Gig economy could be dragging down wages for everyone — even those with regular employment

The growth of the gig economy may be having the opposite effect on Canadian wages — whether you’re a gig worker or not, a new Bank of Canada report states.

Almost a third of Canadians currently engage in some form of freelance, contract, part-time or otherwise precarious work. According the report, the surplus of informal human capital has reduced pressure on employers to maintain regular and sufficient wage increases.

Global News

“I think it is a big concern. It’s widely known that the gig economy is contributing to lowering wages,” said Eddy Ng, F.C. Manning Chair in Economics and Dalhousie University business professor. “Most of the gig economy jobs, as we know, are informal jobs that people have, and you generally find that this tends to concentrate on lower-level jobs.”

Ng explained that freelance, temporary and part-time workers aren’t the only ones impacted by this trend. Formal employees may actually struggle to get a raise now that contractors can so easily be recruited to do the work for less.

“You never get the pay raise because there’s always someone who’s willing to do this cheaper than you. Employees don’t need to bring people on full-time because it’s cheaper to do it this way,” Ng said.

“Employers will give the jobs to the lowest bidder.

The bank’s report hypothesizes that underlying wage growth has fallen short of what would otherwise be consistent in an economy with “little to no slack,” a term that refers to unused economic resources.

Essentially, wage growth in Canada is not consistent with the country’s unemployment rate, which currently sits at a 43-year low.

Andrew Cash, former NDP MP and founder of the Urban Worker Project,  previously told Global News that employers have little incentive to fight the gig work trend.

“Private-sector and public-sector employers have moved to the contract work model because it’s cheaper, and they don’t have to make a commitment to an employee,” Cash said.

Ng adds that should employment trends continue moving in this direction, the workforce could feel the psychological impacts.

“Employment not only provides us with income and security, it also provides us with an identity,” he explained.

“We no longer have quality employment — we always feel job-insecure, and that affects your well-being from a psychological perspective. It also makes it hard for you to plan,” Ng said.

Both Ng and Cash agreed that because employers are likely to embrace any model that provides them with cheaper labour, it’s up to the government to step in to protect workers in precarious employment situations.

“If employees consistently use freelance workers, the government has to say that at some point, once somebody has worked for you for x period of time or has enough hours to qualify, then employment standards have to kick in,” said Ng.

Cash also believes that regulators should account for non-traditional workers when writing employment legislation to ensure they’re protected from abuse in the workplace.

“Oftentimes, you see contract workers doing the exact same work as employees but getting paid less with no benefits or job security,” Cash continued. “Employees are engaging contractors when, by the letter of the law, these contract workers would be classified as employees.”

The federal government has taken some steps to address the issue of precarious work, including changes made to the Canada Labour Code in 2017 to address the changing face of work.

Some of the measures currently in discussion include a guaranteed minimum income and changing employment insurance to make it easier to secure benefits. Prime Minister Justin Trudeau has also referred to the Canada Child Benefit and expanding the Canada Workers Benefit as potential remedies for this problem.

In a recent speech given by Bank of Canada Senior Deputy Gov. Carolyn Wilkins, however, she ceded that there’s little monetary policy can do to impact the structural issues of the labour market other than keep inflation low and keep the economic environment predictable.

“The gig economy has also created a new set of jobs in Canada, and elsewhere that reduces the bargaining power of workers as well,” she said

“Monetary policy can do little to directly influence structural issues affecting the labour market and the wider economy. My job is to keep inflation low and stable so that people like you, in the business community, can operate in a predictable environment that supports sustainable economic growth.”

In the meantime, however, the Bank of Canada report states that a large portion of gig workers take on precarious employment out of necessity rather than by choice.

The number of people in Canada doing non-standard work because of weak economic conditions who would rather be doing something more formal is equivalent to about 700,000 full-time positions.

Regardless of which path the federal government decides to take to address this issue, Ng concludes that it’s policy-makers’ responsibility to act.

“As an industrialized country, we should pay attention to the welfare of the workers,” he said.

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