Upgrading Ontario’s fair wage policy: how to build better construction jobs

May 13, 2014

 The provincial election will generate a lot of conversation about jobs, but any jobs agenda is incomplete without a firm commitment to modernize Ontario’s fair wage policy.

 Fair wage policies establish a floor for employee compensation when government contracts are awarded on a low-bid basis. The goal is to prevent a downward spiral in wages and benefits.

 They are common in the construction industry, where the unique characteristics of construction employment make the industry particularly vulnerable to destructive forms of competition. By taking wages out of the equation, fair wage policies promote positive competition based on efficiencies and quality project management, rather than just cheap labour.

 Some 460,000 people ­– 6.5% of Ontario’s employed labour force ­– work in the construction industry.

 Last fall MPPs from the three main parties acknowledged the importance of ensuring fair competition in public construction tendering during the heated debates surrounding the ill-fated Fairness and Competitiveness in Ontario’s Construction Industry Act, 2013, better known as the EllisDon Bill.

 The EllisDon Bill had its share of problems but it did recognize the importance of ensuring fair competition on public construction tendering, particularly with the rise of large, non-union multi-nationals bidding on public construction projects in Ontario.

 Almost 20 years have passed since the 1995 enactment of Ontario’s fair wage policy. The act has only seen one change, when a newly elected Harris government repealed the requirements for regular rate updates. As a result, Ontario’s fair wage schedules are severely outdated. The act is also missing the inclusion of tenders via public-private partnerships.

 The good news is that fair wage policies are in place in municipalities across Ontario.

 Now is the time for Ontario to modernize its policy to reflect today’s labour market reality and to prevent cheap labour strategies.

 In addition to promoting positive competition, a modern fair wage policy would support other important objectives, such as improving apprenticeship outcomes and enhancing worker safety.  

 How is this the case?

 Fair wage policies support skills training. One American study on the impact of fair wage policy repeal found that when controlling for the economic cycle, unemployment rates and regional differences in the availability of training, construction training fell by 40 per cent in the nine states which repealed their policies. Another study comparing Missouri with four other states in the Great Plains region found that apprenticeships in the four states without fair wage policies declined by 51 per cent during the study period, whereas they increased by 26.9 per cent in Missouri.

 Fair wage policies improve health and safety. A study of injury rates for plumbers and pipe fitters found that occupational injuries rose by 15 per cent in states whose fair wage policies had been repealed. Another study examined injury rates for the entire construction workforce and found that the presence of a fair wage policy was associated with an 8.25% decline in total injury rates.

 While opponents of fair wage policies often argue they are too expensive, most recent studies conclude that they do not increase overall construction costs. This is likely due to improvements in productivity and compression of profit margins.

Modernizing Ontario’s fair wage policy would create the level playing field and positive competition between contractors we need to ensure our public assets are built in keeping with the values we share, including decent labour standards.

 A modernized fair wage policy is, quite simply, smart policy and an antidote to cheap labour strategies. It’s time for an upgrade.

 Josh Mandryk is the author of CCPA Ontario’s new report, The Case for a Stronger Fair Wage Policy in Ontario.