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Led by Alberta, Prairies home to Canada's best labour markets; Ontario continues to languish in sixth place

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Release Date: September 1, 2011
VANCOUVER, BC—Alberta had the best-performing labour market in Canada between 2006 and 2010, followed by Saskatchewan and Manitoba, concludes a new report released today by the Fraser Institute, Canada’s leading public policy think-tank.

The performance of Alberta’s labour market also topped all American states, according to the report Measuring Labour Markets in Canada and the United States: 2011 Edition, which ranks the performance of labour markets in 10 Canadian provinces and 50 American states.

Alberta ranked highest overall in North America in total employment growth and employment growth in the private sector over the five-year span measured, as well as second overall for low duration of unemployment and sixth overall for average unemployment rate.

Saskatchewan ranked second in Canada for the second year in a row, and this year surpassed Alaska to rank second overall among all provinces and states. Manitoba rose to third place in Canada after ranking fourth last year, and jumped to fourth overall (and tied with North Dakota) in North America from eighth in the last year’s report.

British Columbia rounded out the strong showing for Western Canada, slipping slightly to fourth among the provinces after finishing third last year. B.C. remained in sixth place overall in North America, tied with Wyoming.

“The Western provinces have evolved into labour market powerhouses, not only compared to the rest of Canada, but also to the United States,” said Amela Karabegović, Fraser Institute senior economist and co-author of the report.

“On the other hand, Ontario, Quebec, and Atlantic Canada continue to grapple with sluggish labour markets.”

Of the remaining provinces, Quebec tied with Virginia for 12th spot overall in North America, followed by Ontario and New Brunswick in a five-way tie for 16th, Nova Scotia (tied at 21st), Newfoundland and Labrador (tied at 32nd). Prince Edward Island was the lowest-ranked province, tied for 36th overall.

The report found that Ontario continues to struggle with low private-sector employment growth, where it placed ahead of only PEI, and a high unemployment rate. The province ranked ahead of only Quebec in terms of the average duration of unemployment.

“It’s alarming that Canada’s largest province ranks near the bottom on several performance indicators,” Karabegović said.

Alaska again ranked as the top U.S. state but dropped to third overall behind Alberta and Saskatchewan. Other states in the top 10 are: North Dakota (tied at fourth overall), Wyoming (tied at sixth), South Dakota (eighth), Texas (ninth), and Utah (10th).

The report notes that while the recession adversely affected labour market performance in both Canada and the U.S., the deterioration in the U.S. was more severe, at least partly because the financial crisis originated there.

“In general, jurisdictions that performed well before the recession have, on average, also done well over the past five years. The top 30 performers covering the pre-recession period 2003 to 2007 also experienced much better labour market performance between 2006 and 2010, compared to jurisdictions in the bottom half of the rankings,” Karabegović said.

Measuring Labour Markets in Canada and the United States: 2011 Edition ranks labour market performance based on five indicators: total employment growth, private-sector employment growth, unemployment rates, duration of unemployment, and labour productivity over the years 2006-2010.

Improving Labour Market Performance

The report also examines four specific characteristics of provincial and state labour markets that can affect performance: public-sector employment, unionization, minimum wages, and labour relations laws.

“In virtually all provinces, we see high levels of public-sector employment, rising minimum wages, and biased regulations that lead to high rates of unionization which negatively affect provincial labour markets,” said Niels Veldhuis, Fraser Institute vice-president of Canadian policy research and co-author of the report.

High public-sector employment tends to result in higher costs, lower average quality, less responsiveness to customers, and lower productivity. Lower productivity is particularly a concern since workers in the public sector tend to receive a wage premium relative to their private-sector counterparts.

In five provinces—Newfoundland and Labrador, Manitoba, Saskatchewan, Prince Edward Island, and Nova Scotia—more than 25 per cent of all workers were employed by some level of government. New Brunswick had 23.7 per cent of its workforce employed by government between 2006 and 2010, with Quebec at 21.7 per cent, and Ontario at 19 per cent. Overall, Canadian provinces have the largest public sectors, and occupy seven of the bottom 10 spots on this measure.

The study also highlights how high and increasing minimum wages negatively affect Canadian labour markets.

“Since 2009, every province in Canada increased its minimum wage, a move that will reduce employment opportunities for young and low-skilled workers,” Veldhuis said.

Unionization is another aspect of the labour market that impacts performance. High rates of unionization have been demonstrated to have an adverse impact on economic performance including reduced employment growth, profitability, and investment.

Canadian provinces also performed poorly overall in terms of unionization. Quebec, with 39.7 per cent of its workforce unionized, ranked last overall on this measure, while Prince Edward Island, British Columbia, Saskatchewan, Manitoba, and Newfoundland and Labrador all had more than 30 per cent of their workforce unionized. Overall, Canadian provinces occupy the bottom nine spots among all 60 jurisdictions (provinces and U.S. states).

One reason for high unionization rates in Canadian provinces is their relatively biased labour relations laws.

“Provincial labour relations laws inhibit the proper and efficient functioning of the labour market because they favour one group over another, prevent innovation and flexibility, and are overly prescriptive,” Veldhuis said.


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