Monday, March 12, 2012

Current Essential Worker Approach Is Regulation. A Better Way?

The Conservative Party of Canada espouses the importance of smaller government, fiscal responsibility, and keeping government out of the lives of Canadians. When it comes to their approach for solving labour conflict, in portions of the economy critical for national stability, they are doing anything but.

Mediating labour disputes costs money.  The current method, using tactics such as binding arbitration, has significant public cost associated with it. If there is a way to force parties to work it out themselves, it must be used. We should never be spending money on things people or organizations are quite capable of doing if they have the right incentive to do so.

Binding arbitration forces parties, on both sides a conflict, into a situation dictated by government. This is regulation, plain and simple. The assumption is made that the sides are incapable of settlement. This treats the parties like children and does nothing to foster ability to work together.  What's worse, there is significant risk of government appointed mediation having bias reflecting the government's own ideology rather than something more agreeable to both parties. If government truly believes in staying out of the lives of Canadians, they must use an approach in which the conflicted parties solve it for themselves.

So what is essential service all about? It is meant to maintain the country's well being, as a whole. There are goods and services, whether publicly or privately provided, that have huge national cost if they can't operate. Essential service designations are absolutely necessary.

So how can it be made to work? Well, Christian social conservatives will love this one.  It come right out of the Old Testament.  Remember the story of King Solomon and the women fighting over a baby? If we assign unbearable cost to all parties in a conflict, they will have an incentive to agree. All we have to do is make the price of agreeing far greater than the cost of disagreeing. In this way, the parties suffer the cost of failing to agree, not the country.

In the case of the private sector, the employer would pay a significant penalty as a percentage of payroll costs. Employees would pay a significant penalty as a percentage of pay. These penalties would be kept in trust until such a time as an agreement is reached and then the penalties would be returned to the respective parties. In the mean time, it would be work as usual.

In the case of public service disputes, the employer penalty would have to work differently. Holding your own money in trust, for a government, is no cost at all. A government could engage in a war of attrition quite easily. Some method would need to be worked out that would be a significant cost to government, possibly even costing it politically. Perhaps, the government's penalty would be redirected  into currently operating government programs chosen by the opposition. (update) A less political approach would be to distribute the government penalty to provinces, equitably divided according to transfer payment amounts or federal tax base by province, while exempting the distribution from transfer payment calculation.

This isn't a finished framework, however, I hope these ideas can be expanded on, and used, to give us better value from, and less meddling by government.

The wisdom of Solomon!

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