Managing Commodity Lifecycles, Mining

 9. Impacts of commodity price volatility – employment effects 

Along with the challenges of managing fluctuating revenues from mining, are the challenges of managing the labour market consequences of a cyclical industry. Due to the nature of the industry, mining companies tend to attract labour and pay high wages during the upswing of the commodity cycle and lay off labour during the downswing.

The best way to avoid the most extreme swings in the labour market is to assist companies to remain profitable throughout the commodity cycle so that they are not forced into deep cost-cutting and labour-saving programmes. This will involve resisting the temptation to raise taxes and/or royalties when commodity prices fall and government revenues are declining. 

It is recognised that this may not always be enough and that some shedding of labour by the mining industry is virtually inevitable when commodity prices are weak. To the extent that they are able, governments should seek to retrain laid-off workers to maintain the quality of human capital in the workforce and enable workers to migrate to other more buoyant sectors of the economy.

In situations where displaced miners turn to small-scale, artisanal mining, and governments wish to encourage this activity, the focus should be on regularising this activity as far as is possible and preventing any negative social and environment impacts that might arise from an unregulated sector.