FWHLA letter to Minister Raitt

Honourable Lisa Raitt, P.C., M.P.
House of Commons
Ottawa, Ontario
K1A 0A6

November 2, 2011

Dear Minister,

Merit Canada is writing you on behalf of its over 3,500 member companies who directly employ over 60,000 Canadians calling on the government to repeal the Fair Wages and Hours of Labour Act.   Merit Canada is the national voice of Canada’s eight provincial open shop construction associations. Together we represent the companies and workers who build industrial, commercial and institutional, and residential construction projects from coast to coast.

Merit Canada members support and promote wages and working conditions being determined directly between employers and employees or through collective bargaining processes, as freely chosen by the parties, within the boundaries of the law.

We believe that the most effective way for fostering economic growth and reducing unemployment in Canada is to reduce unnecessary regulatory burdens on enterprises and workers.   For this reason, we request that the Canadian Government repeal the Fair Wages and Hours of Labour Act, which creates a national system of regulated minimum wages for the construction industry.

We believe repealing this legislation would also align with the goals of the Red Tape Reduction Commission as this is both an effective and lasting solution to an administrative burden to small- and medium-sized businesses in the construction industry.

Rates paid under regulated minimum wages for the construction industry often exceed the rates that would be payable in the absence of such policies. Consequently, tax dollars are unnecessarily being redirected to construction workers who are already well-paid in comparison to other industries. Accordingly, we are at a loss in understanding why the federal government chooses to single out the construction industry and impose regulated minimum wage rates across an industry which consistently pays workers  25% more than the Canadian Industrial average?   Why for example is it necessary for the federal government to regulate minimum wages for elevator constructors in Metro Toronto at $43.53 per hour?

Data from the US Department of Labor suggests that workers working in a system of regulated minimum wages in the construction industry are about 4% less productive than their counterparts working under competitive wages.

To illustrate the impact of this in the Canadian context, consider that under the Provincial-Territorial Base Fund alone, the Canadian Government is investing $175 million per jurisdiction– for a total of $2.275 Billion. Most of this money is for construction projects, up to 40% of which would normally be necessary for labour.   Assuming that deregulating minimum wages for the construction industry would increase productivity by only 1%, savings to Canadian taxpayers could be as high as $9.1 million.   An increase in productivity of 4% could result in savings of up to $36.4 million.

Even worse from the point of view of governments is the pernicious influence of artificially high wages on employment: by increasing the marginal cost of labour, employers are discouraged from hiring additional workers, even during times of peak demand.   While this is beneficial to those workers who are already employed, particularly the highly skilled with significant on-the-job experience, it reduces opportunities for job seekers, particularly young people with little experience.   At a time when young Canadians are struggling to find a foothold in well-paid industries like construction, such barriers to entry can only be detrimental to Canada’s long-term prosperity.

As a matter of constitutional principle, Federal laws and regulations related to labour should be limited to federally regulated industries.   All of Canada’s provinces and territories already have laws and regulations on employment standards, working conditions, labour relations, wages, and hours of labour of not federally regulated industries.   Since the administrative costs for the Canadian tax payer at the federal level is estimated at $16,000 per complaint, the Act creates both an unnecessary level of governance and a significant cost for the Canadian tax payer at the Federal level.   Repealing the Act could therefore result in significant savings for Canadian taxpayers while simultaneously creating more jobs in the construction industry.

On behalf of Merit Canada, I would be happy to talk to you in more detail about this important issue at your convenience.  I can be reached at (613) 601-2350 or by email at terrance.oakey@meritcanada.ca.

Yours sincerely,

Terrance Oakey
Merit Canada