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The impact of labour policies on Canadian gold mines in World War II

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Abstract

This paper uses a financial and operational data set of Canadian gold mines between 1939 and 1945 to analyse the efficacy of two government labour market policies implemented in World War II. An early war policy designated the gold mining industry as vital for the war effort to boost gold output in order to purchase foreign reserves. The late war policy resulted in restrictions that prevented labour movement into and between the mines. We find that the first policy is largely ineffective in its goal. Although the market allocated labour to the lowest cost producers, the policy caused only a modest increase in gold output. To evaluate the second policy, we estimate the cost curves of the individual mines. The results indicate an inefficient allocation of labour across mines. The gold mining industry experiences operating costs 22% higher than with efficient labour allocation during this late war period. The estimated efficiency loss to the industry is nearly $58.4 million 1940 Canadian dollars.

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Notes

  1. Note that all dollar amounts are 1940 Canadian dollars unless otherwise noted.

  2. The gross national product for Canada in 1939 was $5.6 billion; see Historical Statistics of Canada Series F1.

  3. Data from the Annual Reports of the Ontario Department of Mines.

  4. The importance of gold for Canada’s trade with the USA is best demonstrated using the projected Canada–US trade deficit. During the 1941–1942 fiscal year, the non-war trade deficit with the USA was projected to be $50 million. Wartime procurement of an additional $428 million meant a total trade deficit financing requirement of $478 million. Gold was projected to cover nearly half of this with an output of $215 million.

  5. See Barnes (1995) for a history of these mining camps.

  6. Petrunia (2007) and Petrunia (2008) compared employment growth of manufacturing and retail firms. Huynh and Petrunia (2010) examined the impact of financing on growth.

  7. One specification includes CPI as a variable to examine the impact of the falling real price of gold during this period. No statistically significant result occurs.

  8. To perform this counterfactual, it must be assumed that the policy of keeping the gold mines operational in the later war years would still have occurred in the early war years, otherwise many of the mines would most likely have shut down due to lack of labour, as occurred in the USA.

  9. Results available upon request.

  10. These results are available on request.

  11. We would like to thank an anonymous referee for this suggestion.

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Correspondence to Karl Skogstad.

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This paper has benefited from helpful remarks from Gregor Smith, Livio Di Matteo, participants at the 2016 Canadian Economics Association annual conference, and participants at the 2016 North American Productivity Workshop. Karl’s research is supported by funding from Derek and Joan Burney though the Centre of Excellence for Sustainable Mining and Exploration at Lakehead University.

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Skogstad, K., Petrunia, R.J. The impact of labour policies on Canadian gold mines in World War II. Cliometrica 13, 163–200 (2019). https://doi.org/10.1007/s11698-018-0176-2

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