Sunday, January 18, 2009

Canada will soon be as united as the European Union ...

... at least in one respect. It's a little-known fact that Canada is still in the process of creating an integrated national labour market.

Premiers put the finishing touches today on amendments to a 15-year interprovincial trade agreement they say will guarantee full labour mobility across the country – but experts warn Canadians to be skeptical of what the changes accomplish.

For decades, Canadian trades and professions have found it difficult to switch provinces because of protectionist rules in each jurisdiction that frustrate the easy portability of their skills. Premiers say their solution – first reached last July, and finalized Friday – will end those problems.

“On April 1, 1009 … a nurse will be a nurse, a plumber will be a plumber and credentials will be recognized by each [province] across the country and we will have true labour mobility,” Manitoba Premier Gary Doer said.

But trade experts say there is a significant gap in the revised deal that would still allow provinces to bar out-of-province workers.

“There are gargantuan loop-holes … allowing any province to opt out for something called legitimate provincial objectives,” Lawrence Herman said. “What does that mean? I guess it means whatever any provincial government says it means when it decides to prevent workers from another province coming to work in its territory.”

Mr. Herman, a lawyer with Cassels Brock & Blackwell LLP whose specialties include trade, said the only way to guarantee that trades and professionals can work unfettered throughout Canada would be for Ottawa to pass legislation.

The federal government could use its trade and commerce powers to lay down one unambiguous law, he said – but it appears unwilling to do so.

Mr. Herman said the amended provincial agreement is “better than nothing” but falls short of what Ottawa could enact.

“If the federal government had the backbone to use the trade and commerce power that would make it unconstitutional for any provincial law to prevent labour mobility throughout the country.”

But the premiers maintain their new deal is solid. They say the revised labour mobility chapter of the Agreement on Internal Trade will provide that “any worker certified for an occupation by a regulatory authority of one province or territory is to be recognized as qualified for that occupation by all other provinces and territories.”

Provinces that break the rules could be fined up to $5-million under the agreement.

However, provinces will still be able to bar out-of-province workers from a particular profession or trade if it's “justified as necessary to meet a legitimate objective, such as the protection of public health or safety,” premiers said.

Canada's labour market was, until recently, roughly as fragmented as that of the contemporary European Union, perhaps even more so, despite the large volume of interprovincial migration within a unified country. As the authors of the informative June 2007 report "Moving in the Right Direction? Labour Mobility, Labour Shortage and Canada's Human Potential" noted, the reasons for this discrepancy can be found in the visscitudes of Canada's unification.

At Confederation, the British North America Act set out mutually exclusive areas of legislative authority for both the federal government and the provinces. Since then, the prevailing view has been that the provinces, rather than the federal government, have the exclusive authority to regulate occupational qualifications. As a result, each province regulates its own occupational groups often independently of
other provinces, resulting in a “patchwork” of regulations across the country.

Wherever regulations with respect to a particular profession differ in two provinces, those differences constitute barriers that inhibit the ability of professionals in that field from moving between the provinces and working in their professional field. A surprising result is that, at times, it can be easier forCanadians to have their professional credentials recognized abroad than to have them recognized in another province within Canada.

British North America Act was, of course, drafted for a different age. At Confederation, the Canadian economy operated under quite different conditions from today. Interprovincial barriers may have seemed sensible, given the reality of the time. In the post-War period, however, as global economies emerged, there were various attempts to make it easier for regulated professions to have their credentials recognized in other provinces.

Some have argued that the federal government could assert jurisdiction over interprovincial labour mobility through its constitutional power to regulate “trade and commerce.” Thus far, however, successive federal governments have preferred to act in a more iterative and cooperative manner.

The first federal standards came with the Red Seal program of 1952, which established national standards for some trades, while the later adoption of the Charter of Rights and Freedoms, with its Section 6(2) granting all permanent residents of Canada "the right (a) to move to and take up residence in any province; and (b) to pursue the gaining of a livelihood in any province" subject to provincial laws, reflected the trend towards interprovincial mobility of professional and skileld labour. more progress was made in the 1990s, culminating in the Trade, Investment and Labour Mobility Agreement signed between Alberta and British Columbia in 2006 and this year's recent developments. Not only native-born Canadian citizens but immigrants will benefit as well, since a professionally trained immigrant in Québec wouldn't necessarily have his skills recognized in Ontario.

As "Moving in the Right Direction?" acknowledges, in a tightening labour market like Canada's, with below-replacement cohort fertility rates and unpredictable immigration trends, Canada--provinces, territories, and federal government alike--will need to boost labour participation rates and try to make it easier for the Canadian workforce to be more mobile. The same can easily be said of other countries (and continents) with tightening labour markets. Old barriers just have to be dropped.

Tuesday, January 13, 2009

Going west no more

For my first post here this year, I'd like to bring up a recent article in The Globe and Mail by Gordon Pitts ("The Waning of the Boom", available here). In this article, Pitts explores how the the sharp fall in oil prices is likely to impact the wider Canadian economy, since much of Canada's economic growth is concentrated in an Albertan provincuial economy that had been driven by strong investment in the expensive extraction of oil from the oil shale deposits of Alberta. Without prices in excess of $US100 a barrel to drive continued investment, Alberta's labour market is no longer capable of attracting nearly the volume of workers, temporary and otherwise, that it once did.

In the past, rural communities could export their labourers, but they would not lose all the purchasing power. The normal routine for mobile workers is to spend 20 days in Fort McMurray and go home for 10 days, which means they can still buy new ATVs, pickups, and widescreen TVs in their home communities.

The mobile work force contributed about $150-million a year to the Fort McMurray economy, according to the Oil Sands Developers - in restaurant meals, hotel rooms, casino chips, and drinks in watering holes like the Diggers bar in the Oilsands Hotel ("Metal detectors in use" warns the sign on the entrance wall). And local homeowners could earn $1,200 a month by just renting out a room.

A lot of that income will dry up now, as will the wealth transfer to the rest of Canada. Assume the average mobile worker might bring home $25,000 in surplus cash to spend at home in Fredericton or New Glasgow, N.S. Those 24,000 jobs could potentially channel more than $600-million a year from Fort McMurray to the rest of Canada - or to Latin America and China, which contribute a small percentage of oil sands labourers. And that's not counting the vast oil sands supply chain of equipment and materials.

It is one of the best equalization mechanisms outside government transfers. But now the workers will be coming home and putting pressure on their home economies. Young men and women had put education on hold while grabbing six-figure incomes in the sands. Now, there will be increased demand for schooling and retraining.

The supply of skilled jobs is often controlled by major trade unions, which in the past, would make up for any scarce skills by phoning union locals across the country. There will be fewer of those calls now, and fewer travel cards giving non-Alberta workers access to plum oil sands jobs.

(Yes, you read the last sentence correctly. In certain respects, Canada's labour market is less integrated than the European Union's.)

I've blogged here in the past about how Alberta has become, per capita, Canada's wealthiest province with a 2005 GDP per capita 56% above the national average, continuing a long-standing trend. As for the migration it's a typical sort of labour migration, with temporary migrants' work earning them the money needed to subsidize consumption in their home communities.

One thing that I have been quite curious about is the question of whether or not there are other similar patterns of large-scale labour migration in other high-income countries, with people moving from one region to another. My first guess is that the scope of the movement to Alberta is unique because of the size of the economic gap--GDP per capita in Alberta, to take one metric, is twice that of the three Maritime provinces--and that, maybe, there might be similar movements from the former East Germany to West Germany. Are there, or are there others? I leave the comments to our readers.