Gene Balfour Blogs

Labour regulations & Libertarian principles

In this bulletin, common labour regulations that empower labour unions are analyzed under the IPR and NAP policy lens to determine if they comply. Specifically,

  • The Rand Formula, created in 1945, is a feature of Canadian labour law requiring workers that are covered by collective bargaining contracts to pay union dues – whether or not those workers are union members. (https://cupe.ca/fact-sheet-union-dues-and-rand-formula)
  • Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights.
  • In Canada, rates in unionization have declined in general, and in 2012, Public Sector rates remained above 71% while Private Sector rates were about 16%. Women tended to seek union membership slightly more often that men (31.3 vs 28.5%) and older workers of both sexes tended to work under union contracts nearly twice as often as younger workers. http://www.statcan.gc.ca/pub/75-006-x/2013001/article/11878-eng.htm

THE ANALYSIS

A. Libertarians employ the principle of protecting Individual Property Rights (IPR) to identify which of their legitimate property elements are traded between employer and employee in reaching a mutually agreeable employment arrangement.

The Employer brings Assets to the trade. These Assets may include some or all of the following property: a job description and performance criteria created by the employer to meet business objectives; the physical workplace setting with the equipment needed by the employee in order to perform the job duties; paying customers who have become brand-loyal to the employer without whom the business would not exist; intellectual capital such as contracts, web sites, defined business processes, product designs, manuals, marketing materials; a business plans and the leadership team (Body, Mind and Effort) who utilize all of the above to achieve business objectives; the financial assets to pay salaries and benefits, and to procure from suppliers all of the supplies, materials and equipment required by the business.

The Employee brings his/her Body, Mind and Effort to the trade. Within these personal property elements are specific skills, knowledge and other unique qualities that may prove important for successful job performance. With the sole exception of collective bargaining scenarios, the usual hiring process is a concurrent and bilateral investigation between competing job candidates and the manager(s) responsible for filling the job within his or her department. The hiring process includes: identifying, interviewing, assessing and ultimately determining which one of many job candidate is best suited for the job AND who will also agree with the terms of trade (ie the Assets provided by the employer in the trade).

B. Non-Aggression Principle (NAP) asserts that terms of trade must be mutually acceptable for a successful trade to occur. This implies that no coercion or force is required. However, the practice of Collective Bargaining and the application of the Rand Formula are both examples of NAP violation. How? When workplaces become union certified, the law requires that 50% +1 of the workers must agree to join the union and accept the terms of membership. These terms include 2 things that are of critical importance to the viability and power of unions and their leadership teams:

  1. Payment of Union dues, their main source of their revenues;
  2. Membership solidarity”, the unanimous support for, and compliance with all prescribed union practices during contract negotiations, including work slow-downs (“work-to-rule” workplace actions) and strikes.

The NAP violations for the above include the following:

  1. No worker can refuse union membership or the payment of union dues. Union membership becomes a “condition of employment”, and a threat of harm if he/she does comply. Besides losing income (Assets), the lost freedom of choice (Mind) to “associate”, or not, with the union is also a NAP violation. Non-compliance usually means elimination from the job competition or job termination, if already employed.
  2. Workers are unable to negotiate their own terms of trade independent of the collective agreement (another NAP violation of Mind). This matters because an above average job performer could reasonably expect better compensation than a below average performer. When everyone is subject to the same wage schedules, there is no advantage or incentive (Effort) for an above average performer to produce any more than a below average performer. This hurts both the employer who loses potential productivity gains (Assets) , and the high achiever who may otherwise benefit (Assets) from high performance.
  3. Labour costs are generally higher with a unionized work force than when employers can negotiate bilateral terms of trade with individual workers. [a NAP violation of Assets and Mind]. In the case of private sector employers, these higher costs are often absorbed by paying customers and/or by the business owners through reduced profits [Assets]. To the extent that these costs affect pricing in their competitive markets, the business may also suffer reduced market share [Assets]. If high labour costs become a serious enough issue to the ability of the business to survive, then the business owners may be forced to move their capital assets to a more business friendly jurisdiction where labour regulations may not become a business impediment [Assets and Mind]. Another labour saving option is to increasingly employ advanced technologies to counterbalance the rising wages of a unionized workforce and reduce the level of human labour within their operations. In both scenarios, the union and its members will ultimately lose [Assets and Mind].
  4. The threat, and the realization, of “work-to-rule” and strike actions can have measurably deleterious effects on business. Lost revenues, lost customers, penalties for failure to meet contracted production schedules, brand/reputation damage within the market community, and more, have all been consequences suffered by these actions. If the damage is particularly severe, the employer may need to lay off additional personnel to accommodate for their losses [Assets].
  5. Imposition of the Rand formula by legislation is aggression against employers who would rather not have a union shop owing to the potential harm to the owners’ Assets and survival prospects. Furthermore, when the union decides to go on strike, the employer is unable to mitigate harm by hiring alternative workers who are ready and willing to accept the jobs. [a NAP violation of Assets and Mind].

The majority of our working age citizens are employees, not employers. Many of them think that their employers have the upper hand in the Employee-Employer trade relationship. Sometimes they forget that they accepted the Terms of Trade when they signed the employment agreement, and that they are not entitled to a wage increase unless the employer is willing to offer one.

