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The ONW Salon: What's Good for GM Is Good For ... Ontario?

"What's good for GM is good for America" was a famous saying south of the border. But what about the new agreement between GM and its Ontario workers, inked late Monday, and which is a pattern for all Big Three bargaining? Is it good for the employees, and good for the provincial economy? Richard Mahoney, John Capobianco and Tom Parkin dissect the deal.

 

 

Tom Parkin:

The deal between UNIFOR and GM tells us a lot about what's going on in this economy.

Through the deal, the union secured production at GM facilities in Oshawa and St. Catharines, which had been at risk. That's the good news.

The price to be paid was that new hires would not be eligible for the defined benefit pension plan of existing employees.

And, as this is pattern bargaining with the so-called Big Three - GM, Ford and Chrysler - it seems likely these provisions will carry through to those workplaces.

It's again a story of how working class and - especially younger Canadians - are being left behind in this economy. We have a growing division between middle class people who seem to have recovered from the Great Recession and those outside the middle class who haven't.

In this case, UNIFOR, a union with considerable bargaining capability in an industry that is capital intensive, didn't have the clout to protect jobs and the terms of employment for younger workers.

Now it is true that jobs at Big Three car plants pay better and will still have better pension and benefit provisions that in many, many other working class employers. But the trend is negative. In this situation and elsewhere.

The deindustrialization of South-western Ontario is a serious problem and has many causes. And it is not clear these trends can be reversed.

In Ontario the pulp and paper industry is dead. The old Stelco Steel works is shutting (and taking pensioners' money on the way out). The auto industry is taking a hit. And we don't have the next-generation enterprises coming forward.

As our economy becomes more reliant on the service industry and construction, it becomes less stable. Concerns about a real estate bubble should worry everyone.

Both the provincial and federal governments need to look hard at the situation and develop a strategy for South-western Ontario. I've seen nothing on this coming from Queen's Park or Ottawa and it worries me for the future of our province. Hopefully something is being considered.

 

John Capobianco:

UNIFOR and General Motors reached a tentative contract settlement, which will avert a walkout that was scheduled to begin early next week. As is the case with the majority of these types of negotiations, it went down to the wire and behind-the-scenes deals were eventually struck with both sides claiming victory. Who really wins out on these last minute deals is never easy to determine and it will take years until we actually do know.

What we do know is that laying off/striking workers, when we have a fragile economy, is never good. So for that, it is a win for the workers.

But is it really? As Tom points out, there is a glaring issue that some see as a negative change in the agreement, and that is that new hires will start with a defined contribution plan. It seems that the union made this concession on pensions for new workers by agreeing to a pure defined contribution plan, which I believe is the first such plan that covers the Big Three.

Where the union does claim victory is over a four-year pact covering over 4,000 autoworkers in Ontario in areas including wage increases, signing bonuses and lump-sum payments.

So to my earlier point, it's hard to determine the winners in the long run.

The short-term winners are the workers and the immediate economy, but we need to ensure a stronger economy in the longer term so that we can attract other industries and companies in Ontario if we can't want to be held hostage by last minute deals.

 

Richard Mahoney:

I don't want to set tongues wagging here, but I agree with much of what Tom said above. I know, I know, he's a New Democrat.

But the deal is good news for Ontario and its economy. We do face a much different global market for relatively high paying, secure jobs in the auto sector. And companies like GM, in order to meet price competition from other manufacturers, and because more and more of their own production for the North American market now comes from low wage jurisdictions, are moving to reduce costs in all of their markets.

This has been going on for years. Have a look at Flint, Michigan and Detroit - the epicentre of the North American automobile industry at one point - now suffering from plant closures, layoffs and deindustrialization.

That said, Ontario and Canada have responded and survived better than most. Governments have stepped up to help convince automobile manufacturers to stay: the Ontario government's programs are a model in this regard and have had great success. Our quality of life, universal health care and an excellent public education system also add to the allure of manufacturing in Ontario. So there is good news here for our economy.

The fact that new hires won't get the same pension benefits as existing employees is a huge issue and a big cost. More on that below.  

Tom Parkin:

Richard, I am pleased to be able to say Liberals often agree with me when I identify a problem. I am disappointed that we have Liberals at two levels of government, neither of which seems to be address the problem.

The homily about how we've done better than most was the sort of instruction Mr. Harper used to preach. But it's not a strategy or a solution. I'm not sure it's even true.

Look, we have had unemployment going up for the last two months. Our trade deficit is at historic highs. The percent of working-age people in a job is a historic lows. Household debt continues to rise. The situation is serious.

Since 2002, the percent of Canadians who consider themselves middle class has plummeted from 67% to 47%, reports EKOS Research. And 44% now considered themselves either working class or poor!

And the Liberals' explicit rhetoric enhances these divisions. Middle class growth. Middle class tax cut. Middle class families.

