Canadian Labour Relations Found Wanting
July 1, 1990 -
Those who cling to the idea that labour relations is a power struggle between two adversaries are living in a dream world. So says Tim Armstrong, Ontario's former Deputy Minister of Labour and now that province's Agent-General for the Asia/Pacific Region. (See Tim Armstrong, "Industrial Relations Japanese-Style," Challenges, Winter 1990, pp. 46-50.)
In this hardhitting article Armstrong compares Japanese and Canadian approaches to labour relations and concludes that our ways are self-destructive and not suited to the modern, fast-changing world.
He begins by outlining the changes in Japan that have contributed to the economic success story of that country. Japan's post-World War II labour relations did not originally display what is thought to be a typically Japanese appreciation for consensus and collaboration. On the contrary, until the 1970s, labour relations in that country were embroiled in conflict and erupted in a number of major strikes. The Japanese reached a critical point in 1974-75 when a very large (27 per cent) wage increase coincided with a stalled economy. The threat of runaway inflation (which had reached 200 per cent in 1946) spurred the Japanese into finding a better way. The result was an unwritten social contract among labour, management and government, aimed at achieving non-inflationary growth, enhanced productivity, and distributive fairness. Japanese unions agreed to keep their wage demands within the limits of real economic growth. Employers agreed to maintain employment levels and, where employment adjustments were needed, to involve unions in devising a variety of adjustment programs. The government similarly committed itself to employment and social-security enhancing policies.
While Japanese industrial relations are not problem-free, these arrangements have led to a large measure of cooperation and harmony with remarkable results. The three major participants collaborate on all important aspects of labour relations. Wage settlements and all other ingredients of collective bargaining, including the very important issues of unemployment compensation and work retraining and relocation, are now agreed to via extensive consultations. This has proved to be especially important in view of Japan's large-scale industrial restructuration.
How does the Japanese consensual method compare with our methods in Canada? Armstrong writes:
Our preoccupation has been with developing and reforming the legal framework for collective bargaining. North American bargaining is a highly adversarial method of determining enterprise wage and working conditions. While its outcome is certainly conditioned by the external economic environment, it doesn't consciously attempt to exert an influence on macro-economic policies or performance. Unions and employers in Canada have been content to view their disputes as matters of private contract. While arguments are routinely made about the broader implications of settlements on inflation rates, on comparative unit labour costs, on global competitiveness, and so on, these arguments rarely have a decisive influence on the outcome of bargaining.
Nor in Canada is there any explicit or implicit nexus between the behavior of the bargaining parties and what government is or is not prepared to do as a quid pro quo for certain bargaining behaviour.
While European countries have also developed sophisticated ways of coordinating public policy and collective bargaining, Canada has clung to its old adversarial ways. If a rough balance has emerged between justice and productive efficiency, "it is as a result of muddling through, rather than conscious design," writes Armstrong. Attempts by Canadian governments to bring public policy to bear on collective bargaining, by means of anti-inflation programs, were largely a failure. The fact is, Armstrong says, that North American literature on industrial relations hardly bothers with the theme of a social compact. There is much talk about declining union membership, the increasing caseload of tribunals which deal with unfair labour practices, and union resistance to employee involvement, employee stock ownership and other forms of employee participation. All of this raises the question in Armstrong's mind whether Canada is more class conscious (class-conflict oriented) than Japan. This would be ironic, because historically Japan has been a hierarchically organized society whereas we pride ourselves on being classless and egalitarian.
The Need for Rethinking
Armstrong draws five major conclusions, summarized as follows:
1. An adversarial industrial relations system is anachronistic; it tends to preoccupy management and labour with the status quo. Consequently, the more important matters of quality of working life and the true nature and extent of the challenges from competitors are neglected.
2. Both unions and employers are equally at fault in clinging to the idea that collective bargaining is a power struggle.
3. Canada's fractured federal system, and our attachment to decentralized labour relations, a rugged macho style of industrial relations, and a hands-off approach of government all stand in the way of a social compact.
4. The Japanese social compact system is not a highly calibrated series of specific trade-offs, but it is more a state of mind, a disposition to compromise within a framework of general principles and objectives. Compromise and adjustments are made via a network of relationships, formal and informal. The emphasis is on communication, mutual trust, and a sense of national purpose.
5. Canada's adversarial collective bargaining is aggravated by the Canadian federal system which perpetuates eleven different labour law systems. The time has come to reassess the benefits and burdens of existing legislative divisions in labour matters in light of contemporary problems of global competitiveness.
Do Canadians have the inclination and capacity to move toward a more coordinated consensual approach? We will have to decide for ourselves, but if we are not open-minded, flexible and adaptive, Armstrong predicts that "our...ensconced institutions will lose out to the younger, more flexible, less sclerotic enterprises of Japan and our other Asian competitors."
It is easy to criticize Armstrong's analysis. For one thing, his comparison of the Canadian and Japanese industrial relations systems is preoccupied with a purely pragmatic adjustment to changing circumstances. A choice should not be made solely on the basis of the different outcomes of these two approaches. A prior question should be what is the right and just thing to do?
There is nevertheless plenty of food for constructive thought in his evaluation. It cannot be stressed enough, as Armstrong does, that class conflict rhetoric and practice seriously undermine wholesome economic and social relations. Recognizing this is urgent in view of the massive and often wrenching changes imposed on a modern economy. Anyone who believes that Canada can close itself off from the larger global reality and that we can continue with our old, destructive ways is living in a fool's paradise. That's why Armstrong's thoughtful article deserves careful consideration by everyone responsible for the direction of industrial relations in this country.