Why is labour force development so poor?

Labour is an input to business operations and the basic assumption of capitalism is that the market can assure the efficient allocation of labour to those businesses. Wages, benefits and working conditions, and the nature of the work are all supposed to create signals to workers that cause them to move among employment opportunities. The basic premise is that the state need only tweak the functions of the market if conditions are sub-optimal.  However, there is significant failure in labour markets and such failures are probably more acute within the food system because they are magnified by market failures related to food itself. The capitalist labour market also assumes that wages reflect societal value which is far from true. If it were so, the highest wages would be paid to those providing the most essential societal services, for example the provision of food, air, water, shelter and child care. Commonly, wages reflect the ability of a profession to create scarcity.

The main labour market failures are: skills gaps, poaching (stealing trained workers rather than investing in training, part of the free-rider problem), and labour immobility and inequality (contributing to income inequality). Contributing to these failures are disincentives to work, monopsony, discrimination and information gaps. Other factors relate to the difficulties of crossing industries (workers will not move between industries) and the nature of an occupation (one cannot get a new position within an industry). Private sector firms typically do not want to upgrade low-skilled adult workers because they do not believe it’s worth the training investment and success is not guaranteed.  In contrast, firms will expand the skills of already high-skilled workers because that investment is more likely to pay off[i].

Most typical government responses to these labour market failures are: to set conditions of work, labour standards, minimum wages; to use information to make the labour market function better;  to increase the number of available workers by importing them; to subsidize relocation to regions suffering geographic immobility; to provide retraining to encourage workers to move across industries; and public works to increase employment[ii].

The evidence suggests that skills training designed to move people off welfare is not typically very successful at a reasonable cost, and does not necessarily close wage gaps.  For disadvantaged groups, more success may result when: the programme is vocational with close ties to local labour market; courses are taught by technicians from those labour markets; basic skills are taught in the context of job skills; each participant has a specifically designed program; and the local labour market has confidence in the program (Andersen & van de Werfhorst, 2010).  Exceedingly modestly funded programs attempting to compensate for major skills deficiencies generate a “you get what you pay for” outcome (Heckman, 2000).  However, there is also limited evidence that just spending more will not produced better outcomes if the design is not right (Greenberg, Michalopoulos, & Robins, 2003).

Many OECD countries lack successful long term programmes that improve employment outcomes for disadvantaged groups, who are already disconnected from labour markets.  Many programmes are short term, and not likely to result in significant enhancements to employability.  Small and Medium Entreprises (SMEs) require public support for long-term training.  A common government approach is to import skills rather than develop them but this is often poorly coordinated with labour force needs so many overqualified immigrants are unable to find work.  Unfortunately, Canada has a long history of importing skilled workers, dating back to the end of WWII, a strategy that minimized construction of proper domestic labour market training and development in many trades (Lyons, Randhawa, & Paulsen, 1991).

The general problem of current government approaches to labour force development is too much focus on supply and not enough on demand (Zizys, 2011).  Addressing this requires reduced policy fragmentation and better policy alignment. Policy flexibility to account for regional differences is also critical (OECD, 2014).

The number of post-secondary graduates in entry level jobs below their qualifications speaks volumes about the demand-supply mismatch.  Many “shortages” are really about mismatches and quality gaps, i.e., the pay, conditions of work and hours, a demand-supply coordination problem. Economic development strategies that influence the demand for labour are not linked to labour force development strategies and social programmes. In Canada, thus, the market-driven demand side reconfiguring is out of whack with the more state-driven supply side approach. Zizys (2011) argues that the labour market has changed but not the employment support services. Regulatory and programmatic changes have aggravated the situation, particularly requiring more weeks to qualify for Employment Insurance (EI), and benefit and eligibility changes to social assistance. Less than 40% of the unemployed in Canada are currently eligible for EI and the associated job training opportunities, down from 47% in 2006 (Curry, 2015). Job search support has become the main focus, without any real shifts in how EI and social assistance penalize the movement into work (Stapleton, 2008a,b,c).

