d études socio-économiques de l UQAM

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1 d études socio-économiques de l UQAM A PORTRAIT OF UNION ACTIVITY: LOOKING BEYOND THE MYTHS A socio-economic analysis Martine Lauzon, M.A. (Social Intervention), doctoral candidate in applied social sciences (Université du Québec en Outaouais), researcher at the Laboratoire d études socio-économiques de l UQAM Frédéric Rogenmoser, B.A.A. (Accounting), master's candidate in accounting (Université du Québec à Montréal), researcher at the Laboratoire d'études socio-économiques de l UQAM Léo-Paul Lauzon, Ph.D. (Management Sciences), M.B.A. (Finance), C.A., C.M.A., Director of the Laboratoire d études socio-économiques de l UQAM JUNE 2013

2 INTRODUCTION The discourse is well known and often repeated, notably by the Conseil du Patronat du Québec and the Montreal Economic Institute: unions of workers (but not unions of owners or of professionals such as doctors) are sources of innertia that hurt the productivity of businesses and of the economy. In this overview of our study, A PORTRAIT OF UNION ACTIVITY : LOOKING BEYOND THE MYTHS a socio-economic analysis, we offer first a realistic portrait of collective bargaining coverage and its impacts, through the analysis of various social and economic indicators compiled by the Organization for Economic Cooperation and Development (OECD). Our analysis of 34 OECD countries compares social and economic indicators to rates of collective bargaining coverage, also referred as union coverage 1. Using graphics and tables, we were able to determine whether rates of collective bargaining coverage has had a negative, positive, or neutral effect on society, as manifested in health, poverty, the economy, and other factors. Before we summarize our results, it should be noted that we used the rate of collective bargaining coverage and not the rate of union membership. Many countries do not use the Rand formula, which obliges salaried workers covered by a collective agreement to pay union dues (though even this formula does not require them to be members of the union that signed the agreement). Under that formula, the collective agreement is considered to be a public good, benefiting all salaried workers of a group covered by negotiations, whether or not they are members of the union 2. It is collective agreements that influence the working conditions of the citizens of a country. The French example is striking in this regard, whereby the rate of union membership is 7.6%, but the rate of collective bargaining coverage is close to 90%. Union activity should thus be considered strong in France. We divided the 34 OECD countries into two groups. The first group contains countries that have lower than average collective bargaining coverage for OECD countries (<53.3%) and the second group contains those which have higher than average rates. The first group contains 18 countries: the U.S.A., the U.K., Japan, Switzerland, Australia, New Zealand, South Korea, Ireland, Estonia, the Czech Republic, Mexico, Turkey, Hungary, Poland, Chili, Canada, Slovakia, and Portugal. The second contains 16 countries: Israel, Luxemburg, Germany, Greece, Norway, Denmark, Italy, the Netherlands, Spain, Iceland, Finland, France, Sweden, Slovenia, Belgium, and Austria. 1 The statistics analyzed are almost entirely from the databases of the OECD, the World Health Organization (WHO), the World Economic Forum, Statistics Canada, and the Quebec Institute of Statistics. 2 Thanks to Pierre-André Lapointe for this important precision.

3 The economic indicators included in the analysis are the Gross Domestic Product (GDP) by inhabitant, the rate of unemployment, and the Global Competitiveness Index score issued by the World Economic Forum. We will now summarize our findings for each indicator. The second part of the article will compare the effects of union activity between Quebec and the rest of Canada. It will also discuss the relative conditions of unionized and non-unionized workers in Canada UNION ACTIVITY AND THE ECONOMY (Part I) GDP per capita: 12 of the 18 countries with lower than average rates of collective bargaining coverage have lower than average GDP per capita (including Turkey, Hungary, Poland, New Zealand, South Korea, etc.). They represent 66.6% of the countries of this group. Among countries with higher than average rates of collective bargaining coverage, five out of 16 (31.3%) have lower than average GDP per capita (namely Greece, Slovenia, Spain, Italy, and Israel). Unemployment: Eight of the 18 countries with lower than average collective bargaining coverage (44.4% of such countries) have higher unemployment rates than the OECD average (namely the U.S.A., Hungary, Ireland, Portugal, Estonia, Poland, Turkey, and Slovenia). Among countries that have higher than average rates of collective bargaining coverage, four out of 16 (25% of these countries) have higher rates of unemployment than the OECD average (namely Greece, Spain, Italy and France). The Global Competitiveness Index of the World Economic Forum: The Global Competitiveness Index (GCI) is scored out of seven points and is issued by the World Economic Forum. It is based on GDP, the size of the market, infrastructure, inflation, macroeconomic conditions, education, health, and many other factors. Ten of the 18 countries that have lower than average rates of collective bargaining coverage (55.5% of such countries) have GCI scores lower than five (including Estonia,

