The changes announced to the Temporary Foreign Worker program make it perfectly clear that government ministries are now setting wages, determining who works where, and rendering judgment on how employers manage their human resources.
This is a victory of bureaucracy and politics over free markets and the public good. The best thing the government could do is simply to scrap the program, which amounts to a needless intervention in labour markets that creates both inefficiency and inequity.
The changes announced on Monday suggest that government ministers intend to inspect human-resource departments across the land with, quite possibly, more vigilance than the Canadian Food Inspection Agency tests our beef.
Ottawa’s refrain is that this program is meant to “help fill genuine and acute” labour shortages.
So to ensure that this happens, and that not a single Canadian worker is displaced from a job, the government is going to make the forms employers must complete longer.
It is also requiring them to pay temporary workers the prevailing wage, which it will somehow determine in an appropriate way for each and every workplace. And companies will be required to file detailed plans outlining how they intend to find Canadian workers, someday, to displace the temporary immigrants.
You don’t have to be a libertarian to sense that this is a victory of bureaucracy over free markets, a victory based on the notion that government somehow knows better.
Libertarians are surely sometimes too quick to praise the magic of the market, but there should be no doubt that there is magic.
Just think of what it takes to feed an entire city. Pita and humus; camembert and provolone; milk and wine: all of it available when needed, in the desired quantities. No government bureaucrat dictates who gets what, when, and at what price. Yet millions of people are fed.
What happens if there is a shortage? Well, there certainly is no need for a Temporary Food Program! Prices rise, capital and work effort are realigned and reallocated in response, and more is produced at a price some consumers are willing to pay, while others adjust their spending patterns. Shortages don’t exist if prices are allowed to adjust.
Governments don’t have better information, and they need not implicate themselves in the process. But they do.
They do because they defend the special interests of the few. That is why our cheeses and wines are overpriced and undersold. Tariffs and quotas keep foreign producers out, domestic prices stay artificially elevated, and our refrigerators and wine racks understocked as a result.
Of course dairy farmers and liquor control boards benefit from this denial of free markets, a denial that is sustained by legislation, and the bureaucracy needed to inspect and to enforce ever more arcane rules and regulations.
Labour markets are no different. Just think of what it takes to put an entire city to work.
Welders and plumbers; bus drivers and nurses; baristas and bartenders: all of them available when needed. There is no need for government to dictate who works where, and at what price. Yet millions of people are employed.
If there is a shortage, what happens? Wage rates rise, capital and work effort are realigned and reallocated, and more workers are employed where firms are most willing to pay.
If meat packing plants and doughnut shops in some parts of the country complain of a shortage, temporary or otherwise, then a believer in markets knows that there is a clause missing in that complaint: there is a shortage of workers at the wage employers are willing to pay.
And if that wage is so high as to make production unprofitable? Well that too is the magic of markets. The signal is that firms should invest in more capital-intensive production, or that capital should move on to other sectors or other places.
So why do we need a Temporary Worker Program?
Flooding the market with workers from elsewhere, year in and year out – even during a major recession – is not about an acute labour shortage. It is nothing more than a wage subsidy to low-paying firms, a subsidy that stunts the reallocation of goods, capital, and labour that is the basis for efficient markets.
Not only that, but by blunting the rise in wages that market forces are calling for, the Temporary Worker Program is exacerbating the inequality of earnings in the lower half of the income distribution.
It will continue to displace Canadian workers silently if not directly, despite government assurances, for the simple reason that it artificially keeps wages low, and spoils the magic of the market.
The entire program amounts to a needless intervention that creates both inefficiency and inequity. Perhaps libertarians can see that more clearly than politicians. The whole thing should simply be scrapped.
Miles Corak is a professor of economics with the Graduate School of Public and International Affairs at the University of Ottawa. You can follow him on Twitter @MilesCorak.Report Typo/Error