Policy Brief

A Comparative Analysis of Unemployment

and Poverty in Windsor and Canada


Jordan Brennan, PhD
Economist, Unifor
jordan.brennan@unifor.org











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SUMMARY

As one of the southern-most cities in Canada, Windsor is nestled between Detroit and the
rest of Canada. This geographic fact is an apt metaphor for the current state of play in
Windsor: when Windsor looks across the American border it sees a city in full-blown
decay; when Windsor looks north to the rest of Canada, it sees conditions of life which
exceed its own.

This document compares some recent history of employment and poverty in Windsor and
Canada. The purpose of the comparison is to determine what is specific and what is
general about Windsors recent employment and poverty history. This comparison will
assist in an evaluation of the impact that the most recent City Council has had on the
quality of life in Windsor. Before Windsors City Council uncorks the champagne and
passes around the bouquets, its members should consider the following facts:

The average unemployment rate (for the first nine months of 2014) in Windsor is 8
percent, compared to 7.6 percent in Ontario and 7.1 percent in Canada. The average
employment rate (which measures the number of employed adults as a percent of
the population) in Windsor is just 56.9 percent, compared to 61.1 percent in Ontario
and 61.5 percent in Canada;
According to the pretax low income cut-off (LICO), roughly 13 percent of Canadians
live in poverty. Using the after-tax LICO, which registers the effect of Canadas social
safety net, the poverty rate is nine percent. The low income measure (LIM), which is a
relative measure of poverty, indicates that 13 percent Canadians live in poverty;
All three measures of poverty are worse in Windsor. The pretax LICO is 17 percent,
implying that one-in-six inhabitants of Windsor live in poverty. The tax and transfer
system reduces the pretax poverty rate from 17 to 13 percent after tax, which is still
well above the Canadian average. Shockingly, relative poverty (as captured in the
LIM) is at 20 percent, or one-in-five;
Besides the fact that employment and poverty are worse in Windsor than in Canada,
conditions have generally stabilized or improved in Canada using these measures. In
Windsor, by contrast, the employment and poverty picture has worsened in the past
decade;
The people of Windsor need and deserve better. At a minimum they require a
municipal government that (i) has these troubling facts at its disposal, (ii) believes
these facts require corrective action, and (iii) has a plan to improve the conditions of
life in Windsor.

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The following analysis compares some recent history of unemployment and poverty in
Windsor and Canada. The comparison is two-fold: it compares Windsor with Canada with
a view to determining what is specific (and what is general) about Windsors recent
history; and it compares the history of Windsor with itself with a view to evaluating what
impact recent municipal government has had on the quality of life in Windsor.

The most recent government first assumed office at the end of 2003. Have the conditions
of life improved in Windsor over this period or have they deteriorated? Has municipal
government in Windsor succeeding in boosting the employment rate, lowering the
unemployment rate and reducing poverty?

Table 1 outlines some basic facts. Comparing the respective level of employment and
poverty in each jurisdiction (given the most recent annual data available with Statistics
Canada) suggests that conditions are worse in Windsor than in Canada. In 2013, the
unemployment rate in Windsor was 8.9 percent and in Canada it was 7.1 percent. This
nearly two percentage point difference implies that the unemployment rate in Windsor is
one-quarter higher than the Canadian average, in proportional terms.

Given how the unemployment rate is measured, it is not the best way of determining
economic underperformance. Why? Statistics Canada defines unemployment as follows:
the number of persons who, during the reference week, were without work, had actively
looked for work in the past four weeks and were available for work (those persons on
layoff or who had a new job to start in four weeks or less are considered unemployed).
The unemployment rate is computed by dividing this figure by the total labour market.

The problem with this measure is that those who would like to work but who have given
up actively searching for work are not classified as unemployed. The employment rate
remedys this defect. It is measured as the number of adult employed expressed as a
percentage of the population 15 years of age and over. People who want a job but who
have ceased to actively seek work are captured in this calculation.

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The employment rate in Canada is nearly 62 percent, which is roughly five percentage
points higher than in Windsor, which lends weight to the claim that conditions in Windsor
are worse than the Canadian average.