It's great to help middle class people - I readily admit to be fortunate to be one - but it's the others who are taking the biggest hit in this economy. We need to explicitly include them.

In March Finance Minister Bill Morneau announced his Advisory Council on Economic Growth. First, I was disappointed at the delay - five months to pick a panel on the most important issue? And second, I was very disappointed that not a single appointee among the 14-person panel represents working class people. There are some university economists, but most are from Canada's C-suite. It's exclusive, and won't get the input from everyone who has a stake in this economy.

As for the Ontario Liberals, they've been in power since 2003 and I have yet to see any strategy with more intellectual heft than taking the HST off electricity.

I very sincerely hope the social democrats in Ottawa and Queen's Park push the Liberals very strongly on jobs and economy issues. Some one has to.

 

John Capobianco:

The provincial Liberals have engaged in the worst form of corporate welfare, often being held hostage by companies (profitable U.S. companies) threatening to leave until they get huge government payouts, and then after a few years they end up leaving anyways. It is a dangerous cycle that needs to be fixed and can only be corrected with a long-term economic vision - and taking the HST off electricity bills isn't that.

Look, the auto industry is extremely important to our provincial economy, with huge implications nationally, which is why both the U.S. and Canadian governments bailed them out a few years ago. It was the right thing to do given the deep global recession we were in the midst of at the time.

Keeping the industry here in Ontario, thereby keeping jobs here, is essential. A very good friend of mine has worked with one of the Big Three for over 20 years and has been either on strike or laid off six times during that period of time. However, he doesn't complain as long as he gets to go back to the line and I would imagine he is not alone - most workers feel that way.

But if the economy was stronger, with more and diverse sectors thriving, then my friend and others would have more choices to make. This is what it is all about – a strong economy to keep businesses here, including SME’s, and encouraging others to come, just as Mississauga has done recently with a huge U.S. bio-science firm coming to Ontario rather than locating in New Jersey.

The deal reached by UNIFOR and GM has saved many from having to go on strike. There was a price to pay for the agreement, which many will debate, but for the sake of the economy, people were saved from a strike that, once begun, its end would have been hard to predict. 

 

Richard Mahoney:

For Tom to criticize the Ontario Liberals for giving relief on hydro bills is a bit rich. His leader has been advocating similar relief for years. He seeks to diminish the efforts of the Ontario government to keep and attract jobs in the automotive sector over the last number of years - he will remember significant clashes over this approach with the former Harper government, as witnessed in John’s critique of those polices. If he doubts that Ontario has done relatively better than other similarly situated places, he might want to take a drive through Flint, Michigan sometime soon and compare it to Oshawa.

These trends are global, as Tom points out, and government can and should do more. But there are limits. You can’t force a manufacturer to choose St. Catharines over Mexico (which looks like it just happened - that is one aspect of the GM deal that is a huge win.) What government can do is make our communities attractive places to live in and to invest in - the two concepts are very much connected, as discussed above.

The new GM deal changes the pension plan for new hires. The good news is there will be new hires, but the cost of that is a change to a so-called defined contribution plan.

First things first - a defined contribution plan is not a pension plan. It is a savings plan, enhanced by your employer, but your savings are at risk. A defined benefit plan - where individuals by and large know what their retirement benefit will be - is a pension plan in the popular sense.

That is not to say defined contribution plans are bad - but they by no means provide the same retirement security that a real, defined benefit plan does. That’s too bad for the future hires at GM, and possibly others in the sector, and a trade-off that UNIFOR was obviously prepared to make in the bargaining. But as the economy evolves, fewer and fewer of us have lifelong employment at a place that provides retirement security.

That is why Premier Wynne’s leadership on the Ontario Retirement Pension Plan (ORPP) was so important - providing Ontarians who do not have a defined benefit plan with twice the pension they would have received under the Canada Pension Plan (CPP). That protects Ontarians against the present and future realties of inadequate private sector employer plans or no employer plans at all. And Wynne’s leadership on ORPP has now helped create a national deal on an enhanced CPP - so all Canadians will benefit. That would not have happened without Kathleen Wynne. And to think the ORPP itself almost did not happen because Tom’s friends in the New Democrats opposed it, voted it down and defeated a government budget over that issue. If New Democrats were serious about helping people in a global economy that doesn’t provide retirement security for its citizens, they would have been advocates of an Ontario retirement pension plan, not opponents.

 

Richard Mahoney is a lawyer with deep experience in politics and governance.  He is a former senior advisor to the Rt. Hon Paul Martin, a former Campaign Chair and President of the Ontario Liberal Party. John Capobianco is a Senior Partner and National Public Affairs Lead at FleishmanHillard. He has been a Conservative strategist with over 30 years of political activism at all three levels, including as a former federal Conservative candidate. Tom Parkin is a veteran NDP strategist and a frequent commentator on national issues. 

 

 

 

 

 

 

Posted date : September 21, 2016
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