4 Chili, Ireland, Poland, Hungary, Slovenia, Portugal, Mexico, etc.) In comparison, only five of the 16 countries with higher than average rates of collective bargaining coverage (31.3%) have scores of less than five (namely Spain, Iceland, Italy, Slovenia and Greece). COLLECTIVE BARGAINING COVERAGE AND SOCIAL INDICATORS We also analyzed the following social indicators: life expectancy, infant mortality per 1,000 births, hospital beds per 10,000 inhabitants, health expenditures (public and private) as a percentage of GDP, doctors per 10,000 inhabitants, Gini coefficients, percentages of persons living with less than 50% of the average adjusted family income, rates of poverty among those aged 65 and over, and rates of poverty among children. Life expectancy: Eight of the 18 countries with lower collective bargaining coverage than the OECD average (44.4% of such countries) have average life expectancies of less than 79 years, including the U.S.A., Poland, Hungary, Slovenia, Turkey, Mexico, and others. None of the 16 countries with higher collective bargaining coverage than the OECD average have life expectancies of less than 79 years. Infant mortality per 1,000 births: Nine of the 18 countries with rates of union coverage lower than the OECD average (50% of such countries) have rates of infant mortality of more than four per 1,000 births, including Mexico, Turkey, Chili, the U.S.A., New Zealand, and others. None of the 16 countries with greater collective bargaining coverage than the OECD average have infant mortality rates of more than four per 1,000 births. Hospital beds per 10,000 people: On this indicator, the exceptional performance of South Korea and Japan are noteworthy, with 103 and 137 beds per 10,000 people respectively:

5 Nonetheless, the four OECD countries with the lowest number of beds per person are among those with less than 50% collective bargaining coverage : Mexico, New Zealand, Turkey, and Chili). The U.S.A. is close to the later group, with only 30 beds per 10,000 inhabitants, despite a high level of health expenditures. This is all the more striking when compared to countries such as Germany and France, which have 82 and 69 beds per 10,000 people respectively. Health expenditure (public and private) as a percentage of GDP and numbers of doctors per 10,000 people: Among countries with lower than average rates of collective bargaining coverage, 8 out of 18 (44.4%) spend less than 8% of GDP on health, including Mexico, Chili, Turkey, Hungary, and Poland. Among countries with higher rates of collective bargaining coverage than the OECD average, 2 out of 16 (12.5%) spend less than 8% of GDP on health (Israel and Luxemburg). Some countries, such as Canada and the U.S.A., have high spending, but a low number of doctors and hospital beds per 10,000 people. The U.S.A. spends the equivalent of 17.89% of GDP on health, but has only 24.2 doctors per 10,000 people. Their system of privatized and bureaucratized medicine costs more and obtains less. In Canada, the percentage of GDP spent on health is 11.29% and the number of doctors per 10,000 people is In contrast, in Norway, where collective bargaining coverage is very high, less than 9.48% of GDP is spent and there is a relatively large number of doctors per 10,000 people, at The spending is thus almost half of that of the U.S.A., and the number of doctors per person is almost double. Among those countries with lower collective bargaining coverage than the OECD average, 8 out of 18 (44.4%) have less than 25 doctors per 10,000 people, including South Korea, Mexico, the U.S.A., Japan, Turkey, Canada and others. None of the 16 countries with higher collective bargaining coverage than the OECD average have less than 25 doctors per 10,000 inhabitants.

