Tag Archives: jim stanford

Canada Shows the Power of Unions

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Jim Stanford  Jim Stanford is an economist with Unifor.

December 4, 2013    http://www.nytimes.com

The dream of a decent, “middle class” life still exerts a powerful influence in North American culture. But we often forget that the middle class is actually a relatively recent creation. It was largely a result of working people organizing to win a decent share of prosperity, especially through unionization and collective bargaining.

A major reason for Canada’s greater income equality is that unions represent 31 percent of its workers, compared to 12 percent in the U.S.

There is an inherent asymmetry between employers and workers. Without institutional structures to strengthen workers’ position, workers get enough to survive, while owners, investors and a few professionals pocket the lion’s share of economic growth.

Auto factory wages and working conditions were traditionally poor. Unionization and collective bargaining improved incomes and security, so workers could afford home ownership, a comfortable retirement and college tuition for their kids. In other industries, too, lousy jobs became middle-class jobs, thanks largely to unions.

Many assume that a restaurant job is inherently a poverty-level job. But collective bargaining could help restaurant workers improve wages and working conditions and attain a better life.

Income distribution is far more equal in Canada than in the United States, despite the similarity of their economies. That’s largely because unions represent 31 percent of workers in Canada, compared to 12 percent in the United States. (The minimum wage is Canada is generally around $10 an hour.) Prosperity is shared more broadly.

Higher unionization in Canada is the culmination of many small differences in labor law. In most jurisdictions, unions can be certified when a clear majority of workers sign union cards. There are stronger protections against being fired for union activity (including organizing drives and strikes). Union dues are usually deducted at source by the employer and forwarded to the union. Contracts can be settled by arbitration for new bargaining units or in the event of long work stoppages. In some provinces, employers are not permitted to hire replacement workers during strikes. All of this means that Canadian workers have a better chance to form a union and negotiate a fair deal with their employers.

To be sure, unions are under pressure in Canada (as in the United States) from globalization and hostile employers, and the erosion of unionization would undermine Canada’s social equality. But the positive impact of collective bargaining on equality and social inclusion is still evident.

The collective action of restaurant workers brought public attention to their low pay and insecurity. By formalizing that collective power they could turn their lousy jobs into decent ones.

Should the public service have the right to strike? YES

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By Jim Stanford, Ottawa Citizen November 26, 2013

Should the public service have the right to strike? YES   Photograph by: Chris Mikula , The Ottawa Citizen

It might seem like ancient history, but it wasn’t long ago that Canadian governments knew how to balance their books — and then some. The collective operating surplus of Canadian governments in 2007 equalled almost $40 billion. Teachers, nurses, and other public servants did their jobs. Tax revenues were more than sufficient to pay for their valuable work (in fact, average tax rates were falling, not rising).

Then along came a global financial meltdown. (No one argues, by the way, that it was caused by teachers, nurses and civil servants.) Surpluses dissolved into deficits: not huge, by historic or international standards, but significant. And some political leaders made tackling the deficit their defining crusade. Showing they could manage their own finances helped them pretend they were in control of the worrisome events around them. In that effort, public sector workers and their unions presented a politically convenient target.

It’s not that public sector compensation costs caused the deficit (which didn’t exist, remember, until 2008). Nor would squeezing public employees be central to the deficit reduction exercise. At the federal level, direct compensation accounts for only 8.5 cents of each dollar in total government spending, and that ratio has been stable. Achieving, say, a wage freeze instead of paying a normal two-per-cent annual increase, on that small share of spending, could make no noticeable difference to the fiscal trajectory.

Nor was strike activity crippling the economy and service delivery. In fact, the incidence of work stoppage (measured by days lost per worker to strikes and lockouts) fell in 2012 to the lowest since statistics began in 1946: down over 95 per cent compared to the strike-happy 1970s. Public sector workers are less likely to go on strike, not more: they’ve accounted for one-third of all work stoppage days in the last decade, even though they now make up over half of all union members.

