Here鈥檚 how Canada鈥檚 labour market works these days. We have pub owners in Calgary so desperate for 鈥渜ualified鈥� workers they鈥檙e spending up to $2,000 each recruiting them abroad and bringing them into the country as temporary workers (which does raise the question of exactly how qualified you have to be to work in a pub).
At the same time, we have seasonal workers in Atlantic Canada whom we鈥檙e paying to stay chronically underemployed.
How can this be? We have a saying in Quebec, which as you know we apply to more or less everything bad that happens: 鈥淐鈥檈st la faute du f茅d茅ral!鈥�
How should the labour market work? If pub owners are having trouble attracting workers, they should raise wages. If that hits their profits too hard, they should either raise what they charge for beer or help their staff to be more productive, or both.
If none of that works, they should get out of business: The cost of the service they offer is greater than what people are willing to pay for it. They should try something else.
At the other end of the country, if people are working in jobs that don鈥檛 pay enough to provide what they regard as a decent annual income, they should quit and try something else, possibly in a different part of the country. Instead, the federal government supplements their income with unemployment 鈥渋nsurance.鈥� I put insurance in quotes because insurance is supposed to protect you against random acts of bad luck, such as your house burning down, for instance.
But people in seasonal industries have never-ending bad luck: their house burns down year after year after year, as it were.
What鈥檚 the effect of subsidizing seasonal workers in this way? It keeps their wages artificially low. They can make a satisfactory income with not much wage income because the federal government tops it up.
What would be the effect of tightening the rules so seasonal workers don鈥檛 have unlimited annual access to EI? They鈥檇 have to get more work or higher wages, or both, to maintain their incomes.
If their employers didn鈥檛 come through with more hours or money, many would end up moving. The resulting reduction in supply would eventually force wages up. Doubtless, some seasonal businesses would fold.
How many businesses? Anyone in any way familiar with social science understands that鈥檚 impossible to say exactly 鈥� though that did not prevent the Atlantic premiers from calling on Ottawa recently to back off on its reforms to EI until the policy could be more 鈥渆vidence-based鈥� and its exact effects predicted.
As it happens, EI is probably the most studied federal program we have. We had the Forget Commission in the 1980s. We had the Axworthy review in the 1990s. We鈥檝e had almost countless academic studies concluding the current system subsidizes seasonal industries at the expense of non-seasonal industries.
In fact, you don鈥檛 actually need much evidence to figure that out: 鈥渘o-brainer-based鈥� policies have their place, too. Moreover, the current reforms don鈥檛 go far toward removing the subsidy. What would be much more effective, not to mention fair, would be 鈥渆xperience rating,鈥� under which firms that create chronic unemployment pay higher premiums and those that don鈥檛, don鈥檛.
To sum up: Importing temporary workers to staff Calgary pubs keeps wages in Calgary lower than they should be, while paying EI to seasonal workers keeps them in jobs that can never give them a decent income.
The federal government should get out of both sides of this equation (as in fact, to its credit, it鈥檚 now trying to do) and let the labour market work as it should. Wages should rise in Calgary. Atlantic 91原创s should move to take advantage of them.
It鈥檚 a lovely federation. A common labour market is one of its greatest attributes. None of us has a right to a job in the province of our birth.
William Watson teaches economics at McGill University.
