Ontario's Labour Reforms Ill Advised

Ontario Liberal government labour reforms are traveling across a familiar arc, one traced by NDP and Conservative governments before them. The Bob Rae government leaned left (with employment equity and hiring quotas) and Mike Harris pulled back to the right (with a loosening of provincial regulation). Now, the pendulum is swinging back again towards the centre, that sweet spot of Liberal ambition.

All might seem well with labour relations in this comfy middle ground because it appears to balance competing interests. But a central point is lost in all of this political to-ing and fro-ing: these labour rules have an impact on the job market. Never mind the unions (cheered on by the left) and the companies (supported by the right). What is best for workers in terms of individual rights and job opportunities?

Labour Minister Chris Bentley's specific commitment is to review the Employment Standards Act and pay special attention to the number of work hours permitted without approval from the Ministry of Labour. The government is considering undoing prior Conservative legislation by requiring ministerial approval for employees to work more than 48 hours in one week.

Although the minister has stated his intention to be 'fair and balanced,' the notion that Ontario requires bureaucrats to intervene in the labour market to protect workers reveals a nineteenth century view of labour relations that is out of touch with North American norms. Introducing yet more rigidity into Ontario's labour market will do absolutely nothing to spur investment or economic growth, and in all likelihood will impede both.

To understand why this is so, remember that flexibility is critical to a high-performing labour market. It allows both employees and employers to respond to changes in market conditions. Flexibility for workers means that they are able to quickly and easily divert their efforts to areas of higher value and thus higher wages. Employers, on the other hand, require flexibility in order to respond to changes in the demand for their goods and services, including adding shifts or additional hours in peak periods, introducing new technologies to lower costs, and expanding to foreign markets.

Rigid labour laws, particularly those that are prescriptive in nature rather than outcome-based, can create enormous impediments that result in lost job opportunities and keep workers and companies from ever reaching their full potential.

Ontario is in no position to risk eroding its labour market. In a recent study comparing labour market performance across all Canadian provinces and US states, Ontario ranked twenty-fourth on employment growth, average unemployment, the duration of unemployment, and worker productivity. This places Ontario in the middle of the pack, well below the province's potential.

Existing labour laws, including the Employment Standards Act regulations, are available on the Ontario Ministry of Labour's website. A brief perusal of all the various standards, regulations, and requirements imposed on employers by the ministry shows the hurdles businesses face to satisfy the government that they are treating their employees fairly. These employees would be better served if companies focused on making better products, improving customer service, expanding their business, or finding new and less expensive ways to make better products, instead of completing paperwork.

Minister Bentley and his cabinet colleagues apparently believe that a more regulated environment leads to better labour market outcomes. If that were the case, then Quebec and Saskatchewan would have thriving labour markets, since they maintain the most rigid labour regulations in Canada. Unfortunately for their residents, heavy-handed regulation has not ushered in prosperity. Both provinces perform poorly on labour market outcomes, as measured by the labour market indicators discussed previously.

Ontario needs more flexibility, not less. Ontario still requires mandatory arbitration without offering less expensive alternatives, possesses onerous successor rights (purchasers of failed companies must uphold collective agreements that may have produced the bankruptcy), and protects unions by precluding workers choice laws. These are just three examples of many where Ontario is simply out of step with more dynamic and successful North American labour markets.

More worrisome, however, is the interventionist tone of the government. Its view, implicit in the suggested reforms, is that the best labour outcomes emanate from regulation. The alternative view, which the government seems to have completely ignored, is that workers have more power and security in a highly competitive labour market, one characterized by low unemployment rates, high levels of job creation, and increasing worker productivity. In such an environment, employers must compete for labour by supplying well-paying jobs, better opportunities, and a receptive work environment.

If the overall goals of the government are to enhance labour market outcomes and improve general economic performance, then the last thing the province needs is more heavy-handed regulation. If anything, Ontario needs more flexibility and more choice in the labour market. And that is something that no Ontario government has ever really considered.