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The Progressive Economics Forum

When Management Locks the Doors

Quick: what do U.S. Steel, Rio Tinto, and Caterpillar all have in common?

They’re all enormous, flexible global companies, given carte blanche by the Canadian government to purchase important long-standing profitable assets here with few if any conditions, who promptly locked out their Canadian workers in an effort to extract historic concessions in compensation and security.

Seems to be a trend.

Here’s my recent Globe and Mail column on the growing popularity of management lockouts.  No matter how tough the unions are, it seems that some form of government intervention would ultimately be required to prevent or at least referee these David-and-Goliath battles.  I mention the Manitoba arbitration legislation at the end; there are other openings for government, too (not least being a far more stringent approach to attaching conditions to these takeovers in the first place).

Can you imagine the governments of Germany, Japan, or Korea tolerating what is happening at Caterpillar today: where a global giant buys an important and profitable industrial asset, no conditions attached, and then attacks so aggressively the well-being of domestic workers and the future of the factory itself?  I can’t.  No wonder those countries are all successful and growing manufacturing jurisdictions (paying far more than $16.50 per hour for high-skill heavy industrial work, by the way), while Canada can no longer make that claim.

Anyway, here’s the G&M piece:

Labour Relations Shoe is Now on the Other Foot

Business lobbyists used to express grave concern about the economic impact of strikes.  Those concerns were always overstated.  Time lost to work stoppages of all kinds amount to about one-thirtieth of one percent of total working hours, down 90 percent from the 1970s.  Nevertheless, companies complained loudly that work stoppages undermine output, productivity … and, of course, profits.

Recently, however, business leaders have warmed decidedly to work stoppages.  In the modern bargaining environment, companies (especially multinational firms) hold most of the cards.  And executives are increasingly willing to precipitate their own work stoppages – through management lockouts – to enforce demands for lower wages and benefits.

Two New Year’s Day lockouts highlighted this increasingly popular strategy.  U.S.-based Caterpillar Inc. locked out 450 locomotive builders in London, Ont., demanding wage cuts of 50 percent and other dramatic concessions.  The same day, Rio Tinto, the U.K.-based mining giant, locked out 755 workers from an aluminum smelter in Alma, Que.  That company’s demand to outsource all future bargaining unit openings would attain an even larger cut in future wages.  In both cases, what’s at stake is nothing less than the future of middle-class incomes in high-value manufacturing and resource industries.  And in both cases, executives are willing to lock the doors, unless and until workers swallow their pill.

These lockouts are just the latest in a growing trend by employers to lock out workers as needed to roll back wages and benefits with unionized workers.  U.S. Steel (another foreign giant) used a 50-week lockout to dismantle the defined benefit pension plan for workers in Hamilton.  Canada Post played the lockout card last spring to precipitate one-sided back-to-work legislation from an obliging Harper government.  The City of Toronto is contemplating an unprecedented lockout of 30,000 civic employees, that could start next month, in an effort to wrest job security and other concessions from those workers.

Other recently locked-out Canadians include bus drivers in the Maritimes, longshore workers in Montreal, and warehouse workers in Ontario.  In every case, employees were told to not bother reporting for work until they accepted management’s agenda.

Suddenly, business seems blithely unconcerned about the economic losses of long work stoppages.  Of course, most employers would rather have no union to deal with at all; that way they can dictate painful rollbacks to the workers, no muss, no fuss.  But for those stuck with a union, work stoppages –even long ones – are a small price to pay in the drive to drive down labour costs and boost profit margins.

No matter the economic and social consequences of these hard disputes, don’t hold your breath waiting for government to intervene.  In the Caterpillar case, for example, a federal official stated “this is a dispute between a private company and the union and we don’t comment on the actions of private companies.”  That’s quite a change from the Harper government’s philosophy toward work stoppages at Air Canada (another private company).  Government worries about the economic consequences of work stoppages only when they might produce gains for the workers – rather than losses.

The new popularity of management lockouts reflects the dramatic tilting of the labour relations playing field in recent years.  When workers use work stoppages to make progress in wages and benefits, employers hate them.   But when unions are on the defensive, a work stoppage is a small price to pay.  Global firms have been particularly aggressive, given their ability – ratified by free trade and investment agreements – to shift production and capital seamlessly, playing off workers against another.

This lopsided trend is troubling, and not solely because of its negative impact on fairness and equality.  It also raises macroeconomic concerns.  As employers ratchet down compensation, income shifts from consumers (who spend every penny of it) to corporations (who sit on a growing pile of uninvested cash).  Unions serve an important stabilizing function during times of protracted economic weakness, preventing a cycle of deflation in wages and prices that undermines recovery.  If employers’ current strategy is ratified, that stabilizing force will be weakened.

Politicians should not sit back and watch this growing line-up of confident employers use long lockouts to drive down labour compensation.  Manitoba has a legal provision giving its labour board the authority to intervene in long disputes, settling them through arbitration when an impasse has been reached.  It’s been rarely invoked, but it’s been important in preventing the outbreak of all-out industrial warfare that’s been declared by the likes of Caterpillar and Rio Tinto.  This is a good time for other jurisdictions to consider a similar direction.

Enjoy and share:

Comments

Comment from Toby Sanger
Time: January 23, 2012, 9:36 am

Really good column, Jim. The New York Times has followed you with an article on the same topic in its paper today.

http://www.nytimes.com/2012/01/23/business/lockouts-once-rare-put-workers-on-the-defensive.html

Comment from Paul Tulloch
Time: January 23, 2012, 11:49 am

The only problem I have with this story Jim. Do you really believe this is a lockout?

To me this is a plant closing- plain and simple, shrouded in a some lockout smokescreen to blame workers for the closing.

Mr. Harper needs to be called on the carpet for this. Southern Ontario helped put this guy in power and now his attack the worker economics are coming to bear on Southern Ontario and it seems open season on workers has finally arrived in Canada. Not sure what McGuinty can do, but I do think it is time we ratchet up the pressure for tougher labour laws to hopefully curtail such capital flight strategies.

Comment from Travis Fast
Time: January 23, 2012, 12:12 pm

“To me this is a plant closing- plain and simple, shrouded in a some lockout smokescreen to blame workers for the closing.”

Well in the case of the workers in Alma what it really is about is owners seeing which workers are going to roll over hard and keep their jobs and which ones are going to loose their jobs. They are sandbagging capacity and they want to determine where that capacity gets sandbagged. Global austerity is going to drive the shuttering of more and more capacity and thus we can expect more of the same.

Comment from Paul Tulloch
Time: January 23, 2012, 1:17 pm

Sorry I meant to specify that the plant closing is more focused on Caterpillar.

I would agree the Alma case is a bit different, not as open and shut- (pun intended) as Cat. More or less whipsawing the local with other locals in the Alma case.

In the Cat case however there is no way union members would ever accept a 50% wage cut. So unless that is somehow just an opening tactic in some new brand of bargaining or a bluff of some sorts, then Plant closing is the objective.

Sad.

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