In the News: The Problem with Highly Skilled Young Workers

This article is of interest to both Macro and Micro students, as it deals with issues surrounding Employment on the National Level, as well as costs to businesses.  

As Fall Semester 2013 begins and I begin to see new fresh faces of students coming in to take Economics classes towards their degrees, an article I read this past summer about issues that have come up in Canada have given me pause and made me take a look at the American Labor Markets as well.  In this uncredited CBC article "Is Canada becoming dependent on temporary foreign workers?" It talks about how filling more commonly skilled jobs has become a problem in some parts of Canada and how many businesses are relying on Temporary Foreign Workers to fill in those gaps.

The article is very thorough and looks at what is happening from several angles, showing some of the complexities going on in our neighbour to the North:

• The Western provinces have experienced tremendous economic growth while the Eastern provinces have been suffering during the recent recession.  There has been a tremendous need for tradespeople at many skill levels but not enough of them in those localities to fill the jobs.  

• There were not enough people with the needed levels of skills available so a program was developed to attract mid-level skilled employees, agricultural workers and live-in caregivers in order to address temporary labor shortages.  These are not common skills, but are ones that are acquired with some training and experience, but aren't top level skills requiring advanced degrees or certificates either.

• The program was expanded to include lower level skills in order to address labor shortage issues in those areas--retail, hospitality and service industries. 
  

• Employers found hiring temporary foreign workers was a good deal easier than hiring domestic young workers, because domestic workers would push for higher wages if they remained in that position for a long time or only work for a season until they completed higher education and then left for a better job, leaving employers to have to hire and train new young employees and the process would repeat itself.  

• Canada has one of the highest educated populations in the world. Many young Canadians earning college degrees feel that bussing tables, cleaning toilets, servicing customers in retail stores or other such industries are beneath their educational status and do not want to work these jobs, so employers want to look elsewhere to fill those jobs.

• The Economic Boom of the past few years has not been so great in Eastern Canada--the article cites that in St Catharine's, Ontario, there have been hundreds of people applying for single job positions in lower to mid-level skilled jobs.  Some folks are arguing that employers should be going into the eastern provinces and hiring from workers who need jobs there, helping them move to the West rather than hiring temporary foreign workers.  The counter argument is that people with established roots and families are less likely to move across the country, and if things don't work out shortly, the sunk cost is higher than with a temporary foreign worker who has the job skills to begin with and has their return ticket already established.  

Troubled RBC Executive having to explain why he
laid off Canadian Staff in Branches, Replacing them with TFWs

• One example cited in a related article revealed that in January 2012, Albertan employers received positive confirmation for 1,261 TFW (Temporary Foreign Worker) positions for food counter attendants. At the same time, nearly 350 people made a claim for EI (Employment Insurance, what we call Unemployment Insurance in the US) who had cited significant experience in the same occupation and province.  In other words, 350 locals in Alberta with experience in Food Service were drawing unemployment benefits when they could have been working instead.  It's argued that the restaurants & hotels who hired that staff felt the foreign workers would not push for higher pay, would not complain as much about long hours or poor treatment as would Canadian workers, and they could be sent home if they got out of line. 

• The program has been subject to abuse before with skilled workers.  Royal Bank of Canada (aka RBC Bank) replaced a large number of their branch staff with Temporary Foreign Workers instead. 

In the US we have similar programs--H2B Visas are Business Immigration Visas for Skilled workers who are working in places such as the Medical Center, Universities, Oil Companies and Engineering Firms.  These programs have been expanded due to their being very high demand for Nursing and Medical Staff, Engineers, Academics and Researches, and Workers with strong STEM (Science, Technology, Engineering & Mathematics) Skills/Degrees/Experience; combined with a very lower supply of Americans who have skills like that.  Similar to Canada, employers have to justify this by showing they are having great difficulties filling those jobs with Permanent Residents/Citizens and at the same time have a pressing need for workers with those skills (i.e. causing economics losses to businesses, even business failure due to inability to hire enough workers).  