Ontario suffers particularly from these problems, with most of the training budget for downside training, such as worker re-adjustment to closings and losses. Upside training is currently minimal.  While there are many case-by-case and episodic institutional collaborations to address deficiencies, there is no systemic approach to upside training. Labour supply and demand side networks work largely independently (Verma, 2012).

These problems of government intervention are partly explained by the ascendancy of the main conceptual model for moving people into work, the Labour Force Attachment model.  The model suggests training is less important than just getting a job.  It represents the supply-side approach, rather than focusing on the employers, the demand side.  The weakness of it is revealed by the numerous obstacles to effective implementation, obstacles that have provoked numerous complicated layers of service refinements. Essentially, a supply-side army of byzantine tactics have been created.  It is apparent from all this that governments are just tinkering with the broader forces of the labour market, rather than intervening to create a more desirable one (Zizys, 2011).

Admittedly, the constitution limits creative government intervention and coordination.  This architecture leaves many empty jurisdictional spaces related to labour force development, and battles over who should do what.  On balance, managing labour is primarily provincial as is managing land use.  So what is the rationale for a national labour strategy for food systems? Essentially, the absence of coordination across thematic areas, organizations and jurisdictions calls out for a national approach. Unlike the USA, there is no national or provincial legislative framework for labour force development (Toronto Workforce Innovation Group, 2009). The Constitution, however, appears to permit federal intervention in provincial domains when a wide range of regional circumstances affect national agendas. Most strategies to improve the situation will have to bridge not only these jurisdictional divides, but also the silos between social and employment services, education and economic development.

Food system dimensions

There is no joined up comprehensive strategy for labour force development in the food system.  The CAHRC plan only addresses a very small part of the challenge. It focuses primarily on increasing access to TFWs (providing some relatively detailed recommendations that improve access of employers to workers) and to setting up on-line resources to link employers with potential employees.  The plan also contains broad suggestions on aligning training needs with industry requirements, and best practice tools on management and HR for employers, and subsequent reports have addressed these matters in more detail.  Other reports subsequent to the workforce plan have looked more at diversity and inclusion, particularly for women, First Nations, immigrants, and people with disabilities (cf. CAHRC, 2015; CAHRC, 2016). Similar reports from the Food Processors HR and Canadian Grocery HR Councils only addressed current needs within their sectors from the employers perspective[i].

As late as the early 20th century, Canada was an agricultural economy. The farm population was about one-third of Canada' total population in 1931 (Britnell & Fowke, 1962).  The decline however was steep as government policy during WWII was explicitly designed to move “inefficient” farmers and farm labourers into the war and war industries (Britnell & Fowke, 1962) and then later into the urban industrial work force.  At the same time, the construction of an industrial food system shifted food system work from the farm to other sub-sectors, to the point where now one worker in eight is a food system worker. Labour-saving technology to generate agricultural surplus was a key dimension, spawning a major shift of workers to the farm input sector and a significant increase in farm scale. Labour efficiency was supposed to translate to greater farm profitability, but that did not happen (NFU, 2005; Wiebe, 2012), which also had an effect on hired labour as farmers strove to cut operating costs. Farming is hard work, but technology, while labour saving, also made the work more monotonous. With that arose additional major workplace safety issues, and now farming is one of the most hazardous occupations, third behind mining and forestry (Otero & Preibisch, 2010).

For a majority of farmers, off-farm work keeps the farm viable, helping to keep farmgate prices low.  In this sense, off-farm employment becomes an unacknowledged subsidy for cheap food, but in perpetuating this cycle of low cost, farm labour is compromised, directly and indirectly.

