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"The True Unemployment Rate"
AN EARLY
ANALYSIS OF OTTAWA'S UNEMPLOYMENT STATISTICS, WITH REFERENCE TO H.R.D.C.
OFFICIAL FIGURES COMPARED WITH "OTTTAWA'S HIDDEN WORK FORCE" FIGURES
DATE: April 13th, 2000
By: Robert T. Chisholm B.Sc.Hons.(Eng.)
SOME SALIENT POINTS CONCERNING UNEMPLOYMENT STATISTICS,
TAKEN FROM THE FINAL REPORT OF THE TASK FORCE, "PARTNERS FOR
JOBS" (REFERENCE 2):-
In the fall of 1998, the Ottawa Economic Development Corporation (OED) released its report, Ottawa's Hidden Workforce. The report identified that the real unemployment rate in Ottawa-Carleton is significantly higher than the official unemployment rate when social assistance recipients, discouraged workers and other under-employed workers are factored into the formula. The OED report estimated that there are 145,000 unemployed and under-employed people in this community, some of whom may choose to remain outside the workforce.
(author's note: this is for a total population of about 1.01 million.)
LOCAL EMPLOYMENT PROFILE
Table 1 presents information on the local labour force during the period March 1998 - March 1999.
Source: Unadjusted Data, Human Resources Development Canada,
Economic Analysis and Information Directorate
FOOTNOTES FROM BOTTOM OF SAME PAGE IN THE REPORT:-
Notes:
■
The Labour Force is the population 15 years of age and over who were
employed or unemployed.
■
The Participation Rate represents the labour force expressed as a
percentage of the population 15 years of age
and over.
■
The Ottawa Census Metropolitan Area (CMA) includes the Region of
Ottawa-Carleton, the Township of
Russell, Cambridge, Clarence and South Gower, Rockland, and Casselman
.
.
.
Ottawa's unemployment rate of 6.3% is one of the lowest in Ontario, is lower than that of Ontario (7.1%) and Canada (8.5%). Ottawa's employment growth is considered to be the strongest in eastern Ontario. The positive employment activity is drawing additional job seekers into the labour market and this has resulted in the official unemployment rate remaining relatively unchanged during the past few months.
COMMENTS - SPECIFICALLY RELATING TO THE UNEMPLOYMENT STATISTICS
Based on Table 1 above and from the R.M.O.C. web site, for March 1999
we have:-
For the Ottawa Census Metropolitan Area ("Ottawa C.M.A.") :-
(1) Population 15+: 663,000 - made up as follows:-
(2) Labour Force: 445,200
(3) Not in the Labour Force: 217,700
The "Labour Force", in turn, was made up of (4) 417,100 who are "Employed" plus a further (5) 28,202 persons who are "Unemployed".
We can probably assume that all those persons aged 15 years or less are either in school, are pre-schoolers or infants.
The population of the Ottawa C.M.A., which includes the whole of the
Regional Municipality of Ottawa-Carleton and its 750,000 persons, plus some
other municipalities, was estimated at 1,010,498
in 1996; growth at 7.3% over the period 1991 to 1996 would lead to
an estimated population increase of about 4% from 1996 to March 1999 i.e. approx.
1,051,000 as at March 1999
As already stated above, in other places in the Final Report we also find:-
In the fall of 1998, the Ottawa Economic Development Corporation (OEDC) released its report, Ottawa's Hidden Workforce. The report identified that the real unemployment rate in Ottawa-Carleton is significantly higher than the official unemployment rate when social assistance recipients, discouraged workers and other under-employed workers are factored into the formula. The OED report estimated that there are 145,000 unemployed and under-employed people in this community, some of whom may choose to remain outside the workforce.4
COMMENTS.
In the Final Report, there is also some information about people using
the Ontario Government's "Ontario Works" program, and also some
information about the people who use the Employment Resource Centres in
Ottawa-Carleton.
But what we are concerned with is to have a clear picture of the true
size and character of the overall unemployment problem. This is fundamentally
important and critical to knowing how many jobs need to be created, in
order to get everyone back to work and contributing to the tax base, and also
to determining - at least approximately - what the consequences will be in
terms of additional tax revenue to government, when as many persons as possible
(aged 15 and over, say) are working. This is also fundamentally important and
critical to government's ability in the future to pay for necessary services
such as education and health care, and other important things such as reducing
personal income taxes.
The 28,200 persons whom H.R.D.C. classifies as "Unemployed" in
the Ottawa C.M.A. represent only 6.3% - the so-called "official
unemployment rate" - of the "Labour Force" which is 445,200.
But the report, "Ottawa's Hidden Work Force", already referred
to, shows quite clearly that the true number of unemployed or under-employed
people in Ottawa-Carleton (as at Fall 1998) is 145,000 which equates to 28% of
the true labour force.
Obviously some explanation for this huge discrepancy is imperative.
Some things which do not show in the H.R.D.C. figures are:-
1. Not everybody who is classified by H.R.D.C. as "Employed" is
in fact employed full-time and some of these part-timers actually want
full-time jobs.
2. There is a large number of people classified under H.R.D.C's "Not
in the Labour Force" category - most of whom are also, in real terms,
unemployed, i.e.:-
(a) People who are not eligible for federal
government E.I. benefits - which are administered and paid by H.R.D.C.. They
could be in this position for any one or combination of a number of reasons:-
(i) E.I. benefits expired, following termination
of employment - in real terms, still unemployed (but not recognised as such
in H.R.D.C.'s classification system). These people are often labelled as "discouraged
workers" or people who have "dropped out of the labour
force".
