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The Vulnerable Worker

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Is Work Working? Work Laws that Do a Better Job

PART II — SOCIETY, LAW AND WORK

Chapter Five— The Regulatory Framework

The four case studies illustrate a number of ways in which the current regulatory framework fails to provide adequate protection and support to vulnerable workers:

(1) It has not kept pace with changes in the ways employers have structured the work relationship and with the changing reality of people's lives;

(2) Existing laws and regulations are not enforced to the extent necessary to provide workers with adequate protections;

(3) Supports provided to workers (especially the low skilled) are inadequate to make the transition out of non-standard or low-paid work arrangements;

(4) Existing laws and policies fail to accommodate unpaid work obligations adequately.

Why has this happened? Why is the law failing to provide adequate support and protection to vulnerable workers? This chapter traces developments in the regulatory framework that have resulted in an overall trend toward the deregulation of the labour market. This trend may be a significant factor in weakening the protection and support for vulnerable workers.

From Active Regulation to Passive Deregulation

To understand why certain categories of workers lack adequate legal protections, we need to put the regulation of work in historical context. From the end of World War II until the mid-1970s, the scope of labour-market regulation expanded with economic growth.⁵⁰ The growth of unions and collective bargaining as well as the growth of well-paying public sector work all helped increase the incomes and economic security of millions of workers. Legislation extended the gains made by unions to unrepresented workers. In some respects, the laws and policies of this period were progressive and egalitarian, improving the economic security and equality of some groups of workers — primarily those engaged in standard employment.

Legislation was passed requiring the payment of overtime and a minimum wage, establishing no-fault compensation for work accidents and regulating workplace health and safety conditions, among numerous other measures designed to protect workers.

However, the economic and political climate changed in the mid-1970s. The scale of business profits, which had financed the demands of workers and communities in the post-war period, diminished. Increased competition from foreign markets with lower costs, and the demands of a more confident and empowered workforce for better treatment, prompted businesses to avoid the costs associated with the highly regulated standard employment contract by creating non-standard arrangements that would be less costly. Employers increasingly adopted strategies to enhance their flexibility with respect to the management of labour costs. Thus, there was an increase in contracting out jobs and reliance on non-standard forms of work to shrink the core staff.

The result was a general move toward the deregulation of the labour market. Many were of the view that the post-war regulatory structure had become an impediment to economic growth and prosperity in that it placed excessive demands on employers to compensate workers beyond competitive rates. The concern was (and still is, to some extent) that if the costs of protecting and compensating workers were too high, employers would not be able to resist the pressure to relocate to countries where labour costs are lower. The flight of capital, or the threat of the flight of capital, placed pressure on the state to “deregulate” the labour market.

Some have suggested that the call for deregulation to enhance competitiveness takes both active and passive forms.⁵¹ An example of overt or active deregulation in Canada might be the changes to employment standards legislation introduced in Ontario in 2000. The changes increase the number of hours employees are permitted to work per week and allow employers to “average” overtime hours so employee entitlement to overtime compensation is reduced.

Although overt attempts to diminish labour market protections attract more attention, passive labour market deregulation may have more of an impact on workers. Passive deregulation occurs when changes to labour and employment laws are not made to reflect changes in the economy and in the nature and organization of work. An example would be failing to raise the minimum wage as the cost of living increases, with the result that its real value is eroded. Another example would be failing to change work laws to reflect the growing number of workers in non-standard employment arrangements who lack protections. Finally, deregulation may also occur through the lack of adequate enforcement. This is done by restricting the resources provided for enforcing existing labour and employment legislation and regulations.

Thus, socio-economic changes over the past three or four decades may have resulted in a shift in the attitudes and values regarding the appropriate role of labour and employment regulation. The traditional role involved altering the balance of power between workers and employers, redistributing risk and resources among workers, and establishing the basic terms and conditions of work. Labour and employment laws were a way to ensure the employment contract was fair and non-exploitative. As concern over the profitability and competitiveness of business in the global economy took a more dominant role in shaping labour and employment policy and regulation, the functions of regulation were questioned and even displaced. As a result, the protective and supportive role of labour and employment regulation shifted to facilitating the efficient use of human capital. The individuals in our four case studies represent groups of workers who may well be suffering the consequences of this shift in attitude.

This shift regarding the appropriate role of labour and employment regulation is structured around certain norms and assumptions which merit careful examination.

The Efficiency Costs of Protecting Workers

One key norm supporting the move toward deregulation is that state intervention, in the form of onerous and costly regulatory requirements to promote worker well-being, diminishes competitiveness and efficiency. It is suggested that this leads to job losses and lower standards of living for all Canadians.