6 The Gini coefficient: The Gini coefficient is a number between 0 and 1, where 0 represents perfect equality, whereby everyone would receive the same income. At 1, a single person would have all the income. Therefore the higher the coefficient, the higher the level of economic inequality. Among countries with less collective bargaining coverage, 10 out of 18 (55%) have a coefficient greater than the OECD average of 0.314, thus having higher levels of inequality. Two of the 16 countries with higher levels of collective bargaining coverage have coefficients greater than the OECD average (Israel and Italy). They are thus also among the countries with greater than average inequality. Percentage of the population living with less than 50% of the average adjusted household income: Among countries with lower than average collective bargaining coverage, five out of 18 (27.8%) have more than 15% of the population living with less than 50% of the average household income (namely Mexico, Turkey, Japan, Chili and the U.S.A). By this measure as well, the U.S.A is thus among the countries with the highest concentrations of wealth. Only one of the 16 countries with higher than average collective bargaining coverage (6.3% of such countries) has more than 15% of its population living with less than half of the average household income (namely, Israel). Rate of poverty among the elderly: Among those countries with lower than average collective bargaining coverage, seven out of 18 (38.9%) have poverty rates of over 20% among those aged 65 or over, including Mexico, New Zealand, Japan, Chili and the United States. Three of the 16 countries with higher than average rates of collective bargaining coverage (18.8% of these countries) have rates of poverty of over 20% among the elderly (namely Israel, Greece and Spain).

7 Rate of child poverty: Among countries with lower than average rates of collective bargaining coverage, five out of 18 (27.8%) have rates of childhood poverty of over 15% (namely Mexico, Turkey, Portugal, Chili and the U.S.A). Three of the 16 countries with higher than average collective bargaining coverage (18.8% of these countries) have rates of child poverty of over 15% (namely Israel, Italy and Spain). Finally, in the annexe of this document, statistics are provided on 11 of the OECD countries: the U.S.A., New Zealand, Canada, the U.K., Australia, Germany, Norway, the Netherlands, Finland, France, and Sweden. The reader can thus compare economic and social indicators among countries with low to high rates of collective bargaining coverage. One can see that indicators are more favourable in countries with higher collective bargaining coverage. A more complete analysis with all 34 OECD countries is provided in our study, and we invite you to consult it once it is available on our website.

8 Union activity in Canada and Quebec (Part 2) Inequalities and rates of collective bargaining coverage Between 1976 and 1993, rates of economic inequality in Canada were stable During this same period, the rate of collective bargaining coverage grew: from 32.4% to 35.5% in Canada from 34.9% to 42.5% in Quebec from 30.3% to 32.1% in Ontario Between 1993 and 2010, the tendencies reversed. Inequalities began to increase; while at the same time, among other changes, rates of collective bargaining coverage declined to the following 2010 rates: % in Canada % in Quebec % in Ontario Coincidentally or not, our belle province of Quebec has not only the highest rates of collective bargaining coverage, but also the lowest rate of economic inequalities in the country. Figure 1: The evolution of the Gini coefficient 3 in Canada, Quebec and Ontario after taxation and adjustment 0,35 0,33 0,31 0,29 0,27 Canada Ontario Québec 0,25 Source : Statistics Canada 3 Le Gini coefficient was developed by the Italian statistician Corrado Gini. It is a number between 0 and 1, where 0 represents perfect quality (everyone receiving the same income) and 1 represents a single person earning all the income. Therefore the higher the coefficient, the higher the economic inequalities.

