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If only they were kidding

Intrusive labour reforms won't help Ontario's economy


June 19, 2017
by Michael Hlinka

From the June 2017 print edition

Toronto-based Michael Hlinka provides business commentary to CBC Radio One and a column syndicated across the CBC network.

The Province of Ontario—Canada’s largest province and where I reside—is contemplating the most sweeping labour reforms in my lifetime, according to reporting from The Toronto Star. Among the proposals on the table are:

  1. Moving the minimum wage from its current $11.40 per hour to $15;
  2. Reducing the hurdles to unionization in “key sectors” of the economy, including cleaning staff and home-care workers;
  3. Forcing employers who are hiring part-time to demonstrate why they are not providing full-time opportunities; and
  4. Boosting vacation pay from two weeks to three weeks.

Ontario’s Liberal government has held a majority since 2003. I point that out as they have had lots of time to enact this agenda, but haven’t in the past. It seems to me that after the many scandals that have befallen it over the past 14 years, the party must believe that this is their best hope to achieve success in the next election and hold on to power, because holding on to power is the prime directive for politicians. It’s clearly not serving the best interests of its constituents, because this is economic hari-kari.

In the opening paragraph, I lied. I indicated that the minimum wage is currently $11.40 an hour. The truth is that it’s actually $0.00. If you don’t have a job, that’s how much you’re going to get paid! One of the foreseeable consequences of a $15 an hour minimum wage is that jobs will be lost and hours will be cut back. We know that lost jobs and fewer hours work will mean that real output will be lower, and it is real output, not a fiction like money, that determines a community’s standard of living and quality of life.

There is general agreement that monopolies are a bad thing. Economic theory tells us that this structure inevitably leads to lower production at higher prices than would be achieved in competitive markets, which is why we go to great pains to prevent monopolies from forming in the first place—with one exception—and that is labour unions. The bottom line is that our current laws grant labour unions monopoly-status and it’s simply a common-sense proposition that as they exist today, unions are productivity killers. The idea that more of them will help an economy grow and lead to high employment is ludicrous.

There are several good reasons why employers hire part-time rather than full-time. One reason surely revolves around benefits: it’s frequently cheaper to employ two people for 20 hours a week than one person for 40. This is good because to the extent that a business keeps its costs down, it means lower prices for consumers. If you force that business to employ one person, not only will there be an increase in unemployment, there will be an inflationary effect at the same time which is understood as stagflation, the worst of all possible economic worlds.

Vacation pay is a lie. It’s a lie because the adjustment that any business makes is to reduce the wages for weeks actually worked to pay for it. Mandatorily increasing vacation pay from two to three weeks exacerbates the problem. Things like wages, working conditions, and vacation should be negotiated between employer and employee. There is no reason for Big Government to stick its nose into business where it doesn’t belong. Of course, there’s a populist appeal to having more time off, but once again, the practical implication is less work will be done, meaning that a province whose economy is stagnant, will only get worse.

It’s not difficult to predict what the economic impact will be if the proposals on the table go through. Jobs will be lost. A greater percentage of the working-age population will be unionized, at least short run. Any business that has the choice of operating here or somewhere else where the rules and restrictions are less onerous will choose somewhere else. And the idea of “vacation” will increasingly become almost a sort of cruel joke, because only people who have well-paying jobs can afford the luxury of vacationing in the first place.

The only good news—I suppose—is that these are only proposals. Nothing has been enacted into law yet. But even the fact that there is a cohort of politicians who seriously believe that there is something desirable about this agenda is bad enough. The only way that everyone in this province gets ahead is when the economy grows. This province’s economy has flat-lined for at least a decade, in no small part because government is too big and intrusive and making it even bigger and more intrusive is not the solution.