No, tilting at public sector unions is all about politics, not economics. Governments want to change the channel from persistent economic stagnation and embarrassing scandals. Workers in the private sector suffered during the recession, politicians argue (not that they act to support private sector workers, either). So it’s about time public sector workers suffer, too. The logic of this ideology of “shared misery” may be bizarre, but it’s politically potent.

Thus began the latest chapter in a long-standing Canadian tradition: when times are tough, blame the unions. And then take away their right to strike. It’s happened over 200 times in Canada in the last 30 years.

The latest example is Bill C-4. It would give the federal government unilateral power to define who can strike and who can’t (contrary to past practice and international convention). The government won’t detail how this will happen until after the law is passed. In a true Catch-22, the bill would also neuter the arbitration process for workers who can’t strike. And the whole process is buried within a 321-page omnibus bill, debate on which was curtailed two days after it was introduced. Bill C-4 is an affront to democracy — both in Parliament, and in the workplace.

The attack on public sector labour rights is usually justified by the claim that unions have soaked taxpayers through their irresistible demands. This claim is not supported. In practice, public sector bargaining tends to follow economy-wide trends, but with a lag. Public sector wages were much lower before public sector unionization took off in the 1970s. Wages caught up in the 1980s, then fell behind again during the austere 1990s. The public sector did better in the mid-2000s. But more recently, bargaining has clearly responded to tough times: for four years running, public sector settlements have lagged well behind private sector deals, and behind the general growth of earnings in the overall economy.

Average earnings in the public sector are five to 10 per cent higher than economy averages (depending on how they are measured) — but education and credentials are significantly higher, too. Comparing similar occupations and credentials, it’s largely a wash. Women make more in the public sector than in the private sector, but men make less. The whole wage scale is compressed (with a higher bottom and a lower top). But overall public sector compensation is not out of whack — and powerful economic and political pressures tend to keep it that way.

Governments are the only employer with the power to “solve” their labour relations problems by simply dictating a settlement. The potential for misuse of this confluence of fiscal interest and political power is enormous. Most private sector employers would love to outlaw strikes and dictate wage outcomes, but they can’t — and for good reason. Where public employees provide a genuinely essential service (like fire, police, and some health services), there’s no debate: in place of strikes or lockouts, a neutral arbitration system should replicate collective bargaining outcomes without work stoppage. But other public sector workers must have the same rights as anyone else in our society to organize themselves and promote their interests, up to and including withdrawing their labour if that’s necessary to get a deal.

Jim Stanford is an economist with the trade union Unifor. Tuesday night at the Canadian War Museum, in a debate hosted by the Macdonald-Laurier Institute and moderated by former House speaker Peter Milliken, economist Jim Stanford and professor Tom Flanagan debated the resolution “The right to strike has no place in the public sector.”

© Copyright (c) The Ottawa Citizen

Should the public service have the right to strike? YES

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By Jim Stanford, Ottawa Citizen November 26, 2013

Should the public service have the right to strike? YES   Photograph by: Chris Mikula , The Ottawa Citizen

It might seem like ancient history, but it wasn’t long ago that Canadian governments knew how to balance their books — and then some. The collective operating surplus of Canadian governments in 2007 equalled almost $40 billion. Teachers, nurses, and other public servants did their jobs. Tax revenues were more than sufficient to pay for their valuable work (in fact, average tax rates were falling, not rising).

Then along came a global financial meltdown. (No one argues, by the way, that it was caused by teachers, nurses and civil servants.) Surpluses dissolved into deficits: not huge, by historic or international standards, but significant. And some political leaders made tackling the deficit their defining crusade. Showing they could manage their own finances helped them pretend they were in control of the worrisome events around them. In that effort, public sector workers and their unions presented a politically convenient target.