9 And yet, there was economic growth... Figure 2: The evolution of the Canadian GDP in 2007 inflation-adjusted dollars $ $ $ $ $ $ $ $ $ Source : Statistics Canada A 2012 study of the Institut de recherche en économie contemporaine (IREC) shows that the richest 1% of Quebec residents hold 12% of total wealth. In 1985, they were attributed 7% of all income (Zorn, 2012). Atypical employment Figure 3: The evolution of atypical employment in Quebec between 1997 and ,5% 38,0% 37,5% 37,0% 36,5% 36,0% Source: Quebec Institute of Statistics

10 Between 2000 and 2010, the number of atypical jobs (part-time or temporary work) increased by 20% (Source: Quebec Institute of Statistics). Also according to the Quebec Institute of Statistics, atypical employment represented close to 1.5 million jobs in 2010 (248,000 more than in the year 2000). According to a 2006 study entitled Quand le travail n empêche plus d être pauvre! ( When work no longer prevents poverty! ) [Ulysse, P.-J., 2006] only 28% of those who work part time do so by choice. Another 27% do it for lack of other choices and 44% give other reasons. In Canada in 2001, less than two thirds of all Canadian workers had a permanent, fulltime job that would generally be referred to as a 'typical' job. [Tremblay, 2009; 29, our translation]. And wellbeing at work? One in five workers in Quebec experiences serious psychological distress. Close to 36% of [workers in Quebec], a total of 1.3 million people, say that they experience a certain level of work insecurity, meaning that they recently had a period without work or that they consider themselves at risk of loosing their job in the near future according to a study of the Institut de recherche Robert-Sauvé en santé et sécurité du travail (2012, our translation). Back to the future It is currently well viewed, in some circles, to criticize unions and to wish to be done with them. This discourse is not new and even mirrors the past. In the 1940s, many theoretical approaches discredited trade unions, alleging that they took companies hostage and that the market should be allowed to self-regulate. In a 1944 article, the American economist Henry Simons claimed that unions are monopolies that contribute to reducing production and raising costs. By achieving unduly advantageous salaries for the minority which they represent, the corollary of their action would be to harm the rest of society [2008; 310, our translation]. In the 1950s, Milton Friedman of the Chicago School claimed that trade unions are harmful to the laissé-faire and flexibility of the job market: another argument that is often used today against unions. Friedman even went so far as to deny that unions have historically contributed to the improvement of working and living conditions of workers. [ ] the rise of atypical work places workers under increased subordination and in many aspects echoes the early industrial era, when workers went each day in search of work.

11 The main difference is that today this atypical work is widely praised as being the result of workers' efforts to be more autonomous! [Gagnon, 1998; 2] Is this really what we want, a return to the past? The impact of union activity It's a common story: the new economy has called the rules of the game into question and has put unions in a position of vulnerability and dependency. A number of changes reduce the power of unions, including the restructuring of companies, the increase in precarious employment, the tertiarization of the economy, and the disengagement of the state. [Haiven et al., 2006; 567]. Improvements that can be attributed to unions include the reduction of the work week, the minimum wage, holidays off and payment for those days, parental leave, support for injured workers, sick days, paid vacations, employment insurance, job security, the right of women to vote, and pay equity between women and men, among other things. It is easy to forget that it is thanks to unions that child labour is no longer allowed in Canada or in Quebec; while in many countries it is still common to for children to be considered primarily in terms of their market value. Unions do no good? According to a recent study of the Canadian Labour Congress (2011) 4 In 2011, there were 4,562,800 union members in Canada, representing 31% of the workforce. Their combined weekly earnings of 4.38 billion dollars account for 35.6% of the national total. On average, unionized workers earned $5.11 more per hour than nonunionized workers. This union advantage resulted in the injection of more than 793 million additional dollars into the economy each week. These amounts support local businesses and services, increase tax revenues, and by doing so, finance public services. 4

