Caterpillar and Rio Tinto lockouts highlight latest management strategy

Business lobbyists used to express grave concern about the economic impact of strikes. Those concerns were always overstated; time lost in work stoppages has declined by 90 per cent from the 1970s. Nevertheless, companies traditionally complain that work stoppages damage sales, productivity and, of course, profits.

Recently, however, business leaders have warmed to work stoppages. In the current bargaining environment, companies (especially multinational firms) hold the best cards. And executives are increasingly willing to precipitate their own work stoppages -- through management lockouts -- to enforce demands for lower wages and benefits.

Two New Year's Day lockouts highlighted this strategy. U.S.-based Caterpillar Inc. locked out 450 locomotive builders in London, Ont., demanding wage cuts of more than 50 per cent. The same day, Rio Tinto, the U.K.-based mining giant, locked out 755 smelter workers in Alma, Que. That company's demand to outsource all future bargaining-unit openings would ultimately achieve an even larger reduction in wages. In both cases, the future of middle-class incomes in our manufacturing and resource sectors is at stake. And in both cases, executives are willing to lock the doors until workers swallow their pill.

These are just the latest in a growing trend by employers to lock out their own workers. U.S. Steel used a 50-week lockout to dismantle the defined benefit pension plan for workers in Hamilton. Canada Post played the lockout card to precipitate back-to-work legislation from an obliging Harper government. And the City of Toronto is contemplating a lockout of thousands of civic employees to wrest concessions from the union.

Suddenly, business rhetoric about the costs of long work stoppages has been silenced. In the eyes of many employers, work stoppages -- even long ones -- are a small price to pay for driving down labour costs and boosting profit margins.

The popularity of lockouts reflects the dramatic tilting of the labour relations playing field in recent years. With unions on the defensive, management is eager to go for the jugular. Government has stood back or, worse, egged on the lockouts (as Ottawa did with Canada Post). Multinational firms are especially aggressive, given their ability (underwritten by free-trade agreements) to shift production and capital seamlessly between jurisdictions.

This trend is troubling, for macroeconomic as well as ethical reasons. As employers ratchet down compensation, income shifts from consumers (who spend every penny) to corporations (which sit on a growing pile of uninvested cash). That undermines aggregate spending and weakens the recovery. And the more employers succeed in driving down wages, the greater the danger of setting off a cycle of deflation in wages and prices (such as the one that bedevilled Japan for a decade).

So how should politicians respond to employers ready to lock out workers to slash compensation? Pushing the companies to treat Canadian workers fairly would be a start, rather than ratifying their actions with regulatory approvals, tax cuts and silence.

Labour law reforms could also play a role. Manitoba, for example, implemented an innovative provision in 2000 giving its labour board the authority to intervene in long disputes, including imposing arbitration when there's an impasse. It's been rarely invoked but has helped prevent all-out industrial warfare of the sort we're seeing at Caterpillar and Rio Tinto. This would be a good time for other jurisdictions to consider similar legislation.

Jim Stanford is an economist with CAW. This article was first published in the Globe and Mail.

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