It’s not that public sector compensation costs caused the deficit (which didn’t exist, remember, until 2008). Nor would squeezing public employees be central to the deficit reduction exercise. At the federal level, direct compensation accounts for only 8.5 cents of each dollar in total government spending, and that ratio has been stable. Achieving, say, a wage freeze instead of paying a normal two-per-cent annual increase, on that small share of spending, could make no noticeable difference to the fiscal trajectory.

Nor was strike activity crippling the economy and service delivery. In fact, the incidence of work stoppage (measured by days lost per worker to strikes and lockouts) fell in 2012 to the lowest since statistics began in 1946: down over 95 per cent compared to the strike-happy 1970s. Public sector workers are less likely to go on strike, not more: they’ve accounted for one-third of all work stoppage days in the last decade, even though they now make up over half of all union members.

No, tilting at public sector unions is all about politics, not economics. Governments want to change the channel from persistent economic stagnation and embarrassing scandals. Workers in the private sector suffered during the recession, politicians argue (not that they act to support private sector workers, either). So it’s about time public sector workers suffer, too. The logic of this ideology of “shared misery” may be bizarre, but it’s politically potent.

Thus began the latest chapter in a long-standing Canadian tradition: when times are tough, blame the unions. And then take away their right to strike. It’s happened over 200 times in Canada in the last 30 years.

The latest example is Bill C-4. It would give the federal government unilateral power to define who can strike and who can’t (contrary to past practice and international convention). The government won’t detail how this will happen until after the law is passed. In a true Catch-22, the bill would also neuter the arbitration process for workers who can’t strike. And the whole process is buried within a 321-page omnibus bill, debate on which was curtailed two days after it was introduced. Bill C-4 is an affront to democracy — both in Parliament, and in the workplace.

The attack on public sector labour rights is usually justified by the claim that unions have soaked taxpayers through their irresistible demands. This claim is not supported. In practice, public sector bargaining tends to follow economy-wide trends, but with a lag. Public sector wages were much lower before public sector unionization took off in the 1970s. Wages caught up in the 1980s, then fell behind again during the austere 1990s. The public sector did better in the mid-2000s. But more recently, bargaining has clearly responded to tough times: for four years running, public sector settlements have lagged well behind private sector deals, and behind the general growth of earnings in the overall economy.

Average earnings in the public sector are five to 10 per cent higher than economy averages (depending on how they are measured) — but education and credentials are significantly higher, too. Comparing similar occupations and credentials, it’s largely a wash. Women make more in the public sector than in the private sector, but men make less. The whole wage scale is compressed (with a higher bottom and a lower top). But overall public sector compensation is not out of whack — and powerful economic and political pressures tend to keep it that way.

Governments are the only employer with the power to “solve” their labour relations problems by simply dictating a settlement. The potential for misuse of this confluence of fiscal interest and political power is enormous. Most private sector employers would love to outlaw strikes and dictate wage outcomes, but they can’t — and for good reason. Where public employees provide a genuinely essential service (like fire, police, and some health services), there’s no debate: in place of strikes or lockouts, a neutral arbitration system should replicate collective bargaining outcomes without work stoppage. But other public sector workers must have the same rights as anyone else in our society to organize themselves and promote their interests, up to and including withdrawing their labour if that’s necessary to get a deal.

Jim Stanford is an economist with the trade union Unifor. Tuesday night at the Canadian War Museum, in a debate hosted by the Macdonald-Laurier Institute and moderated by former House speaker Peter Milliken, economist Jim Stanford and professor Tom Flanagan debated the resolution “The right to strike has no place in the public sector.”

© Copyright (c) The Ottawa Citizen

A fine balance: GDP growth by sector and the impact of austerity

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Jim Stanford 

By Jim Stanford    September 11, 2013

A fine balance: GDP growth by sector and the impact of austerity

The second-quarter GDP numbers confirm that Canada’s continuing “recovery,” such as it is, is still balancing very precariously on a knife-edge between expansion and contraction. The various sources of growth vary widely in their current momentum. The overall net balance is barely positive. And coming austerity in the public sector could very much push the balance into negative territory in coming quarters.