12 Table 1: The contribution of union workers' salaries to the Canadian economy Average hourly rate paid to union members $26.50 Average hourly rate paid to non-unionized workers $21.39 Union advantage for local workers $5.11 per hour Number of unionized workers 4,562,800 Members of unions as a proportion of the labour force 31.2% Weekly earnings of union members Weekly earnings of union members as a proportion of total weekly earnings in Canada What the union advantage brings to Canada $4.38 billion 35.6% $ million per week Source : Canadian Labour Congress (2011) In terms of individual remuneration, it is also advantageous to be unionized, as shown in 2011 weekly incomes of $ ($24.15 per hour) for unionized workers versus $ ($19.74 per hour) for non-unionized workers, averaged across both sexes. It should also be highlighted that the working conditions negotiated by unions have a positive effect on conditions in an entire sector, and not only in the company targeted (and the inverse is also true). Table 2: The evolution of the weekly salaries of unionized and non-unionized workers, Unionized $ $ $ $ $ $ Non- Unionized $ $ $ $ $ $ Source : Quebec Institute of Statistics

13 Table 3: The evolution of hourly wages of unionized and non-unionized workers, Unionized $17.88 $18.65 $19.98 $21.33 $23.46 $24.15 Nonunionized $13.49 $14.37 $15.62 $17.19 $19.01 $19.79 Source : Quebec Institute of Statistics CONCLUSION Some have negative views towards unions, due to their interests or by ignorance, and are encouraged by certain media sources that continuously accentuate the negative aspects of workplace conflicts and salary demands. In light of the indicators shown here, the countries with the most collective bargaining coverage tend to have better economic competitiveness and more favourable social indicators. Furthermore, the anti-union claims of neoliberals are unfounded when measured against the facts documented in this socio-economic analysis of OECD countries. We have demonstrated that the situation in highly unionized OECD countries is often much better than that of less unionized countries. The danger of union activity is therefore a myth, which bases itself on interests and ideologies in its continued claims that unions of workers prevent the generation of wealth. Such claims by the opponents of unions do not stand up to this analysis of indicators from OECD countries.

14 Annexe: Tables Table 1: Comparison of collective bargaining coverage rate and economic data 5 OECD countries Union density (last available year) Collective bargaining coverage rate (last available year) Gross domestic product per capita in US dollars at current prices and current PPP in 2011 Underemployment rate in 2011 Global Competitiveness Index (1-7) ( ) United States (US) 13,1 % 13,1% ,88 $ 9,1% 5,47 New Zealand (N-Z) 17,0 % 17,0% ,01 $ 6,7% 5,09 Canada (Can) 31,6 % 31,6% ,92 $ 7,5% 5,27 United Kingdom (UK) 32,7 % 32,7% ,75 $ 8,0% 5,45 Australia (Aus) 40,0 % 40,0% ,46 $ 5,2% 5,12 Germany (All) 62,0 % 62,0% ,43 $ 6,0% 5,48 Norway (Nor) 74,0 % 74,0% ,27 $ 3,3% 5,27 Netherlands (P-B) 82,3 % 82,3% ,09 $ 4,4% 5,50 Finland (Fin) 90,0 % 90,0% ,49 $ 7,9% 5,55 France (Fra) 90,0 % 90,0% ,68 $ 9,3% 5,11 Sweden (Sue) 91,0 % 91,0% ,67 $ 7,6% 5,53 OECD - All of the 34 member countries 53,3 % Source: OECD (2012) and World Economic Forum (2012) 53,3% ,96 $ 8,2% - 5 Union density: The last available year is 2011 for all countries except: 2010 for Germany and Finland; 2008 for France. Collective bargaining coverage rate: The last available year is 2010 for all countries except: 2009 for Canada, Germany and United Kingdom; 2008 for France, Netherlands, Norway and Sweden; 2007 for Finland, Australia and New Zealand. GDP per capita: The data for Canada, New Zealand, Australia and OECD are estimated value. For non- estimated value, Canada GDP per capita was $ in 2010, New Zealand GDP per capita was $ in 2009, Australia GDP per capita was $ in 2010 and OECD countries GDP per capita was $ in 2009.

