To remain competitive, Ontario needs to follow Indiana and Michigan's lead
With Labour Day fresh in our memory and Ontarios unemployment rate having recently increased to 7.6 per cent, the province would do well to follow Indiana and Michigans lead and adopt worker choice laws. Doing so would make Ontario a significantly more competitive jurisdiction for business investment and provide a much needed shot in the arm for the provinces struggling manufacturing sector.
In 2012, both Indiana and Michigan enacted worker choice laws and there is a reasonable likelihood that Ohio may soon do the same.
To have an informed debate about the impact of worker choice laws, it is important to understand the legal differences between U.S. states and Canadian provinces. In the United States, federal legislation prohibits workers from being forced to join a union and allows workers to opt-out of union dues that are not related to representation. That is, if unions want to pursue social or political goals unrelated to the representation of workers in collective bargaining, workers are permitted to have their union dues reduced proportionately if they do not want their dues supporting such activities.
Twenty-four U.S. states, including Indiana and Michigan, expanded on federal legislation to allow workers in these states to completely opt-out of union dues. These laws became known as Right-to-Work (RTW).
Labour laws in Canada are rather different. In all Canadian provinces, mandatory union membership and full dues payments are permitted as a condition of employment. This means that workers who wish to join a unionized firm are forced to become union members and financially support the representative union.
This has resulted in marked differences in unionization rates. In 2012, for instance, Ontario maintained a private sector union rate of 15.3 per cent compared to union rates of 10.0 per cent in non-RTW states and 3.9 per cent in RTW states.
This difference is critical for Ontario. The conclusion of most scholarly research on worker choice laws finds that they increase economic growth and employment, particularly for the manufacturing sector.
The economic benefits of worker choice laws come primarily through reductions in unionization. Perhaps not surprisingly, when workers are given a choice with respect to union membership and dues payment, they choose unions less often. In addition, the ability of workers to choose means unions must be more responsive and sensitive to the wishes and demands of their members or risk losing them.
Our recent study, U.S. Worker Choice Laws and Implications for British Columbia and Ontario reinforces the scholarly literature: worker choice laws in the U.S. on average increase economic growth by about 1.8 per cent and employment by about 1.0 per cent in the states with Worker Choice laws.
Oklahoma offers a particularly interesting case study. That state adopted worker choice in 2001 and shares a border with seven states, four of which adopted worker choice laws earlier, while the other three states have no such laws. The data suggest that the average growth rate in manufacturing increased by nearly 18 per cent in Oklahoma after 2001, due in large measure to the adoption of its worker choice law.
Now consider Ontario, which is being subjected to significant competitive pressures from Indiana and Michigan where workers benefit from greater choice and more business investment in their state. Our findings suggest that a worker choice law would yield important economic benefits for Ontario.
If we apply a conservative version of the Oklahoma experience to Ontarios manufacturing sector---an increase in manufacturing activity half that observed in Oklahoma---a worker choice law in Ontario would increase manufacturing output by $4 billion (2012).
If the general findings on worker choice laws hold for Ontario (i.e. they increase economic growth by 1.8 percent and employment by about 1 percent), total economic output in Ontario would increase by $11.8 billion a year (about $874 per person) and employment would increase by 57,000.
These predicted effects are not trivial, and the prospective benefits should engender a debate in Ontario about worker choice laws. As Ontario struggles to regain its competitiveness, it seems obvious that labour competitiveness and worker choice laws will have to be front and centre.
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