Applied Research Bulletin - Volume 4, Number 2 (Summer-Fall 1998) - September 1998

Are Low-Skilled Workers Losing Ground in Canada?

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According to the OECD Economic Outlook (1997), labour market conditions for the least skilled workers have deteriorated in most member countries, including Canada. In some countries, like the United States, an increased wage premium for high-skilled workers is observed, while labour market conditions have worsened not only for the least educated workers, but also for a fairly large segment of the low-skilled adult population.

In a recent analysis from the Applied Research Branch, Daniel Boothby and Yves Gingras look at the changing labour market conditions for Canada's work force. Their analysis does not show any deterioration of labour market conditions for low-skilled Canadian workers in the 20 to 54 age group. However, some data do suggest that there has been a relative decline in access to the labour market and to employment for low-skilled workers 55 years of age and older.

Boothby and Gingras divide the Canadian workforce into two groups: low-skilled workers (those without a post-secondary diploma) and high-skilled workers (post-secondary graduates). They then examine a number of labour market indicators to determine whether the relative labour market conditions for the low-skilled workers have deteriorated over the last two decades.

The indicators used in this analysis may be divided into two categories: those that concern access to the labour market and to employment, and those that concern income-generating capacity. Labour force participation rates and employment rates are used as indicators of access to the labour market and to employment, while weekly wages are used to measure the income-generating capacity. The Boothby-Gingras Report uses the ratio of the value of each indicator for low-skilled individuals to its value for high-skilled individuals to measure relative changes in labour market conditions for the two groups.

Access to the Labour Market

The proportion of low-skilled individuals in the labour force has been steadily declining. In 1976, for example, the low-skilled labour force in the 20 to 54 age group was three times larger than the high-skilled labour force. In 1997, the high-skilled labour force aged 20 to 54 years was larger than the low-skilled labour force in the same age group. For individuals 55 years of age and older, the low-skilled labour force has declined from five times as large as the high-skilled labour force in 1976 to less than one and a half times as large in 1997.

Note:	The vertical line at 1989 indicates the last year before changes in the data collection methodology.
Source:	Computation from unpublished Labour Force Survey data

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The changing ratios between the low-skilled and high-skilled labour forces have been decomposed into the part attributable to changes in the participation rate of each group and the part attributable to changes in the respective populations. For individuals in the 20 to 54 age group, the decline in the relative size of the low-skilled labour force is attributable entirely to the decrease in the size of the low-skilled population, not to an increasing exclusion from the labour market, as is shown by the ratio between participation rates.

Note:	The vertical line at 1989 indicates the last year before changes in the data collection methodology.
Source:	Computation from unpublished Labour Force Survey data

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For individuals 55 years of age and older, the decrease in the relative population size accounts for more than 83 percent of the change in the relationship between the low-skilled and high-skilled labour forces.

Access to Employment

The employment rate for a group is the proportion of the population in the group that holds a job. Consequently, a decline in the ratio of the employment rate of the low skilled to the rate for the high skilled may mean that low-skilled persons are having more trouble finding employment.

As is the case for differences in the labour force ratios, changes in the low-skilled share of total employment in the two groups are primarily due to changes in the relative size of the low-skilled and high-skilled populations. In the case of workers 55 years of age and older, the relative deterioration in the employment rate of low-skilled workers also contributed to the decline in their share of employment.

Note:	The vertical line at 1989 indicates the last year before changes in the data collection methodology.
Source:	Computation from unpublished Labour Force Survey data

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Income-Generating Capacity

Another factor that might be disadvantageous to low-skilled workers is the wage they can command for their work. Between 1981 and 1994, there was a slight upward movement of the wage ratio between low-skilled and high-skilled workers in the 20 to 54 age group, a trend which was briefly interrupted by downturns following the recessions of 1981 and 1991.

Note:	The vertical line at 1988 indicates the last year before changes in the data collection methodology.
Source:	Computation from unpublished Survey of Consumer Finances

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Changes in the Labour Force Survey make it difficult to compare educational levels after 1989 with the earlier years. Consequently, no firm conclusion should be drawn from trends in relative earnings capacity beyond the fact that they do not indicate any deterioration in conditions for low-skilled workers 20 to 54 years of age. There is much more variability in the ratio of weekly earnings for the 55 to 64 age group, making it difficult to identify any trend.

In conclusion, the analysis does not show any deterioration in labour market conditions for the low-skilled segment of the Canadian population in the 20 to 54 age group. Some data do suggest that there has been a decline in access to the labour market and to employment for low-skilled individuals 55 years of age and older.

The most striking findings of this analysis are the very rapid rise in the level of qualifications of the Canadian working-age population and the absence of any deterioration in labour market conditions for low-skilled workers in general.

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