In examining assumptions supporting this norm, one first needs to analyze the claims that so-called equity measures — regulations designed to promote fairness and worker well-being — are costly and detract from Canada's competitiveness. According to labour economists, like Gunderson and Riddell, little empirical evidence exists on the extent to which labour and employment regulations increase labour costs and the extent to which these costs are offset, at least in part, by the benefits gained in terms of increased productivity and decreased costs in the form of sick leave, etc.⁵² There is considerable support for the notion that enhanced labour protections may increase productivity and competitiveness, because healthy, secure workers are generally absent less, are more motivated, make fewer mistakes, have fewer accidents and perform better. Furthermore, a number of studies support the conclusion that investment is attracted to, not repelled by, adherence to core labour standards. More research is needed to determine the extent to which the costs associated with equity measures may be offset by productivity gains to determine the validity of this claim.

However, even if we accept the notion that protecting workers is costly, we need to also examine the assertion that the cost of providing protection to all vulnerable workers is too high for employers and the state to bear. If the costs are too high for employers and the state, what makes us think the vulnerable workers themselves are any more capable of bearing these costs? Although they may be transformed into other kinds of costs, the costs of participating in the labour market do not disappear. For example, maintaining wage levels at a rate below the poverty line may well assist employers to keep labour costs to a minimum, but what are the costs to individual workers, their children and society? To what extent do these costs count as part of the equation when the decision is made not to raise the minimum wage, for example? There is empirical evidence of the link between unemployment and poverty, stress, health deterioration, child abuse, spousal abuse, suicide, accidents and increased demands on social services. The costs associated with these social problems should be taken into account when considering the efficiency costs of regulating the labour market.

The traditional view is that state intervention is necessary to compel employers to take measures that promote fairness in the workplace and worker well-being. In an unregulated free market, employers will not necessarily be motivated to ensure that all workers have at least minimum standards of work.

The notion that has gained ascendancy of late is that the market should be given more latitude to set the basic terms and conditions of work for some workers. It is contended that market forces often do promote worker protection and well-being. To attract and maintain high-quality labour, it is necessary to offer workplaces that are safe, healthy and fair. Hence, certain groups, such as self-employed workers, are not covered by legislation governing the basic terms and conditions of work. It is assumed that market forces will set the appropriate terms and conditions of work for these workers. Is this always the case?

One argument in favour of not increasing the minimum wage is that by elevating the wage above the market rate, we inhibit an employer's ability to compete in the international market and thereby endanger the jobs of the very workers we seek to protect. It is argued that raising minimum wages could have a negative effect on competitiveness.

Question:

Employee Associations and Unions

Related to the notion that less restraint should be placed on the market to set the terms and conditions of work is the idea that third-party intermediaries, such as unions and employee associations, create additional deficiencies that ultimately harm the economy and workers. Some feel unions and enhanced employment protections are not needed as employers and individual employees can work out, in a non-confrontational way, a mutually advantageous work arrangement without third-party intervention. However, this model of industrial peace may be based on certain assumptions about the balance of power between employers and workers and about the compatibility of interests, which may not correspond with reality in every case.

Alice de Wolff, author of a study by the Contingent Workers' Project, stated:

“Much is made about non-standard workers, particularly women, having more flexible time to be with their families. This study suggests that where employment flexibility actually assists an employee with their family responsibilities, it is likely to be accompanied by fairly high earnings. The study participants were dealing with a very different reality — unpredictability and a constant process of re-scheduling rather than flexibility. Forty-three percent didn't know their schedules in advance, 45% worked split shifts; and temporary workers reported being constantly on cal. This has a profound impact on workers' abilities to maintain healthy friendships, intimate and familiar relationships, and stable child or elder care arrangements. They find it difficult to support their children at school, get involved in any community involvement, or to participate in a regular course of study. ” 53

The respondents in the study appreciated some aspects of contingent work: they had some form of work, were able to keep their skills updated, and did not have to get completely involved in workplace dynamics. However, many did not experience flexibility in any real sense. 54

As we saw in the case studies, some vulnerable workers lack the power and experience to assert their needs and interests in the presence of a powerful employer. If the employer is unwilling to accommodate them on important issues, such as wages and workplace safety, vulnerable workers may have no recourse. The enforcement and compliance mechanisms for labour and employment standards may be inadequate to provide effective protection for these workers.

Question:

· What are the appropriate roles for unions and employee associations in protecting worker interests in the new economy?

Labour Market Flexibility

Although countries have implemented it differently, the “flexibilization” of the workforce has arguably become the dominant trend in labour market regulation. In the global economy, employers require increased room to manoeuvre in managing their workforce. They need to be able to hire and fire employees as needed, to limit the duration of their contracts to suit their production schedules, and to keep labour costs as low as possible by not paying into employee insurance programs and providing benefits. In addition, employers need employees with increased skill levels, who are willing to take responsibility and initiative, and will co-operate with the employer as partners in production. This flexibilization of the workforce means economic security for employees is expected to come from the possession, refinement and successful marketing of skills by the individual worker in a constantly shifting labour market. Long-term attachment to particular firms or employers is no longer a reality.

