A Passing Grade for Manitoba

Commentary, Workplace, Frontier Centre

A new study of labour-market performance, unique in its attempt to quantify workplace flexibility across all Canadian provinces and American states, contains both good news and bad news for Manitoba.

Published by Vancouver’s Fraser Institute, Measuring Labour Markets compares jurisdictions based on five indicators of performance: total employment growth, private sector employment growth, average unemployment, duration of unemployment, and productivity. Manitoba, scores surprisingly well among Canadian provinces; only Alberta and Ontario do better. Relative to the performance of all 60 jurisdictions, though, only Alberta offered a serious competitive challenge, with a score of second.

While our province ranks third in Canada, it scores only 35th out of 60 when states are added to the mix. Immediately neighbouring states like Minnesota and South Dakota, in 10th and 19th place respectively, score higher, but Manitoba beats out North Dakota and Montana, with rankings of 48th and 44th.

Comparisons of this sort naturally present difficulties. Unemployment and productivity figures are objective, as are levels of wage regulation, although the effects of the latter on overall prosperity are often disputed. But the import of labour laws, a patchwork of different rules subjectively interpreted by a variety of forums, is not as easy to quantify. The usefulness of a comparative analysis therefore depends on the validity of the assumptions it contains.

This study – the first in a planned series of annual reports – honestly identifies those fudge factors. The authors explain their methods clearly and back up the values they use with a wide range of public data sources like Stats Canada.

In job growth, a clear benchmark, Manitoba lands right in the middle, with an average of about 1.5 percent a year between 1998 and 2002. Although our unemployment rate is the best in Canada, we rank only 42nd when states are included. As in Saskatchewan, unfortunately, a lower unemployment figure is more related to an exodus of workers in a static labour market than with job creation, where we rank 8th in Canada. In productivity per worker, Manitoba sits 7th in Canada, and a dismal 56th on the continent. On the bright side, we score 3rd with respect to average length of unemployment in Canada and 39th overall. Unemployment here tends to be comparably short-lived but that’s probably because people move to other provinces instead of hanging around.

Manitoba’s large public sector, measured as a percentage of total employment, puts us near the competitive bottom of labour market characteristics. Why does it matter? Because failure in the private sector is results in a rapid remobilization of capital and labour to areas where they can be put to best use. The use of these resources in the public sector is much more opaque; monopolies supply many services and measurement of results is the exception, not the rule. This gives us lower overall productivity. Similarly, Manitoba’s high rate of unionized to non-unionized workers, again reflecting our larger public sector, is shown by extensive research to coincide with lower productivity, and puts us at a disadvantage.

A fourth measurement of the efficiency of work markets – the extent and effects of labour laws and the nature of their enforcement – will certainly raise objections from union advocates. The authors admit the qualitative aspects of such analysis but defend its validity up front: “Labour laws tilted too heavily in favour of one group at the expense of another or laws that are overly prescriptive and prevent innovation and flexibility will inhibit the proper functioning of the labour market.”

This general concern divides into several topics. How easy is it to certify or decertify a union, and are the rules balanced? How much use is made of binding arbitration, and who arbitrates? Is joining a union a necessary condition of employment? If a workplace is sold, are union contracts binding on the new owners? Can the union stop the use of new technologies that will reduce the number of workers? Are replacement workers allowed and can third parties attend pickets? How transparently do labour boards account for their decisions?

The answers to these questions vary widely from place to place. Manitoba scored 7th in the country. “Areas of concern for Manitoba were its poor ratings on requirements for certification and decertification, mandatory arbitration, and its treatment of technology,” the report says. “In addition, Manitoba, like all Canadian provinces protects unions through closed shop legislation and impedes innovation and capital reallocation through restrictive successor rights.”

In light of the ever-increasing flow of goods and services across the American border, the fact that most other provinces have rigid, job-depressing labour laws is irrelevant. Our enterprises compete with other jurisdictions unencumbered by such practices.

Measuring Labour Markets, sure to arouse emotions with labour traditionalists, lays out detailed steps Manitoba could take to improve the performance of its labour markets, allowing for higher wages through higher productivity and more choices in a bigger job market. Because they have the potential to move us closer to the front in the race for economic success, they deserve serious consideration.