March Questions and Answers

Joel Emes

Q: How does Canada's unemployment rate compare internationally over time?

A: Table 1 shows historical unemployment rates for several countries in the Organization for Economic Co-operation and Development (OECD). This table highlights a major difference between Canada's recent economic performance and that of our main trading partner, the United States. In 1981 our unemployment rates were equal. Since then, our unemployment rate differential has deteriorated considerably, so that in 1996, Canada's rate was 4.3 percentage points higher.

Q: How long do people remain unemployed in Canada? How does this compare internationally?

A: In 1996, the percent of unemployed people who have been out of work for over a year varied considerably among OECD member countries, from 9.5 percent in the United States, to 65.6 percent in Italy. Table 2 reveals the relative change in long-term employment within various countries. Someone is considered to be long-term unemployed when they have been out of work for 12 months or longer. Compared to many OECD countries, long-term unemployment is not a serious problem in Canada; compared to the US, we have room for improvement.

Q: Why is long-term unemployment a problem?

A: A high long-term unemployment rate is a problem because workers who stay out of the labour force for extended periods of time are not gaining work skills or experience, and may be more likely to require state support of one form or another throughout their lives. This has serious implications for countries with generous social safety nets; public pensions that are not fully funded provide a good example. Many countries are beginning to realize that their pay-as-you-go pension plans are going to face funding problems because of a high ratio of retired people to working people. A high unemployment rate combined with a high long-term unemployment rate exacerbates this problem because at any given time there are fewer workers to fund the public pension.

Q: How does Canada's employment creation record compare internationally?

A: Once again, Canada's record is good compared to that of the EU, but shows some room for improvement when compared to the US. From 1981 to 1996, the US averaged employment growth of 1.54 percent per year, Canada's employment growth averaged 1.43 percent per year, while the EU managed only 0.16 percent per year on average. This month's graph looks at employment growth rates in Canada, the US, and the EU. Both Canadian and American employment growth rates rebounded quickly after the recessions in the early 1980s and '90s. The ratio of total employment in Canada and the US as a percent of total employment in the EU has gone from 79 percent in 1981 to an estimated 97 percent in 1997. Between 1973 and 1992, the private sector was responsible for 84 percent of all new jobs created in the US and Canada, while the private sector in the EU accounted for only 41 percent of total employment growth.

Tables and Graphs

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