Hello and good morning.
Thank you very much for inviting me here today to speak to you. My name is Benjamin Dachis. I'm a senior policy analyst at the C.D. Howe Institute. For those who are not aware of us, the C.D. Howe Institute is an independent, not-for-profit organization that aims to raise Canadians' living standards by fostering economically sound public policies.
I'm the co-author of a paper related to the matters under discussion here today, specifically those in division 17 of Bill C-4. The paper is “The Laws of Unintended Consequence: The Effect of Labour Legislation on Wages and Strikes”, published in 2010. It is available on the C.D. Howe Institute website. It's a little long for translation, so I brought some copies along with me as well if people are interested.
I am working with co-authors on an expanded academic version of the paper as well, which I can speak to during questions if you are interested.
We can summarize our results, which I'll get into in some detail later. First, we find that relative to the workers with the full right to strike, workers who are subject to an essential services designation have lower wages otherwise. Second, workers who are subject to compulsory arbitration have higher wages than workers with the full right to strike. Third, placing workers under compulsory arbitration reduces the likelihood of bargained contracts in the future and creates a greater reliance on arbitration.
Between 1978 and 2008, about 4% of public sector contracts that we observed were settled with a strike, whereas about 8% were settled with arbitration, 11% were settled through legislation, and over 60% were freely bargained. Over the last 30 years, governments have generally taken two approaches: limiting the ability of workers to strike, or the consequences of a strike. This is apart from back-to-work legislation, which I can discuss later if you like, and the results of that legislation.
The first approach is the essential services designation. In these cases, workers are allowed to strike, but some portion of the workers are legally obligated to continue providing services. The proposed language in the bill that we're discussing today will enable the government to place more workers and positions under this designation.
The second approach is to forbid strikes and to require remaining disputes to be decided through arbitration. The bill as written will require that when more than 80% of a bargaining unit is designated as essential, disputes will be decided through arbitration without the option of a work stoppage. Our work looks at the consequences on wages of workers and their strike behaviour when governments apply such rules to their workers.
We answer this by comparing the nearly 6,000 major public sector labour contracts that were settled between 1978 and 2008 with what happened when workers were subject to the regulations. Controlling for other factors—and I can get into details of that if you like—we find that when a workforce is subject to an essential services designation, compared with workers with the full right to strike, their real wages are about 2% lower than otherwise.
On the other hand, we find that when workers are subject to compulsory arbitration, that increases their real wages by about 1% relative to workers with the right to strike. We also find that using arbitration in the previous contract reduces the likelihood of a freely bargained next contract and more than doubles the likelihood of using arbitration again to settle the next contract. This suggests that a move to arbitration will beget a cycle in which parties return again and again to third-party intervention to settle their disputes.
Others have found that mandatory arbitration led to an increase in other types of disputes, such as work to rule or other work slowdowns. In sum, a move to increase the number of bargaining units that have some workers—that is, less than 80% share—who cannot go on strike will likely reduce wages, but placing more workers under compulsory arbitration will likely increase wages and lead to a great future reliance on arbitration and potentially other disputes.
Thank you for your attention. I look forward to taking any questions.