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The State of the Unions

www.conferenceboard.ca



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The newly merged CAW and CEP unions vision is to provide acollective voice for the broader public students, retirees, and theunemployed

Developments to Watch

4

4

,be little change in labour-management relations or collectivebargaining outcomes, but

If the new union succeeds in becoming the recognized voice of the

disenfranchised, its social and political influence will be considerablyenhanced


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Studies have demonstrated that public sector employees enjoy asubstantial wage premium relative to the private sector about 13%without considering union status and at least 6% with that adjustment


5

5

- . ., ,disability, health and welfare benefits) is also considerably higher inthe public sector

Governments will increasingly focus on bringing public sector

compensation and benefits more in-line with the private sector


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Terms of the recent auto industry agreement reflect concessions overand above those negotiated when GM and Chrysler were inbankruptcy and the industry is now profitable the new two-tier wagestructure now constitutes a benchmark in the auto sector as cost


6

6

pressure u s t roug out t e n ustry s supp y c a n

At the very least, there will be considerable downward pressure onwages in manufacturing and related industries


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The Economic Outlook

www.conferenceboard.cawww.conferenceboard.ca


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The global economy has endured 4 years of fragmented anduncertain growth there is little evidence that this will improvesubstantially over the short to medium terms

In General

88

economy have eroded consumer confidence and slowed businessinvestment

Fiscal restraint will reduce government spending for the first timesince the late 1990s


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Employment growth remains somewhat lower than historical norms,but real hourly wages for full-time workers have posted meaningfulgains increasing by a total of 10% between 1998 and 2012

In General

99

regions and industries are considerable with the biggest gains inAlberta and Saskatchewan while Central Canada and the Maritimeslag


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Real GDP Growth Rate in Canada(percentage change)

1.0

2.0

3.0

4.0

1010

Source: The Conference Board of Canada, Statistics Canada

-4.0

-3.0

-2.0

-1.0

0.02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012f 2013f 2014f


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Employment Growth in Canada(percentage change)

2.0

2.5

3.0

1111


-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

1997 1999 2001 2003 2005 2007 2009 2011 2013f


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Wage Growth(percentage change)

4

4.5

5

4

4.5

5Average Weekly Wages Consumer Price Index (CPI)

1212


0

0.5

1

1.5

2

2.5

3

3.5

0

0.5

1

1.5

2

2.5

3

3.5

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012f 2013f 2014f


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The Compensation Outlook



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Projected average base pay increases for unionizedworkers are1.6% in the public sector and 2.3% in the private sector lower thanincreases for non-unionizedworkers at 2.8% and 3.0% respectively

The Pay Environment in 2013

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sector realize smaller gains than employees in non-unionizedpositions and the public sector will likely continue for some time


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Projected Wage Adjustments By Industry(per cent)

2013 Projected Wage Settlements by Industry

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17

Source: HRSDC.


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2013 Projected Wage Settlements by RegionProjected Wage Adjustments By Region(per cent)

18

18

Source: HRSDC.


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Actual and Planned Compensation Increases(per cent; average increase among all non-unionized employees)

3.9 3.93.9 4.04.0

4.5

2012 Actual 2013 Planned

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19

2.9 3.0

2.6 2.8 2.52.5

.

2.5 2.7

3.0

0.0

0.5

1.0

1.5

2.0

2.53.0

3.5

BC AB SK MB ON QC Atlantic

Source: The Conference Board of Canada


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The Bargaining Outlook



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Governments in all jurisdictions remain focused on eliminating theirbudget deficits public sector unions cannot expect more thanmodest real wage increases

The Public Sector

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antipathy towards public sector workers, the collective bargainingclimate will be challenging


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Reports of record corporate profits must be put in perspective,corporate profits have recovered to their long-term levels whilelabour income as a percentage of GDP has remained relativelyconstant since 1996

The Private Sector

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As with the auto industry, corporate profitability does not preclude thepossibility that unions will have to make concessions whereinvestment and employment growth is strong, unions should be ableto realize gains


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Corporate Profits(per cent of GDP)

12%

14%

16%

23

23Source: The Conference Board of Canada, Statistics Canada

0%

2%

4%

6%

8%

10%


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Labour Income(labour income as a per cent of GDP)

48%

50%

52%

24

24Source: The Conference Board of Canada, Statistics Canada

40%

42%

44%

46%

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012f

2013f

2014f


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The Haves and the Have Not

Private Sector

Oil & gas, mining are

Public Sector

Governments focused on

25

25

o ng we - compe on

for labour is puttingupward pressure onwages

Organizations withlegacy costs are not conflict between need forcost containment andlabour's expectations

e m na on o e c s w m

wage increases andemployment growth

Public sector unions that havefaced years of restraint may notbe so accommodating in 2013


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Both labour and management are bringing more realisticexpectations to the bargaining table

Over half (53%) of respondents to the Boards Compensation

What to Expect

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26

-

relationship as cooperative while many (42%) rated the relationshipas neutral


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Negotiation Issues(percentage of unionized organizations)

ManagementWages (55%)

UnionWages (85%)

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27

Organizational change (36%)Flexible work practices (34%)

Business competitiveness (32%)

Health benefits (36%)Pensions (29%)

Outsourcing and contracting out(26%)

Flexible work practices (19%)


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Conclusion



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The Canadian economy faces a period of slow near-term growth thatwill challenge government spending and revenue capacity over thelong-term

The New Normal

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compensation across Canada, regardless of the political party inpower

Bargaining outcomes in manufacturing and related industries will

mirror those in the auto industry downward pressure on wages andbenefits, and increasing use of two-tier wage structures


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The new normal is characterized by modest economic prospectsbeing matched by modest expectations at the bargaining table

The good news is that this may provide a degree of stability and

The New Normal

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rather than rhetoric


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