CURRENT ANALYSIS rbc.com/economics

Many jobs lost in the pandemic will be recovered relatively quickly

as vaccinations ramp up and the Canadian economy re-opens. But

for visible minorities and women—groups whose employment was

among those hit hardest by the pandemic—a return to labour mar-

kets considered ‘normal’ prior to the crisis won’t be good enough.

As we steer closer to the end of this recession, it’s worth remem-

bering that for these groups, a revival of the status quo will mean

once again coping with longstanding employment and wage gaps

that placed them at a distinct disadvantage. Closing these gaps

would not only address ongoing inequities in the job market but

would open powerful economic opportunities for Canada. For in-

stance, finding ways to better engage the skills of visible minority

workers could boost GDP by close to $30 billion per year.

Long-run structural labour market gaps to re-appear

In many cases, those hit hardest by the pandemic job downturn in

Canada were already struggling. The unemployment rates for some

groups have long exceeded the rest of the population, and re-

mained above national levels even when the economy was thriving.

Indeed, since 2001, the jobless rate for visible minorities has ex-

ceeded that of non-visible minorities by an average 2% annually.

This gap grew even wider during the crisis—with the unemployment

rate hitting 16.3% in July for visible minorities compared to 9.3% for

Rebuilding Canada’s labour market: The inclusive recovery imperative June 4, 2021

Rannella Billy-Ochieng’ | Economist | 416-974-8840 | rannella.billy-ochieng@rbc.com rbc.com/economics

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2001 2006 2016 2021*

Unemployment rate gap visible vs non-visible minority population

Higher jobless rates for visible minorities entrenchedfor decades

Source: Statistics Canada, RBC Economics 2021 figures are sourced from the Jan-May LFS supplementary data for population group 15-69 relative to non-visible minority (excluding indigenous)

2

4

6

8

10

12

14

Arab Chinese SoutheastAsian

Black South Asian Filipino LatinAmerican

NotIndigenousor a visibleminority

Unemployment rate for persons aged 15 to 69, not-seasonally adjusted, May 2021

Jobless rates for visible minorities in Canada remain high

Source: RBC Economics, Statistics Canada

5

15

25

35

45

55

5

10

15

20

25

30

SoutheastAsian

South Asian Filipino Black LatinAmerican

Arab Chinese NotIndigenousor a visibleminority

% low wage employees (left axis)

% of people that reported it was difficult/very difficult tomeet basic household financial commitments (right axis)

% of employees earning low wages (less than two-thirds of the 2019 median hourly wage of $24.04)

Many of Canada’s visible minority workers struggle to meet financial obligations

Source: Statistics Canada LFS supplement Jan 2021, RBC Economics

0

10

20

30

40

50

60

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

% who received CERB (right axis) Median earnings (left axis)

Median 2015 earnings reported in 2016

Visible minority workers relied more heavily onincome supports

Source: Statistics Canada, RBC Economics

CURRENT ANALYSIS

rbc.com/economics

non-visible minorities. This is in part because visible minorities are over-represented in hospitality and other industries, that are

among the hardest hit sectors of the economy.

What’s more, visible minority Canadians have historically underperformed in the labour force —a pattern that translated into a total

earnings gap of more than 15% in 2016. There is, of course, diversity among groups. Recent data shows that Chinese Canadians

take home comparable wages to the non-visible minority population, although unemployment in this group is more than 2.5% higher

in 2021. And in recent months, fewer Filipino Canadians were unemployed than non-visible minority Canadians, though this group,

on average, earns sharply lower wages (as little as 76c/$1). The impact of labour market underperformance among visible minori-

ties is significant. More than 25% of Southeast Asian workers earn low wages. And nearly half of all Latin American workers have

trouble meeting their financial obligations.

Labour force participation among women remains persistently be-

low that of men. This is one of the key inequities that the newly-

announced federal childcare program is meant to address. But

participation among visible minority women is even lower, running

more than 0.5 percentage points below that of women at-large

since the pandemic began. And even before the crisis, the unem-

ployment rate for female visible minorities was over 3% higher than

that of the broader female population. Government income sup-

ports for those losing work during the pandemic have been signifi-

cant, but that aid is set to wind down later this year. At that point,

there will be fewer guardrails in place to support these women that

have historically been at a disadvantage.

There are substantial economic benefits to reducing structural labour market gaps

Canada stands to gain significantly if it can engage the skills of these groups. For instance, ensuring that the skills of visible minority

workers are re-aligned to their most productive means—essentially

better utilizing Canada’ available supply of labour—would lift GDP

by nearly $30 billion per year. Making that shift won’t be easy, how-

ever. Much of the potential economic gain depends on closing a

substantial wage gap that has affected many highly-skilled visible

minorities and women.

