Ontario workers are on the job about three and
half fewer weeks annually than their counterparts in US peer states and this
is costing $3,700 per capita in lower prosperity. Much of the gap in hours
worked – the intensity gap – is the result of preferences for more vacations
in Ontario. However, a significant percentage of the gap is because many
Ontarians are working part-time but would prefer to work full-time. The
intensity gap is also wider among more highly educated and higher income
Ontarians. These are some of the key conclusions of Working Paper 9, Time on
the job: Intensity and Ontario’s prosperity gap released today by the
Institute for Competitiveness & Prosperity.
The intensity gap translates to lower economic output in Ontario which in
turn reduces after-tax disposable income by $5,500 annually for the average
Ontario family. It also reduces federal, provincial, and local government
revenues in Ontario by $17 billion. Closing at least some of the intensity gap
would contribute to a reduction of Ontario’s worrisome prosperity gap. The
prosperity gap refers to how much Ontario trails its peer group of the largest
US states and Quebec in Gross Domestic Product (GDP) per capita.
“We have always argued that closing the prosperity gap should come from
working smarter, not harder,” said Roger Martin, Chairman of the Institute and
Dean of the Rotman School of Management at the University of Toronto. “But we
need to understand what’s driving the intensity gap, which is the second most
important factor in the prosperity gap, and that’s what we do in this Working
Paper.”
Drawing on data from Statistics Canada, US statistical agencies, and
Mercer Human Resource Consulting, the Institute has been able to deepen our
understanding of the hours worked gap between Ontario and its US peers. From
an international perspective, Canada and Ontario are on the middle ground –
workers here work more hours than the French and Germans, and fewer than the
Americans.
Half of the intensity gap is the result of Ontario workers taking more
full weeks off than their US counterparts, including nearly an extra week of
vacation annually. “That’s not something that’s likely to change,” said
Martin. “It’s in the other half of the intensity gap that the Institute’s work
indicates there may be opportunities for change. When we’re at work,” said
Martin, “the average work week is about one and a half hours shorter than in
the US.”
But that doesn’t mean all workers have a shorter work week than their US
counterparts. In fact for two thirds of workers, the Ontario-peer state
difference in the hours they actually work in a week is negligible. The real
difference is at the two extremes. More of Ontario’s workers are part-time and
many of them are doing so because they can’t find full-time work. Involuntary
part-time affects workers with less education and skills and this points to
the importance of investing in education in Ontario. It also points to the
spin-off effects of Ontario’s economy not fulfilling its full prosperity
potential. What’s worrisome is that the gap attributable to part-time work has
increased over time. In the late 1970s, there was less part-time work in
Ontario than in the peer states. Our higher unemployment and our lower
competitiveness relative to the peer states mean fewer opportunities for
full-time work – and the result is fewer hours worked by Ontarians overall.
The other key contributor to shorter average work weeks is the fact that
fewer of our workers put in long work weeks (defined as 50 or more hours per
week). Managers and professionals tend more to work long weeks both sides of
the border. But among the most highly educated and highest income workers,
fewer Ontarians work long work weeks compared to their peer state
counterparts. “This is part of a recurring trend we see in our work,” said
Martin. “We match the peer states in the basics, but at higher levels we
trail.” US researchers have found that high income, highly educated workers
are investing in long hours to strengthen skills, build personal networks, and
establish their standing within organizations. Our most productive workers do
not seem as willing to invest in extra hours.
The Institute also points out that hours on the job will become an
increasingly important issue for Ontario’s economy. With the baby boom
generation approaching retirement, there will be fewer workers available to
build economic prosperity. Smart employers will need creative human resources
policies to ensure that critical skills are not lost because of out-dated
approaches to retirement. According to Eleana Rodriguez, Principal of Mercer
Human Resource Consulting, who provided research data from Mercer’s 2006
Policies & Practices Database to the Institute for this Working Paper,
“responding to demographic changes and engaging employees in change has never
been more important for organizations and the coming retirement boom presents
challenges and opportunities for all of us who have a stake in Ontario’s
prosperity.”
