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The Progressive Economics Forum

Of Rising Tides and Sinking Boats

Recently, Minister Kenney took to twitter to defend his decision to limit the number of precarious workers entering Alberta through the Temporary Foreign Worker Program. Again, the minister is to be applauded for his grasp of the situation. His changes do little to fix the actual problem though.

The evidence that he cited was the lack of wage growth among restaurant workers in Alberta. The graph below shows that, adjusted for inflation, restaurant worker wages in Alberta peaked in 2010, and have fallen since then by over $35 / week. At the same time, the overall average weekly wage has risen by $67 / week. Wages for retail workers haven’t budged, and manufacturing wages have risen only slightly.

Source: CANSIM 281-0027

Source: CANSIM 281-0027

What is driving this? Workers bargaining power has been restricted in two ways. First, workers employed through the Temporary Foreign Worker program are tied to a single employer. Second, many are not allowed to unionize. If a worker is unhappy with the wages or working conditions of their job, they can neither band together to demand better, nor walk across the street to a better employer.

The result is that employers do not have to raise wages to attract and keep workers. If there is a sufficient supply of vulnerable labourers, then current non-TFWP workers may be easily disciplined with the treat of being replaced by a willing temporary worker.

Limiting the pool of workers whose bargaining power is restricted may improve the situation of non-TFWP workers somewhat, if it means that they are less likely to believe the treat of being replaced. But it does nothing to improve the situation for temporary workers.

If there is a need for more low-skilled workers in Alberta, then Alberta should open up temporary and permanent immigration for low-skilled workers. But all workers should be allowed to move between employers, and to bargain wages and working conditions through the union of their choice. The best way to enforce employment standards is by giving workers the power to stand up for themselves.

Enjoy and share:

Comments

Comment from Ron Waller
Time: September 15, 2014, 4:20 pm

People should be aware that Justin Trudeau was critical of Kenney for putting limits on the abused TFW program. He said putting caps on TFWs will hurt people in Fort McMurray because they have low unemployment and a booming economy:

Canadian Press: Trudeau: TFW Program Among Most ‘Anti-Alberta’ Policies In Years

Today Trudeau criticized Harper for cutting EI payroll taxes on small businesses. He wants these tax cuts extended to corporations. This position ignores the fact that Harper cut corporate taxes by $15B/yr and Canada has the lowest effective corporate tax rate of ALL major economies according to KPMG. Our tax rate is half that of China’s for God’s sake!

What also needs to be taken into account is that Canada has very low payroll taxes compared to other developed countries. So these trickle-down payroll tax cuts will do little to create jobs.

If we want to increase aggregate demand and create actual jobs we should restore EI benefits to what they were before the Chretien Liberal cuts. Fact is Chretien and Harper ripped off workers for $52B, paying down government debt by making poor workers pay for benefits they could never collect on.

So far Trudeau is RIGHT of Harper on foreign investment in the tarsands from Chinese oligarchs, Temporary Foreign Workers and EI payroll tax cuts for corporations. The 2015 election is shaping up to be a dismal farce: Hope. Change. More of the same. In with the new boss, same as the old boss…

Comment from Ron Waller
Time: September 15, 2014, 7:27 pm

Just read an interesting paper that puts TFWs into context: Polanyi’s Paradox and the Shape of Employment Growth by David H. Autor.

He notes that labor market polarization, “meaning the simultaneous growth of high education, high-wage and low-education, low-wages jobs” is due to two main factors. First is automation which is apparently eliminating middle-wage jobs. Second is that low-skilled jobs can’t be automated and — since they are performed on-site — can’t be outsourced.

So what’s the solution to the outsourcing problem of domestic low-skilled jobs? Instead of outsourcing the jobs you insource the labor: i.e., through a Temporary Foreign Workers program.

So what drives the outsourcing and insourcing of service sector and manufacturing jobs? Economic ideology says this process will make us more prosperous. But in reality, wealthy investors and corporate executives are the only ones prospering. Whenever they cut wage costs, share value and executive bonuses rise. This is clearly the main driving force behind the return of Gilded Age inequality.

The problem with this double-edged globalization is that it kills the markets the oligarchs need to make their money from. Developing countries produce more than they consume. Their workers can’t afford to buy the things they make. First World countries consume more than they produce. They run up personal and government debt to maintain the illusion of high living standards. Eventually the entire system collapses.

So ultimately we need Keynesian-era solutions. Instead of free-trade blocks we need common regulation blocks. This means using tariffs to punish nations that abuse workers, produce more than they consume and pollute the environment.

Second we need government intervention in the economy to raise living standards to ensure all segments of society share in the benefits of GDP and productivity growth — as well as have affordable opportunities to become skilled workers. This requires progressive taxation, higher minimum wage, better public benefits (pharma-care, eye-care, dental-care,) big green infrastructure spending, and the elimination of free-trade deals and TFW programs.

Call this a democratic economy that serves the wants and needs of the vast majority — as opposed to the oligarchical model that indulges the insatiable greed of a few at the expense of everyone else.

We have become slaves to pseudo-technocrats with a self-serving economic agenda. What they offer is obviously dismal, but it doesn’t remotely resemble a science. The solution can’t be an endless economic debate that never makes any progress. We need a populist revolution to get the job done.

Comment from Angella MacEwen
Time: September 16, 2014, 4:06 pm

Great comments, thanks Ron. It’s particularly useful to note that the Liberal policies on EI and the TFWP aren’t terribly progressive either.

Comment from Ron Waller
Time: September 17, 2014, 7:46 am

Thanks. I think the problem with the Liberal party is that while opposing the Mulroney agenda so fiercely in opposition, they became the Brian Mulroney party when they came to power in 1993. They won half the NDP vote, but instead of representing it moved to the right-of-center.

There was little progressive about Mulroney’s conservatism and there is little progressive about the Liberal party’s conservatism of the past 20 years.

Trudeau is moving the party further right and it’s not surprising he has different messages for different groups. To the center-left he talks about inequality and the shrinking middle class. To the right-of-center he talks about increasing Chinese foreign investment, getting our resources to China, free-trade, low taxes, “hard work” getting pipelines built, cosmetic environmental regulations so Canada can export more dirty energy with less flack from environmentalists.

In the fine print is that his plan to reduce inequality and save the middle class is to dig more holes in the ground.

His plan to upgrade the skillset of our workforce (which is based on sound economics) is to increase RESP limits. So children better get cracking and build up their RESPs if they don’t want to be saddled with oppressive student debt and absurd interest payments later in life!

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