Thursday, September 4, 2008

The Frasier Institute, Mississippi, and Quebec

Canada’s right-wing ‘think’ tank, the Frasier Institute (the term ‘institute,’ I guess, gives it the patina of academia, although, of course, it is affiliated with no university), in its latest evaluation of North American labour market ‘flexibility,’ gave Quebec the bottom spot. The jurisdiction with the top ranking is Mississippi. To find out the kind of simplistic thinking this ‘institute’ engages in, feel free to read the following article from today’s Globe and Mail:

Fraser Institute's labour ‘flexibility' too hard and fast


September 4, 2008 at 6:00 AM EDT

When the downtown Montreal borough of Ville Marie passed a bylaw last year requiring shopkeepers to keep the sidewalk in front of their stores clean, everyone agreed it was a victory for civic-mindedness.

Everyone, that is, but municipal workers. They filed a grievance, arguing the bylaw violated their union contract – and won. An arbitrator recently ruled that the regulation amounted to an illegal contracting out of a union task. The city, after all, could not make citizens sweep without pay.

Montreal's cols bleus, as the city's “blue collar” workers are known, never fail to live up to their hard-won reputation for work avoidance and basic unco-operativeness. Indeed, the bylaw would never have been passed in the first place if the cols bleus had been doing their job.

This Montreal street-sweeping saga may help explain why Quebec comes up dead last in the Fraser Institute's latest ranking of North American labour market “flexibility.” With the highest rate of unionization on the continent, at 40.2 per cent of all workers, and the second-highest minimum wage relative to per capita gross domestic product, Quebec has chosen a policy prescription for job market sclerosis. Or, at least it has in the Fraser Institute's pro-free-market world view.

And just which province or state has got it right in the Vancouver-based think tank's mind?

That would be Mississippi, among others. The Magnolia State is one of 22 with right-to-work laws. Such legislation allows workers to choose whether or not to join a union and make financial contributions to it. In Mississippi, the state constitution has made the closed-shop illegal since 1890.

That hostility toward unions is one of the reasons only 7.8 per cent of Mississippians belong to one. Mississippi has no state minimum wage, either. Yet, you'd be hard-pressed to argue that workers or the state economy are better off because of these “flexible” labour laws.

Just ask the Mississippi Poultry Workers for Equality and Respect, a group that's been combatting abusive labour practices in an industry dominated by underpaid blacks and Latinos. Just ask the 600 workers in Laurel who were hauled off to prison last week by Immigration and Customs Enforcement agents after a raid on an electronics plant there.

What has all this labour “flexibility” meant for the Mississippi job market? Employment grew at an annual rate of 0.3 per cent in the five years to 2007, putting Mississippi in 58th spot out of 60 states and provinces. Employment in union-crazy Quebec grew at an average rate of 1.5 per cent, good enough to earn it a 21st place ranking.

To be sure, a few Quebec unions have priced themselves out of the market with wage and benefit expectations that bear no relationship to their productivity or competitiveness. But that is the fault of short-sighted union leadership, not of unionization in and of itself.

What's more, the Fraser Institute study ignores some of the most important factors determining the state of the job market, such as education levels, population growth and economic diversity or lack thereof.

Then there's oil. But can you really say that Alberta has the “best-performing” job market in North America, when wage inflation means signing bonuses for burger flippers? When employee loyalty only lasts as long as it takes to get a better offer? When high-school students calculate that it's more lucrative to drop out than get a diploma?

Similarly, can you really label Quebec's job market an underperformer when it has nearly closed a yawning gap with Ontario? Three decades ago, the unemployment rate in Quebec consistently topped Ontario's by about five percentage points. In July, the difference was a mere point – 7.4 per cent versus 6.4 per cent. What bridged the chasm? Economists regularly point to education. Quebeckers now graduate – from high school, college and university – in equal proportions to Ontarians.

Desjardins economist Hélène Bégin recently predicted that the unemployment rate in Quebec could soon fall to 5 per cent, as slow population growth and retiring boomers cause the work force to shrink. But that would not in itself signify a healthy labour market any more than the rate of unionization would constitute an obstacle to one.
Ask Barack Obama. He promises to adopt a Quebec-style “card check” system under which workers can form a bargaining unit if a simple majority sign union cards. Current law requires a secret ballot. Mr. Obama's reform could reverse the three-decade-long decline in the rate of unionization south of the border, where it stands at 13.6 per cent.

Would that be such a bad thing? Somewhere between Montreal's cols bleus and those Mississippi poultry workers, there has to be a happy medium. The Fraser Institute hasn't found it.

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