The Broadbent Blog


Merit Canada’s low-wage, low-skills plan for the Canadian construction industry

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Having successfully lobbied the Conservative government to repeal the federal Fair Wages and Hours of Labour Act, Merit Canada now wants the Conservative government to enact what is ostensibly a “low-wage policy”. It’s an effort that threatens to drive down labour standards for all workers, erode wages, and imperil the long-term health of the construction industry.

The Repeal of the Fair Wages Act

The Conservative government repealed the Fair Wages and Hours of Labour Act with a single line in their 425-page omnibus budget Bill C-38. The Fair Wages Act set the minimum wages contractors with federal government construction contracts had to pay their workers. By setting a floor for employee compensation, the Act helped prevent destructive competition based on undercutting workers’ wages, which can occur given the low-bid nature of construction procurement. At the same time, by taking wages out of competition in construction procurement, it promoted positive forms of competition based on enhanced productivity and improved project management, rather than simply cheap labour.

The government’s decision to repeal the act was made without consultation with industry stakeholders or relevant study into the impact of the change, and appears to have been motivated solely by the lobbying efforts of the anti-union contractors’ organization, Merit Canada. According to records from the Office of the Commissioner of Lobbying, then-Minister of Labour Lisa Raitt was being lobbied by Merit Canada on the Fair Wages and Hours of Labour Act as early as February 2011. Just days after the decision to scrap the Act was made public, Merit Canada Chairman Curtis Monsebroten boasted of his organization’s “remarkable success” in lobbying federal Conservative politicians since opening its national office in 2011.

From a Fair Wage Policy to a Low-Wage Policy

Unsatisfied with simply weakening labour standards through the repeal of the federal fair wage policy (FWP), Merit Canada is now lobbying the Conservatives to introduce a “low-wage policy”. Specifically, Merit Canada is pushing the government to introduce an “open tendering clause” in its transfers which would prohibit municipalities, provinces, and territories from introducing labour standards such as FWPs into their procurement practices, or from entering into Project Labour Agreements with building trades unions to ensure large, complex construction projects have access to a skilled labour supply to do the job right and on time. It would also deny federal funds to public bodies which are bound to collective agreements with construction unions (and can thus only subcontract to union signatory contractors) until and unless they decertify their unions. This would starve many municipalities, school boards, and other public bodies of much-needed federal assistance.

Flipping the Historical Rationales for Fair Wage Policies on their Head

FWPs mandate minimum wages and benefits that must be paid to workers on government contracts for services. FWPs establish a floor for employee compensation in order to prevent the undercutting of wages and benefits in industries where government contracts are awarded on a low-bid basis. FWPs emerged from concerns with setting a level playing field for employers bidding for government work and preventing labour abuses by employers who ultimately secured government contracts. They also emerged out of a desire for government to act as a model employer, as well as to prevent governments from using their significant market share and purchasing power to undercut local labour conditions.  FWPs allow governments to positively impact market conditions through their role as a major consumer of construction and other services. They are a illustrative example of how governments can use their tendering policy to achieve broader policy objectives, including economic fairness for workers.

Merit Canada’s proposed low-wage policy would do precisely what fair wage policies were first introduced to prevent. As they would have it, the Government of Canada would use its market power and economic leverage over municipalities, provinces, and territories to drive down labour standards for all workers. This would have serious negative consequences for the long-term health of the Canadian construction industry.

The Destructive Impact of a Low-Wage Policy

In addition to concerns about economic fairness and the autonomy of other orders of government to shape their own procurement policy, a low-wage policy would seriously undermine apprenticeships and skills training in the construction industry at precisely the time when public policy ought to be encouraging the next generation to take up careers in the skilled trades. According to a recent estimate by the Construction Sector Council, Canada will need 250,000 new construction workers by 2021. In order to reach this goal, public policy must focus on attracting and retaining a new generation of Canadians to high-skilled and well-paying careers in the trades. Far from this, a low-wage policy will only exacerbate labour shortages and reliance on the temporary foreign worker program.

i. The Link Between Fair Wage Policies and Apprenticeships

FWPs are strongly associated with improved apprenticeship outcomes. Numerous studies provide strong evidence here. For instance:

  • A comparative study of apprenticeship outcomes in 35 states between 1989 and 1995 found that FWPs were associated with higher registration rates and higher completion rates. The study found completion rates during this period in non-FWP states were only 28 percent, while in FWP states they were 52 percent, and that they increased with the strength of the FWP. At the end of the period, 32 percent of apprentices in non-FWP states were still training, whereas only 7 percent of apprentices in FWP states were still training.
  • Another study found that when controlling for the economic cycle, unemployment rates and regional differences in the availability of construction training fell by 40 percent in the nine states which repealed their FWPs, compared to those which retained their policies.
  • In a comparison of Missouri with four other states in the Great Plains Region between the 1973-1979 period and the 1987-1990 period, another study found that apprenticeships in the four non-FWP states declined by 51 percent over the two periods, whereas apprenticeship programs increased 26.9 percent in Missouri during the two periods.

 

ii. The Link Between Construction Unions and Apprenticeships

A low-wage policy would also weaken the apprenticeship system by undermining construction unions and the market share of their signatory contractors. Construction unions have an enormously positive impact on apprenticeships and skills training. A recent study commissioned by the Ontario Construction Secretariat found that apprentices in the unionized construction sector — indentured to jointly administered training trusts — had a 30% higher completion rate than apprentices indentured to individual employers in the non-union sector. This is likely due to the tremendous investments made by construction unions and their signatory contractors in skills training, coupled with the market failures in the provision of training which arise in the non-union construction industry.

By forcing the repeal of FWPs and undermining construction unions, a low-wage policy would weaken apprenticeships and skills training. This is not a path down which the Government of Canada should lead the construction industry.

The High-Skills Path for the Canadian Construction Industry

The Conservative government has indicated its intentions to boost apprenticeships in the skilled trades, including through recently announced plans to support the use of apprentices on federal construction projects. These are laudable goals, but, unfortunately, the repeal of the Fair Wages Act and a potential low-wage policy are at odds with this strategy. The repeal of the Fair Wages Act puts responsible contractors who invest in their workers at a competitive disadvantage, and a low-wage policy would ratchet down wages and benefits, and, through its impact on unionization and provincial/territorial and municipal FWPs, reduce those jurisdictions' use of apprentices on government construction projects.

A smart strategy for boosting apprenticeships in the skilled trades would involve federal construction spending to support the apprenticeship system by enacting a modern fair wage policy tied to the use of apprentices. More importantly, this kind of plan simply cannot involve a low-wage policy that would reduce labour standards and weaken the apprenticeship system at other levels of government.

If governments at all levels want to attract and retain the next generation of journeypersons and apprentices, they must begin by supporting these goals with their own procurement policies.

This means rejecting a low-wage policy, enacting policies which support the use of apprentices in public construction, and ensuring that the women and men who build Canada receive their fair share of the fruits of their labour.