Modernizing labour laws could set Alberta up for economic success

The mark of a dynamic economy with flexible labour laws is one where employers and workers can quickly and easily respond to market changes

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By Charles Lammam
and Hugh MacIntyre
The Fraser Institute

VANCOUVER, B.C., April 20, 2017 /Troy Media/ – Alberta’s key labour laws could soon change. Those reforms should focus on creating a more dynamic economy to benefit all Albertans.

While Premier Rachel Notley’s government has not detailed what changes may be in store, it’s reviewing a swath of issues, including leave from work, termination and rules related to union representation.

The provincial government argues that a review of labour laws – including the employment standards act and labour relations laws – is necessary because a lot has changed in the three decades since the last major reform.

alberta labour laws
Charles Lammam

Indeed, technological changes – such as the mass adoption of the Internet – are reshaping the way we think about work and creating new kinds of opportunities for many.

But for Albertans to fully seize these opportunities, the provincial government should ensure that its labour laws facilitate flexibility in the labour market.

By flexibility we mean the ability of workers and employers to come to arrangements that benefit both, and for Albertans to be able to adapt swiftly to changes in the economy. Overly restrictive or prescriptive labour regulations generally impede the ability of employers and workers to adjust to changing economic conditions, such as a weakening economy or the introduction of new technologies that change how products are made or how services are delivered.

A mark of a dynamic economy is one where employers and workers can quickly and easily respond to market changes.

For workers, a dynamic economy affords them greater opportunities to find jobs that better match their preferences for compensation, working conditions and career prospects. This is particularly true in the Internet age that affords many workers, through platforms such as Uber and Airbnb, the autonomy to decide where, when and how they work.

alberta labour laws
Hugh MacIntyre

To create opportunities for workers, employers also need flexibility to take advantage of innovation or shifts in the market. This could mean reorganizing the workforce or making new investments in productivity-enhancing machinery and equipment. If the government wants to modernize labour laws to create a more dynamic economy, improving labour market flexibility is one way to do it.

Jurisdictions with less restrictive labour regulations have better job-creation records and experience faster-growing economies, according to research.

For instance, a study published by the International Monetary Fund examined 97 countries from 1985 to 2008 and found that improvements in labour market flexibility led to less unemployment. In particular, less stringent regulations related to both hiring and firing (including mandated benefits such as leave and paid vacations) produce positive outcomes. In other words, workers ultimately benefit from less stringent regulations through more job opportunities, something the government should note as it reviews these regulations.

Another IMF study found that a flexible labour market can help hasten a recovery from a financial crisis, especially in terms of unemployment among young workers just joining the workforce. They can be hardest hit by an economic downturn. Indeed, research generally finds young workers benefit most from a flexible labour market.

One way the Alberta government can improve the flexibility of the labour market is by making the laws that regulate the interactions between employers, workers and union representatives more balanced. Laws that favour one of these groups over the others prevent flexibility when they impose resolutions rather than foster negotiation.

Consider that an Alberta worker can now be required to join a union or pay full union dues as a condition of employment. The government could reform legislation to guarantee workers a choice. Similar laws in the United States are associated with increased economic growth and employment.

While this Alberta government has enacted policies that undermine rather than facilitate economic prosperity, the labour law review is an opportunity to reverse this trend.

The government could set in motion reforms that will help create a more dynamic economy to the benefit of Albertans.

Charles Lammam is director of fiscal studies and Hugh MacIntyre is a policy analyst at the Fraser Institute.

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