Led by Alberta and Saskatchewan, Canada's Western provinces are among the best-performing labour markets in North America, according to a report by the Fraser Institute.
Alberta ranked first overall with Saskatchewan second, said Measuring Labour Markets in Canada and the United States: 2012 Edition, which compares the performance of labour markets based on five indicators: total employment growth, private sector employment growth, unemployment rates, duration of unemployment and labour productivity over the years 2007-11.
Manitoba rounded out the strong showing for the Prairies, ranking third in Canada and fifth in North America, while British Columbia placed fourth among the provinces and seventh in North America.
"Western Canada continues to dominate North America in terms of labour market performance, leading the country in key areas of employment growth, private sector job creation and low unemployment rates," said Amela Karabegovic, Fraser Institute senior economist and co-author of the report.
Of the remaining provinces, Quebec is fifth in Canada (11th overall), followed by Newfoundland and Labrador (sixth in Canada, 13th overall), Ontario (seventh among the provinces and 16th overall), and Prince Edward Island (eighth in Canada, tied for 19th overall). New Brunswick and Nova Scotia were the worst-ranked provinces, tying for 21st overall.
"While Ontario, Quebec, and Atlantic Canada fare well compared to many U.S. states, they are far behind the Western provinces in important areas such as private sector job creation and total employment growth," said Karabegovic.
"The situation in Ontario is worrisome, given its population and importance to Canada's overall economy."
Alberta had the highest average total employment growth among all provinces — it was first among the provinces for private sector employment growth, third among the provinces for average unemployment rate and fourth among the provinces for low duration of unemployment.
Ontario, on the other hand, lagged behind most provinces in terms of total employment growth (eighth among provinces) and private sector employment growth (seventh among the provinces), said the Fraser Institute. Ontario also recorded the lengthiest durations of unemployment among all provinces.
"Ontario may be Canada's largest economy but, right now, its labour market is slightly more attractive than that of only three Canadian provinces: Prince Edward Island, Nova Scotia and New Brunswick," said Karabegovic.
Improving labour market performance
The report also examined four specific characteristics of provincial and state labour markets that have been proven to affect performance: labour relations laws, public sector employment, unionization and minimum wages.
On labour relations laws, all Canadian provinces trail the U.S. states, with Alberta ranking as the best province and Quebec the worst.
"Labour relations laws in Canadian provinces tend to be unbalanced, favouring one group over another, resulting in higher rates of unionization," said Karabegovic.
"Balanced labour relations laws provide workers with a choice of whether they want to become union members and pay union dues. Many U.S. states have implemented such regulations and, as a result, they have reaped the benefits of increased investment, employment and economic growth."
Unionization is another aspect of the labour market that has an impact on performance as studies have shown high rates of unionization adversely affect economic performance by reducing employment growth and investment, said the report.
Quebec, where 39.5 per cent of the workforce is unionized, ranked last overall on this measure. All other provinces except Alberta had a unionization rate exceeding 25 per cent. Overall, Canadian provinces occupy the bottom nine spots in North America on this measure.
Canadian provinces also experience high levels of public sector employment. High public sector employment results in higher costs, lower average quality, less responsiveness to customers and lower productivity. Lower productivity is particularly a concern since workers in the public sector tend to receive a wage premium relative to their private sector counterparts, said the Fraser Institute.
In five provinces — Newfoundland and Labrador, Saskatchewan, Manitoba, P.E.I. and Nova Scotia — more than 25 per cent of all workers were employed by various levels of government. Newfoundland and Labrador had 29.5 per cent of its workforce employed by government between 2007 and 2011, compared to Ontario at 19.2 per cent and Quebec at 21.8 per cent.
Overall, Canadian provinces have the largest public sectors in North America and occupy seven of the bottom 10 spots on this measure, said the report.