QED Research Spotlight by JDI Research Associate Brock Mutic summarizes recent research by QED Professors Allen Head and Huw Lloyd-Ellis in collaboration with former PhD student Derek Stacey

Deciding whether to buy or rent a home is one of the largest financial decisions many people make. Across cities in the United States, however, this decision is not made equally, as the affordability of homeownership varies; in different cities, it is relatively more or less affordable to buy a home, compared with renting. Although economists hypothesize these differences are driven by local economic conditions, understanding which local factors are at play is no easy task: the effects in question lay submerged in the depths of the economic ocean, driven by the rough currents of the dynamic and complex housing market, and are not easily visible from the surface. Wading through the tide, and pulling the relevant effects up from below, is a task requiring a very precise net, and a very steady hand. 

Recognizing that the determinants of home affordability are relevant for millions of people however, as everyone needs a home, Queen’s Economics Department researchers Dr. Allen Head and Dr. Huw Lloyd-Ellis, in collaboration with Dr. Derek Stacey of the University of Waterloo, were undeterred by the waves. Setting their boat on the water, they engaged in research to study the question, in a paper recently published in International Economic Review. The team built a ‘frictional assignment’ model of the housing market to study the factors affecting inter-city home affordability, calibrated it, and tested it against observational data. Ultimately, they produced insightful results, with relevance for housing policy. 

QED Research Spotlight article by JDI Research Associate Brock Mutic highlighting recent research by QED Professor Sitian Liu

The COVID-19 pandemic upended our lives and the economy in unprecedented ways. Institutions and ways of organizing society which had previously been ubiquitous, had to be rethought and reworked on a dime, because of a deadly virus. One such institution was the office: although once a quintessential symbol of modern economic life, and an unquestioned premise of the modern labour market, the pandemic dissolved the office’s status as a synecdoche of work. In particular, it caused workers in unprecedented volumes and variations of jobs to transition to remote work, and to work-from-home models. The office was dead in the era of COVID-19, and Zoom had killed it.  

Although remote workers gained increased work flexibility and safety from the virus, they lost their physical connectedness to each other. Coworkers were no longer separated by floors or cubicles, nor firms by blocks or kilometers. Economic relations, while previously physical and direct, became abstract and mediated; instead of relating directly to other people, remote workers separated by an unquantifiable digital distance could only directly relate to the shadows of the people on their screens. 

JDI Research Associate Brock Mutic interviews Queen’s Economics Department (QED) Professor Allen Head about ongoing research and Canadian public policy

Queen’s Economics Department Professor Allen Head, in an ongoing research project in collaboration with Professor Beverly Lapham and former Queen’s Ph.D. student Dr. Alex Chernoff, has been investigating how productivity is distributed, and how consumers search for products, across the Canadian retail market. The research, in uncovering how Canadian retail prices are affected by cost pass-through and demand changes, has the potential to improve our understanding of how inflation operates in the Canadian context. This summer, the QED blog caught up with Dr. Head, in anticipation of his forthcoming research, to learn more about his exciting project. 

QED Blog: It’s great to speak with you, Professor Head. Can you please tell us a bit about your current research project? 

Dr. Allen Head (A.H): As you explained, the new research, in collaboration with Professor Lapham and Dr. Chernoff, jointly estimates the productivity distributions and consumer search processes for retail industries in Canada. We do this using detailed firm-level data on Canadian retail firms, including information on their revenue, costs of goods sold, and profits. 

By Brock Mutic, Queen’s Economics Department

A PhD student research profile featuring Frédéric Tremblay, who completed his PhD at Queen’s in 2021 and is currently a postdoc at Queen’s for the NSERC One Society Network. Image provided by USAID.

Frédéric Tremblay’s research on savings groups grew out of work with Limestone Analytics on projects for organizations such as USAID and World Vision. Such organizations want to quantify the impact of their international development programs, but traditional tools for measuring such impact tend to underestimate the benefits of financial inclusion interventions. In his PhD dissertation, Tremblay proposed a new method for modelling the welfare gains from savings groups in developing countries.

Savings groups (SG) are institutions where small groups of people come together to save and take out loans. These simple, member-owned institutions can provide rudimentary financial services to communities who are marginalized or otherwise lack access to such services, often in the developing world. Queen’s Economic Department (QED) postdoc and former PhD student Frédéric Tremblay developed a model of SGs capable of capturing their core features and design elements in his PhD dissertation. His research has policy relevance for NGOs and policymakers hoping to better understand these institutions, and how they can help the most marginalized communities around the globe access basic financial services.

