Hudak’s anti-labour policies could backfire on the economy

Provincial PC leader Tim Hudak’s war on unions is based on an overly simplistic theory that lowering workers’ wages and benefits will retain and attract new business to Ontario. This dramatic surge in new businesses will eventually lift the wages of all workers as demand for labour rises and the market economy takes over.

Of course, if he’s wrong, it could badly damage the standard of living for most workers in the province, drive up the deficit as lower paid workers pay less in taxes, and undermine critical infrastructure that really attracts companies to locate here (such as health and education). It would also surely drive up health care costs given the substantial evidence linking income levels to health status.

Given the high stakes, you’d think the Tories would take a close look at the evidence before taking such an extreme ideological hard-right position.

Unfortunately for Hudak, most impartial analysis suggests undermining unions and lowering wages has little effect on creating jobs or spurring economic growth. For some U.S. States that have gone down this road, it has actually led to a decline in jobs and industry locating there.

Let’s face it — if your goal is to make Ontario a low wage destination, you have a lot to compete with already, including 24 U.S. States that have preceded Ontario with such legislation. But even those low wage states are losing jobs to China and Mexico. Paul Monies, a Oklahoma business reporter, notes that “right-to-work laws are a welcome mat for companies who care most about low-wage, unskilled labour and who are committed to a region only until they are able to relocate someplace where the laws protecting workers are even weaker.”

Is this really a prescription for economic stability?

A 2011 brief from the U.S. Economic Policy Institute notes that in the years following Oklahoma’s 2001 decision to adopt such anti-labour policies 160 employers announced mass layoffs and more than 100 facilities closed their doors in the face of even lower-wage competition from abroad.

The report notes that the Imation Corporation’s decision to locate in Oklahoma was hailed as an early victory, much as GM’s recent decision to move the Camaro production from Oshawa to Michigan is being viewed as evidence in support of Michigan’s anti-labour legislation. Four years later Imation eliminated a “significant share” of its local workforce in Oklahoma to shift production to Mexico. The legislation didn’t prevent GM from leaving Oklahoma City either, closing its plant in 2006 as production also shifted to Mexico where those on the assembly made one-tenth the wage of U.S. non-union autoworkers.

Despite wild claims of attracting new companies with such legislation, like those by Hudak and company, Oklahoma saw steady declines in manufacturing employment in the years following its adoption of right-to-work laws, losing 50,000 such jobs over the first decade of the millennium. The number of new companies coming to the State also declined, creating one-third fewer new jobs annually. Unemployment increased from 3 per cent in 2000 to 6.86 per cent in 2010.

The Economic Policy Institute suggests so-called “right-to-work” legislation has little impact on corporate decisions to locate to one State versus another.

The 2010 State New Economy Index – measuring each state’s economic dynamism, technological innovation, digital transformation, knowledge jobs, and integration into global trade – ranked Massachusetts, Washington, Maryland, New Jersey and Connecticut as the most desirable and best positioned locations for the globally competitive industries of the 21st century. None of these States have right-to-work legislation.

In fact, if Ontario’s goal is to move to the next economy, why is Hudak gearing his labour policies towards the last economy?

As much as Hudak winks at us when he suggests that workers will reap the benefits of a union-free workplace, the evidence suggests right to work laws lowers wages and benefits for both union and non-union workers alike.

The Economic Policy Institute report states “there is a danger that, by undermining wage standards in both manufacturing and other industries, they will inadvertently hamstring job growth by restricting aggregate demand in their local economies.” In short, people who earn less spend less in the local economy. The report notes that for every $1 million in wages cut to workers, $850,000 less is spent in the economy, translating on average to a loss of six jobs in the local community.

During the last election, Globe and Mail columnist (and no friend to labour) Jeffrey Simpson said Hudak’s platform was built on “illusions, bad math and avoidance of hard truths.”

Seems nothing has changed.

More on this to come.