But certain types of production, especially seasonal ones, still need significant labour because many processes are not readily mechanized.  The arrival of the Seasonal Agricultural Workers Program (SAWP) in 1966 was, in part, a response to such labour problems, but rather than looking more broadly at the economic structure of agriculture, and the inability of farmers to garner enough revenue from the marketplace to pay a decent wage, temporary foreign workers (TFWs) were deemed the solution. The situation for domestic workers has become even more difficult with changes to EI and social assistance, and their growing failure to support seasonal farm and processing work.

A key difficulty is that most food system work is devalued in the public’s consciousness and not considered high-skill and highly rewarding. Being a successful farmer requires an enormous number of skills but this is not recognized outside the sector. The situation is comparable in food processing (Verna, 2012). Farm labour is popularly considered the lowest of all skill levels, yet farmers involved in TFW programs consistently report they want to rehire the same workers because of their heightened skill level.  Interestingly, many Ontario workers report that the TFW programme costs them more than hiring local people when all costs are included, but for the cost, they access a more reliable workforce (McKnight, 2014). Similarly, trucking is generally considered a low skill job, but not only must drivers be technically skilled and mechanically savvy, those that transport animals must also understand animal behaviour and handling. Yet training can cost up to $5000 to obtain a license and safety requirements and border crossing permissions seriously limit who is interested in driving (Glen, 2015b).  Significant shortages of truckers are reported.

So, food system work requires more skill than is generally acknowledged, but equally many positions fall into the low and medium skill category, and because these are the categories most affected by changes in the economy, and because of current deficiencies in education and training supports, it makes sense that such positions would be available.  Across the food system, job quality is affected by seasonality, the shift from full-time, well-paying work in manufacturing to part-time, limited-benefits work in food service, and frequently the loss of unionization (Zizys, 2011). A key issue arises from these realities: how to help low- and medium-skilled workers contribute to food system processes?

Consumer food prices and the structure of food supply chains are significant contributors to labour problems. Labour is the biggest part of the consumer food bill, because food changes hands so often as it moves through global supply chains (Hendrickson & Heffernan, 2002). It can account for some 38% of the average cost of a food item (USDA, 2003).  This means that the incentives in the system are designed to lower labour costs and many firms, particularly in retail, have attempted recently to renegotiate their labour agreements (Sturgeon, 2013). A general rule of capitalist economies is to keep wages low to reduce costs to businesses, but not so low as to seriously compromise consumer spending.  In the food system, there is significant pressure to keep food prices and wages and work protections low to allow for global competitiveness, and governments encourage such competitiveness. Farms and food firms rarely pay wages that are competitive with other sectors, a disincentive to work in the sector (Zizys, 2015). Competition among domestic food retailers is fierce, driving down prices paid to farmers and manufacturers (Sparling, Quadri, & van Duren, 2005; see Table).  Governments have made limited efforts to reduce oligopoly and oligopsony, thereby increasing competitive pressures on small to medium enterprises that are historically the largest employers collectively (AAFC, 2015).

Downward and upward pressure on wages

Downward pressures on wages Upward pressures on wages
Canada’s policy to keep food cheap at retail Scarcity of skilled workers in certain professions
Competition amongst dominant retailers which drives down wages within retail firms and amongst suppliers competing for access to retail Foodie culture which drives up prices and wages in certain associated sectors
Off-farm labour which directly and indirectly subsidizes farm labour Corporate concentration which enhances executive compensation
Excluding farm labour from many provincial labour standards
Perception of food system work as low skill
Weakening of labour unions or the failure to permit unionization

 

[i] Note that there is also a national sectoral organization for independent fish harvesters, the Canadian Council of Professional Fish Harvesters Retrieved from: http://www.fishharvesterspecheurs.ca/?ct=.  Canadian Council of Professional Fish Harvesters' report, Fisheries Seasonality and the Allocation of Labour and Skills

Endnotes:

[i] Labour Market Failures Retrieved from: http://www.economicsonline.co.uk/Market_failures/Labour_market_failures.html

[ii] Labour Market Failures Retrieved from: http://www.economicsonline.co.uk/Market_failures/Labour_market_failures.html