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Quebec’s high rate of unionization hurts employment and investment

Montreal, August 26, 2005 – Quebec is the jurisdiction with North America’s highest unionization rate (40%), and this strong union presence comes accompanied by weaker employment levels, according to an Economic Note published today by the Montreal Economic Institute.

The unionized minority obtains higher wages and fringe benefits than the majority of workers who do not belong to unions, but this premium comes at a high price to those who are pushed into unemployment.

“With labour costing more, unionized companies use less of it and replace labour with equipment,” explains economist Norma Kozhaya. “Unions thus redistribute income in favour of their members to the detriment of the unemployed and of non-unionized workers.”

Investment held back

Quebec’s heavy unionization also has the effect of reducing incentives to invest in physical capital and in R&D.

The Institute’s document cites a study that appeared in the Industrial and Labor Relations Review showing that an industry with an average unionization level has a gross capital investment rate 18% to 25% below that of a non-unionized industry.

In terms of investment in R&D, another study estimates a drop of 28% to 40% when going from a lightly unionized industry to a heavily unionized one.

Results of legal privileges

Among the factors contributing to Quebec’s high unionization rate, the author points to the legal privileges enjoyed by unions in Quebec.

Quebec is one of five Canadian provinces where a union can be accredited with no secret ballot being held. If the union receives the signatures of more than 50% of employees, it will generally be recognized upon simple submission of union membership cards. Moreover, Quebec employers do not have the right to intervene in contesting union representativeness. This is not the case in most other provinces or in the United States.

These and other legal privileges help make Quebec the most highly unionized jurisdiction in North America. While Quebec’s unionization rate is 40%, the Canadian average is 31.8%, and the average among U.S. states is 13.8%.

Titled The consequences of a strong union presence in Quebec, this Economic Note is available on MEI’s Website.

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Information and interview requests: Patrick Leblanc, Director of Communications, Montreal Economic Institute, Tel.: (514) 273-0969 / E-mail: pleblanc@iedm.org

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