Flexible work arrangements are also said to be of great benefit to workers, allowing them to balance work and child and elder care, training and other life commitments. The assumption is that workers voluntarily choose flexibility and autonomy over the security of employment and that they do, in fact, experience real flexibility and autonomy. As the case studies point out, this is not always the case.

While workers who are well-educated and highly skilled can take advantage of the deregulation of the labour market and increased flexibility of work arrangements, evidence suggests disadvantaged workers are not faring as well in the competitive labour market. They are not well positioned to negotiate contracts on an individual basis. This intensifies the differences in working conditions between the relatively powerful elite worker and the disadvantaged worker.

Although part-time work may provide flexibility for some workers with an alternate source of income, evidence suggests a large number of part-time workers are not seeking flexibility. Rather, they take whatever work they can find and hope to piece together a full-time work week based on multiple jobs. In other words, they are involuntary part-time workers who would like full-time work but cannot find it.

For some self-employed workers, the push toward autonomy and flexibility has been a double-edged sword. There is evidence that many workers initially welcome the idea of increased independence only to find that the financial pressure of saving for retirement, paying for dental and vision care, and other health-related care for one's family, as well as living with the insecurity of contract work seriously undermines the value of the flexibility and autonomy. Well-paid workers with other family and community support and resources may be able to benefit from these arrangements; others may need additional support.

Fiscal Austerity and Reduction in the Size of Government

The pressure from business to deregulate and reduce labour costs to enhance competitiveness parallels a movement in countries like Canada to reduce the size of the public service and public spending. Concerns about the deficit, tax rates, and government inefficiency and waste prompted all levels of government to reduce budgets drastically, downsize the public service and reduce services. Included in these reductions are the budgets to ensure compliance and enforcement of labour and employment-related laws and regulations, and measures to enhance or restructure existing protections to include a broader range of workers. As a result, there has been a certain reluctance by governments to consider any proposal that would increase public spending and government infrastructure to better protect vulnerable workers.

The cost of providing public goods, and protecting fundamental rights and vulnerable workers can be quite high, and there is good reason to examine carefully the wisdom of state expenditures in that regard. However, people like Nobel prize winner Amartya Sen, have stated that financial conservatism — important as it is — cannot stand in solitary isolation as a rationale for either action or inaction. It must fit into the broad framework of the social objectives a country sets for itself.⁵⁵ It may, therefore, be appropriate to consider whether the needs of Canada's most vulnerable workers have taken a back seat to the goal of debt reduction and public service downsizing.

Government fiscal austerity may have disproportionately negative consequences for some of the most vulnerable Canadian workers. To the extent that fiscal austerity or the privatization of public services affects employment in the public sector, it is likely to reduce access to better protected and remunerated forms of employment. This has an impact on women, immigrants, people from visible minority groups and others who have difficulty accessing jobs in the private sector. Unless some compensatory action is taken, no matter how beneficial this reduction in the size of the public sector may seem, it will have ramifications for vulnerable workers and for society as a whole. Will the cost of dealing with those issues exceed the savings generated by reducing the size of government?

Unpaid Work

The current regulatory model assumes workers can either afford to hire someone to do the unpaid work involved in child-, elder- and home-care, or someone else in the home provides that care for free. As highlighted in the case studies, this assumption is clearly not borne out by the evidence. In fact, large numbers of Canadian workers struggle to combine work in the paid labour force with unpaid work obligations or work in non-standard work arrangements to accommodate their unpaid obligations. The result for many is crushing workloads, work-life imbalances that result in serious health consequences and unsatisfactory work arrangements.

Non-marketable forms of work are, in fact, those most crucial to humankind.⁵⁶ Disregarding the close ties between work inside and outside the market is tantamount to disregarding both the circumstances of peoples' lives and those of the market. This sets a course for disaster. Treating labour as an infinitely flexible resource compromises workers' living conditions and the conditions under which their children are raised.

Question:

· Is a regulatory model that fails to take unpaid work obligations into account sustainable?

Summary

There may well have been a shift away from the regulatory intervention of the state to promote worker protection toward greater emphasis on the use of market forces to regulate the use of labour. While deregulation has had positive consequences for employers and highly qualified workers, it has left gaps and deficiencies in the regulatory structure.

It may be that we have arrived at a point in the evolution of labour and employment regulation where it is appropriate to ask some hard questions about these results, such as:

· Are the gains made as a result of the deregulatory shift worth the costs incurred by vulnerable workers, their families and, ultimately, society?

· Is this shift consonant with the basic values of most Canadians?

· Does the current regulatory structure appropriately reflect core Canadian values?

· Are we willing to allow the traditional functions of labour and employment law and policy to be displaced by the economic drive toward deregulation?

The answers may lie in our basic values and beliefs about the appropriate role of the state in regulating the labour market. What are society's interests in regulating work? What core values do we need to promote and protect? These questions form the discussion in the next chapter.