Here’s how the numbers add up. I examined the year-over-year change in each major component of GDP (the familiar C+I-G+X-M, with housing investment broken out as its own category), using real (chained 2007) data. The ultimate change in real GDP depends, obviously, on a weighted average of all the component changes. This is a simple way to think about where the impetus for growth is coming from (or not, as the case may be).

The accompanying figure summarizes the data. 

  • Consumers are still spending at a decent clip, despite (or more precisely thanks to) their accumulating debt.
  • Residential housing investment has now peaked and is starting to decline moderately. (Recent data on housing starts and residential construction employment suggest further flatlining or gentle contraction in this volatile sector.) 
  • Business capital investment continues to be lacklustre, despite abundant corporate cash flows. In fact, this graph overestimates the strength of business investment because of well-known problems with the implicit GDP deflator for this category of spending (apparent prices of business capital are distorted downward by the secular fall in the price of computer-related assets, and this makes “real” investment spending look bigger than it is — at least in macroeconomic terms).
  • Net exports are a wipe-out: the trade deficit continues to widen in the face of iffy global demand and our overvalued currency. This result is especially disappointing in light of recent improvements in U.S. demand conditions; it indicates the deep structural weakness in Canada’s participation in the global economy that the Harper government’s rush to sign more FTAs will only reinforce.
  • This leaves the government sector, considering both current “consumption” (spending on programs) and capital investment (infrastructure). The net year-over-year increase as of the second quarter was still positive, but barely so: up by 1 per cent in real terms. This reflects growth in real current consumption (up 1.4 per cent year over year), offset by a contraction in capital spending (down half a percentage point). The net trend in total government spending has recovered from the significant negative values recorded in 2011 (as temporary stimulus spending, mostly on capital “make-work” projects, was being unwound). But at barely 1 per cent real government expenditure is still shrinking both as a share of GDP and in real per capita terms, and hence can be considered evidence of continuing austerity. In contrast, when the economy was recovering much more robustly in latter 2009 and 2010, total government expenditure was growing by as much as 6 percent year over year.

The weighted average of all sectors produces the uninspiring 1.4 per cent year-over-year expansion in total GDP recorded in the second quarter. That’s not enough to offset productivity growth and population growth — which is why there has been no further recovery in the national employment rate (employment as a share of the working-age population) since the end of 2010 (almost 3 years of labour market stagnation). This isn’t so much a “recovery,” as it is treading water.

What’s the outlook going forward? In short: more of the same. 

There’s no sign of coming vigour in either net exports or business investment (what are supposed to be the major engines of growth in a globalized capitalist economy). Best-case scenario for the housing sector is a continued soft landing: that is, an easy-going decline. Consumers are still willing to borrow and spend, for now: how that will hold up in the face of coming interest rate hikes (on both mortgage and non-mortgage debt) is an open question.

Fiscal policy will therefore continue to determine the net balance of economic forces. If governments decide to tighten spending further, then the overall balance would shift even closer to zero (or even cross to the minus side).

This simple analysis also highlights what is required to achieve a more optimistic outlook — one where expansion in spending is sufficient to generate a sustained increase in the employment rate, with resulting spin-off benefits for incomes, spending, and subsequent job-creation. 

New industrial and trade policies could help to address the weakness in net exports and business capital spending. Failing that, fiscal policy must do more of the economic lifting. 

The corporate sector continues to deleverage and accumulate liquid assets; there is no shortage of “money” in Canada’s economy. 

From a social perspective, therefore, there is no fiscal constraint on government’s ability to lead future growth through a major and sustained expansion in spending (especially capital spending — for example, on transportation, housing, and green energy).

After all, that’s how we solved the last decade-long stagnation. Today, five years after Lehman Brothers, it’s increasingly clear we need something similar (hopefully not motivated by war) to end this one.

 

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