Hot! Strikes losing historic leverage

TheStar.com – business
Published On Mon Jun 20 2011.   By David Olive, Business Columnist

Striking Canada Post workers had to be legislated back to work or this year’s Summerside Lobster Carnival would have been a fiasco. As of Monday, applications for the spelling bee, parade and other festivities mailed in from across P.E.I. totalled a mere 10, compared with more than 40 last year.

“We’re scared that there are some entry forms somewhere in Canada Post and they aren’t getting to us,” said organizer Catherine Dickson.

After public-employee strikes that embittered Torontonians, a year-long strike at Vale S.A.’s former Inco operations in Sudbury, and simultaneous work stoppages this month at Canada Post and Air Canada, Canadians can be forgiven in thinking we’re entering a new era of labour disruptions.

But that’s not the case. A few reasons why:

Inflation is at harmless levels. Inflation is the chief driver of wage demands that culminate in work stoppages. But apart from recent spikes in gasoline and housing prices, inflation has been quiescent for two decades now, never rising above 5 per cent in the past 10 years. Inflation is currently running at a 3.3 per cent annual rate. The strike-prone 1970s, when it seemed Canada Post was more often on strike than on the job, were characterized by double-digit inflation, which peaked at 12.9 per cent in 1975.

Workers then were understandably determined to keep up with a spiralling increase in their cost of living, even as their own wage demands contributed to the spiral.

The economy remains in recession. Officially, the recession ended more than a year ago — as measured by a resumption in GDP growth — but try telling that to Canada’s 1.5 million unemployed.

Canada’s jobless rate of 7.4 per cent is intolerably high. That compares well enough with America’s 9.1 per cent jobless rate. But the unemployment rate in Germany is 7.0 per cent and in Australia a mere 4.9 per cent. Canada’s high jobless numbers obviously weaken the bargaining power of all workers, given the surplus in labour supply.

Union membership has steadily declined over the past three decades, to a current 30.8 per cent of the non-agricultural workforce. The comparable figure for the U.S. is a mere 12.3 per cent. The sharp drop in union membership is cited as a leading cause of the flatlining of inflation-adjusted middle-class incomes in Canada and the U.S.

Employers are taking a hard line. A 17-month strike at Caterpillar Inc. in 1994 marked a turning point in North American labour relations. Employers had been loath to “take a strike,” fearing permanent loss of market share while their plants were idled. Cat took the 1994-95 strike — the longest on record — and striking workers eventually returned to work without a contract. Employers have been playing hardball ever since.

Governments have turned pro-employer. Labour laws of every description — from organizing a bargaining unit in the first place to traditional prohibitions against employers bringing in “scabs” or replacement workers — have been steadily eroded not only by conservative governments but centre-left ones. Strikers have always enjoyed little public support. With that in mind, the Harper government threatened strikers at both Air Canada and Canada Post with back-to-work legislation, and the principle of collective bargaining rights be damned. Thus Air Canada’s 3,800 striking airport check-in agents and call-centre staff settled with management after a brief three-day strike. And the time elapsed since more than 40,000 Canada Post workers began rotating strikes to their return to work, expected Friday, will be 22 days, a small fraction of which affected the country as a whole.

Canada Post and Air Canada are sick puppies, and they have lots of company. They are struggling with fundamental change in their business models. Canada Post admirably has chalked up 15 consecutive years of profit, which looks awfully good in comparison with an effectively insolvent United States Postal Service (USPS), which lost $8.5 billion last year and is on track to lose another $6.4 billion this year.

But Canada Post’s profits are slender and shrinking, only $281 million in 2009 earnings — the latest reported year — on revenues of $7.3 billion. That’s a miserable return on invested capital.

Revenues in its core business of “transaction mail,” or letters, keep falling, a victim of cyberspace, principally email, but also social networking. The consistent black ink on Canada Post’s bottom line has come almost entirely from wringing costs out of its workforce of 71,000 employees.

Air Canada has lost $513 million over the past four years, returning to profitability last year with meagre earnings of $107 million on 2010 revenues of $10.9 billion.

Both corporations are saddled with unfunded pension liabilities — the biggest stumbling block at the bargaining table for both.

This is a widening crisis for all “legacy” employers, public and private. You can’t bargain away demographics, and legacy employers — such as 144-year-old Canada Post and 74-year-old Air Canada — now have more retirees than active employees.

Each has hit the wall in its ability to continue with guaranteed, or “defined benefit,” pension payouts. Each is attempting, with great resistance from workers, to switch to “defined contribution” schemes in which employer and employee contribute to pension funds which, fingers crossed, will generate enough investment income to cover retiree obligations.

The good news for would-be contestants in the Summerside Lobster Carnival is that the deadline for applications has been extended from Monday to Tuesday. And anyone calling organizer Catherine Dickson to say their application “is in the mail” is very likely to be believed.

< http://www.thestar.com/article/1012225–olive-strikes-losing-historic-leverage >

3 Comments

  1. As a Social Work student, I am trying to make a strong understanding of the economy and politics. After reading this article, I realized I had a strong opinionated response. “Inflation is at harmless levels.” In my opinion, this is the case, currently, but I feel that the progressing inflation is well on its way to harmful levels. I feel that the prices of goods and services have become ridiculous. What about the increase in taxes on our food, gasoline and heating? “Never rising above 5 percent.” Is that supposed to be seen as a safe zone?

    Inflation can have positive and negative effects on the economy. I feel that recent inflation has had a negative effect on the economy. I feel that this inflation is discouraging and has caused many people to avoid investing and saving money as the money they were investing and saving is now being used to pay the extra price for goods and services. I feel that if inflation continues to increase, there will be a shortage of goods, because citizens will become miserably concerned that prices are going to continue to increase, and may therefore begin “hoarding” to feel and keep safe from this possible shortage.

