How job security laws cause unemployment

The National Centre for Policy Analysis (NCPA) and Fraser Institute of Canada have released an index of labour market performance showing that those states with higher-performing labour markets create more jobs, have lower unemployment and higher productivity.

The study measures the effect of public policy on labour market performance during the last 5 years for which data were available by assessing employment growth, unemployment rates, and duration of unemployment and worker productivity.

By indexing the labour market measures, the study found some interesting relationships to total economic growth:

  • The South-western U.S. states dominate the index with 4 states (Nevada, Utah, Arizona and Wyoming) in the top 10; meanwhile, Southern U.S. states, such as Mississippi, Alabama and Louisiana, were mostly found in the bottom 10.

  • The northern tier of U.S. states out-performed all Canadian provinces; Canada's national unemployment system is cited by the study as one policy that impedes the improvement of Canada's labour market.

    The 22 U.S. states that have adopted so-called Right to Work legislation took 8 of the top 12 spots in the index:

  • Among the states, those with right-to-work statutes took nine of the top 12 spots, including first-place Nevada, and 12 were in the top 20.

  • Specifically, right-to-work states were five of the 10 states with the lowest average unemployment rates over the 1999 to 2003 period.

    They also dominated the rankings of the states with respect to average duration of unemployment – one of the four indicators used to construct the Index. Of the states with the shortest durations of unemployment, seven of the 10 best states, and 14 of the 20 best states, have right to work.

    Source: Amela Karabegovi, Keith Godin, Jason Clemens and Niels Veldhuis,Measuring Labour Markets in Canada and the United States: 2004 Edition, Fraser Institute and the National Centre for Policy Analysis, September 2004.

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