Table 1
Employment and Low Income in Windsor and Canada
Measure Windsor Canada
Proportional Difference
Can-Win (Approx.)

Employment
Unemployment Rate (2013) 8.9% 7.1% One-fourth higher in W
Employment Rate (2013) 56.5% 61.8% One-twelfth lower in W

Poverty
Low Income Cut-Off Before Tax (2011) 16.8% 12.9% One-third higher in W
Low Income Cut-Off After Tax (2011) 13.3% 8.8% One-half higher in W
Low Income Measure After Tax (2011) 19.7% 12.6% One-half higher in W
Source: Statistics Canada, Tables 282-0002, 282-0110, and 202-0802.


And what of poverty? Measures of poverty vary, but Statistics Canada has a few metrics
that poverty researchers commonly use:

Before-tax low income cut-offs (pretax LICO): this measure was determined from an
analysis of the 1992 Family Expenditure Survey data. Income limits were selected on the
basis that families with incomes below these limits usually spent 54.7% or more of their
income on food, shelter and clothing. Low income cut-offs were differentiated by
community size of residence and family size.

After-tax low income cut-offs (after-tax LICO): this measure was also determined from an
analysis of the 1992 Family Expenditure Survey data. These income limits were selected
on the basis that families with incomes below these limits usually spent 63.6% or more of
their income on food, shelter and clothing. Low income cut-offs were differentiated by
community size of residence and family size.

Low income measures (LIMs): this is a relative measure of low income, set at 50 percent
of adjusted median household income. This measure is categorized according to the
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number of persons present in the household, reflecting the economies of scale inherent in
household size.

Table 1 compares these measures of poverty in Windsor and Canada. Using the pretax
LICO for Canada, roughly 13 percent of persons live in poverty. That is one-in-eight
Canadians. When we use the after-tax LICO, building in the effects of the tax and transfer
system the social safety net the poverty rate drops from 13 percent to (roughly) nine
percent (or one-in-ten Canadians). The LIM (after tax), which is a relative measure of
poverty, indicates that 12.6 percent (one-in-eight) Canadians live in poverty.

All three measures of poverty are worse in Windsor. The pretax LICO is at 17 percent,
implying that one-in-six inhabitants of Windsor live in poverty. The tax and transfer
system reduces the poverty rate from 17 to 13 percent, which is still well above the
Canadian average. Shockingly, relative poverty (as captured in the LIM) is at 20 percent, or
one-in-five.

Using the low income cut-off (before and after tax) and the low income measure, the
poverty rate in Windsor is roughly one-third to one-half higher than the Canadian average.
Given that poverty is often a story of unemployment and underemployment, it is not
surprising that Windsors poverty indices would be worse than the Canadian average,
since employment opportunities in Windsor are worse than the Canadian average.

Clearly, the conditions of life in Windsor, as captured in various measures of employment
and poverty, are worse than the Canadian average. But how have these measures
changed over time? Are the conditions of life getting better, are they getting worse or
have they remain unchanged in each jurisdiction?

Figure 1 contrasts the unemployment rate in Canada (from 1990 to 2013) and in Windsor
(from 1996 to 2013). The unemployment rate in Canada (captured in the thin broken line)
has been trending downward for decades. In 2013, Canadas unemployment rate was 0.5
percent lower than it was in 2003. In Windsor, the unemployment rate (the thick black
line) in 2013 was 1.5 percentage points higher than in 2003. From the standpoint of the
unemployment rate, conditions have improved slightly for Canadians over the past
decade, but for the inhabitants of Windsor they have clearly worsened.

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It is also worth noting that, prior to 2003, the unemployment rate in Winsor moved in
tandem with the Canadian average, but after 2003 Windsor delinked from the Canadian
average and has since trended far above it. The year Mayor Francis assumed office is
precisely the year that unemployment in the two jurisdictions began to follow a different
pattern. We cannot assume there to be a causal relationship here, of course, but no one
can seriously claim that the Francis-led city government has improved the unemployment
picture in Windsor.


Source: Statistics Canada Table 282-0110 and 282-0002.

