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Strict labour regulations raise construction costs in Quebec

Montreal, May 4, 2010 – Strict regulation of the construction trades is artificially raising construction costs in Quebec, according to an Economic Note published today by the Montreal Economic Institute (MEI) and prepared by its researcher David Descôteaux.

“Labour regulations in the construction industry get in the way of worker versatility and make building site management more complicated, more expensive and slower,” Mr. Descôteaux says.

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%.

The effects of the “compartmentalization” of trades

In the Economic Note, Mr. Descôteaux remarks that “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.” An investigation by Samson Bélair in 2002 provided an estimate that Act R-20 increases the time required to perform construction work in the production machinery industry by 17%.

The study also explains that, even with the construction industry facing a labour shortage, Act R-20 results in the workers subject to the Act 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 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 can also be assumed that the low number of hours declared results partly from black market work – which is favoured by the rigidity of the regulations.

“It is clear that certain rigidities imposed by Act R-20, including the compartmentalization of trades, harms productivity in the construction sector in Quebec,” stated Michel Kelly-Gagnon, president and CEO of the MEI. “Fortunately, Quebec has nothing to envy its neighbours as regards the talent of its construction workers and contractors. Furthermore, there are indications suggesting that assertions about construction costs being systematically higher in Quebec are not necessarily true. Though the dangers of corruption should not be ignored, nor should the impact of restrictive labour regulations on the cost of infrastructure be underestimated.”

The complete Economic Note published today, titled The Compartmentalization of Trades in the Construction Industry, may be consulted free of charge on our website.

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The Montreal Economic Institute (MEI) is an independent, non-partisan, non-profit research and educational organization. Through studies and conferences, the MEI informs public debates in Quebec and Canada by suggesting wealth-generating reforms based on market mechanisms.

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Information and interview requests: Ariane Gauthier, communications coordinator, Montreal Economic Institute, Tel.: 514 273-0969 ext. 2231 / Cell: 514 603-8746 / E-mail: agauthier (@iedm.org)

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