Labour Code Amendments Drag on Employment Growth

Release Date: 12 August 1997

VANCOUVER, BC>>>  The proposed amendments to the Canada Labour Code are inconsistent with the federal government's general objective of creating an environment conducive to job creation, a Fraser Institute study has found.

The Case for Liberalizing the Canada Labour Code: Why Enhancing Union Security is Inconsistent With Employment Creation, a special issue of Fraser Forum, concludes that unions are a primary source of inflexibility in the Canadian labour market. "The proposed amendments to the federal labour code will produce additional rigidities within sectors of national economic importance and potentially destabilize labour relations," said Mr. Fazil Mihlar, senior policy analyst at the Fraser Institute and co-author of the report.

Industries governed by the federal labour code include: bus operations, trucking, shipping, air transport, broadcasting, telecommunications, banks, postal services, and industries declared to be for the general advantage of Canada, such as grain handling and uranium. "Any disruption in these key industries -- lifeline of an export-oriented economy like Canada's -- will have an adverse effect on the rest of the economy," added Mihlar.

In addition to the existing right of exclusive representation and mandatory union dues from all employees, irrespective of a worker's desire to be a union member, the proposed amendments would:

• partially ban the use of replacement workers during strikes and lock-outs;
• oblige employers to provide names and addresses of off-site workers as well as access to any electronic communication system that a firm may have to assist unions in the drive to certify workers;
• impose wage floors for successive contractors in the transportation sector; and
• introduce provisions for remedial certification based solely on the opinion of the Industrial Relations Board.

These amendments, if introduced, would impose substantial costs on Canadians, primarily in the form of higher unemployment, the study shows. International evidence suggests that unions negatively affect employment creation, and that employment in unionized industries is indirectly reduced through lower firm profits and reduced levels of investment in physical capital and R&D. "The proposed amendments do not recognize this reality. The federal government, in spite of this evidence, has drafted legislation which increases union security, thereby introducing more rigidity into the Canadian labour market," warned Mr. Mihlar.

Mihlar stresses that if the proposed amendments are passed, they will handcuff the ability of federally regulated firms to operate in an efficient manner. "If the government really wants to reduce unemployment, it must provide the flexibility that is necessary for firms to operate in a modern competitive environment. The evidence is that the proposed changes to the labour code, if implemented, will do just the opposite," said Mihlar.

Britain and New Zealand liberalized their labour laws by eliminating union privileges and mandatory union membership, and by protecting individuals' rights to negotiate their own terms of employment, all of which helped to reduce the unemployment rate in Britain from 13.5 percent in 1984 to 7.4 percent in 1996. New Zealand's unemployment rate fell from 10.3 percent in 1991 to 5.9 percent in 1996.

Likewise, with a liberalized federal labour code, Canada could potentially create more employment and bring about widespread secondary effects. For example, cost reductions or increases in productivity in transportation could have substantial additional benefits for almost all other sectors of the economy. Canada is a trading nation and the production of export goods and services generates employment for 3.3 million Canadians, or 1 in 3 private sector jobs. All of these goods are transported in some manner and would benefit from any efficiency gains.

As part of a broader strategy to increase employment growth, the Canada Labour Code should be amended to include the following provisions:

• granting individuals the right to freely choose whether or not to associate with other employees for the purpose of advancing collective employment interests;
• giving individuals the right to join a union of their choice;
• protecting the individual's right to negotiate contracts with or without the assistance of a freely chosen agent; and
• requiring employers to seek individual written consent for the check-off of trade union dues every three years.

Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.

For further information contact:

Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca

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