Labour law and the new inequality.

• Author: Lynk, Michael
• Position: Rand Memorial Lecture - UNBLJ Forum: Recent Developments in Canadian Labour and Employment Law

The different sorts of equality are finally inseparable but up to a certain point they are sufficiently distinguishable, and one may speak of political equality, equality before the laws and economic equality. Without the last, the first and second exist only measurably, and they tend to disappear as it shrinks.

William Dean Howells

INTRODUCTION

Thank you very much for the invitation to deliver this year's Rand Memorial Lecture. This is both an honour and a special moment for me, not the least because of the ways in which I have found myself connected to Ivan Rand. I never met him, of course, but I sometimes feel that he hovers nearby. He and I were both born and raised in the Maritimes, sons of this salty soil. And, like many Maritimers, we both wound up working someplace else, far from our homes, which leads to my second connection. Ivan Rand was the founding Dean of the Faculty of Law at the University of Western Ontario, where I have taught for the past decade. Indeed, there is somewhat of a friendly rivalry between Western and UNB over our respective claims to him, but I think his legacy is rich enough to nurture both law schools. To add a further connection, Ivan Rand was Canada's representative on the 1947 United Nations Special Committee on Palestine (UNSCOP), which ultimately recommended the partition of that tormented land. I have worked for the United Nations in Jerusalem, and I am presently researching Rand's role in UNSCOP, with the intention of publishing this research in the near future. The literature on UNSCOP to date plainly shows that Ivan Rand was recognized at the time, and long afterwards, as one of the intellectual driving forces on that historic committee. (1)

The fourth connection I can claim, and the one that is woven into tonight's Lecture, comes from my professional interest in Canadian labour law. Ivan Rand was, of course, the author of the famous Rand Formula, based on his arbitration decision that settled the protracted 1945 Ford auto strike in Windsor, Ontario. (2) This strike was one of the epic labour battles that forged our modern industrial relations system. (3) The pre-war laissez-faire legal approach towards unions--where they were tolerated but unprotected--was in the process of being statutorily eclipsed at the time of the Windsor Ford strike by the more intensely regulated structure that was based upon the principles of the American Wagner Act (its statutory title is the National Labour Relations Act). This nouvelle epoch would positively affirm the collective voice of unions in the Canadian workplace, recognize the legal status of collective agreements, and replace the courts' jurisdiction to regulate the workplace with expert panels of labour relations boards and arbitration boards. (4) In the wake of this legal transformation, unionization in Canada would jump from 18 percent of the non-agricultural workforce in 1941 to 28.4 percent by 1951, a gain of 63 percent. (5) A brave new world of labour law and industrial relations was being born, but it needed sturdy intellectual and judicial foundations to stand up. Ivan Rand would provide some of these vital pillars.

Rand had been chosen to arbitrate the terms of the Windsor Ford collective agreement by the federal cabinet, with a big push from Paul Martin Sr., who was a new Liberal cabinet minister from Windsor (and the father of Paul Martin Jr., the future Prime Minister). At the time, Ivan Rand was sitting as a Justice on the Supreme Court of Canada, with his famous ruling on civil liberties and the abuse of executive power in the Roncarelli v. Duplessi case still ahead of him. Reflecting on the Ford strike and Ivan Rand, Paul Martin Sr. would later say:

I talked to him about these problems ... I knew his views ... he was a man who knew the evolution that was taking place in social thinking ... he had been thinking about these questions for a long time ... and it just happened I was in a position to help bring about his appointment. (6) In his landmark arbitration award, released in January 1946, Ivan Rand was aware not only of the issues of this particular strike, but he understood clearly the larger context as well. In what is now regarded as one of the most influential Canadian labour law decisions ever written, he would state:

... labour unions should become strong in order to carry on the functions for which they are intended. This is machinery devised to adjust, toward an increasing harmony, the interests of capital, labour and public in the production of goods and services which our philosophy accepts as part of the good life; it is to secure industrial civilization within a framework of a labour-employer constitutional law on a rational economic and social doctrine. (7) This was the objective. But Rand also recognized the gritty reality. In the industrial sphere, he maintained, the law must curb economic power in order to ensure, if for nothing else, a measure of social stability against the spectres of inequality and depravation:

