Question

Energy projects are usually large and impact local labor markets. Suppose a large energy project is being implemented in North-East of Edmonton which will employ approximately 10,000 individuals in the construction phase during the first two years and then 1,500 people in its operation stage after construction.

1. What impact do you expect this project to have on the labor market in Edmonton during the construction phase? Explain.
2. What impact do you expect this project to have on the labor market in Edmonton during its operation stage [after the construction]? Is this effect going to last forever? Explain.

Answer 1

a.During the construction phase, the labour market in Edmonton will boom since local labour will not be able to satisfy the rise in demand. This will lead to an increase in wage rates which will then attract labour from outside Edmonton in order to supply the required amount of labour.

b.During the operation phase, 1500 new jobs will be created while 10000 jobs in construction will disappear. The skills required for the construction of a plant will not always translate to the skills required for the operation of a plant which means that a significant portion of the labour supply will have to leave or find other work. The 1500 new jobs created will again boost the labour market by increasing demand for more skilled labourers which will raise wages and will be much more long term as compared to the construction phase.