In the wake of corruption allegations in the construction industry, some media have asserted that the cost of building and maintaining roads is too high in Quebec compared to Ontario. Quebec construction workers – who are very much in demand – have nothing to envy their neighbours in the other provinces as regards their talent and the quality of their work. However, they suffer from a major obstacle: a lack of flexibility caused by laws and regulations governing the construction industry. Notwithstanding shady practices, there is reason to look into the effects of Quebec regulations on higher construction costs.
The effect of the “compartmentalization” of trades
Act R-20 (Act respecting Labour relations, vocational training and workforce management in the construction industry) and its regulations, which apply to nearly 60% of construction work in Quebec, set out descriptions of 26 trades. Employers are required to hire only workers holding certificates of qualification in each trade to perform work.
Here is an example among many. Ceramic tiles have to be installed by a “tile setter” and not by a “resilient flooring layer” (who installs carpets). Many workers, however, know the rudiments of several trades. Ontario, for example, has just six construction trades with compulsory certification.
Without this obstacle, Quebec construction workers could be more versatile and could raise their productivity, which would help the Quebec government and taxpayers save on construction costs, especially for infrastructure. In a 2002 study, economist Pierre Fortin estimated the total impact of Act R-20 on increasing overall construction costs at 10.5%.
Moreover, the compartmentalization of construction trades, because of the rigidity it brings into work organization, is among the causes of delays most often mentioned by industry stakeholders.
The coexistence of unemployment and labour shortages
Although the construction industry faces labour shortages, Act R-20 results in workers covered by the law declaring an annual number of hours worked well below their potential. The average number of hours declared to the Commission de la construction du Québec (CCQ) by construction trades workers who worked at least one hour in 2008 was 963. In comparison, the average Quebec worker puts in nearly 1,600 hours a year. This difference may be explained by various factors (including the temporary unemployment experienced by construction workers between jobs and time devoted to work not covered by Act R-20 such as home renovation), but it could also stem from a lack of work in overly specialized trades. It may be assumed that the low number of declared hours results partly from black market work, but this is actually favoured by the compartmentalization of trades.
The assertion that the cost of a road is higher in Quebec than in Ontario comes from a 2008 Transport Canada study. That study notes, however, that cost differences may be due to a series of hard-to-identify factors. A CCQ study published in 2006 shows, on the contrary, that construction costs per square foot for comparable commercial buildings (Home Depot and Wal-Mart stores) are lower in Quebec than in Ontario.
While the debate on costs is not over, it is clear that certain rigidities imposed by Act R-20, including the compartmentalization of trades, harms productivity in the Quebec construction sector. Though the dangers of corruption should not be ignored, nor should the impact of restrictive labour regulations on the cost of infrastructure be underestimated.
David Descôteaux is a Researcher at the Montreal Economic Institute.