The Real Culprit in Current Labour Disputes is the Lack of Competition

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posted April 26, 2004
In both Newfoundland and British Columbia, public sector unions have once again proved willing to take advantage of their monopoly status to bring public service sectors to a grinding halt. On Canada’s far east coast, the unions may soon be legislated back to work after shutting down public services in Newfoundland. On the far west coast, health unions are now threatening to close operating rooms and cause cancellations of elective surgeries. Despite the fact that their members’ current pay and benefits are typically well in excess of comparable workers in the private sector, the unions see no reason to accept the wage concessions that the provincial governments and taxpayers are demanding because public services cannot be delivered without the unions’ consent. This has had the effect of dramatically altering the lives of almost 4.7 million Canadians.

There are real differences in wage bargaining when services are provided by monopolies and when those services are provided in the presence of competition. Suppose unionized workers at a grocery store decided to exercise their right to withdraw their labour (strike). Because of competitive alternatives, the strike is little more than an inconvenience for consumers. Competitive forces also compel the union and the grocer to settle their differences and come to an agreement that benefits both parties.

Comparatively, workers with a monopoly are able to withdraw their labour and leave consumers stranded without services (transport, health, education, or otherwise). The employers in this situation -- the government and taxpayers -- are left with less ability to bargain for an agreement that suits both parties needs because the services cannot be delivered until the union accepts the deal offered. In effect, the unions are given free reign to determine the contract that they will sign.

In recognition of these facts, the government of British Columbia recently began contracting out health support worker jobs to competitive private contractors, much to the dismay of the monopoly workforce. As a result, taxpayers are getting far more value for their dollar: prior to contracting of cleaning services, for example, housekeepers in the hospital sector earned in excess of $18 per hour, while new contracted employees earn between $9 and $11. The same sorts of savings apply to laundry work and administrative jobs that have been opened to private competition. Contracting out has also created the opportunity for better workers and services because contracts can be cancelled and given to another service provider if sub-standard services are delivered, which was impossible under the old monopoly system.

Even if these benefits were the only ones that accrued from competition, there is a clear case for the provincial government to expand the contracting of services. Reinstating the union’s monopoly would only make unionized workers better off and stop the labour disputes in the short run, without improving the lives of taxpayers or patients. In fact, going backwards will make them worse off.

Beyond the basic, and well understood, benefits listed above lies what is probably the most important benefit of contracting to British Columbians and Newfoundlanders today: the ability to deliver public services without interruption. Contracted workers, even with the right to withdraw their labour in a wage dispute, do not have the ability to stop the delivery of all public services. If all basic support worker services in both BC and Newfoundland had been privately contracted before March of this year, over 500,000 Newfoundlanders would still have unimpeded access to their taxpayer-funded hospitals, schools, businesses, and other services, while British Columbians would not be looking forward to the prospect of having elective surgeries cancelled across the province. Further, the predictable recurrence of these strikes and work stoppages, which occur every time the contracts come up for negotiation, would have come to an end before this year’s strikes began.

The only way to ensure value for the taxpayer, and better services for those individuals who require them, is to competitively contract for all public sector services. Contracting also eliminates the ability of a single provider to deny services to an entire province for their own ends -- an ability that should be legally prohibited until competitive contracting is fully implemented. Though it is easy to blame militant unions or government budgets for the 500,000 Newfoundlanders who are still without public services, or for nearly 4.2 million British Columbians who will likely lose access to much of their health care system, the real culprit is a lack of competition.

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