15 Table 2: Comparison of collective bargaining coverage rate and health data 6 OECD countries Union density (last available year) Collective bargaining coverage rate (last available year) average life expectancy (last available year) Infant mortality per 1,000 births in 2011 Hospital beds per 10,000 people (last available year) Health expenditure as a percentage of GDP in 2007 numbers of doctors per 10,000 people (last available year) United States (US) 11,3 % 13,1% 78, ,89% 24,2 New Zealand (N-Z) 20,8 % 17,0% 81, ,10% 27,4 Canada (Can) 25,6 % 31,6% 80, ,29% 19,8 United Kingdom (UK) 52,0 % 32,7% 80, ,64% 27,4 Australia (Aus) 18,0 % 40,0% 81, ,73% 29,9 Germany (All) 18,5 % 62,0% 80, ,64% 36,0 Norway (Nor) 54,6 % 74,0% 81, ,48% 41,6 Netherlands (P-B) 18,2 % 82,3% 80, ,92% 28,6 Finland (Fin) 70,0 % 90,0% 80, ,95% 29,1 France (Fra) 7,6 % 90,0% 81, ,88% 34,5 Sweden (Sue) 67,7 % 91,0% 81, ,63% 37,7 Source: OECD (2012) and WHO (2012) 6 Union density: The last available year is 2011 for all countries except: 2010 for Germany and Finland; 2008 for France. Collective bargaining coverage rate: The last available year is 2010 for all countries except: 2009 for Canada, Germany and United Kingdom; 2008 for France, Netherlands, Norway and Sweden; 2007 for Finland, Australia and New Zealand. Average life expectancy: The last available year is 2010 for all countries except: 2011 for France and Sweden; 2008 for Canada. The data for United States and France are estimated value. For nonestimated value, US average life expectancy was 78.5 years in 2009 and France average life expectancy was 81 years in Hospital beds per 10,000 people: The last available year is 2010 for all countries except: 2011 for New Zealand. Numbers of doctors per 10,000 people: The last available year is 2009 for all countries except: 2010 for New Zealand, United Kingdom and France; 2008 for Canada, Sweden and Netherlands.

16 Table 3: Comparison of collective bargaining coverage rate and poverty data 7 OECD countries Union density (last available year) Collective bargaining coverage rate (last available year) Income distribution (0= perfect equality 1 = Perfect inequality) Gini coefficient (late 2000s) Percentage of the population living with less than 50% of the average adjusted household income (last available year) Rate of poverty among the elderly (65 or over) (last available year) Rate of child poverty (last available year) United States (US) 11,3 % 13,1% 0,378 17,3% 22,2% 21,6% New Zealand (N-Z) 20,8 % 17,0% 0,33 11,0% 23,5% 12,2% Canada (Can) 28,8 % 31,6% 0,324 11,4% 4,9% 14,8% United Kingdom (UK) 25,8 % 32,7% 0,342 11,3% 12,2% 13,2% Australia (Aus) 18,0 % 40,0% 0,336 14,6% 39,2% 14,0% Germany (All) 18,5 % 62,0% 0,295 8,9% 10,3% 8,3% Norway (Nor) 54,6 % 74,0% 0,25 7,8% 8,0% 5,5% Netherlands (P-B) 18,2 % 82,3% 0,294 7,2% 1,7% 9,6% Finland (Fin) 70,0 % 90,0% 0,259 7,9% 13,0% 5,2% France (Fra) 7,6 % 90,0% 0,293 7,2% 5,3% 9,3% Sweden (Sue) 67,7 % 91,0% 0,259 8,4% 9,9% 7,0% Source: OECD (2012) 7 Union density: The last available year is 2011 for all countries except: 2010 for Germany and Finland; 2008 for France. Collective bargaining coverage rate: The last available year is 2010 for all countries except: 2009 for Canada, Germany and United Kingdom; 2008 for France, Netherlands, Norway and Sweden; 2007 for Finland, Australia and New Zealand. Percentage of the population living with less than 50% of the average adjusted household income, rate of poverty among the elderly and rate of child poverty: The last available year is 2008 for all countries except: 2007 for Canada, United Kingdom and Finland.