K-shaped economic recovery is hurting low-wage earners
Vulnerable and often minority workers more likely to have lost job or hours
When the first wave of COVID-19 restrictions shuttered businesses across the country, Valerie Choy-Remark immediately feared the worst for her kefir shop.
“I knew that it was going to be far longer than people anticipated,” she said.
Located in Toronto’s underground PATH network, deKEFIR relied on a steady stream of commuter foot traffic to keep sales volume high.
Now, “it’s a ghost town. It’s really eerie,” says Choy-Remark. By mid-August, March’s temporary closure had become permanent and Choy-Remark’s employees were helping clear out the storefront as deKEFIR closed for good.
“We’d paid them out of our own pockets for the first two to three weeks until CERB was announced,” she says. “But they refused to take pay for (helping us move). That’s when you know your staff are more than just staff, they’re family.”
Choy-Remark and her employees aren’t alone. Early in the pandemic, economists hoped for a V-shaped recovery — pent-up demand causing the economy to spring back once the coronavirus threat had dissipated. But as the pandemic drags into its ninth month, the hope that we’ll all spring out of this together has dwindled. Instead, the economic recovery is shaped more like a K, dividing sectors, businesses and people into those that are springing back and those that continue to struggle.
During the first wave, the national unemployment rate nearly tripled from 5.6 per cent in February to 13.7 per cent in May. In that time, Statistics Canada reports “severe declines in most types of economic activity,” including a nine per cent drop in employment earnings
and an 11 per cent shrinkage in the economy as a whole.
As the economy reopened, some of those jobs did return. Statistics Canada estimates the number of Canadians whose employment was affected shrank from 5.5 million in April to 1.8 million in August. However, as Choy-Remark’s story shows, not every sector has bounced back the same way. And for every small business employer in her situation, there’s a staff of employees out of their jobs.
Unlike the previous recession which hit manufacturing hard and left the service sector relatively untouched, the pandemic has hit the service sector worst, says Sheila Block, a senior economist with the Canadian Centre for Policy Alternatives. She explains that the uniquely public health-centred nature of this economic crisis has put industries such as food services, hospitality and retail at particular risk. While office work and professional services can be moved online, that option just isn’t available for workers in publicfacing roles.
Indeed, Statistics Canada data shows the smallest job losses are in fields such as finance, public administration and scientific research — each showing around 20,000 jobs lost — compared with 260,000 in food service and accommodation. These sectors tend to have high numbers of low-wage and hourly workers and include gig services such as Uber Eats.
The result? Those already in the most vulnerable and lowest earning segment of Canada’s workforce are more likely to have lost jobs or hours and less likely to have returned to work.
Fifteen per cent of those earning less than $22 an hour are laid off or working fewer than half the hours they did in February, while the rest of the workforce has more or less fully recovered.
Statistics Canada data also show that low-wage and service sector jobs employ women and people of colour at rates higher than other segments of the economy. In 2019, for example, the Metcalf Foundation reported that visible minorities made up just 46 per cent of Toronto’s population, but accounted for 63 per cent of its working poor.
“If you focus in on Toronto, you have an exaggeration of those trends and that has to do with the structure of employment and wealth in Toronto,” says Block. She references a 2017 report, “The Opportunity Equation in the Greater Toronto Area,” which warned that Toronto was becoming the income inequality capital of Canada. The authors found Toronto had the highest index of inequality between neighbourhoods compared to Montreal, Calgary and Vancouver. And while the data will take a while to catch up with the sudden changes brought by the pandemic, Block says the added strain on Toronto’s working poor will inevitably ripple through the city’s well-being.
“COVID has heightened our awareness of the importance of our collective vulnerability,” she says. As the economic divide begins to draw boundaries between those who can and cannot afford to work from home, order in groceries or take a day off sick, financial inequality will put lower-income people in positions of greater risk. “(Economically), there are many ways in which we are not in this together. But none of us are safe until we’re all safe,” says Block. “Public health measures require a social safety net.”
One of the organizations on the front lines of providing that safety net is WoodGreen Community Services. From child care, to housing to employment services, WoodGreen vicepresident Michelle German says they’ve seen a spike in demand for aid in their service areas — especially among seniors and new Canadians.
“More people are in crisis than ever,” she says. That includes seniors who may be homebound and rely on multi-services and newcomer families who struggle to access food and service — particularly those who arrived several months before COVID. This has derailed in their settlement journey, German says.
This creates a double problem especially for recent immigrants, who Statistics Canada identifies as overrepresented within struggling service sector industries and more likely to have lost jobs in the pandemic’s first wave.
“Those with resources are leaning on their resources,” says German. “And those who rely more on community and community services are finding them more difficult to access. It’s impossible to untangle the economic, social, physical and mental health effects that COVID is having on communities.”
So far, financial programs offered by the federal government have been successful in mitigating the harm of the pandemic on both the individual and national levels, says Block.
Thanks to the Canada Emergency Response Benefit (CERB), Employment Insurance (EI) and rent and mortgage deferrals, StatsCan reports that household income actually rose by 11 per cent in the second quarter, with the household savings rate shooting up from eight to 28 per cent. But as the crisis wears on, we’ll need solutions that go beyond simple financial stopgaps.
“What I think government should be doing is finding people who run programs and are good at that and supporting that so the whole cost doesn’t land on the private sector,” said Leigh Smout, president of World Trace Centre — Toronto. His organization has created the Recovery Activation Program, which provides training and resources to help businesses transition from in-person to online commerce. The more businesses you can keep afloat, the more job’s you’re able maintain, he says.
But online business doesn’t work for every industry. And according to Institute for Research in Public Policy researcher Colin Busby, there’s a serious risk those with no choice but to furlough workers may not be able to bounce back at all.
Workers who are laid off or put on furlough may move on to other industries — usually at a lower wage — and may not return when their original employer reopens. This can create a vicious circle where the employer doesn’t have the workers needed to meet demand, can’t pay the overhead to stay open and can’t afford to hire a new team. If that’s the case, we may never see airlines, hospitality businesses or movie theatres return to the availability we’re used to.
“I don’t think that’s alarmist at all,” he says. “I think that’s a very realistic scenario.”
That’s exactly what happened with Choy-Remark’s employees. “They need a paycheck. They can’t just hope that you’re gonna reopen,” she says.
Choy-Remark says she’s caught in limbo.
“This (October) is the first month that I’ve not worked since I was maybe 18,” she says. Luckily, her husband has been able to pick up enough photography work to keep them steady while Choy-Remark — like many other working women during the pandemic — picks up more of the child-care responsibilities.
“I’m grieving 10 years of sweat and equity I put into my business,” she says. “Does the government want me to get back on my feet and be an employer again? Or is it asking me to go ahead and take a stopgap measure?”
In the end, says Block, “We can’t really have a sustained recovery without some stability in the public health situation.”
“It’s impossible to untangle the economic, social, physical and mental health effects that COVID is having on communities.” SHEILA BLOCK CANADIAN CENTRE FOR POLICY ALTERNATIVES