8/4/07

Gov't union arbitration model fails smell-test

The strike in Vancouver by CUPE workers and the strike by the United Steelworkers in the coastal forest industry offer vivid examples of the differences between public- and private-sector job action.

In a nutshell, the private-sector dispute is constrained by the competitive pressures of the marketplace. In the current dispute, the companies are making no money on existing capital investment and are risking permanent damage to the long-term viability of their enterprise because customers will secure sources of lumber elsewhere. The workers, on the other hand, do not enjoy the same level of job security as their public-sector counterparts, and hence risk permanent job loss if the enterprise is significantly damaged.

While their short-term rhetoric is predictably at odds, both parties have a stake in the long-term viability of the industry, and hence contracts must reflect the competitive reality.

In the case of the public-sector strike, no such constraints exist. The public monopoly means that the customers are held hostage by the labour dispute and hence there is no chance that the enterprise, in this case the government, will go out of business. Workers know they will always have a job to go back to. In the absence of competitive pressure, the most effective weapon for the unionized workers to press their demands is to sufficiently inconvenience the public so that they will pressure the politicians to make a settlement.

What is clear is that the application of "the private-sector strike" model to a public-sector monopoly without the constraints offered by a competitive environment has proven to be highly problematic, both financially and in terms of public inconvenience. As Angus Reid spokesman Craig Worden recently summarized in light of recent poll results, "British Columbians are very supportive of unions up to a point, but when it starts to affect their lives in a negative way, then that support will start to wither away."

Inevitably, inconveniencing the public during public-sector strikes leads to calls for a new way of negotiating contracts. But that is far easier said than done. As a July 24 Treasury Board of Canada report reminds us, there are only three avenues available to determine remuneration: One side (read government) decides unilaterally; both sides agree; or a third party dictates terms.

My bet is that many Canadians would favour a third-party approach as possibly the "fairest" means to a solution. Unfortunately, in practice, as the Treasury Board report pointed out, "studies consistently find that productivity, ability-to-pay, and labour-market disequilibria play little role in shaping arbitral decisions."

Not taking into account the ability to pay on the part of taxpayers is a recipe for financial disaster, which makes this approach unacceptable to government. In practice, the arbitration model has tended to exacerbate financial problems by focusing on comparability within the public sector, no matter whether existing contracts are financially viable or not.

Given that governments don't like the arbitration model and unions understandably don't like government-legislated settlements, calls for changes to the current bargaining model amount to little more than wishful thinking. Besides, despite having to swallow imposed settlements from time to time, the Treasury Board study, as well as others, makes clear that overall public-sector union negotiators have done very well for their members, especially lower skilled ones, when compared to their private-sector counterparts. Which is hardly an incentive to embrace change.

(canada.com)

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