By Huw Lloyd-Ellis, Queen’s University

Over the past year or so, most Canadians have experienced situations that appear to be associated with shortages of labour in various sectors of the economy. Whether they’ve been unable to obtain certain goods and services, have observed construction projects sitting idle or, most recently, have lost their luggage while travelling through Pearson airport, many experiences point to significant problems in the labour market. These issues are not unique to Canada, however, and similar trends are being observed in several other OECD countries (especially the USA, the UK and Australia).  

Measuring Labour Shortages

While we all have anecdotes and there is ample discussion of the issue in the media, it is useful to have quantitative measures of labour shortages. This allows us to gauge more clearly (1) how significant these shortages are, (2) in what industries they are most acute and (3) the variation that has occurred over time. Understanding these features is essential for determining the underlying causes of labour shortages and therefore the likely role of policy in mitigating them. A labour shortage essentially means that employers have jobs that they want to fill but there are relatively few workers who are looking to take those jobs. Economists therefore typically measure the extent of such a shortage using “market tightness”: the ratio of the vacancy rate to the unemployment rate.[1] While unemployment rates across industries are commonly available via Statistics Canada’s Labour Force Survey (LFS), measures of vacancy rates that are comparable across industries and over time have only been available relatively recently through their Job Vacancy and Wage Survey (JVWS).

By Senthujan Senkaiahliyan, Queen’s University Smith School of Business

As Ontario begins to slowly enter a post COVID-19 world, we see priorities shifting from the health system to other avenues. Although on paper, COVID-19 may seem manageable, it remains a significant burden to our health system with a reported 0.4 hospitalization rate this past month. (Public Health Ontario, COVID-19 Data Tool)
As health systems shift priorities to resilience, research has begun to take place into assessing our current health workforce to help manage and better protect it from further shocks. However, as we fight one war, another one emerges and that is the increasing inflation within our province and nation. Statistics Canada recently reported that annual inflation rate has jumped to 7.7% in May, which is the fastest it has increased since 1983.

In our previous article, we highlighted how Bill 124 has effectively capped healthcare workers from compensation increases to 1% annually. This moderation period is to last for three years with some employer groups ending their moderation period in 2024. It was projected that due to these caps and increased workloads, we will see nurses leaving the bedside in favour of care-coordination or administrative roles that are less taxing mentally and physically. The currently released Health workforce Crisis report by the Canadian Nurses Association has confirmed that projection in which they highlighted that all three stages of the nursing profession (early, mid, and senior) have been critically impacted by the pandemic.

With inflation reaching almost 8% as of this month (and expected to be a lot higher by the end of the year) and nurses only receiving a 1% adjusted wage for this fiscal year, they are facing what amounts to more than an estimated 7% pay cut in our current economic situation. These effective reductions in salary for nurses and other healthcare workers send out a clear message that this is no longer a sufficiently compensated or valued profession. As certain industries are attempting to offset inflation by promising increases and bonuses to employees, Bill 124 bars hospital management from properly compensating their nurses for their services.

So, what does this mean? Already, the Ontario Nurses’ Association has noticed a “mass exodus” of nurses leaving the bedside but now with inflation we will see them leave the profession entirely. The clinical skills that nurses possess are highly valued in other industries, noticeably the technology sector. Clinical Informatics has been massively growing and mid to senior-level nurses have been utilizing their skills to build and serve growing IT infrastructure among healthcare practices. Another growing field is clinical research, in which nurses often can wear multiple hats such as coordinating studies as well performing many of the clinical duties required in clinical trials. Previously we reported a skills gap for entry-level nurses as they move towards care coordination and vaccination centre roles where they do not receive adequate bedside training but in a post-COVID world, we will see a training gap in which mid and senior level nurses who are often the backbones of preceptor training leaving their roles to pursue other avenues in which they are fairly compensated for their time and skills.

Among the public, healthcare workers have been hailed as heroes and many young students look at nursing as a career that is respected and a contribution to societal good. The Canadian Nurses Association has seen a rise in young people applying to nursing schools, but this trend has not translated into an increase in nursing school class sizes. With the lack of experienced nurses in the field, it will be very hard to support an increase in clinical placements to help support these new graduates. Without adequate clinical training, we can very well see many nurses graduating from school without establishing the core critical competencies.

We must look to innovative solutions to combat this national nursing shortage crisis. Pre-pandemic policies and health systems have been proven to be ineffective when faced with external shocks. To truly build resilience in our future healthcare system, an evaluation of all policies, including Bill 124 must be immediately conducted to ascertain if the short-term savings in health workforce dollars will translate into the long-term of effects of an inefficient and poorly staffed healthcare system.

Senkaiahliyan was a masters student in the Smith School of Business at Queen’s University. Image from Shutterstock.