Ontario workers have little to celebrate this Labour Day

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Appeared in the Toronto Sun, August 31, 2017
Ontario workers have little to celebrate this Labour Day

Labour Day is a time when we celebrate workers. Unfortunately, over the past three years, Ontarians have had little to cheer about the province’s labour market.

While the Wynne government touted positive job-growth numbers in July, a longer view shows Ontario’s labour market has performed poorly when stacked up against other North American jurisdictions.

A strong labour market is critical for the prosperity of workers. It matches workers looking for the right job opportunity with employers looking for workers with the right skills.

In a high-performing labour market, opportunities abound with rapid job-growth, low unemployment and high productivity. But that has not been the experience of Ontario workers over the past three years. Instead, abysmal labour market performance has hurt workers in the province.

To properly judge the strength of Ontario’s labour market performance, we must look beyond the headlines about how many jobs were created last month or whether unemployment has ticked up or down, for a more comprehensive measure that goes beyond the latest news.

In a recent study we measure the labour market performance in Canada’s 10 provinces and the 50 U.S. states from 2014 to 2016. The study creates an overall index score (from 0 to 100) for each jurisdiction based on five indicators including job-creation, unemployment and worker productivity (measured by the average value of goods and services each worker generated with his or her labour). Higher scoring jurisdictions ranked better.

Ontario’s overall score on labour market performance (47.7 out of 100) is in the bottom third of North American jurisdictions, ranking just 44th of 60.

One of the major sore spots for the province is its relatively high average unemployment rate of 6.0 per cent (ranking 43rd). Moreover, compared to people in other provinces, Ontarians are more likely to experience long spells of unemployment. Over the three-year period, an average of one in five (20.9 per cent) unemployed Ontarians were unemployed for 27 weeks or more—the highest rate among Canadian provinces.

Ontarians have also endured a lack of job-creation. Over the past three years, Ontario’s average annual total job-growth was a meagre 0.9 per cent, which ranks in the bottom half (33rd) of Canadian provinces and U.S. states.

Another important indicator of labour market performance is worker productivity, which is a key driver of compensation. Low worker productivity is ultimately reflected in lower relative wages. Ontario ranks 52nd out of 60 North American jurisdictions on this crucial indicator, with output per worker of only CA$108,271 (for perspective, worker productivity in Alberta, Canada’s top ranked province on this metric, is $145,214).

Ontarians might be surprised to know that next door Michigan, a manufacturing jurisdiction similar to Ontario, performs considerably better overall, ranking 25th out of 60. On the specific indicator of average annual job-growth, the wolverine state’s rate is more than twice (2.2 per cent) that of Ontario (0.9 per cent).

While there are many reasons for Ontario’s weak performance, the provincial government hasn’t done the labour market any favours with a series of policy choices that have made Ontario less attractive for investment, businesses, entrepreneurs and skilled workers. The policies include higher tax rates, rapid debt accumulation, soaring electricity costs, higher minimum wages and more stringent labour and environmental regulations.

By contrast, Michigan has enacted policy reforms in recent years that improve the dynamism of the labour market and foster economic prosperity. The state has reformed business taxes, brought spending under control, and guaranteed workers a choice when it comes to financially supporting unions.

Pursuing similar policies would likely give Ontarians more to celebrate on Labour Day in the future.