Canada’s construction industry has two growing problems.
The first is a shortage of tens of thousands of workers. As equally problematic, are government policies that further limit the pool of available workers leading to higher project costs, delays and missed opportunities.
Eager to gain the support and votes of skilled trades workers, governments at every level are aligning themselves with select construction unions.
The trouble is, when governments lean too far into these relationships and become compromised, the end result can be “regulatory capture” or in simple terms, policy decisions that put the public interest second.
It’s a scenario playing out with increasing frequency in construction, as public policies governing billions of dollars in public construction work benefit certain construction unions at the expense of the public, many construction contractors and thousands of their workers.
One of the most blatant examples of regulatory capture in the construction sector is in B.C., where in 2018 the NDP government devised new rules without broad industry consultation, that allow only Building Trades Union (BTU) members to build major public projects. Contractors cannot bid on these projects, unless they employ BTU workers, even though these unions represent less than 20 per cent of the province’s construction workforce.
Although B.C.’s restrictive labour deal was promoted as a way of boosting opportunities for underrepresented groups, we’ve seen the opposite. A Cowichan Tribes contractor and his workers were prevented from working on the new $1.4 billion Cowichan District Hospital on their own lands because they do not belong the province’s favoured minority unions. This embarrassment forced the government to make a one-off exception, finally allowing these workers to help build the hospital. But the damage was already done and will likely be repeated.
A similar exclusive labour agreement was struck more recently between select unions and The Ottawa Hospital to build its new $2.8 billion civic campus. At the height of a labour shortage, thousands of Ottawa-area construction workers and contractors are prevented from bidding on and building this taxpayer-funded project, because the workers have chosen not to affiliate with certain unions.
The Montreal Economic Institute (MEI) estimates this anti-competitive labour deal will escalate project costs by anywhere from $168 million to $525 million by 2028.
The worst of it, concludes the MEI, is that the public is stuck with the tab.
“It is unacceptable for a public entity to make taxpayers pay more by granting exclusivity to only a certain group of affiliated workers,” it states.
This serves as another notable example of the disturbing trend of regulatory capture.
For years, the City of Toronto has allowed select unions to monopolize the city’s public construction work. Toronto is the only city in Ontario that prevents all qualified contractors from bidding on taxpayer-funded projects. Unless their workers belong to certain unions, contractors can’t bid, no matter how experienced they are.
Toronto chooses to stick with this dated, costly and “captured” labour arrangement, even though it clearly is not in the public interest.
A recent report by the Cardus think-tank found Toronto council could save local taxpayers $347 million each year on public construction work by supporting a competitive bidding process. There’s no question that the more bids there are, the greater the competition, innovation and productivity.
Recently the federal government announced its intention to award tax incentives for clean energy projects. The hitch is that workers on these projects are to be paid “prevailing wages and benefits.”
The government has acknowledged it has equated these rates with those set exclusively by the BTU. This practice will cause massive wage inflation across the construction sector and will jeopardize investment.
While it is appropriate to make sure skilled tradespeople are well paid, investment thrives on competition, not artificially inflated wages and benefits.
Giving equal weight to all relevant construction stakeholders is the way to make good public policy decisions. Otherwise, governments do the public a disservice by designing construction labour policies that are a bonanza for select unions. Awarding public construction work based on union affiliation is even more egregious given that roughly 80 per cent of Canada’s construction workers are either non-union or choose to affiliate with unions other than the Building Trades.
“Regulatory capture” demonstrably sets back Canada’s construction industry. The choice between “capture” versus “competition” is clear, and yet our governments continue to choose the former over the latter.
Maximizing worker choice, encouraging contractors to innovate and ensuring good value for taxpayers and investors is what healthy competition is all about.
It’s the only way all Canadians benefit when large capital and public infrastructure projects are rolled out.
Paul de Jong is president and CEO of the Progressive Contractors Association of Canada. Send Industry Perspectives Op-Ed comments and column ideas to firstname.lastname@example.org.