The adoption of a new labour law in Michigan has reignited the debate about what Ontario needs to do to remain a manufacturing powerhouse.
Michigan struck a blow against unions in the heart of the U.S. labour movement by passing a so-called right-to-work law that prevents mandatory union membership in the workplace and allows people to decline to pay union dues. Similar laws have been adopted by 24 U.S. states, mostly in the South, by politicians who believe that they will help bring in factory jobs by weakening unions' financial power.
The issue of right-to-work legislation is gaining prominence in Ontario in part because Michigan is a traditional economic rival that competes with the province for investment in the manufacturing sector. Indiana, another northern manufacturing state, adopted a similar law earlier this year, showing that the idea is creeping northward. Ontario Progressive Conservative Leader Tim Hudak has promised to enact such legislation if he is elected premier.
But there's little evidence that existing next door to America's latest right-to-work state will suddenly turn the heartland of Canadian manufacturing into a wasteland.
Labour laws are just one item in the long list of factors that lead a company to choose a particular state or province. It is less important than such items as the quality of the work force, proximity to the market or customer, tax rates, currencies, subsidies and the political clout that companies can gain by creating hundreds or thousands of jobs in a jurisdiction, say business executives and people who have studied the impact of right-to-work laws.
"International companies are much more interested in the quality, price, educational standard and reliability of the labour pool from which they draw," said one former municipal development official who played a key role in recruiting companies that located along the Highway 401 auto corridor in Ontario.
The complex nature of the choices companies make is outlined by Linda Hasenfratz, president of auto parts maker Linamar Corp. of Guelph, Ont. Ms. Hasenfratz is a strong advocate of laws that permit freedom of choice by banning what is known as the "closed shop," which requires all workers to join a union and pay dues if a majority of workers votes in favour of a union.
For companies not already in North America, the Michigan law could be the deciding factor that leads them to choose the Great Lake State over Ontario, she said Wednesday. "For somebody coming in and trying to make a decision on 'Where am I going to to put this plant that I need to supply the Northeast?', it puts Ontario at a disadvantage."
But Michigan's new labour regime would not be a lure for Linamar, a maker of engine and transmission parts, even if the company were to need a new plant to supply a customer in Detroit.
"If we're doing something for Detroit, it's going to make a lot of sense for us to start it up in Guelph," she said. "For us to launch a new plant in Guelph is much less cost and much less risk than for us to try to start a new plant somewhere else. I can basically launch it from the plant next door."
It is hard to find conclusive proof that right-to-work laws lead to a bonanza of new jobs for the jurisdictions that have them.
Oklahoma passed such a law in 2001 even though it had experienced eight successive years of growth in manufacturing jobs – which are usually the kinds of the jobs state politicians are pursuing when they advocate legislation aimed at curbing unions.
After the legislation was passed, the number of jobs in Oklahoma's manufacturing sector shrank by almost one-third and the number of new companies locating in the state fell, Gordon Lafer, a University of Oregon professor, wrote in a paper for the Washington-based Economic Policy Institute in 2011. "The scientific – as opposed to ideological – analysis of right-to-work laws shows that right-to-work laws lower wages and benefits for both union and non-union workers alike, while having no positive impact whatsoever on job growth," Prof. Lafer wrote.
Advocates of right-to-work laws often point to the growth of auto assembly plants in Alabama, Mississippi and other southern U.S. states as evidence that the laws are critical in luring offshore-based car companies.
But Japan-based auto makers Honda Motor Co. Ltd. and Toyota Motor Corp., for example, located in Ontario in the 1980s and have expanded in the province steadily – Toyota opened a new plant in 2008 in Woodstock, Ont. – even though it is regarded as a friendly environment for unions.
Their Japanese auto companies' first U.S. operations were located in Ohio and Kentucky, respectively, neither of which has passed right-to-work legislation. Both companies expanded into Indiana before that state passed such laws.
Both Ford Motor Co. and General Motors Corp., whose U.S. workers are represented by the United Auto Workers union, closed assembly plants in Georgia during the recession. Georgia is a right-to-work state.