Labour Market Progression between 1996 and 2001

On average, the earnings of working poor individuals increased considerably between 1996 and 2001. Yet 45% of them still had low earnings in 2001.

While the main reason for a definitive exit from poverty was often family-related rather than work-related, this does not imply that the working poor did not experience any progression in the labour market.

First of all, Table 8.7 shows that 75% of individuals who were working poor in 1996 were still working 910 hours or more in 2001, compared to 82% of other workers. Not surprisingly, the average work effort of those who reported the number of hours that they worked in 2001 and in 1996 did not increase significantly between those two years, as it was already very high in 1996 (1,980 hours of work in 1996 compared to 2,010 hours in 2001). However, their hourly wages and total earnings rose considerably over this period. On average, the hourly wages reported by those who were working poor in 1996 increased by more than $3/hour and their average annual earnings more than doubled between 1996 and 2001, going from $9,000 to $18,300.

However, it should be noted that despite the important progress observed between 1996 and 2001, the average hourly wages and earnings reported by individuals who were working poor in 1996 did not rise to the levels of workers who were not poor in 1996. In 2001, the average annual earnings of the working poor were still less than half those of other workers, and nearly half of these working poor individuals (45%) continued to report low earnings in 2001.

Table 8.7

Labour market situation in 1996 and 2001 of individuals who were working poor in 1996, average and median (in parentheses) values*

Working poor

in 1996 Working non-poor in 1996

1996 2001 1996 2001

Average number of hours worked 1,979

(1,955) 2,013 (2,086) 2,031 (2,086) 1,879 (2,085) Average hourly wage of salaried workers

($/h, in 2001 constant dollars) 10.17 (9.31) 13.57 (11.70) 18.30 (16.88) 20.78 (19.11) Average annual earnings

(in 2001 constant dollars)

9,044 (8,139)102 18,324 (13,221) 38,089 (33,248) 40,811 (35,100)

Worked at least 910 hours during the year 100.0% 74.5% 100% 81.8% Had low earnings103 73.6% 45.0% 10.4% 16.0%

* Only those observations for which there were no missing values in the variables of interest in 1996 and 2001 were

retained. For hourly wages in particular, many of the observations were suppressed because of the workers who reported themselves as self-employed in one of the two years (no hourly wages are available for this category of worker). Moreover, negative incomes were set at 0 for the calculation of average and median values.

102 _{At first glance, it may be surprising to find that average earnings are much lower than the average calculated by} multiplying the average hourly wage by the average number of hours reported. However, it is important to point out that the SLID information on hourly wages is available only for salaried employees, whereas employment earnings

As chapter 4 showed, being self-employed is a significant determinant of low income among workers. Thus, it is interesting to look at the extent to which the working poor moved away from this status. Graph 8.2 shows that only slightly more than 25% of the Canadians who were working poor and self-employed in 1996 became salaried employees by 2001. The vast majority (67%) of working poor individuals who reported at least one period of self-employment in 1996 were still self-employed in 2001. By contrast, less than 10% of Canadians who were working poor and salaried in 1996 became self-employed during this period (see Graph 8.3).

Graph 8.2

Paths taken between 1996 and 2001 by the self-employed working poor individuals identified in 1996

* There is no restriction on the number of hours worked in 2001 for being included in any of the three categories.

Graph 8.3

Trajectories taken between 1996 and 2001 by salaried working poor individuals identified in 1996

Self-employed working poor in 1996 (240,400) 100% Self-employed in 2001 67.1% Salaried employees in 2001 22.7%

No longer working or unknown whether they were still working

in 2001* 10.2% Self-employed working poor in 1996 (240,400) 100% Self-employed in 2001 67.1% Salaried employees in 2001 22.7%

No longer working or unknown whether they were still working

in 2001* 10.2% Salaried working poor in 1996 (273,300) 100% Salaried employees in 2001 74.1% Self-employed in 2001 9.5%

No longer working or unknown whether they were still working

in 2001 16.5% Salaried working poor in 1996 (273,300) 100% Salaried employees in 2001 74.1% Self-employed in 2001 9.5%

No longer working or unknown whether they were still working

in 2001 16.5%

Table 8.8 shows that while the average earnings of working poor individuals doubled between 1996 and 2001, which clearly means that their labour market conditions improved, their family income increased even more, by 135%. This substantial increase in average family income can be explained in part by the fact that half of the individuals who were working poor in 1996 experienced a change in the composition or size of their family between those two years. While this proportion is comparable to that observed among working non-poor individuals, it shows that families not only play a key role in the current financial situation of workers but also greatly influence their financial situation over the longer term.

Table 8.8

Family situation in 1996 and 2001 of individuals who were working poor in 1996

Working poor

in 1996 Working non-poor in 1996 1996 2001 1996 2001

Average family income

(2001 constant dollars) (14,420) 15,605 36,647 (30,678) 58,301 (53,492) 65,601 (58,610)

Had a low family income 100.0% 29.1% 0.0% 3.2% No change in family structure or size n.a 49.7% n.a 48.5%

While average and median values may draw a picture of overall trends, they do not inform about the dispersion of observations within a given group. To have a better idea of the change in the working conditions of the working poor, it is helpful to look at the proportion of them for whom conditions improved significantly, remained essentially the same or deteriorated over 1996-2001 (see Table 8.9).

When looking at the change in work effort, hourly wages and annual earnings of workers between 1996 and 2001, it becomes apparent that these are less stable among the working poor than among other workers. Working poor individuals are more likely to experience a significant increase or decrease in these three variables compared to other workers, which suggests more variability in labour market behaviour and/or opportunities. Close to 39% of those who were working poor in 1996 had significantly increased their work effort by 2001 and 36% of them had reduced it. In comparison, 45% of workers who did not have a low income in 1996 worked about the same number of hours in 2001, less than one quarter had increased their work effort while less than a third had decreased it. Between 1996 and 2001, the wages and earnings of approximately two thirds of the working poor increased significantly while they stagnated or decreased for most other workers.

Table 8.9

Distribution of individuals who were workers in 1996 by labour market progression between 1996 and 2001 and low-income status in 1996

Working

poor in 1996 non-poor in 1996 Working Number of hours of work

Significant increase104 38.8 24.4

No significant change 25.4 45.0

Significant decrease 35.7 30.3

Average hourly wage (in 2001 cst. $)

Significant increase 62.4 46.7

No significant change 24.3 35.8

Significant decrease 13.3 17.5

Employment earnings (in 2001 cst. $)

Significant increase 63.8 44.9

No significant change 13.2 26.8

Significant decrease 23.0 28.4