Government Interventions in Labour Disputes Have Unforeseen Costs: C.D. Howe Institute

Jun 17, 2010 | Government News

When politicians consider intervening in labour disputes, they should also consider the long-term, potentially unintended results of such action, according to a study released today by the C.D. Howe Institute.   In “The Laws of Unintended Consequence: The Effect of Labour Legislation on Wages and Strikes,” authors Benjamin Dachis and Robert Hebdon investigate the lessons from previous government legislative interventions, whether through compulsory arbitration, “back-to-work” legislation or bans on replacement workers during strikes, and find these actions have unintended results that give reason for sober second thought. 

Among their findings: 

– Banning strikes increases public-sector wage levels appreciably. Legislation requiring compulsory arbitration in disputes involving public employees has increased wages by about 1.2 percent per settlement.

– “Back-to-work” legislation reduces the likelihood of a freely settled contract in the next round of negotiations, perpetuating the cycle of government intervention.

– Bans on temporary replacement workers reduce wages, contrary to previous evidence, and increase the likelihood and length of strikes, as do reinstatement rights for striking workers.

– Allowing union certification only through a secret ballot decreases the number of strikes and lowers the wage costs of unionized employees.

This Commentary provides policymakers with a fresh perspective on their potential actions and consequences in the minefield of labour disputes. Whether governments seek to shift the balance of labour-employer power, end work stoppages or prevent them in the first place, policymakers should weigh the unintended consequences before acting. 

For the study go to:   http://www.cdhowe.org/pdf/commentary_304.pdf 

For more information contact:           

Ben Dachis, Policy Analyst, C.D. Howe Institute; or Robert Hebdon, Professor, McGill University.  Phone 416-865-1904 email: [email protected].

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