Economy

Legislation should help rather than hinder the gig economy – The Globe and Mail

Published

5 years ago

February 13, 2020

Peter St. Onge, senior economist at the Montreal Economic Institute, and Daniel Dufort, senior director of external relations at MEI

Now that British Columbians can finally hail a ride-share on their phone – a right Quebeckers only won last year – a new threat is emerging, this time from California.

Casual or “gig” work has been around a very long time, but the sharing economy has put freelancers in the spotlight. It’s especially important for workers who can only work part-time: single parents, college students, the elderly and seasonal workers. These groups have long counted on the ability to work flexible hours when they really need to, be they waiters, nannies, deliverymen or translators.

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What has changed is the dramatic creation of new part-time jobs thanks to the internet and cellphone apps. These have expanded the range of services people are willing to hire for, and made it much easier both to work and to hire people for casual work. The sharing economy has created more than 60,000 Canadian jobs a year on average between 2005 and 2016. This has been fantastic for consumers, who can now easily hire someone to deliver the groceries, shovel the driveway, walk the dog, mow the lawn or walk them to their car safely at night. And, of course, now you can call a cab that actually comes on time.

So far, labour laws have helped by sheltering casual workers from the hassle of paperwork, and employers from the risks inherent in hiring permanent employees. Unfortunately, regulators are becoming hostile to this new job creation. California Assembly Bill 5 (AB 5), which took effect on Jan. 1, effectively turns freelancers into employees. The goal was to improve conditions for gig workers, but, in practice, it has meant the disappearance of their jobs. Mass layoffs of part-time and full-time freelance workers have occurred in the media and the film industry, with fears of more to come.

The experience of California illustrates why governments should avoid interfering in the sharing economy. Despite good intentions, forcing employers to provide benefits to contract workers risks pricing low-wage workers out of employment altogether. Studies have also shown that even when the company is paying for the benefits, the costs get directly passed along to the employees. So even workers who don’t lose their jobs end up paying for the mandated benefits through reduced wages.

Empirically, job losses from mandatory benefits disproportionately target low-income workers. A similar phenomenon occurred in Ontario where an Montreal Economic Institute study estimated that 50,000 young workers lost their job in the wake of a hike in the minimum wage from $11.49 to $14 on Jan. 1, 2018.

Losing one’s job not only hurts the worker today, but can negatively affect future job prospects. One study found that the simple fact of having a part-time job reduces the odds of being unemployed a year later by more than 80 per cent – from 25 per cent for unemployed workers to just 4 per cent for part-time workers. Working part-time also considerably increases the chances of having the work situation you prefer a year later, whether full-time or part-time, from 41 per cent for those unemployed to 69 per cent for part-time workers. In other words, a great way to get the job you want is to work any job right now.

Flexibility is key to the sharing economy: to work, to hire, to buy and sell. Even those who do it for the money may only be able to work part-time because of school, or are semi-retired workers who prefer only working a few hours each week. Statistics Canada estimates that only one in four part-time workers (24 per cent) are led to work part-time for economic reasons. Nearly half (48 per cent) have to care for children or other family members, have a disability, or are going to school, while 28 per cent have voluntarily chosen to work part-time. A poll conducted in the United States in August, 2018, showed that only 7 per cent of American contract workers would rather be considered as full employees.

The Canadian economy is already one of great upward mobility. A 2012 study of census data found that 83 per cent of Canadians in the bottom 20 per cent of income earners in 1990 had moved up to a higher income category 10 years later. In 2009, the percentage of those who had risen into a higher bracket was 87 per cent, with 40 per cent having even reached the two highest quintiles. However, temporary jobs at the bottom of the ladder are often a prerequisite for this phenomenon to endure.

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Too often, lawmakers propose reforms that might sound good, but actually make the problem worse. Instead of making it harder to hire freelancers and part-time workers, lawmakers should be making it easier. The freedom to contract and work as one pleases is not only a fundamental right, it is among the most effective ways to help marginal workers who need that first rung on the ladder.

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Economy

Liberals announce expansion to mortgage eligibility, draft rights for renters, buyers

Published

12 hours ago

September 16, 2024

Anne Joseph

OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.

She says the changes will come into force in December and better reflect the housing market.

The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.

The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.

On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.

Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.

Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.

The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.

The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.

This report by The Canadian Press was first published Sept. 16, 2024.

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Economy

Statistics Canada says manufacturing sales up 1.4% in July at $71B

Published

12 hours ago

September 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.

The increase followed a 1.7 per cent decrease in June.

The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.

Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.

Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.

In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.

This report by The Canadian Press was first published Sept. 16, 2024.

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Economy

S&P/TSX gains almost 100 points, U.S. markets also higher ahead of rate decision

Published

3 days ago

September 13, 2024

Anne Joseph

TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.

“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.

In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.

The S&P/TSX composite index closed up 93.51 points at 23,568.65.

While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.

Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.

But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.

Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.

“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.

“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.

A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.

It would also be “counter to what they’ve signaled,” he said.

More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.

“That’s going to be more important than the size of the cut itself,” he said.

In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.

“Here, the labour situation is worse than what we see in the United States,” he said.

The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.

The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.

The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.

— With files from The Associated Press

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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