The employment picture for both Canada and Windsor are bleaker than the facts in Figure
1 suggest, however. Figure 2 contrasts the employment rate in Canada (thin broken line)
with the employment rate in Windsor (thick black line). For Canada as a whole, the
employment rate increased from the early 1990s until 2008. Between 2008 and 2013, the
employment rate dropped two percentage points and then stabilized at a lower level.

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The employment picture in Windsor is considerably worse. The employment rate in
Windsor trended upward from 1997 until 2000. Between 1996 and 2001, Windsor had a
higher employment rate than the Canadian average. It is not until 2003 that Windsor fell
below the Canadian average. Between 2003 and 2009 employment fell rapidly in Windsor,
declining an incredible seven percentage points. The bleeding stopped after 2009 and
there has been a modest (stress: modest) recovery since then, with the employment rate
climbing from 55 to 56.5 percent.


Source: Statistics Canada Table 282-0110 and 282-0002.

According to Figure 2, one reason why the unemployment rate declined in both Canada
and Windsor in recent years is not because those who lost their jobs in the 2008-09
meltdown found gainful employment shortly thereafter; it is because many unemployed
people gave up actively seeking work and were henceforth not counted among the
unemployed (perversely).

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Canadians continue to hear talk of a jobless recovery and this is borne out by the facts.
The employment rate in Canada in 2013 is roughly where it was in 2002 (and where it was
in 1990), meaning the Great Recession of 2008-09 wiped out a full decade of employment
growth.

The story in Windsor is much worse, as Figure 2 suggests. Whereas Canada experienced
one year of employment contraction from 2008 to 2009 with no recovery, Windsors
employment rate decline dramatically after 2003 and is well below the Canadian average
(after being above the Canadian average in the five years to 2001).

The decline of employment opportunities in Windsor is captured in Figure 3, which plots
the size of the labour force and full-time employment from 1996 through 2013. The
labour force is measured as the number of civilian (non-institutional) population above
the age of 15. Statistics Canada measures full-time employment as the number of people
who work 30 hours or more per week at their main or only job.


Source: Statistics Canada Table 282-0110.
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The facts tell us that the labour force and full-time employment were expanding in the
late 1990s and early 2000s and have contracted dramatically over the past decade.
Between 2003 and 2013, the labour force in Windsor contracted by 5.4 percent whereas
full-time employment contracted a stunning 9.3 percent. In Canada, both the labour force
and full-time employment have increased in the past decade, making Windsors
experience painfully abnormal.

The foregoing facts clearly indicate that (i) Windsor has performed worse than the
Canadian average in multiple measures of employment health and (ii) the ten years from
2003 through 2013 were a particularly bad time in Windsor. Not only has Windsor
underperformed the Canadian average, but the pattern in Windsor has detached from the
overall employment pattern in Canada.

Given that poverty and low-income are closely associated with unemployment and under-
employment, we would expect given the poor employment picture in Windsor
poverty in Windsor to be above the Canadian average and, perhaps more troubling,
getting worse. But first, how is Canada performing as a whole when it comes to poverty?

Figure 4 provides a historical overview of low income and poverty in Canada by
contrasting three measures: the LICO before and after tax and the LIM from 1976 through
2011 (the latest available data point).

The recent history of Canadian poverty is complicated. The two LICO measures tell us
three significant things. First, the level of poverty in Canada fluctuates from year to year,
but the overall trend in recent decades has been one of declining poverty. Second, as of
2011, Canadian poverty was at its lowest level on record. Third, the after-tax level of
poverty is considerably lower than the pre-tax level, which suggests that Canadas tax and
transfer system is doing what it should be doing, namely mitigating the extent (and
experience) of low income.

According to the LICO measures the story of Canadian poverty in recent decades is
positive. However, the LIM tells a different story. This latter metric is a measure of relative
poverty. Recall, the LIM is set at 50 percent of median household income, which means
that it compares how those in the bottom income brackets are doing relative to middle
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class (the median income is the middle point separating the upper half from the lower
half of the Canadian income distribution).


Source: Statistics Canada Table 202-0802.

According to the data in Figure 4, the LIM: fell from a historic high in 1977 to a historic low
in 1989; it rose from a historic low in 1989 to a high in 2004; and, as of 2011, it registered
a value of 12.6, which was just above the historic average. The LIM tells us that relative
poverty in Canada in 2011 was at its historic average. This suggests that the lower income
groups have fared worse than the middle class since 1989 when the Canada-U.S. Free
Trade Agreement came into place.

