Income Gap in Canada Widening at ‘Dramatic’ Pace, CIBC Says
(Bloomberg) -- Canada has seen a “dramatic” widening of the income gap due to Covid-19, according one of the country’s largest banks.
That’s the conclusion of research by Canadian Imperial Bank of Commerce, which conducted an analysis of changes in employment by wage category, rather than wage type. The study found the lower the pay grade, the worse the job-market performance, which is typical during a recession. But it also found that higher-income Canadians actually experienced job gains during the crisis, which is an anomaly.
“This is a very different situation than any other recession,” CIBC economist Benjamin Tal said Tuesday by phone.
High-wage earners gained almost 350,000 jobs over the past year, and had it not been for this increase, the overall level of employment would be close to one million jobs below pre-recession levels, rather than 640,000 currently, Tal said.
All the jobs lost in 2020 were among workers that earned below average wages, Tal said. Workers who earned less than C$13.91 ($10.91) an hour saw employment decline by more than 20%, while employment among those earning at least C$41.73 increased by more than 9%.
He says there’s “little doubt” the numbers will get worse in the coming months. CIBC expects overall employment to decline 2% in the first quarter, and the jobless rate to return to 9%. The widening earnings gap highlights the disproportionate impact of the crisis on the youngest and oldest cohorts, he said.
However, Tal says the rise in high-wage employment has masked the deeper-than-perceived drop among low-wage workers, suggesting government support was appropriately targeted.
“It means a recovery in the second half of the year when we are on other side of this crisis will be even faster than people perceived,” he said.
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