Alberta is unique in a number of ways, and our labour issues are no exception. The recent changes to the Temporary Foreign Worker Program have made it more difficult for Alberta employers who are already struggling to find workers. Alberta’s low unemployment rate, labour shortages, and high average earnings means that employers rely on temporary foreign workers to fill spots that otherwise would be left vacant. Without those workers, many local businesses would unnecessarily suffer, and so too would Alberta’s economy.
There are no easy solutions for such a complex matter, but Todd Hirsch’s recent article in the Globe and Mail provides some interesting insight. You can read about it below.
Greater mobility a key to solving Alberta’s labour woes
Special to The Globe and Mail
Published Friday, October 10, 2014
Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.
“I’m dreading Christmas this year,” an employer in Calgary tells me. “If they cut my temporary foreign workers, I’m doomed.”
There’s no question the Temporary Foreign Worker Program (TFWP) has problems. A small number of employers have abused it, prompting Ottawa’s changes. Perhaps more tweaks are needed, but getting rid of the program isn’t an option – at least not for Alberta. It’s not that simple.
Economics textbooks explain that imbalances in the labour market will eventually sort themselves out through wages. If demand for workers is high, wages will rise. So if Alberta construction crews, coffee shops and catering companies can’t find workers, they shouldn’t hire foreigners – they should pay more.
The problem is that wages have already risen exorbitantly. Alberta’s average weekly earnings are 23-per-cent above the national average and keep ratcheting higher, both for skilled and unskilled workers (although the gap is larger for skilled workers). There are limits to how high wages can rise before it puts unmanageable strain on employers.
Independent business owners are the least able to raise their prices in order to increase wages. Franchise operators who are part of a national chain (e.g. fast-food outlets) are handcuffed by pricing decisions made by the corporate office. And if you’re not part of a national chain, you’re handcuffed by your competition that is part of a national chain.
But economics offers another theory as to how job markets adjust, and that’s through labour supply. Workers will migrate to the jobs and wages will equalize across the country. If only economic theory was so easily observed in the real world.
Canadians are able to move and work anywhere in the country, but there are practical limits to this. It’s often expensive and inconvenient, and it’s difficult to leave friends and community. So, because of the limited number of Canadian applicants for jobs in Alberta, companies have partly filled the hole with foreign workers. It’s unfair and inaccurate to claim this has driven down wages to below the poverty line.
Rather than axing the TFWP, Ottawa could be making it easier to find willing Canadians. If we want Alberta employers to use fewer foreign workers, let’s increase the supply of available Canadian applicants. Maybe some policy grease could lubricate the gears of labour mobility.
One policy idea is to reduce the number of available weeks of employment insurance in high-unemployment regions. This would be contentious, especially given the tighter requirements Ottawa has already placed on the EI program. But the longer period of entitlement is really just paying people to stay put. It discourages labour mobility.
Another idea is to enrich the income-tax incentives for relocating. Offer more generous deductions for moving expenses, or maybe a tax-free year for lowincome workers who relocate across the country. Or offer cash incentives in the form of refundable tax credits (like the GST rebate) for those who move to take work.
Some argue that it’s unreasonable to expect people to uproot themselves for a dish-washing job in Calgary. But why? Except for aboriginal peoples, we’re a nation of people who migrated for work opportunities. Isn’t a job washing dishes for $15 an hour better than no job or prospects at all? (Also, there are many other job openings in Alberta far more engaging and lucrative than washing dishes.)
Another objection is that Alberta is expensive and you can’t live on $15 an hour. That’s only partly true – Calgary and Edmonton are expensive cities (Fort McMurray is its own special case). But Calgary and Edmonton are still less expensive than Toronto or Vancouver. And the cost of living in many smaller communities is quite affordable. The average rent for a one-bedroom apartment in Camrose, Alta., is $736, while in Windsor, Ont., it’s $745. The unemployment rate in Camrose is 3 per cent; Windsor’s is 9 per cent.
The long-term solution, of course, is to figure out how to bring more well-paying, full-time jobs to all regions of the country. That’s a more complicated question and one certainly worth asking. But in the short term, we can address our labour market imbalances by increasing worker mobility. Why live in a great country like Canada if you don’t take advantage of it?
Alberta’s construction crews rely on the TFW program to fill labour shortages.