The economic forces of “supply and demand” are always at play in the pricing of any product or services, including labour market prices. Employers tend to have a negotiating advantage when qualified workers are in plentiful supply. Conversely, a scarcity of qualified job seekers shifts the advantage to the potential employees. This has been an increasingly common scenario in our modern, technologically advanced businesses that require employees with highly specialized skills and experience.

Labour laws like the Rand Formula came into existence at a time when employers had the upper hand in negotiating for relatively unskilled labour that was plentiful after World War II. The rising popularity of labour unions was inspired by the difficulty that many of Canada’s ex-armed forces men experienced as they struggled to find jobs that paid well enough to support young families with many children. Opportunistic politicians cleverly turned this into a political movement – one which they took full advantage of in order to get elected and then pay back the voters who supported them with legislation aimed at using government force to strong-arm employers for better pay and working conditions. Their successes were sometimes warranted, and sometimes not, but they always earned a “political win”.

Today, many of the labour regulations have outlived their useful purpose and shifted the negotiation advantages to the union and its members. Their influence in the workplace, especially in Public Sector institutions that enjoy monopoly control of their “markets”, has become a drag on the Assets of all taxpayers except those who benefit directly from exclusive membership in a public service union. Unfortunately, once a union infiltrates an enterprise like a public monopoly, it is nearly impossible to eliminate it, and this fact certainly eliminates the taxpayers’ freedom of choice [Mind] to employ non-union personnel in their public institutions if they should so desire.

An historical review of the many instances of premeditated harm inflicted by unions on business owners and their legitimate Assets will reveal the scars left by decades of harmful labour actions. These were only possible owing to unfair regulations like the Rand Formula that have given unions the legal right to ignore the property rights of many citizens.

As a Libertarian, how does the above analysis influence your thinking regarding labour policy?

First, ask yourself if you agree with Libertarian Principles 1 & 2. The life experience of every human being determines their Life Lens and, consequently, how readily he or she may accept these Principles. Persons who view themselves as victims - powerless in their daily quest for survival and prosperity - will not likely accept them. Others, who possess effective and useful survival skills and attributes, will embrace these Principles and the following comments will likely appear very sensible.

Libertarians defend individual property rights against aggressors of all sorts, including government regulators. Laws and regulations are instruments of power that are used to exert force on people to control their choices and actions. Governments create these instruments, and employ the agents of force (“enforcement officers”), to strong-arm compliance from persons subject to the provisions defined within these instruments.

A Libertarian Remedy

On the labour file, the OLP would review, under the IPR and NAP lens, all labour regulations including Minimum Wage Laws, the imposition of Payroll Taxes, and others. Objective? To remove non-complying regulations and restore safe, productive and fair work environments for the mutual benefit of every employer and employee.

Libertarians would prevent elected politicians from passing partisan legislation that would hurt some members of society in order to advantage other, more politically favoured groups. Our laws should protect everyone, equally.

Furthermore, too many unnecessary regulations place a burden on the economy and force businesses to expend resources on red tape when the resources could be more productively allocated to meeting business expansion. By chipping away at the 380,000 existing Ontario Provincial statutes to eliminate those that are most damaging, these Libertarian efforts would unshackle the productive economy (ie the wealth-producing and Asset-building business enterprises).

Replace counter-productive government regulations and taxes with provisions that defend Consumer Rights, and the ensuing economic expansion would provide our citizens with more job options, higher wages, better working conditions and, overall, better upward career prospects for everyone.

The function of a political party is to attain power so it can pass legislation favoured by voters and, thus, to stay in power. The OLP exists to repeal legislation that interferes in the economy and makes criminals of people who have done no harm. We believe that this will make the province, country, and world, a better place for all.

A Final Note

There will be many people who will challenge our position regarding labour laws. To avoid making this a "personal fight against unions", it is very important that Libertarians address the shortcomings of these laws rather than redressing the people who exploit them to their advantage.

Many will claim that the middle class exists solely from the existence of the Rand Formula and legalized Collective Bargaining. They will never, however, address who must sacrifice their Assets, or mention any of the unexpected consequences that have occurred as a result of this use of state force.

Others will insult Libertarians with adjectives like “heartless” or “selfish, but they will never speak about the fact that unions serve only their membership for their own personal gain and at the cost of higher prices and lost jobs incurred by other citizens.

Some people hold tightly to their existing views and are unwilling to even consider alternatives. Who know what has shaped the Life Lens of these people, but it is always best to respect their views and “agree to disagree”. You will generally earn more respect if you discuss these topics with civility and, who knows, maybe one day they will remember a friendly and reasonable discussion with a Libertarian (you) and maybe he/she will begin a shift in perception that could be life-changing for them.

Principles matter. If our principles truly matter to you as much as they do to me, then you will naturally find and embrace the arguments that will help others to see labour laws through a Libertarian lens. This is when you will enjoy your most rewarding discussions.

For a good read on this topic, see Unions in Trumpland by Matthew Lau - a Toronto writer fo­cus­ing on eco­nom­ics – published in the National Post - (Latest Edition), Feb 02, 2017.

Enjoy the journey

Gene Balfour

Member, Ontario Libertarian Party since 2007: 2018 candidate for the Haliburton-Kawartha Lakes-Brock riding; Libertarian candidate in 4 past elections.

March 13, 2017

… and don’t forget - Principles matter, and Libertarian Principles matter most.

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