The Conservative labour platform

A couple of weeks ago the Conservative Party unveiled their platform, which they have tried to portray as being pro-worker. Broadly speaking, their policies are not good for workers or the labour movement. Below are the main policies they have proposed, along with my thoughts. 

[The Conservatives will] ensure the needs of Canadian workers are being addressed by having a seat on the boards of directors. To ensure workers’ needs are heard at the very top, an O’Toole government will require federally regulated employers with over 1,000 employees or $100 million in annual revenue to include worker representation on their boards of directors. 

This is similar to policies that exist throughout Europe, sometimes called “codetermination”. Such policies are in effect in many countries, including Austria, Germany, Norway, and France, and can be an effective way for workers to fight for better working conditions when paired with strong unions. However, the Conservative policy has been watered down to the point of near-meaninglessness. 

Firstly, the scope of the codetermination policy is very limited. The Conservative proposal applies to only federally regulated (not provincially regulated) employers with “over 1,000 employees or $100 million in annual revenue”. Only about 6% of Canadian workers are federally regulated, and many of those workers work for employers that are too small to be covered by the policy. In other countries, codetermination laws apply to workers working for large employers in 100% of employment jurisdictions.

Secondly, the representation offered under the policy is minimal. The Conservative plan specifies that workers will get “a seat” on the boards of directors of applicable employers. A corporate board for a large employer is typically composed of 10 or more people (often 12). Given that decisions under a board government structure typically require a majority of votes, one seat has little influence. To contrast, the codetermination laws in Germany require that up to half of the board of large firms be composed of worker representatives. In other countries the requirement is usually one-third.

Lastly, the Conservatives do not say how their worker representatives would be selected. For codetermination to function at all, the worker representatives have to advocate the interests of the workers. If representatives are simply picked by employers, or if there are poorly run elections, the representatives will not provide effective representation. In other countries that have implemented codetermination, representatives typically come from within labour unions, which ensures that the representatives are well-informed and capable of effective advocacy. 

We will launch a Super EI that temporarily provides more generous benefits (75% of salary instead of 55%) when a province goes into recession (a 0.5% increase in the unemployment rate, as defined by the “Sahm Rule”). EI will return to normal levels once the recession is over, as evidenced by three months of job gains.

Canada’s typical income replacement rate of 55% does not provide enough income to cover basic expenses while a person is conducting a job search, so increasing it during periods of higher unemployment is helpful, if unnecessarily limited. But this policy is a lot less appealing when you think about the implementation criteria listed by the Conservatives. 

Using the “Sahm Rule” (which basically says that moderate short-term increases in unemployment indicate the start of a recession) to determine the start of a recession is reasonable. However, the metric for determining the end of a recession (and therefore the end of “Super EI”) is farcical.

Ontario Unemployment Rate, 2020

For instance, there were three months of continuous job growth in Ontario from June to August 2020, despite the fact that unemployment remained above 10% during that period. As the policy is currently described, the benefit would have started in April and ended in September, even though the economy was clearly still in recession.

As unemployment has continued steadily decreasing since then, workers would have gotten just a few months of “Super EI” during the entire pandemic period as of this writing. This is a common trend in recessions, where short-term job growth often occurs even though the unemployment rate remains high relative to the pre-recession period. Cutting off benefits when unemployment is still high and the economy is still in recession is needless, cruel, and bad policy.

The other issue is that limiting a benefit increase to recessions doesn’t really make sense given Canada’s very weak EI system at present. We know that countries with much more generous unemployment systems than ours have similar rates of employment, and we know that labour market churn is high in Canada even during periods of low unemployment. Why not have “Super EI” permanently? 

We will require gig economy companies to make contributions equivalent to CPP and EI premiums into a new, portable Employee Savings Account every time they pay their workers. The money will grow tax-free and can be withdrawn by the worker when needed.  

There are a few issues with this proposal. For starters, accounts-based unemployment systems are worse than socialized unemployment systems. It is hard for an individual to plan and consume savings appropriately as future work and retirement can be unpredictable. Some workers have structurally lower work levels and may need additional income replacement above the levels provided by the accounts. Workers also often find managing the accounts to be complicated and stressful, and generally they don’t do a good job of investing and withdrawing money effectively. 

It’s also not clear how the withdrawals will be controlled. This is meant to replace EI and CPP for gig workers, so savings should be forced to the extent possible and withdrawals should only be possible during periods of lower-than-usual income. Otherwise, many workers will use the funds inappropriately and the account will not serve as a form of social insurance.

Ultimately, it would be much better to regulate gig workers as employees and allow them access to the regular social insurance system. The Conservative proposal is possibly better than the situation at present, but private savings accounts are a poor replacement for collective social insurance. 

Canada’s Conservatives will increase employee ownership of Canadian companies by establishing Employee Ownership Trusts, which provide a tax advantage for company owners to sell to their employees. This will take the form of a reduction in capital gains tax when the owner sells to a trust owned by the employees, enabling ownership to transfer to the people who have partnered in building the business.

Given that stock compensation is usually offered instead of salary or other benefits, a tax break to owners for selling stock to employees is just a way for wealthy people to avoid paying the tax they owe. This proposal would effectively provide a loophole for rich people to skip out on their tax obligations by shifting compensation of people they employ towards in-kind compensation in stock rather than through wages. 

This is a policy that benefits wealthy people, not workers.

I generally take a dim view of these proposals. The reality is that the Conservatives are a right-wing business party that is actively opposed to labour. Their labour platform mostly consists of weak and ineffective policy, and that is probably on purpose.