These articles illustrates several economic concepts that we need to look at in more detail  Consider the following questions and please RESPOND IN THE COMMENTS SECTION:

1.  What are factors affecting the Supply and Demand for Temporary Foreign Workers (TFWs)?  

2.  What are some potential effects on Domestic Wage Rates for industries that hire TFWs?

3.  How does hiring TFWs affect a business's Total Revenue, Total Costs, and Economic Profits/Losses?  

4.  What is Economics problems are possibly created when businesses rely too much on TFWs?

As always, stick to economic analyses, stay away from partisan politics and use SOUND REASONING based on Economic Theory.  I look forward to seeing replies!

Success to you all!!!

Prof. Hank Lewis  

In the News: Greek Yogurt succeeds as Greece Fails Financially

As a bit of a foodie, I have had Greek and Bulgarian style yogurt, as well as the standard North American Style yogurts. Truth to tell, American Style yogurt does not taste like it did 30 years ago. Somehow the slightly sour taste and thickness has given way for a blended smoothie style that is easier for many to eat, but lacks some of the nutritious benefits of traditional style Yogurt. However, thanks to a confluence of conditions, things have taken off in a strong positive direction for Greek style Yogurt. 

This article would be of interest to both Macro and Micro students.




Canada's Metro News Daily gives details of this in this article telling Why Greek Yogurt is flying off the shelves in Canada--similar to what it's doing here in the US, but at an even faster rate!  Several of the non-price determinants of Demand and Supply are at work here, and are worth further investigation.

Per the article:

"Greek yogurt is flying off supermarket shelves in Canada after conquering the U.S. market. The high-protein content, natural ingredients and creamy taste have made it a hit with consumers in a health-conscious culture...

“I can’t remember the last time I’ve seen anything this strong. It’s been explosive in growth, unbelievable,” said Carlo Noce, category manager, dairy and grocery, at Longo’s. Sales have tripled and quadrupled in some locations, he said. Greek yogurt is low in sodium and can be used in cooking and instead of sour cream, said Noce.... Dieters like it because it is natural, nutritious, filling and convenient.

Chobani created the Greek yogurt market in the U.S. The company has gone from boot-strap start-up to $1-billion worth of business since launching out of an old Kraft plant in upstate New York in 2007. The number of employees has increased from five to 1,200. “It’s a real Cinderella story,” said Kyle O’Brien, executive vice-president of sales for Chobani. Chobani founder Hamdi Ulukaya got the idea when his parents visited from Turkey when he was a student in New York and complained the yogurt available in the U.S. wasn’t rich and creamy enough. “It’s not like we invented something. We just brought it to life in the U.S.,” said O’Brien. The timing was right, O’Brien said. Pitched as healthy, natural and nutritious, it hit a sweet spot in the American food market.

It didn’t hurt that Dr. Oz recommended eating Greek yogurt as part of a healthy diet.

A report by UBS Investment Research in the U.S. in 2011 said Greek yogurt brands captured market share more quickly than almost any segment ever in a major food category – at the time 13 points in three years. But it also concluded the growth in Greek yogurt could spell trouble for existing yogurt makers who fail to innovate and capture market share.

Chobani is now third in market share in the U.S., behind Yoplait and Dannon, sold as Danone in Canada. General Mills, which bought Yoplait in 2011 for $1.2-billion U.S., has seen sales decline in the category because it wasn’t ready for the Greek invasion, according to U.S. analysts.

Canadian consumers eat three times as much yogurt as American consumers, a fact O’Brien attributes in part to the popularity of yogurt among Quebecers, who take an artisanal approach to food and prefer natural products. According to Danone’s Canadian website, yogurt was introduced to Montrealers at the turn of the 20th Century.

What we see at work here are several factors involving the non-price determinants of demand and supply shifting in the yogurt market.  The most obvious one is changes in consumers tastes and preferences.

For Your Discussion:

1. What has happened to Demand for Greek Yogurt in North America?  What factors other than tastes and preferences account for it?

2.  What has happened to Supply of Greek Yogurt in North America?  What factors have led to this?

3.  What is the resulting effect on equilibrium price and quantity (P* & Q*)?  

First 5 students to post correct, intelligent comments with correct answers will get a bonus point added to their unit 1 test.

Success to you all!

Prof. Hank Lewis