74-507-XPE. Ottawa.

Statistics Canada. 2001. Retirement Savings Through RPPs and RRSPs 1999. Catalogue no. 74F0002XIB. Ottawa.

Statistics Canada. 2000. Women in Canada 2000: A Gender-based Statistical Report. Catalogue no. 89-503-XPE. Ottawa.

Statistics Canada. 1997. Labour Force Update: The Self-employed. 1, 3, Autumn. Catalogue no. 71-005-XPB. Ottawa.

Townson, Monica. 2004. The Development of Maternity and Parental Benefits in Canada. Unpublished paper prepared for Shields and Hunt, Barristers and Solicitors. Ottawa.

Townson, Monica. 2003. Women in Non-Standard Jobs: The Public Policy Challenge. Ottawa. Status of Women Canada Policy Research Fund.

Townson, Monica. 2000. Reducing Poverty among Older Women: The Potential of Retirement Incomes Policies. Ottawa. Status of Women Canada Policy Research Fund.

Vosko, Leah. 2003. "Precarious employment in Canada: Taking stock, taking action." Just Labour: A Canadian Journal of Work and Society. 3, Fall. Toronto. York University Forum on Precarious Employment. (accessed March 8, 2005).

Vosko, Leah F., Nancy Zukewich and Cynthia Cranford. 2003. "Precarious jobs: A new typology of employment." Perspectives on Labour and Income. Online edition, 4, 10, October: 16 to 26. Statistics Canada Catalogue no. 75-001-XIE. Ottawa.

Zeytinoglu, Isik Urla. 2000. "Social justice for workers in non-standard employment forms and contracts." In Globalization and the Canadian Economy: The Implications for Labour Markets, Society and the State. Richard P. Chaykowski (ed.). Kingston, Ontario. Queen's University.

---

Notes

1. Also referred to in this paper as occupational pension plans.
2. Non-standard jobs in this data source are all forms of self-employment (with or without paid help), part-time jobs (less than 30 hours a week), and temporary jobs. All other jobs are considered "standard."
3. The contributory period is from age 18 to the commencement of pension between age 60 and 70. An exclusion for low earnings is permitted for up to 15% of that period. Years when the individual had a child under age seven may also be excluded from the calculation of average earnings on which the pension will be based.
4. The National Council of Welfare and other organizations which track low income regularly generally use the before-tax LICO which includes income from government transfer programs but not credits and deductions given through the income tax system.
5. Refers to those with one of more of part-time, temporary work, own-account self-employment, or multiple job-holding. People in more than one category are counted only once.
6. Statistics Canada is required to collect data on "visible minority" groups so that compliance with the federal Employment Equity Act can be measured. The agency defines "visible minority" as persons other than Aboriginal peoples, who are non-Caucasian in race or non-white in colour. We also use the term "racialized workers" to indicate workers who are in a visible minority.
7. This calculation excludes the self-employed.
8. Also referred to in this paper as a "workplace pension plan."
9. For convenience we will refer only to the CPP in this section.