Montreal, November 23, 2021 – For several years now, a number of observers have noted a slowdown in economic and social mobility in Canada. While some try to establish a link between economic inequality and social mobility (that is, individuals’ potential to improve their lot), the reality is that bolstering economic freedom is a central piece of the puzzle. In a new publication launched today by the Montreal Economic Institute, authors Vincent Geloso and James Dean identify barriers to economic and social mobility that could easily be eliminated.
“The discussion surrounding slowing social mobility too often obscures the fact that obstacles to economic freedom place substantial limits on the ability of workers at the bottom of the ladder to lift themselves up. Using a provincial index of economic freedom on a scale of 0 to 10, along with federal government statistics on income mobility, we find that a one-point drop in labour market freedom entails a per capita income loss of 3.7%. In a province like Quebec, where restrictions are particularly severe, the effects of liberalization would in all likelihood be very beneficial,” says Vincent Geloso, co-author of the publication and assistant professor of economics at George Mason University.
“When we talk about labour market restrictions, we’re thinking for instance of tasks that are reserved to certain professions. The construction sector is probably the best-known example, with its numerous competency cards. This basically prevents workers from diversifying their activities and accessing other revenue sources,” continues Mr. Geloso, an associate researcher at the MEI.
“According to our calculations, for the period from 2013 to 2018, the rate of social and economic mobility for the poorest Quebecers would have been around 15% higher if Quebec had the same level of economic freedom as Alberta,” adds Vincent Geloso. “Economic freedom is too often seen as a concept meant to benefit big business, whereas in reality, these barriers have important negative repercussions for workers,” concludes the author.
The publication entitled “Economic Freedom Leads to Greater Income Mobility” is available on our website.
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