Dutch Diseased Labour Markets

If one reads the G&M and NatPo business sections one is treated to a steady stream of largely rosy and pompous pronouncements on the structural shift in the Canadian economy towards resource extraction on the one hand, and on the other hand, to the non- tradeable service sectors.  The tell is of course that the selfsame economists have had very little to say about the government’s continual expansion of the temporary Foreign workers (TFW) program which has meant that the non-tradable sectors are becoming increasing like the tradable sectors from the point of view of labour markets.  This manipulation of the labour supply curve has meant that what little benefits should have flowed from the resource boom to the labour market, particularly the low skilled segment, have not just been muted but reduced.

Just one example should suffice to make the point.  Tim Hortons in Newfoundland and Labrador is now making extensive use of the TFW program to solve their staffing needs in the context of an unemployment rate of 14%!  One of the problems with TFW program is that it encourages employers and governments to ignore structural problems in labour markets.  Another problem is that in the low skilled segment of the labour market there is a negative feedback effect.  Instead of increasing wages, benefits and improving working conditions in order to encourage higher rates of mobility among the unemployed it actually allows employers to decease conditions and remuneration. Thus, further discouraging unemployed workers and increasing the reliance on TFW.  Not many unemployed workers are going to move their family for an insecure job with declining security and conditions.

Harpers stroke of degenerate genius is to change existing EI regulations to force unemployed school teachers to take jobs at Tim Hortons and thus throw skilled labour into competition with unskilled workers and TFW.  To my mind this is a disastrous labour market policy.  There are, of course, better options. The problem is that the official discourse in the country remains wedded to simple schoolboys account free markets and supply and demand in the context of a real world economy in which supply and demand are manipulated at almost every-turn.  The disjuncture between the theory and the reality at this point can only be explained by the fact that it serves interests of capital in general and some privileged classes of workers.

And if you think the TFW program is a small and a well target program with little impact on the labour market you are mistaken.  Near fully one third of jobs created is now going to TFW’s with something like a third going to urban centres like Toronto and not Northern Alberta.