In industry, capital must in the long run be looked upon as occupying a dominant position. It is in some respects a greater risk than labour; but as industry becomes established, these risks change inversely. Certainly the predominance of capital against individual labour is unquestionable; and in mass relations, hunger is more imperious than passed dividends. (8) The Windsor Ford strike--also known in some industrial relations circles as the Treaty of Windsor--and Rand's intellectual ground work for the terms of the settlement would became emblematic of the new relationship between unions and employers in Canada that won labour its own seat at the post-war banquet table.

But, on a larger scale, the growth of unionization that the Treaty of Windsor and the new Canadian labour law regime ushered in became a central part of what Paul Krugman, the 2008 Nobel Laureate in Economics, and others have called, in the American context, the Great Compression. (9) Labour law, unionization, and the new labour market institutions that emerged in these post-war years made an integral contribution during the period between the 1940s and the 1980s to the dramatic dampening of the wide income and wealth inequalities that had plagued Canada, the United States, and the rest of the industrialized world before 1940. This Great Compression brought an unlamented end to the prolonged Gilded Age, it made a post-war middle-class society possible in the industrial democracies, and it led to a host of political and social transformations in Canada--such as comprehensive public health care, a national public pension plan, a progressive taxation system, income transfers, regional equalization and an activist role for the state in the economy--which ensured sustained economic growth and, in turn, reinforced the achievements of this new era of social equity.

The Great Compression had an extraordinary run for approximately forty years in Canada, but over the past twenty-five years it has run out of steam. Today, there is a growing library of economic reports which point to the unmistakable trends toward rapidly rising economic inequality in Canada, the United States, Europe and, indeed, around the world. (10) Even as the benefits of globalization since the early 1980s have brought hundreds of millions out of poverty and created unprecedented global wealth, the flip side of the coin has been a surging tide of inequality, resulting in the benefits of globalization, both nationally and internationally, being shared in an increasingly inequitable manner. Comprehensive reports issued over the past four years by the most respected of international institutions--the World Bank, (11) the Organization for Economic Cooperation and Development, (12) the International Labour Organization, (13) the UN Human Settlements Program, (14) the World Health Organization (15), and the UN Development Programme (16), among others--have all shown that economic inequality has been steadily growing, with a host of consequential social tensions and economic fissures. The beneficiaries of this new global wealth have been overwhelmingly at the very top of the social ladder, with significant wage stagnation throughout the broad middle, and a declining share of wealth and income going to those occupying the lower social rungs. (17) "The central economic issue related to globalization", Amartya Sen, the 1998 Nobel Laureate in Economics, declared in 2002, "is that of inequality". (18)

Paul Krugman has labelled our new era the Great Divergence and the Second Gilded Age. Richard Freeman, a Harvard labour economist, has called it the New Inequality. (19) These terms apply aptly to Canada. Since the mid-1980s, we have also witnessed a steady widening of our income and wealth inequality levels, while at the same time our unionization levels in Canada have eroded, the redistributive effectiveness of labour market institutions have weakened, and our labour laws have waned in vitality. The thesis of my lecture this evening is that there is an important symmetry--here in Canada and throughout the world--between vibrant labour laws and healthy unionization rates, on the one hand, and relative economic equality levels and social well being on the other. Strong purposive labour laws are an integral part of what Andrew Sharpe, an economist and the Executive Director of the Centre for the Study of Living Standards in Ottawa, calls the virtuous circle. (20) This circle is made up of the combination of dynamic social programs, such as the progressive fairness in our taxation system, protective labour and employment standards, and effective levels of public spending on education, health, and infrastructure. These equalizing institutions help to produce and reinforce a vibrant democracy with high civic engagement, low relative levels of poverty, social mobility into a broad and stable middle class, and an upper class that has wealth, but not so much...