In terms of absolute poverty (measured using the pre- and post-tax LICO) Canada has
made gains. Using the LIM measure, which captures relative poverty, things have gotten
worse in Canada.

Given that the story of poverty in Canada ranges from good news to troubling
depending on the poverty measure, how has Windsor fared in its experience of poverty?
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Figure 5 plots the pretax LICO in Windsor from 1976 through 2011. The thin broken line
measures the number of people living in poverty (scaled on the left axis, in thousands).
The thick black line measures the percentage of Windsors population living in poverty
(scaled on the right axis). Again, we use 2003 as the reference year to determine how the
past decade has compared with previous times.

The facts are sobering. As of 2011, 58 thousand people in Windsor lived in poverty, which
is roughly 17 percent of the population. Five short years beforehand, in 2006, 34 thousand
inhabitants of Windsor lived in poverty, or 11 percent of the population. In the five years
to 2011, then, 24 thousand people were added to the ranks of the impoverished, which
increased the poverty rate by more than half. When we compare 2011 with 2003 our
reference year we find that six thousand more people lived in poverty as of 2011 and
the poverty rate was half a percentage point higher.


Source: Statistics Canada Table 202-0802.

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There is only one year in the recorded statistical history of Winsor which registered more
people living in poverty than in 2011: in 1982, after a devastating recession, 61 thousand
inhabitants of Windsor lived in poverty, thus making 2011 the second worst year on
historical record (despite the fact that the poverty rate in 2011 was considerably lower
than in 1982).

Whereas Canada has made considerable gains on the poverty file according to the LICO
measures, Windsor has a higher percentage of its population living in poverty than at any
time in the past 15 years. What about other measures of poverty?

Figure 6 plots the LIM for Windsor from 1976 through 2011. The thin broken line
measures the number of people living in poverty (scaled on the left axis, in thousands).
The thick black line measures the percentage of Windsors population living in poverty
(scaled on the right axis). Again, we use 2003 as the reference year to determine how the
past decade has compared with previous times.


Source: Statistics Canada Table 202-0802.
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As of 2011, 68 thousand inhabitant of Windsor lived in poverty. This is 23 thousand more
people than in 2003 and it represents (by far) the worst year for poverty in the statistical
history of Windsor. In 2011, 20 percent of the population lived in poverty (again, using the
LIM). This was more than five percentage points higher than in 2003, when roughly 14
percent of the inhabitants lived in poverty.

According to the LIM, 2011 registered the single highest value for poverty since record
keeping began in 1976. Perhaps even more troubling, the trend line is unambiguously
upward, which suggests that poverty may continue to worsen in Windsor.

With a view to covering our bases, we might probe one additional measure of poverty to
assess how Windsor has fared in recent times. According to Statistics Canada, the Market
Basket Measure (MBM) attempts to measure a standard of living that is a compromise
between subsistence and social inclusion. Importantly, it reflects differences in living costs
across regions, since housing, for example, is much more expensive in some cities and
regions than in others. The MBM represents the cost of a basket that includes: a nutritious
diet, clothing and footwear, shelter, transportation and other necessary goods and
services (such as personal care items or household supplies). The cost of the basket is
compared to disposable income for each family to determine low income rates.

Data for the MBM only dates to 2002, so we do not have a deep historical picture using
this metric. However, between 2002 and 2011, the MBM for Canada as a whole declined
by one percentage point, falling from 13 to 12 percent. Not a tremendous improvement,
but progress nonetheless. In Windsor the MBM of poverty increased by one percentage
point between 2002 2011, climbing from 13 to 14 percent (after hitting a high of 15.5
percent in 2009). Here again we find (i) Windsor falling below the Canadian average and
(ii) conditions worsening in Windsor over the past decade while improving for Canada as a
whole.

The people of Windsor need and deserve better. At a minimum, they require a municipal
government that (i) has these troubling facts at its disposal, (ii) believes these facts require
corrective action, and (iii) has a plan to improve the conditions of life in Windsor.