The Fraser Institute

The Fraser Institute

September 03, 2009 06:00 ET

The Fraser Institute: Quebec Labour Market Was Second-Worst Performer in Canada; Province Needs to Address High Minimum Wages, Large Public Sector, and Biased Regulations

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 3, 2009) - Quebec was the second-worst performing labour market in Canada and one of the worst in North America between 2004 and 2008, the most recent years for which data are available, according to a new study released today by independent research organization the Fraser Institute.

"During the time studied, Quebec had one of the highest unemployment rates in North America with workers enduring lengthy spells of unemployment, and it was among the worst jurisdictions in terms of worker productivity," said Niels Veldhuis, co-author of the study and Fraser Institute senior economist.

Among Canadian provinces, only Newfoundland and Labrador had a lower ranking than Quebec.

The peer reviewed study, Measuring Labour Markets in Canada and the United States: 2009 Edition, assesses the performance of labour markets and examines characteristics which impact performance. The study includes an overall measure of 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 2004-2008. The complete study is available at www.institutfraser.org.

The period studied is one in which most of North America experienced strong economic growth but Veldhuis notes that employment and unemployment data from the past 12 months shows a deterioration in labour market performance for most provinces and U.S. states. However, he points out that even in an economic downturn, the top rated jurisdictions have continued to outperform those that are lower rated.

"The provinces that performed well in the past five years have, on average, also done well in the past 12 months. For example, the top 30 jurisdictions in the study's rankings have generally experienced much better employment growth and lower levels of unemployment than jurisdictions in the bottom half of the rankings," he said.

"However, up to date data are only available for two indicators: employment growth and unemployment. An overall assessment of the impact of the recession on labour markets will need to wait until all data are available."

Overall, Alberta had the best performing labour market in all of North America between 2004 and 2008 while Saskatchewan was second among Canadian provinces, ranked eighth in North America, with British Columbia finishing third in Canada and ninth among all 10 provinces and 50 U.S. states. Neighbouring Ontario was ranked 35th overall.

"Quebec's government should be concerned about the gap in its labour market performance compared to other provinces and U.S. states," Veldhuis said.

"Quebec's unemployment rate was almost twice as high as the rates in Alberta and Saskatchewan, and its rate of total employment growth was about half of that found in Alberta and British Columbia."

The study also examines four aspects of labour markets that directly affect labour market performance: unionization, public sector employment, minimum wages, and labour relations laws.

"Unfortunately, Quebec has unfavourable labour market characteristics and regulations which results in poor performance. This translates into fewer jobs, higher rates of unemployment, and lower productivity," Veldhuis said.

"Quebec needs to re-examine issues such as raising minimum wages, biased regulations that lead to high rates of unionization, and high levels of public sector employment."

Quebec maintains one of the highest minimum wages in North America, ranking it 59th out of 60 jurisdictions. High minimum wages have been proven to reduce employment and on-the-job training, especially for young people seeking to enter the job market.

"Quebec increased its minimum wage in 2009, which will have adverse effects on employment just as the country appears poised to come out of recession," Veldhuis said.

Quebec also ranked dead last in North America for its high rate of unionization, 39.9 per cent of its workforce.

One reason for Quebec's high unionization rate is its pro-union labour relations laws. Evidence shows that labour relations laws biasing one group at the expense of another, or which are overly prescriptive, reduce labour market performance. On this measure, Quebec was again ranked last in North America for its restrictive set of labour laws.

"Quebec needs to consider changes to its labour characteristics and regulations to encourage economic growth and boost the performance of its labour markets, especially in a time of recession," Veldhuis said.

The Fraser Institute is an independent research and educational organization with locations across North America and partnerships in more than 70 countries. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.

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