The business case for and against a unionized workforce


In an industry facing unprecedented change and challenge, debate is everything. At Prairie Manufacturer Magazine, Point/Counterpoint is our effort to contribute to furthering the conversation. Each quarter, we will bring you two competing viewpoints on a pressing manufacturing issue to help inform and guide your business decisions. Who knows — we may even change your opinion.

The argument for

By Sudhir Sandhu

The rise of unions coincided with the Industrial Revolution and the concurrent conflict between industrialists and urban workers. Early on, this conflict was often a violent class struggle. While the violence subsided, the conflict orientation remains.

Given this history, agreement is a distant bridge for proponents and opponents of unionization. Invariably, arguments for and against unionization become embroiled in questions of fairness, individual versus collective rights, and an existential struggle for power between labour and employers.

There is ample objective evidence to make the case that unionization is good for the firm and the economy as whole. The benefits of unionization are evident from both microeconomic and macroeconomic perspectives.

For the macroeconomic case, let’s revisit Reaganism and Thatcherism. As celebrated 1980s pro-business, anti-union leaders, Reagan took on American air traffic controllers while Thatcher dismantled coal miners in the U.K. Both proposed that freeing business from regulation and unions would mean more wealth for all. Their assault accelerated declines in unionization rates in many developed economies. From 1980-2017, American union density dropped from 20.1 per cent to 10.7 per cent and Canada’s from 38 per cent to just over 30 per cent.

Reagan and Thatcher had predicted unparalleled economic growth and riches for all economic classes. Except that didn’t happen.

By 2015, they had been proven wrong by two staunch defenders of the free market, the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD). The IMF stated ‘evidence strongly indicates that de-unionization is associated with rising top earners’ income shares.’

The OECD found that ‘countries where income inequality is decreasing grow faster than those with rising inequality.’ It found that the U.S. and U.K. economies lost between 6-9 percentage points of growth due to increasing wealth concentration.

Turns out that, as unionization declined, greater inequality followed and economic growth slowed. The IMF and OECD had made an undeniable macroeconomic case for more unionization.

But what about the microeconomic case? Even if higher union density is good for the economy as a whole, why should individual firms care? Don’t firms exist to maximize profits for owners?

Yes, but are unions antithetical to that profit purpose? Absolutely not. Do most managers see unions as an asset? Absolutely not. Most managers see unions and collective agreements as constraints on management rights.

In Outliers, Malcolm Gladwell described a persistent conflict between the Hatfields and McCoys that endured through generations despite significant changes in their wealth and status. Similarly, union-management conflict persists as a ‘dividing the pie’ conflict rather than focusing on ‘growing the pie.’

Progressive employers understand that an engaged workforce is essential for long-term business success. Building an engaged culture includes having employees who act as company advocates, not only for the products and services of the organization, but also for recruiting talent.

When smart employers involve unions as partners in building a culture of engagement, the likelihood of success becomes exponentially higher. Collective agreements become a blueprint for shared goals, collaboration, and equitable profit distribution.

Having unions represent the common interests of employees is both easier and effective. Unions can facilitate employee consultation and clearly articulate employee interests so the parties can commit to a common framework. This model exists.

Germany has a formidable economy. German workers form work councils which ensure that key decisions at workplaces are not taken by the employer alone, but involve worker representatives. Work councils cannot consider just the interest of the employees; they must work with employers ‘in a spirit of mutual trust — for the good of the employees and the establishment.’ While Germany relied on mutual trust and cooperation, we treated unions with distrust.

And, it turned out unions were indeed the canaries in the coal mine. As unions suffered, so did our economies. Reversing this downward trend in the well-being of developed economies will require individual firms treat their employees as partners and unions as agents of engagement.

That is the ultimate microeconomic and macroeconomic win-win proposition.

Sudhir Sandhu is the chief executive officer of Manitoba Building Trades.


The argument against

By Yvette Milner

There are inherent advantages to workplaces where membership in a union is not a condition of employment. We define this as ‘open shop,’ and can include non-union employees, unionized employees, or an employee association working together.

Most industrial sectors in Canada are majority comprised of open shop employers. Take construction, for example, where open shop entities account for 70 per cent of the entire industry. These are small, medium, and large-sized businesses engaged in industrial, commercial, and residential projects.

Despite this dominance, however, governments coast-to-coast continue to utilize closed tendering practices that restrict bidding on public sector contracts to unionized vendors. It is not difficult to figure out that, when only 30 per cent of suppliers are eligible to participate, competition goes down, costs go up, innovation suffers, and thousands of workers are put at-risk. In the long run, that benefits no one.

As president of an organization that exclusively represents open shop contractors, I see the positive aspects of our member workplaces on a regular basis.

The flexibility of open shop businesses is perhaps the most prevalent distinction. For instance, employees can be promoted or rewarded based on merit (a novel concept indeed), as opposed to a unionized environment, where employees are often rewarded based primarily on seniority — often at the cost of having the right people in the right jobs to maximize performance.

It should go without saying that employees can flourish in an environment where they are hired for their skills, where they can multitask, and where they can fill a variety of roles. It should also go without saying these are cornerstones to operational efficiency. Unfortunately, in unionized settings, these are not always possible due to narrowly defined scopes, third-party liaisons, rigid compensation structures, and limited vertical movement. The result is weakened employee productivity and reduced employer profitability.

The fundamental problem is that unions represent the needs of a collective group, which can come at a cost to the individual employee. As someone who has worked in a variety of labour platforms, I personally value the opportunity to make the business case to my employer regarding my value to the organization, instead of having that ‘worth’ predetermined by set of guidelines and rules designed to benefit others. Whether this is a negative or a positive will likely depend on your experience and perspective.

One stereotype I find myself constantly pushing back on is that open shop organizations have less safe working conditions. Having served in the labour relations field most my career, I contend that is simply untrue. Industry standards (like COR safety certification in construction) are routinely exceeded by non-unionized employers and, in some cases, far surpass even the strongest of unionized organizations.

Another stereotype I fight is that open shop employers do not pay fair wages. As with the products and services our members offer, supply, demand, and quality dictate price. And, in a marketplace where employers are currently competing furiously for talent, inadequate compensation is just not an option. It goes beyond wages, too. All of our members provide a comprehensive benefits plan that is at the top of its class.

Attracting and maintaining the very best human capital is the name of the game for modern industry. Having the elasticity to pivot to the new business realities is more important now than ever before. For our members, the philosophy is straightforward and the concept proven: Open shop means freedom of choice and individual fairness.

I’m not sure how you can argue with that. And it can only bode well for our industry and in the future.

Yvette Milner is the president of the Merit Contractors Association of Manitoba.