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Jock Finlayson: The future of Canadian unions is bleak

VANCOUVER, BC, Aug 24, 2012/ Troy Media/ – Recent news that two of Canada’s biggest unions are contemplating joining forces points to the challenges confronting trade unions in today’s hyper-competitive economy.The Canadian Auto Workers (CAW) and the Communications, Energy and Paperworkers Union of Canada (CEP) are looking at merging to enhance their bargaining power and their ability to advance the interests of their members. In late August, the CAW formally voted to combine with the CEP, which itself will take up the matter in the fall.

Should the merger proceed, the enlarged union would have more than 300,000 members employed in a host of industry sectors, but with a particular focus on manufacturing, communications and transportation.

This announcement comes on the heels of a number of previous union combinations. Looking ahead, more mergers are likely. The strategy makes sense for unions struggling with dwindling memberships, rising costs, and determined efforts by employers to contain their compensation bills. Many businesses have been able to reap benefits by spreading fixed costs over more employees or customers; a similar logic applies to unions, which can gain economic advantages by adding members and also by diversifying the industry sectors in which they operate.

The spurt of union mergers comes against the backdrop of a long downtrend in “union density” – defined as the proportion of the overall workforce that belongs to a union. Falling density is particularly evident in the private sector, where only 16 per cent of workers in Canada now hold union membership cards. Thirty years ago almost one in three private sector employees were part of a union.

Driven by unions’ diminishing “market power” in the private sector, economy-wide union density has gradually decreased since the 1980s; in Canada, it currently sits just below 30 per cent. Density is noticeably lower in some provinces, like Ontario (26.6 per cent) and Alberta (22 per cent). In contrast, Newfoundland (38.1 per cent) and Quebec (36.3 per cent) have the highest union density rates, while British Columbia (30 per cent) is close to the national average.

When it comes to unions’ presence, the public and private sectors in Canada increasingly resemble two different worlds. In the public sector, unions are deeply entrenched and represent significant majorities of employees. Nationally, more than 70 per cent of workers in the broad public sector – which includes government administration, social services, education, and most of the large health care industry – are union members. As noted above, this compares to private sector union density rates of 15 to20 per cent across the provinces.

But it’s worth noting that union density also varies significantly within the business community. In Canada, the most heavily unionized segments of business are utilities (61 per cent) and transportation (41 per cent). Industries with low union density rates include retail/wholesale trade (13 per cent), financial services (8 per cent), accommodation and food-services (7 per cent), and professional, scientific and technical services (4 per cent).

In 2010, the average national hourly wage for unionized workers was $26.04, compared to slightly less than $21 for non-unionized employees. Apart from wages, unionized workplaces often tend to provide workers with more generous benefits than the typical non-union organization. To some extent, the union/non-union compensation gap is attributable to varying distributions of unionized employees by firm size and by industry – that is, unions are more common in larger enterprises, which generally offer higher pay than smaller firms, and in capital-intensive industries, which also feature above-average pay levels.

But even after accounting for such factors, academic research finds that a residual “wage premium” still exists for unionized employees. This remains a selling point for unions seeking to sign up new recruits.

What does the future hold for Canadian unions? Through mergers, lobbying for changes in labour laws, and improved organizing and marketing efforts, unions are trying to stem further declines in their influence. But they face an uphill battle. Several factors are likely to keep union density on a downward trajectory, at least in the private sector economy:

The shift of employment towards service-producing industries (where unions are weaker), and away from manufacturing and other goods-producing sectors (where they are better established).The emergence of an increasingly competitive business environment, in which firms have little or no ability to pass on higher costs to their customers. In many sectors of the economy, powerful competitive forces now make it very hard for unions to achieve a lasting pay premium for their members.The growing role of smaller enterprises as a source of jobs. Unions have difficulty penetrating smaller workplaces and find it costly to service members who may work in such firms. The likelihood that a given organization is unionized rises with the number of employees. Businesses with fewer than 100 workers account for approximately half of private sector employment in Canada, a share that has edged higher over time. This trend spells continuing trouble for unions hoping to expand their clout in the business sector.

Jock Finlayson is Executive Vice President of the Business Council of British Columbia.

As published in Troy Media