    “The economy remains in recession.” I agree with this statement even though you state that this recession officially ended a year ago. Do you think that the intolerably high rate of unemployed who disagree with this statement may be impacted by social assistance? Do you agree that maybe the government needs a stronger standard for those wishing to receive social assistance? I feel that people have begun relying on social assistance rather than leaning on it. In my opinion the able-bodied unemployed should not be allowed to rely on social assistance. In some circumstances, such as layoffs, the able-bodied unemployed should be temporarily allowed to receive social assistance. I feel that social assistance was created to help those who are in fact, IN NEED, not those who claim they are in need or are too lazy to work for their money.

    I also agree that the government has turned “pro-employer” and that they “have hit the wall in its ability to continue with guaranteed or defined benefit pension payouts.” I agree with the idea of employer and employee contribution in terms of investing money. This is how my dad’s pension plan works, and as a citizen who just recently began investing and saving money, I feel that the amount of money saved is fairly reasonable. I feel that this system will generate enough investment income to cover retiree obligations if the amount of money invested is favourable to the amount of money needed to survive.

    All in all, I feel that this article hit the highs and lows of what is currently occurring around us. But I feel that it needs to be realized that social assistance is being taken advantage of by those who do not need this assistance, and in my opinion this is unfair to those in need. I feel that new criteria need to be formed in order to determine the level of need citizens withhold.

  2. After reading this article, I knew I had to post a comment or a critique. Basically, unions have been strong since Jimmy Hoffa led the “International Brotherhood of Teamsters” which was formed in the early 1900’s and still exist making it one of the largest unions in the world – if not the largest. However, this author does present some viable reasons for unions losing leverage.

    First off, “inflation is at harmless levels”? I would have to disagree with this as gasoline spikes, housing prices, utilities and taxes continue to increase while our wages stay the same not to mention that the working poor need to work 2 or 3 jobs just to stay above the poverty line. Harmless, I beg to differ when you have a single parent who is forced to neglect their children of “quality time” to earn a living. These people cannot put money into RRSP contributions and have no pensions. Some of these individuals don’t even have benefits. This comment is just like a snowflake within a blizzard.

    Second, “the economy remains in a recession”. I would have to agree with this comment. The real question remains: Why are we still in a recession? As indicated, “the recession officially ended more than a year ago” but why is our jobless rate still high? Many reasons emerge as to why we still remain in a recession. Employers are cutting back on positions within their companies, machines are taking up more production line jobs, more employers are looking for more skilled individuals with post secondary education and unions are weakening due to “inflation”. Meaning, people cannot afford to go on strike because they risk of going bankrupt.

    Third, “employers are taking a hard line”. Yes in some industries, it may be easier for employers to hold the employees accountable for striking. For example, in the mining industry, if there is no demand for the produced minerals within the same time the collective bargaining agreement is due, the employers can afford to hold off negotiations until demand is once again restored – hence keeping contractors (or “scabs”) employed for less money to do the work. However, in the social services sector, it may be more difficult for employers to hold off negotiations as there is no profit to be made and there is no money in surplus in the bank to keep the agencies afloat. Their money is based on government funding.

    Lastly, “governments have turned pro-employer”. Could this be due to politicians having a portion of the profits? Is government turning into a “business” rather than working for the people?

    In conclusion, unions are becoming weaker than in the past. Why is that? Is it because more contracts, part-time and casual jobs are offered? Is it partly due to employers not being able to keep F-T employees due to the cost of benefits and pensions being provided to the retired population? There are many reasons as to why unions are weakening, why unions are needed and why employers/government are “business” focused however in order to meet the answers to those questions, I would need more than a page to answer these questions.

  3. Groups, organizations, teachers, companies, employees and students are all common groups of people you hear about regularly going on strike. As stated in the above Spon, “Strikes Losing Historic Leverage”, people go on strike for many different reasons, but one of the main reasons being people are demanding higher wages. The cost of living is increasing all over the world and people can no longer afford to be paid minimum wage. Housing, food, transportation, and healthcare are all examples of things we need in our daily lives to survive but they continually increase in price causing people to fall deeper into poverty. Why can’t the government understand that they are raising the prices on necessities so they need to raise peoples wages in order to match the increases they have made?

    When it comes to strikes it always brings to mind the concept of capitalism where the rich get richer and the poor stay poor. Majority of people who strike are apart of the working class, and the people who are controlling their strike and the decisions made are capitalists who are receiving more benefits from their work then the actual workers. If the concept of Marxism was applied during strikes and towards wages in general, our economy would be a much more equal earning environment. If the working class was granted higher wages to match the increasing cost of living it would allow the rich to stay rich, the working class to have a stable income, and potentially lead the poor into finding jobs and gaining income, also known as the trickle down effect.

    Having strikes as part of our history and current economy helps to realize that more work and thought needs to be put into the aspect of wage equality for workers. From the fundamental social work value of humanism we want each person to be well rounded in all areas of their life, which includes mental, physical and emotional health. If wage increase brings about a positive change for people and takes away a stress in their life then their overall well being should increase and cause society to become a happier place all together. Striking is an aspect of looking for equality in our society, if people want to make a change they must stand up for what they believe is right and make the change happen as opposed to sitting around and waiting for the government to change things. I understand and agree that striking is not always the most efficient or cooperative way to bring about change, but I do believe that it is better than people sitting around and complaining about things as opposed to making their voice heard and trying to make society a better place.

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