Strike replacement legislation: the employment debate

perform the work of striking or locked-out employees during the strike or Ž Ž .. lock-out’’ Section 46 4 . Three provinces have also restricted the use of professional strikebreakers: Ž Ž .Ž . British Columbia Labour Relations Code, Section 3. 3 d ; effective November . Ž Ž . 1973 , Manitoba The Labour Relations Act, Section 14 2 ; effective January . Ž Ž . Ž . 1985 and Ontario The Labour Relations Act 1990 , Section 73 1 ; effective June . 1983 . In Manitoba and Ontario, a professional strikebreaker is defined to be ‘‘a w person who is not involved in a dispute whose primary object in the board’s x opinion , is to interfere with, obstruct, prevent, restrain or disrupt a legal strike.’’ British Columbia’s definition is similar. Fig. 1 summarizes the incidence of the four types of strike replacement laws in Ž . Canada as of December 1994 and underscores the variation in these laws across both provinces and time. If this variation is exogenous, it provides a ‘‘natural experiment’’ for testing the effects of these labor policies. At the same time, however, it is apparent that all of the provinces that banned permanent strike replacements also enacted reinstatement rights provisions. Given this overlap and the conceptual similarity between permanent strike replacement bans and reinstate- ment rights, the empirical analysis will not include a separate variable for permanent strike replacement legislation.

2. Strike replacement legislation: the employment debate

In U.S. and Canadian policy debates over restrictions on employers’ abilities to use strike replacements, employers and employer groups fervently argue that such restrictions would decrease employment. For example, in response to the proposed labor law changes that resulted in the 1993 Ontario strike replacement ban, the Ž . Council of Ontario Construction Associations COCA argued that ‘‘proposed labour relations reforms will mean lost jobs, lost investment in the province and Ž further erosion of Ontario’s international competitiveness’’ Council of Ontario . Construction Associations, 1992a, p. 4 . An Ernst and Young report commissioned by COCA surveyed employers’ beliefs about the likely impact of the proposed Ontario labor law changes and concluded that the proposed legislation would Ž result in the loss of 295,000 jobs in Ontario Council of Ontario Construction . Associations, 1992b, p. 10 . In announcing the November 1995 repeal of the Ontario strike replacement ban, the Ontario Labour Minister stated that ‘‘by restoring balance to our labour laws, we have taken a major step to attract new Ž . investment and create jobs’’ Canada NewsWire, 1995 . In response to a Canadian federal proposal to ban strike replacements, the Business Council of British Ž . Columbia 1995, p. 2 asserted that ‘‘there is little doubt that the contemplated changes to the Canada Labour Code would, over time, have a negative impact on business investment, employment levels, and the relative competitive position of Ž Canadian industry.’’ Similar arguments are made in the United States see U.S. . 3 Congress, 1989, 1991, 1993a, 1995 . The primary thinking that underlies these arguments is a simple bargaining Ž . power model Chamberlain and Kuhn, 1965 . In this framework, restrictions on an employer’s use of strike replacements increase the costs of strikes to employers by making it more difficult to continue production during a work stoppage. At the same time, strike replacement bans decrease the costs of strikes to unions and employees by reducing the risk of job loss. Thus, strike replacement legislation theoretically increases labor’s relative bargaining power which yields collective bargaining settlements with higher labor costs than in provinces without strike Ž . replacement restrictions Fares and Robert, 1996; Cramton et al., 1999 . With ` higher labor costs, employment falls. 4 A second line of reasoning articulated is that restrictions on the use on strike replacements may cause production to shift to other locations during a strike. If production is shifted to a locale without strike replacement restrictions and this shift is relatively permanent, then employment will be reduced in jurisdictions with strike replacement legislation. Finally, to the extent that strike replacement prohibitions are perceived to be linked with increased strike activity, employers and potential employers may feel that the industrial relations climate is unattrac- tive and locate production elsewhere. On the other hand, proponents of strike replacement restrictions claim that these policies can increase employment. In particular, the government of Ontario articulated cooperative labor-management relations and effective employee partici- pation as rationales for the labor law reforms that included the 1993 strike Ž . replacement ban Ontario Ministry of Labour, 1991 . Strike replacement restric- tions are argued to reduce antagonism in the collective bargaining relationship which yields a more productive workplace and employment is not adversely affected. For the permanent replacement ban, it is possible that employment in some circumstances will increase in that once a strike concludes, the firm must Ž re-employ the striking workers but may also wish to retain due to positive search . and hiring costs good employees it uncovered during the strike. This effect is limited to those situations in which temporary replacements are actually utilized and is therefore unlikely to have discernable effects beyond specific examples. Ž . Finally, Budd and Wang forthcoming develop a sequential model in which wage bargaining follows a fixed capital investment decision. Unlike the other Ž models which assume that capital is constant e.g., Fares and Robert, 1996; ` . Ž . Cramton et al., 1999 , in the model of Budd and Wang forthcoming , strike 3 Similar arguments are also articulated in response to other proposed labor and employment law Ž changes, for example minimum wage increases or workplace safety and health regulatory changes e.g., . U.S. Congress, 1993b . 4 This model also implies that strike replacement restrictions increase wages, but this prediction has Ž . been tested elsewhere Budd, 1996; Cramton et al., 1999 so this paper focuses on employment. replacement restrictions potentially reduce capital investment so that the wage effect is ambiguous. Extending this reasoning, strike replacement legislation has an ambiguous predicted effect on employment depending on the legislation’s effect on capital and wages and the relationship between capital, wages and employment. Thus, two concluding points are in order. One, nearly all of the claims about replacement policies and employment pertain to the threat of using replacements, not the actual usage. Two, there is considerable debate over whether strike replacement legislation affects employment. What happens in practice is an empirical question.

3. Provincial aggregate employment data