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No, unions aren’t job killers

A response to the Fraser Institute’s Matthew Lau

Canadian PoliticsEconomic CrisisLabour

Ontario Premier Doug Ford speaks as he participates in the PC Party leadership debate in Ottawa on Wednesday, February 28, 2018. Photo courtesy City News.

On Monday, Matthew Lau, a right-wing writer who works for the Fraser Institute and Montreal Economic Institute, wrote a piece titled “Conservatives are wooing unions and killing jobs as a result” for Postmedia’s flagship paper, the National Post.

The piece suggests that Canadian conservative parties have abdicated traditional right-wing economics by cozying up to labour unions:

​​In a remarkable and ill-advised transformation over the last year or two, Canada’s Conservative politicians have abandoned the fight against the corrosive influence of labour unions and are now instead promoting unionization and trying to enlist unions as political allies. This transformation was significantly hastened when Erin O’Toole became Conservative leader and immediately began wooing unions for votes, including by proposing policies to make unions even more powerful than they already are… In Ontario, Doug Ford seems to have outsourced much of his party’s policy shop to union activists, last week defending his raising of the minimum wage to $15 per hour…

Firstly, Lau’s premise is wrong. Conservatives continue to maintain right-wing economic policy across the provinces in which they govern, and advocate similar policy at the federal level.

For instance, the federal Conservatives ran on a set of mostly meaningless labour policies in 2021. They proposed to give workers a seat on corporate boards, but in a highly neutered form relative to implementations elsewhere. They promised to expand EI during recessions, but only perhaps for a handful of months at a time (during recessions that can last years). They proposed giving tax breaks to company owners to sell stock to their employees, which is a great way for rich people to dodge taxes by shifting employee wages over to compensation through assets. It was a pleasant sounding mix of reforms, but hardly a positive step forward for unions or labour more generally.

It is true that the Ontario PCs have increased hourly minimum wages slightly, from $14.35 to $15 (starting in January 2022), but this wage increase was scheduled to take effect in January 2019 under legislation passed under former Ontario Premier Kathleen Wynne (the bill would have also tied the minimum wage to inflation). Upon taking office, Doug Ford killed this legislation.

Ford did pass a meagre minimum wage increase, but only after essentially postponing that increase for three years. He also increased it in a tight labour market where minimum wages have less relevance. I don’t think this qualifies as some sort of radical pro-worker policy.

Elsewhere, Ford has hardly been a friend of labour, repealing paid sick days and pay equity for part-time workers, and capping pay increases for public sector employees to well below the rate of inflation. Relative to even the business-friendly Ontario Liberals, Ford has stacked the deck against labour.

The rest of the piece is a pretty standard attack on unions. He basically states that unions two-tier the labour market at the expense of non-unionized workers, which is not true. In general, the presence of unions even in a mostly non-union sector tends to raise wages and working conditions for all workers in that sector, as non-union employers have to start competing with union wages and conditions. Ultimately of course, it is best to have unionization spread through the entire workforce through sectoral bargaining arrangements as is the case in countries like Finland and Sweden.

Lau voices his concern about the possibility that unions produce mass unemployment and wage depredations for workers who don’t find themselves at the bosom of a labour union. Tellingly, Lau doesn’t produce any statistics here to back himself up. The problem for Lau is that other countries with more powerful and expansive labour unions than ours have similar or better prime age employment numbers and have better wage equality for lower-income workers.

The reason why labour unions are economically useful is that individual workers have much less power in bargaining arrangements than their employers. Businesses are large and engage in concerted activity in sectors to keep wages in check, whereas individual workers have no similar mechanism to enhance wages. In order to have any semblance of egalitarianism in the labour market, unions seem to be a necessary precondition. For instance, in the densely unionized Nordic countries, wages are far more equal than in more “liberalized” countries like Canada.

Lau closes with a narrative about market efficiencies in hiring and firing workers. He claims that the presence of unions serves to prevent employers from paying workers according to their productivity, an arrangement that Lau claims will result in wage gains for workers relative to the less liberalized, more unionized arrangement.

The problem is that this story is simply untrue. If it was true that workers were able to bargain against businesses individually to the break-even point of profitability, or close to it, why does around a third of income in most developed countries flow to owners as capital income? This is money that flows mostly to rich people for owning profitable assets, like businesses.

This is true even in countries with more liberal labour markets than Canada, such as the United States and Australia. Surely, if such people felt reasonable competitive pressure in hiring workers, a large proportion of this income would flow to workers instead as workers would trade off offers from different firms right to the point of the firms becoming unprofitable. Instead, the countries that have historically done the best job of tamping down on capital income as a fraction of total incomes are the heavily unionized Nordics.

Ultimately, Lau’s piece is silly on a number of levels. It is clear that the Conservatives, while trying to seem more union-friendly for electoral reasons, have little interest in pushing pro-labour or pro-union economic policy. It is also obvious that liberalized labour markets produce poor results for typical workers and generate massive wage inequality. The right approach for a country like Canada would be to seriously expand union density, an outcome that Canada’s conservative parties and Lau are probably equally opposed to.

Oliver Mackenzie is a Victoria-based video producer and writer who works for a variety of government, nonprofit, and media clients.


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