Strikes Have Economics Benefits, Not Just Costs

In the tumultuous years since the COVID pandemic and the subsequent outbreak of inflation, Canada has experienced a large number of work stoppages. Canada experienced over 800 strikes and lockouts in 2023, resulting in 6.6 million days of work time lost. That’s much higher than in most recent years, but still lower than peak levels of industrial disputes experienced in the 1970s and 1980s. The year-end numbers for 2024 (which won’t be published for some months) will show a downturn in days lost (which will likely total about 2 million, including the recent postal strike).

Business lobbyists and commentators complain loudly about the economic costs and disruptions associated with these work stoppages, regularly calling on government to order workers back to their jobs (even violating labour rights guaranteed under the Charter of Rights). It is important to keep in mind, however, that occasional disputes (which in 2024 will have totaled just 0.05% of all person-days worked in Canada) are a healthy feature of a labour relations system that equips workers with enough bargaining power to win fair wages, benefits, and workplace protections. In this light, strikes have economic benefits, as well as costs.

Centre for Future Work director Jim Stanford explored these issues in a recent commentary, originally published in the Toronto Star:

The Cost of NOT Striking

By Jim Stanford

As a labour economist, I’ve been asked repeatedly by reporters about the economic costs of recent labour disruptions: ports, railways, airlines, and most recently postal workers (whose five-week strike was forcibly ended last week).

Reporters press me about the dire consequences for Canada’s economy. How many billions will be lost? Isn’t this the worst possible time for a work stoppage?

I point out that in most cases, major economic losses from work stoppages (whether strikes or employer lockouts) never come to pass. Yes, there are delays and inconveniences. Indeed, that’s ultimately the point of a work stoppage: to impose an economic cost on the other side, in hopes of pressuring them to compromise.

But once workers are back on the job, backlogs get cleared, and production and sales resume. It’s rare that the impacts of a work stoppage can even be detected in national economic data.

Curiously, I have never been asked about the economic costs of not going on strike – that is, the costs of an absence of labour disruptions. But I should be. Because apparent labour ‘peace,’ in its own right, does not automatically signify economic well-being. Instead, it can indicate deep problems in how the economy operates, and how its fruits are distributed.

Without the bargaining power that comes with having a union, including a viable choice to stop working, employers always have the upper hand in wage determination. Wages and conditions will trend toward legal minimums, profits will be higher, and inequality greater.

The wages and benefits won through union power, backed up when needed by strikes, contribute to a more balanced and inclusive economy. And most of the victories won on picket lines don’t only benefit those who walked off the job. Rather, they can spark important progress in all workplaces.

A timely example is a 42-day strike by postal workers in 1981, which won the first paid maternity leave provision in Canada. This right (broadened to both parents) is now enjoyed by most workers in Canada through the Employment Insurance system. Without that precedent-setting strike, it would have taken many more years to achieve parental leave – imposing major costs on families, and the economy.

A telling comparison can be made with Australia (where I have also worked), which has among the strictest limits on strikes of any industrial country. Among other barriers, an unelected commission can order an end to almost any strike deemed too damaging, with no back-to-work legislation or ministerial intervention needed.

Therefore, strikes are rare: relative to population, Canada lost 14 times more days to work stoppages since COVID than Australia. However, Canadian wages have rebounded much more strongly from recent inflation. Real (inflation-adjusted) hourly wages in Canada are now 5% higher than in 2019 – whereas in Australia, they are 5% lower. With less ability to defend wages against post-pandemic inflation, Australian workers have experienced a historic reduction in living standards.

That 10% difference in real wages translates into an extra $135 billion per year in workers’ wallets in Canada. That’s $135 billion more consumer spending power – and right now the economy needs every dollar of it.

To be fair, Australia has other policies (like strong minimum wages) to support wages, even though strikes are rare. But Canada’s system – replete with the occasional frustration of work stoppages – has more successfully protected workers’ purchasing power. Other international comparisons also confirm that when workers exercise real bargaining power, including strikes when needed, wages are higher, and income is distributed more evenly.

It may seem like Canadian workers have been strike-happy lately, as they fought to protect living standards against inflation. But in historical perspective, work stoppages are still relatively uncommon.

Even with the postal strike, work stoppages this year (both strikes and lockouts) will total about 2 million lost days of work: about 0.05% of all days worked. Back in 1976, a record 11 million days were lost – in a labour market half as large. Relative to population, strike frequency is down 90% since then.

Recent strikes have helped rebuild the purchasing power of Canadian workers after the tribulations of the pandemic. In so doing, they served an important economic function: improving incomes, spending, growth, and fairness. And without those strikes, we’d all pay a big cost.