(ii) Employed but working in
"non-insurable" employment either as business owners or as
self-employed "independent contractors". This form of employment has
some advantages, in terms of expenses which are legally tax-deductible and
result in the person paying less personal income tax than would be the case for
regular employees. Some people are in a position to do very well, others are
simply forced into it because there is no other work available to them. It may
also be low-paying and insecure work (painters and decorators, for example).
Further, people in this position have no means of paying Employment Insurance
contributions voluntarily and so can never establish eligibility for any
re-training programs as the means to get better-paying work (or as the means to
become bigger contributors to the tax base).
In Canada, unlike the U.S., there are no
Professional Employment companies for people to sign up with ( as at April
2000) if they have to work as independent contractors, as a means of being able
to pay Employment Insurance contributions and hence establish eligibility for
re-training programs plus other Employment Insurance benefits.
(iii) Never able to get work - by reason of
such workplace-related factors factors as "lack of experience" for
whatever work they try to get, skills mis-match relative to labour market
needs, being perceived as a high risk on account of a long period of
unemployment, or some form of bigotry such as that based on age even if the
person is mentally and physically fit to work - in real terms, unemployed (but
not recognised as such in H.R.D.C.'s classification system). These people
are also often labelled as "discouraged workers" or people who
have "dropped out of the labour force".
(b) People participating in "Ontario
Works" training programs as a means of getting back to work. This group
gets some financial help from the Ontario government but nowhere near a
full-time wage for the work which they are training for (as we would expect) -
in real terms, still unemployed (but not recognised as such in H.R.D.C.'s
classification system).
(c) People who want to work and who are
artificially ineligible from both federal government and Ontario provincial
government re-training programs - in real terms, unemployed (but not
recognised as such in H.R.D.C.'s classification system). These people are
also often labelled as "discouraged workers" or people who
have "dropped out of the labour force".
(d) Full-time parents - some of whom have
access to sufficient or more than sufficient family income relative to needs and
wants, so do not want to work at all.
But some of them want to change their situation
to add to the family income and so want to work at least part-time. On
the other hand, they are still classed by H.R.D.C. as "Not in the
Labour Force" as opposed to "Unemployed" and usually cannot
access any federal government or Ontario provincial government programs as the
means to get work and start to contribute to the tax base.
CONCLUSIONS
It is clear that H.R.D.C.'s figures (for March 1999, as an example)
of only 28,200 persons in the Ottawa C.M.A who were "Unemployed" -
with 417,000 "Employed", in a "Labour Force" of 445,200 and
217,700 "Not in the Labour Force" - are totally mis-leading and
contain a massive under-statement of the number of people who are unemployed in
real terms.
H.R.D.C. -derived figures have been and still are continually causing
mis-leading reports to appear in the media, which in turn mis-lead not only the
general public but also business leaders and the politicians as to the true size
and character of the problem and the numbers of full-time jobs needed to solve
it.
The only realistic basis currently available, for knowing the true
numbers of unemployed and under-employed in the Ottawa C.M.A., is the report
"Ottawa's Hidden Work Force" already referred to. Based on this, the
true number of unemployed or under-employed in Ottawa-Carleton is 145,000
persons (in a total population of about 1.1 million), which equates to a true
unemployment rate of about 28% of the actual available labour force.
Therefore, the figures in "Ottawa's Hidden Work Force"
constitute the only realistic basis for setting targets in terms of jobs
needing to be created - for the dual purposes of (a) getting everybody back to
work who wants to work and (b) maximising tax revenues to government, as the
basis for adequate funding for necessary services as health care and education
and as the basis for allowing government to reduce personal income tax rates
and other tax rates.
CLOSURE
The dis-information concerning the unemployment rate for Ottawa-Carleton,
represented by the H.R.D.C. figures, is general throughout Canada. The
difference in Ottawa-Carleton is that it is the first municipality in Canada to
even have an accurate analysis of the true picture, quite apart from actually
setting up a plan to deal with it.
Based on the report, "Ottawa's Hidden Work Force", and the fact
that the Ottawa C.M.A's population of about 1.01 million represents about one
thirtieth of Canada's total population of about 30 million, one could roughly
estimate the total number of unemployed in Canada at about 4.35 million
persons.
From a recent newspaper article concerning the number of persons
contributing to the tax base, ".....some Statistics Canada figures for
Canada as a whole refer to 14 million current contributors, but a potential for
21 million contributors." Which suggests, in turn, that the true number of
unemployed persons in Canada as a whole is 7 million. Whilst the full picture
would only become clear with more information on this point from Statistics
Canada, this last-mentioned figure would seem to make sense: Ottawa-Carleton is
doing better ecnonomically than almost all other Canadian municipalities -
hence any estimate of the total number of unemployed in Canada as a whole,
based on the Ottawa C.M.A. sample, is certain to be on the low side.
Robert T. Chisholm
Nepean, Ontario
April 13th, 2000
REFERENCES
1. "Ottawa's Hidden Work Force". Report released by Ottawa Economic Development Corporation, October 1998
2. Final Report of the Task Force, "Partners for Jobs". Web site:-
http://city.ottawa.on.ca/city_services/finempsupport/pdf/reportSep99.pdf