Labour's Real Need

Labour Day is here once again, an annual celebration dating back officially to 1894 when the federal government designated the first Monday of September to celebrating the virtues of labour.

Unofficially, it had its roots two decades earlier, in a Toronto protest aimed against laws that deemed unions to be a restraint of trade. The call then was for legalized unionization. Looking at labour relations law today, somewhat ossified after a century of development, the more appropriate plea is for laws and regulations that free workers.

Labour relations law, in the past and now, were to govern the interaction between employers and their employees. Unfortunately, labour relations law in Canada has been hijacked by unions, such that its practical application mainly governs relations between employers and union bosses. This failure must be reversed if Canadian labour markets are to reach their potential and provide plentiful and high paying jobs for all who wish to work.

Unions enjoy monopoly representation rights across Canada. If potential workers wish to secure employment with unionized firms, they must either join the union and/or support them financially through the payment of mandatory dues.

In stark contrast, 22 U.S. states have enacted worker choice laws, or what are commonly referred to as Right-to-Work laws that allow workers to choose whether they want to join a union and support it financially. Interestingly, when workers can choose, unionization rates decline dramatically. This is shop floor level democracy at its best.

As shown by academic studies, the deleterious effects of monopoly unionization also include economic effects such as reduced profitability (and hence investment and research and development), lower rates of job growth, and reduced rates of worker income growth. The benefits of the system accrue only to existing workers on a seniority basis, at the expense of others wanting jobs and of the general economy.

Canadians would therefore be well served by replicating Right-to-Work laws here. These laws do not prohibit unionization, they simply offer workers choice. And a central benefit of U.S. Right-to-Work laws is that unions have become much more responsive to their own members.

Canadian labour relations law is also lacking over successor rights -- the applicability of contracts once a business is sold, leased, or transferred. Workers, like employers, need to be flexible and responsive to change. Successor rights limit employers’ ability to effectively redeploy capital and labour resources, inevitably resulting in a less dynamic and prosperous society.

Every Canadian province enforces collective agreements when businesses change hands, with some offering Labour Relations Boards only a small degree of latitude in special circumstances. The very public example of Air Canada’s bankruptcy shows how important it is to renegotiate labour costs and conditions in the light of changing market realities. The solution here is to increase the number of options that new employers can tap into so that viable and durable businesses emerge out of changes in ownership.

Reform in right-to work and successor laws are needed across Canada. Specific provinces have specific problems that need attention. For instance, Saskatchewan and Quebec both maintain highly union-biased certification and decertification rules. The biases take the form of low thresholds for union certification votes, automatic certification procedures, and high thresholds triggering decertification. These two provinces should bring their union-slanted voting practices into line with other provinces.

Six of the 10 provinces, including British Columbia, Ontario, and Quebec, also require mandatory arbitration for labour disputes without providing for preliminary alternatives, which cost less and may result in quicker resolutions.

The use of replacement workers is another area of difficulty for several provinces. British Columbia and Quebec specifically preclude the use of replacement workers, while three other provinces are purposefully vague on the issue. All provinces would be well served to introduce more flexibility and balance with respect to the use of replacement workers by following the lead of Alberta, which allows replacements workers and also entitles displaced workers to retain their positions once a resolution is achieved.

A final area of difficulty relates to the protection of unions at the expense of technological change. Four provinces actually require employers to notify unions when they plan to introduce new technologies that may affect the collective agreement. Worse still, all four provinces allow the unions to file grievances with Labour Relations Boards that may actually preclude the potential investment.

If anyone wants a recipe on how to kneecap an economy, this is it. The most direct and effective way to increase wages is to increase productivity. One of the easiest ways to increase productivity is to increase the amount and quality of capital in the hands of workers, such as through investment in machinery and equipment. These laws, which are most pervasive in Saskatchewan and Quebec, prevent the very investment that makes workers more productive and ultimately more prosperous.

Canadians must take back the labour market and its regulation from unions. The provinces that do will reap great rewards in the form of increased job creation, increased worker incomes, and higher levels of productivity. And, in line with the nationalism so often expressed by Canadian union leaders, they can steal a march on a large number of competing American states.