Reverberations of Temporary Work

Temporary Work:

The gig economy was estimated to account for 7.3% of all Canadian workers in 2016; that is according to several folks who posted "preliminary results" to the internet and then asked that they not be circulated! A lesson in the internet's capabilities, perhaps?

In 2019 the Bank of Canada determined the same gig economy to encompass nearly 1/3 of all Canadians, while Statistics Canada estimates that indexed growth in all temporary work is approximately 30 points greater than of the permanent work over the period, 1997-2018.

Regardless of how you slice it, temporary work is becoming more common, and it appears one significant contributor is healthcare and education which is of particular interest to me. Considering the cost premium of permanent positions and the relentless pursuit of overhead reduction in public service, this isn't surprising. When government money dries up and the work doesn't, institutions adjust to hire based on whatever pots of money they can find. This means charitable sources and grants are leveraged, which of course by their very nature are temporary.

And so, the reality for many Canadians is that temporary work will be, or has become a permanent thing...

An Initial Reverberation:

Canadians love real estate. We love it to the point of not properly funding our retirements, kids' educations, or even having enough left over to cover an emergency. In this respect I am an outlier having rented for all of my adult life while investing down other avenues. Alas, at 40 years old I am succumbing to the allure of drywall, and have finally received my ticket to the dance.

The first number at the dance is called the mortgage preapproval. Traditionally chaperones (the banks) have relied on security (the underwriters) to throw out temporary workers from the dance because they are perceived as risky, and in some cases are. The DJ (the lawyer) won't let you hear the second song until you've sufficiently jived to the opening piece. Several dance moves must be mastered: the down payment, minimal existing debt, minimal existing payments, and typically, a permanent job. This last one can be avoided however, pending an appropriate letter of support from a village elder, or ones' parents. Sometimes a limb is requested.

And so, a house is preferably purchased in Canada with proceeds from a permanent job...

Future Reverberations:

Canada is a great country, but when it comes to jobs and houses we are conflicted. Our conundrum is probably a symptom of broader economic issues (i.e. loss of jobs to automation, a shift to greener energy), but also by our very Canadian financial illiteracy. Debt is only investment to a point, in addition, debt needs a sturdy foundation to materialize a gain.

I suspect that given Canada's economic over reliance on housing (we have backed ourselves into an economic corner), banks will become increasingly lenient in their requirement for job permanency. After all, there are a plethora of alternate lenders (also here Chart 7) waiting in the wings to mop up business the banks deem unfavorable. Letting this business slip away may be wise risk management on one hand, but would hit our biggest lenders in their favorite revenue stream (50% of RBC's revenue comes from personal banking).

I can't help thinking that Canada is looking more and more like the pre-2008 United States, at least in our quest to make everyone an home owner. Yes, we have the OSFI stress test which alleviates some risk, but will it be enough? Will political pressures roll it back?

I am not an economist, and all of this is just opinion.

What do you think?

Is our working world at odds with the Canadian dream?