Friday, May 16, 2014

Foreign Workers and Employment in New Brunswick

Here's David W. Campbell:
This is not an academic question.  It happened this week.
Now, I suspect there would be folks lined up to tell us everything that was wrong about that firm – low wages, not appealing work, etc. but the bottom line is that a manufacturing firm could not find 20 workers or so in an area with a 20% unemployment rate and an employment rate of around 40% (i.e. only 2 out of every five adults has a job).
As always seems to be the case, the real story has nothing to do with either immigration or low wages. Here’s the coverage before it started to be spun for political purposes:
“Cory Guimond, owner of Millennium Marine, says his new operation in the United States will help his company navigate through American red tape… He says federal rules in the United States restrict the entry of many types of boats made in Canada which is a concern, since he exports the bulk of his boats south of the border.” http://www.cbc.ca/news/canada/new-brunswick/escuminac-boat-maker-launches-business-in-maine-1.2639855
So, so much for the ‘real life’ example.

Now for the argument. Two issues are being discussed here, first, the temporary foreign workers program, and second, the issue of low wages.

Regarding the first: while I am a big supporter of immigration, and I believe it is key to building the province’s economy, the Temporary Foreign Workers program is not about immigration. It’s right in the name! “Temporary.”

Employers can hire workers for a maximum two years under the program. They also have to pay a $275 processing fee for each employee. It’s not surprising a company paying minimum wage would balk at the fees. http://www.esdc.gc.ca/eng/jobs/foreign_workers/lower_skilled/index.shtml

The second issue is the size of the wage being offered. We hear over and over how a higher minimum wage results in lower employment. But the opposite is the case.

The ship factory in the example is a case in point. “Guimond also found few people willing to drive 30 minutes from Miramichi for full-time work,” says the article. http://www.cbc.ca/m/touch/canada/newbrunswick/story/1.2642404

The reason for this is, if you are working for minimum wage, the cost of the transportation is greater than the wage being earned. The wages are so low people are better off sitting at home – and this would be true even if there were no Employment Insurance or welfare. In Eastport, a city of 1,300 people on an island in Maine, people can walk to work. It makes a big difference.

And getting rid of the low wage jobs could be exactly what this province needs. People have more money to spend. Businesses look for projects where the business case *can* be made at $20/hour, instead of trying to compete with Bangladesh. http://www.cbc.ca/news/business/raising-minimum-wage-could-rescue-the-economy-don-pittis-1.2516796

The hallmark of a career in New Brunswick is lower wages, whether working in the public sector or working for one of the major provincials employers. Nobody wants to stay here when you get paid that much more for the same work elsewhere (and don’t say the cost of living is lower in New Brunswick – for almost everything, except maybe home ownership, it’s higher).

Frankly, we in New Brunswick have tried the low-wage solution to our economic problems for decades. It's time to try a new approach, because the old approach has demonstrably been a failure.

2 comments:

  1. Economists have been studying the effect of minimum wage... Might I suggest you have a look?

    http://onlinelibrary.wiley.com/doi/10.1093/ei/40.3.315/full

    http://jhr.uwpress.org/content/XL/4/867.short

    http://ideas.repec.org/p/fip/fedhwp/wp-03-17.html

    http://www.econstor.eu/handle/10419/34946

    It is a complicated topic and I do not think handwaving arguments are likely to pan out. What is clear however is that higher minimum wages do low employment. This is a robust result. Whether it makes people better off or not on the whole is less clear.

    ReplyDelete
  2. The increase of a minimum wage has an immediate short-term result in a lowering of employment (3 percent fewer jobs for a 10 percent increase in wages). It was a wider and more long-term benefit to the economy.

    ReplyDelete

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