Canada’s future labour force will be increasingly diverse. Over a

million visible minority youth will hit working age over the next dec-

ade. Immigration is also accounting for a rising share of expected

Canadian population growth. In 2016, 22% of Canadians identified

as a visible minority. By 2036, 34.7% to 39.9% of working Canadi-

ans will belong to the visible minority community, according to Sta-

tistics Canada. Improving labour market outcomes for these groups

will require finding new ways to recognize, and ultimately reward, the credentials of recent immigrants.

Engaging workers at the margins will hedge against an aging workforce

Baby boomers continue to retire in ever-greater numbers, putting a strain on labour supply. Difficulty finding workers has long been

a problem for Canadian companies and will continue to be post-pandemic. Amid such a pronounced demographic shift, it is impera-

50

52

54

56

58

60

62

64

66

68

70

Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21

Total - Visible minority

Not Indigenous or a visible minority

Pre-covid average employment rate

Female employment rate as % of population aged 15 to 69, not-seasonally adjusted

Visible minority women fall further behind in recoveringjobs post-pandemic

Source: RBC Economics, Statistics Canada

-45

-40

-35

-30

-25

-20

-15

-10

-5

% wage gap visible vs non-visible minority Canadians, median employment income

Most visible minority groups face significant wage gaps

Source: Statistics Canada 2016 Census, RBC Economics

CURRENT ANALYSIS rbc.com/economics

tive to attract new workers, but also to more effectively utilize the

workers we have. The underutilized talent pool of visible minority Ca-

nadians can help bolster Canada’s aging workforce. It can also give

Canada a skills advantage since many of these workers are universi-

ty educated.

We can rebuild a better, more inclusive Canadi-an labour market

As Canada rebuilds its economy, it has an opportunity to re-envision

its labour market and make a deliberate effort to close gaps that have

put many Canadians at a disadvantage. The challenge for policymak-

ers will be to ensure that the right infrastructure is in place to recog-

nize skills and credentials and to encourage dislocated female and visible minority workers to rejoin the labour force. For women,

the issue is even more pronounced, given the overarching needs of balancing work, child/elder care and other domestic responsibil-

ities.

The crisis has opened a unique opportunity for Canada to address these longstanding shortcomings in our job market. Failing to

seize it, will mean missing out on a sizeable economic opportunity.

The material contained in this report is the property of Royal Bank of Canada and may not be reproduced in any way, in whole or in part, without express authorization of the copyright holder in writing. The statements and statistics contained herein have been prepared by RBC Economics Research based on information from sources considered

to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This publication is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.

®Registered trademark of Royal Bank of Canada.

©Royal Bank of Canada.

5 10 15 20 25 30

0 to 4 years

5 to 9 years

10 to 14 years

15 to 19 years

20 to 24 years

25 to 34 years

35 to 44 years

45 to 54 years

55 to 64 years

65 to 74 years

75 years and over

Visible minorities as % share of the total population

Canada’s future workforce will be increasingly diverse

Total share of visible minorities

Source: RBC Economics, Statistics Canada 2016 Census

Disparities vary by region

Interestingly, despite the fact that Atlantic Canada has the smallest visible minority population, it’s the only region where the unem-

ployment rate for this group is comparable with non-visible minorities. By contrast, Central Canada is home to some of the largest

unemployment rate gaps in Canada. In Quebec and Ontario, the unemployment rates for members of the visible minority communi-

ty are 4.8% and 5.3% higher respectively.

The success of Atlantic Canada likely stems from its approach to immigration (the Atlantic Immigration Pilot) which makes it easy

for employers to draw from a pool of talent (whether in Canada or abroad). However, nearly half (45%) of the international immigra-

tion flows last year were concentrated in Ontario.

-25

-15

-5

5

15

25

35

45

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

visbile minorities unemployment rate gap (left axis)

% share of visible minorities (right axis)

Unemployment rate gap visible vs non-visible minority population as at May 2021

Pronounced unemployment gaps found in Central Canada

Source: RBC Economics, Statistics Canada

-26

-24

-22

-20

-18

-16

-14

-12

-10

Largest CMA Middle sized CMA Smaller sized CMA

Wage gap for visible vs non-visible minority full time workers aged 25 to 54 years

Structural labour market gaps more common in larger cities

Source: RBC Economics, Statistics Canada 2016 Census