The Importance of Labour Market Mobility to Productivity Growth

For an individ- ual worker, the less frequent and/or the shorter the duration of spells of unemployment during his or her career, the more time is spent “on the job,” acquiring human capital and hence boosting productivity. [...] For soci- ety as a whole, the lower the unemployment rate, the greater the fraction of the labour force that is actually going to work and producing output. [...] That means, of course, that the average productivity of workers—when measured as total economic output divided by the total workforce—goes up, since the average person in the labour force is actually working and producing more rather than being “between jobs.” For these reasons, empirical studies showing that specific govern- ment policies promote faster wage and employment growth or lead to lower [...] As of 2012, 87.5 percent of Canadians earning the minimum wage lived in households above the Low Income Cut-Off (LICO) threshold, while 83.4 percent of workers from households falling below the LICO threshold earned more than the minimum wage. [...] About the Author Robert P. Murphy is a Senior Fellow at the Fraser Institute, Research Fellow at the Independent Institute, and author of the widely acclaimed book, Choice: Cooperation, Enterprise, and Human Action.