PC's plan would lead to labour chaos: economics...
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Jan 11, 2013  |  Vote 0    0

PC's plan would lead to labour chaos: economics expert

Ottawa East News

The Progressive Conservatives vow to bring in U.S.-style right-to-work legislation if the party wins the next election. But an economics expert at Carleton University says that would lead to lower wages for all Ontario workers, usher in labour chaos and further damage the Ontario economy.

A party “white paper” was released recently to gauge voter feedback. While not a series of campaign promises, it is considered the direction leader Tim Hudak and the party intends to go.

Sweeping changes to strip unions of power is at its core.

“It’s time for Ontario to re-examine outdated workplace rules that date back to the 1940s and adapt them to the much more flexible requirements of today’s employees,” reads the Paths to Prosperity: Flexible Labour Markets. “We must realize that labour flexibility and more opportunities for workers are essential to retaining and attracting the very best talent to our province.”

The white paper goes on to say a series of government policies favour union leaders over employees and their employers in ways that reduce opportunities for individual workers and are obstacles to economic growth.

“Union leaders have become so powerful that many employees in effect have two bosses, their actual employer and the people who run their union,” reads the white paper. “Mandatory union membership, forced paycheque contributions, closed tendering for government contracts and the artificial restriction on the number of our youth able to enter the skilled trades – these are not policies that foster the open, innovative economy Ontario needs.”

U.S. President Barak Obama recently commented on states - such as the one-time union powerhouse Michigan - enacting right-to-work legislation. He called it “right to work for less” legislation. It’s a phrase Justin Paulson, assistant professor of sociology and political economy at Carleton, said accurately captures what happens in those regions. Alabama and about 23 others with right-to-work have the lowest wages; when workers are divided they are more vulnerable.

“Encouraging employees to opt out of paying dues substantially weakens any union’s ability to negotiate on behalf of all of its members,” said Paulson, who studied in the U.S. “The result is almost always weaker unions and lower wages. This is uncontroversial; the lowest in the U.S. are in right-to-work states, and while right-to-work proponents claim that this is somehow offset by the creation of more jobs, the dynamics behind employment and unemployment are far more complicated than whether or not strong unions exist.”

Paulson said a “flexible” workforce – the ability to fire workers and restructure almost at will – only sometimes increases profits. He said the idea that cheap labour always equals high profit is “rather sophomoric.” It might have an effect in the short term, but it doesn’t account for other variables and doesn’t hold for all industries.

The assumption in the PC argument is that corporations don’t like unions. Paulson said that is far from always the case; that unions reduce employee turnover, add experience, and bring other benefits. A well-paid workforce usually means fewer social problems that require government intervention; intervention that requires taxes from corporations.

He added that the bulk of investors are from within a given region. There are not many outside investors considering a move to Ontario. So to discard labour laws that have worked for 70 years in the hope of attracting outside entrepreneurs isn’t a wise decision.

“For all the rhetoric of companies being able to pick up and move to the ‘most attractive’ locales, it’s mostly smoke-and-mirrors, just as the outcries about outsourcing in the 1990s were pretty much red herrings,” Paulson said. McDonald’s can’t have an Ontario customer’s burger flipped in Mexico. “Most companies, and certainly most factory operations, are not able to move. And there are all sorts of factors at play – unionization is just one among a great many – in choosing where to establish a new business operation.”

Paulson joins a growing list of economists and others, along with groups like the right-leaning International Monetary Fund, who say taking an austerity approach hasn’t fixed problems in Europe, and likely won’t improve the stalled situation in places like Ontario. He said cutting back the size of government might be ideologically appealing to some, but it is the opposite of what needs to happen to grow an economy.

“You can’t get out of a stagnant economy by austerity,” Paulson said. “You have to grow your way out of deficit; if the goal is to eliminate a deficit.”

Austerity needed

Jack MacLaren said austerity measures are the only way to go; that the private sector in this province has taken a hit to the tune of some 60,000 jobs and now it is the public sector’s turn.

“Everybody in our society is going to have to shoulder the burden,” said the Carleton-Mississippi Mills MPP, adding that high taxes are collected to pay for an educated, healthy workforce, but that the time has come for Ontario to compete with other jurisdictions.

“We are living beyond our means,” MacLaren said. “We haven’t paid the true costs of government as we’ve gone along. And now it’s come home to roost.”

He said unions served a purpose in the past, but that individuals can nogiatate wages on their own or move to another province that will appreciate their skills.

MacLaren dismisses the notion that government can have a hand in shaping and growing an economy. The best it can do is clear up red tape for the private sector. His universal statement is that the private sector does a better job: every time. He even downplays taxpayers’ investment in his own salary.

“As someone in the public sector, I’m a burden on society,” MacLaren said. “If government is smaller with fewer workers, we’ll tax you less.”

He is on board with his party’s plan to enact right-to-work legislation. He especially holds that lower business taxes will attract more investors, which in turn will create more jobs, which in turn will drive wages up.

Paulson doesn’t buy that line of argument.

“It won’t work. The whole right-to-work strikes me as a straight union-busting tactic. It serves an ideological function, but that’s it,” he said. “The idea that it would bring up wages is ridiculous. It’s just not mainstream economics.”

He said austerity measures – cutting government jobs, reducing wages, failing to add stimulus - puts an economy into a recessionary tailspin or, at best, a kind of stagflation. Ontario, with some of the lowest corporate taxes in North America, would benefit from raising them, according to Paulson.

Union violence

His fear is that if Ontario continues to go after unions – much like the Liberals did with teachers – it will embolden the more radical left-wingers in the union movement. For the last 30 years or so, moderate union leaders have won the support of the majority with steady increases in pay. Should that fall away, the moderates’ grip on union workers would slip.

Few remember how wildcat strikes, vandalism, even all out rioting and violence, happened with some frequency in North America. Business suffered, workers suffered, all agreed laws respecting workers were needed in order to benefit the whole.

Would dismantling labour laws and taking away Charter and union rights mean a return of the radical left?

“I think you should have concerns,” Paulson said, pointing to last year’s student uprisings in Quebec and elsewhere.

He said these things are unpredictable, but it could get a whole lot worse if governments insist on eliminating deficits rather than grow economies.

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