Institut Fraser

Institut Fraser

August 25, 2009 06:00 ET

Institut Fraser: Least Balanced Labour Relations Laws Among Canadian Provinces Found in Quebec; Change Needed to Encourage Employment Growth

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 25, 2009) - Quebec has the most biased and prescriptive labour relations laws among all Canadian provinces, concludes a new study from independent research organization the Fraser Institute.

And if the province hopes to grow employment as the global recession wanes, the provincial government should look to easing its labour market regulations.

"Empirical evidence from around the world indicates that jurisdictions with more flexible labour markets enjoy better labour market performance," said Niels Veldhuis, Fraser Institute director of fiscal studies and co-author of An Empirical Comparison of Labour Relations Laws in Canada and the United States: 2009 Edition.

"When we compare labour market regulation among Canadian provinces and U.S. states, Quebec has by far the most prescriptive labour relations laws tilted in favour of unions. Ultimately, this will restrict future economic growth."

In An Empirical Comparison of Labour Relations Laws in Canada and the United States: 2009 Edition, Veldhuis and his co-authors provide an empirical assessment of labour relations laws in the private sector for the 10 Canadian provinces, the Canadian federal jurisdiction, and the 50 U.S. states. The study's Index of Labour Relations Laws provides an overall measurement of the extent to which jurisdictions achieve balance and flexibility in their labour relations laws.

"Quebec's labour relations laws inhibit the proper and efficient functioning of the labour market because they favour one group over another, prevent innovation and flexibility, and are overly prescriptive, imposing a resolution to labour disputes rather than fostering negotiation between employers and employees," Veldhuis said.

The study found Quebec's labour relations laws create an inflexible labour market and among all provinces, are the most biased in favour of unions. The province scored 1.3 out of 10 on the Index of Labour Relations Laws with only the Canadian federal government recording a worse score at 1.1 out of 10.

Manitoba is the third worst jurisdiction, at 1.8 out of 10; followed by British Columbia, New Brunswick and Newfoundland & Labrador, each with a score of 2.8 out of 10. Prince Edward Island scores 3.0 out of 10, with Saskatchewan next at 3.2 out of 10. Nova Scotia (3.3 out of 10) and Ontario (3.4 out of 10) round out the Canadian jurisdictions measured.

Of the Canadian jurisdictions measured, Alberta has the most unbiased and least prescriptive labour relations laws, earning it a score of 5.3 out of 10, the only province to score more than 5.0 on the Index of Labour Relations Laws.

"Quebec scores particularly poorly when it comes to regulation of unionized firms and issues such as successor rights, technological change, arbitration, replacement workers, and third-party picketing," Veldhuis said.

"Quebec regulations in these areas are heavily biased in favour of existing unions and act as a detriment to new investment."

The highest ranking jurisdictions, scoring 9.2 out of 10 on the index, are the 22 U.S. states with Right-to-Work regulations that allow employees to opt out of joining a union or paying union dues. The remaining 28 U.S. states have an overall score of 7.5 out of 10 on the index.

The study stresses the importance of the labour market flexibility because it determines the ease with which workers and employers can reallocate their resources to take the opportunity of changes in market conditions. Improving labour market flexibility is especially important in an economic downturn as firms attempt to respond through restructuring and reorganization, and workers attempt to move from declining sectors and/or regions to prospering ones.

Successor rights provisions are a good example of how labour laws affect firms and thus labour market performance, especially in a difficult economic climate. They determine whether, and how, collective bargaining agreements survive the sale, transfer, consolidation, or otherwise disposal of a business. Legislation in Quebec and all Canadian provinces as well as the federal laws make an existing collective agreement binding upon a new employer when a business, in whole or in part, is sold, transferred, leased, merged, or otherwise disposed of. In other words, a purchasing employer is bound by an existing collective agreement that it had no part in negotiating. Conversely, it is rare in the United States for a purchaser to be responsible for the incumbent collective bargaining agreement.

With so many companies restructuring, merging, or dealing with bankruptcy as a result of the global recession, successor rights become an even more important aspect of labour relations laws, Veldhuis said.

"If someone were to purchase assets from a foundering business such as GM or Chrysler, Canada's stringent successor laws would impede the reorganization of the business and the efficient reallocation of its capital."

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The Fraser Institute is an independent research and educational organization with locations across North America and partnerships in more than 70 countries. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.

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