Matthew Lau: Let the markets handle the skilled-trades labour shortage

Matthew Lau: Let the markets handle the skilled-trades labour shortage

The Ontario government is out with new ads to get more young people to pursue careers in the skilled trades. The ads, which are circulated online, shown in movie theatres, and displayed on Tim Hortons’ screens across the province, are part of the government’s larger effort, costing taxpayers more than $75 million, to promote the trades and get businesses to hire more apprentices.

It is, unfortunately, just another case of the government meddling in labour markets and wasting taxpayers’ money. Monte McNaughton, the Ontario Minister of Labour, Training, and Skills Development, contended in a recent speech that “if businesses don’t step up and start taking on new apprentices, our economy will suffer. There is no excuse. It is time for the business community to step up to the plate.” Every $1 that a business invests in hiring an apprentice, claimed McNaughton, delivers a return of $1.47.

But if that’s true, what is Minister McNaughton doing in politics? If he has information on how to earn such spectacular returns on capital, he should quit his post, launch hundreds of businesses across Ontario, hire all the apprentices that are supposed to return $1.47 for every $1 invested, and make himself fabulously rich. Instead of instructing others on how to earn massive profits, why doesn’t he just do it himself?

If returns really are that high, why should Ontario taxpayers be forced to pay, among other corporate subsidies, an “apprentice completion employer bonus” of $1,000 to businesses that hire apprentices? With a return of 47 per cent, there shouldn’t be any need for the taxpayer subsidy.

In addition to subsidizing the hiring of apprentices, the Ontario government, again using taxpayer dollars, wants to guide more young people to pursue careers in the trades in order to help deal with a “serious labour shortage.” Thus the need for an advertising campaign to convince youth and their parents that the skilled trades “offer exciting, meaningful, well-paying careers.”

But other careers are also fulfilling and well-paying. If a young person wants to be a welder, that’s great, but if he or she wants to be an accountant, that’s pretty good, too. It is not at all clear why the government should try to convince more people to be welders instead of accountants, any more than it should, say, try to convince people to eat more oranges instead of pears.

Claims of a “serious labour shortage” in the skilled trades fall far short of justifying a government intervention in the labour market. After all, a shortage of oranges would not justify a government advertising campaign encouraging people to switch from oranges to pears in an effort to preserve the orange supply.

In the market for fruit, economists’ advice to government would be to do nothing. A shortage of oranges would cause their price to rise, encouraging suppliers to produce more and consumers to buy fewer. Prices would stabilize where supply and demand were in balance, eliminating the shortage. No government needed, just markets at work.

Indeed, so quickly do private markets adjust to shortages that when one persists the right question to ask is not what the government should do to correct the situation but what the government is currently doing that is preventing the market from eliminating the shortage in short order.

Anyone skeptical that shortages, including in the labour market, are generally the product of ill-advised government control should consider the persistent shortage of medical doctors in Canada. Why the doctor shortage? Because markets are not allowed to work. Provincial governments refuse to ration consumer demand through prices, do not pay doctors properly (unlike teachers, doctors can’t go on strike), limit the numbers of physicians trained, and place heavy restrictions on where many of them can practice.

As with the physician shortage, the culprit for any shortage of skilled-trades workers is also the government. Occupational licensing impedes entry into the trades, while rich subsidies for university education encourage too many people to enrol in less-than-useful undergraduate programs instead of going into the trades. To eliminate shortages and let businesses thrive, we don’t need the government to get more involved. We just need to let markets work.

Matthew Lau is a Toronto writer.

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