These are stories Report on Business is following Tuesday, Feb. 7, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
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Indiana and 'right to work' This isn't directly related to the controversial shutdown of the London, Ont., locomotive plant, but the decision by Caterpillar Inc. and subsequent focus on Indiana got me wondering about "right to work" legislation.
Whether you call it "right to work" or "anti-union" depends on which side of the bargaining table you're on, and the research is all over the map.
Caterpillar's Progress Rail Services announced Friday that it's shutting down its Electro-Motive Canada plant in London, a 62-year-old operation where 700 jobs will be lost, including those in management. The work will be moved to other plants in North and South America because, the company said, costs at the London operation must be competitive.
It locked out its union, which had said no to deep wage cuts.
Caterpillar didn't specify where the jobs would go, but Indiana is the logical candidate, given that there's an operation there, and the company held a packed job fair on the weekend, offering work at far less pay than in Canada.
This came at the same time that Indiana became the 23rd state in the country, and the first in about a decade, to adopt such "right to work" legislation. Though unconnected, it got me poking around, particularly in two studies cited by The Wall Street Journal.
Such legislation means that a worker can't be forced automatically to pay union dues, a long-running practice that meant you paid because you were represented. (In Canada, it has been known as the Rand formula, based on a ruling by Justice Ivan Rand in a strike by what was then the United Auto Workers against Ford in the mid-1940s.)
Unions, of course, don't like what Indiana and others have done, complaining the removal of automatic dues weakens their ability. Business and government hold another view.
"Indiana will improve still further its recently earned reputation as one of America's best places to do business, and we will see more jobs and opportunity for our young people and for all those looking for a better life," Governor Mitch Daniels declared as he signed the bill last week.
The governor also said those who objected to the new law were unnecessarily troubled: "No one's wages will go down, no one's benefits will be reduced, and the right to organize and bargain collectively is untouched and intact."
Is he right?
In a study published by the Economic Policy Institute in Washington, researchers Elise Gould and Heidi Shierholz found that wages in right-to-work states are 3.2 per cent below those of states without such legislation. The rate of health insurance that is sponsored by employers is 2.6 percentage points lower, and for employer pension plans 4.8 percentage points lower.
The EPI is described on the liberal side of the spectrum. Contrast that with the National Institute for Labor Relations Research in Springfield, Va., which is clearly on the other side of the table, describing itself as a non-profit body "analyzing and exposing the inequities of compulsory unionism."
Its study found that employment growth in right-to-work states outpaced the others from 2000 to 2010 (in fact, employment fell in the others). At the same 10-year span, manufacturing growth climbed, as did compensation in the private sector.
David Doorey, an Associate Professor of Labour and Employment law at York University's School of Human Resource Management, seems to have the best answer: There's no substantial proof either way.
"There are dozens of studies 'showing' that these laws decrease wages and benefits and have no positive effect on employment levels ... and dozens showing the exact opposite," he says on his workplace law blog.
He does note, however, that the voluntary nature of dues payment makes it harder for unions to raise the money they need.
"The entire point of this type of legislation is to cut off resources from unions so that they become weak and ineffective," Dr. Doorey says.
"Proponents argue that it creates jobs, on the theory that there are a bunch of anti-union employers who will flock to whatever state passes the law ... Opponents dispute that claim, and argue that all it does it allow employers in those states to pay workers less and give them fewer health and pension benefits. They claim it is part of the race to the bottom that corporations encourage and that Republican politicians are more than happy to implement in exchange for the huge political contributions to their campaigns."
- A message to Caterpillar: This is Canada, not Indiana
- Mike Moffatt's Economy Lab: The $5-million Electro-Motive subsidy that wasn't
- McGuinty presses Ottawa to review 'outdated' foreign takeover rules
- Caterpillar pulls plung on London plant
- Read the EPI study
- Read the NILRR study
- Read David Doorey's blog
Patience wears thin I chuckled today when I read on the wires that patience is wearing thin where Greece is concerned. That's true, of course, but patience was wearing thin about 18 months ago.
Here's what you need to know: The crisis drags on with no agreement among political leaders to meet the terms of the Troika, the international lending group that includes the International Monetary Fund, the European Union and the European Central Bank, that will pave the way for fresh bailout funds. Indeed, a key politicial meeting has now been pushed into tomorrow. Nor is there a deal with private creditors on the terms of the hit they'll take as part of Greece's overall plan.
At the same time, major unions are striking again today, which, as Greece goes, also isn't really news.
As one government official put it to Reuters, "we must find a solution today." I thought that was the issue 18 months ago, too. Or at least yesterday, when Germany's Angela Merkel and France's Nicolas Sarkozy again pushed the Greeks to come to terms lest the euro zone fall apart.
"The political climate in Greece suggests otherwise and as such continues to make any deal to implement further austerity difficult, especially with a 24-hour strike starting today, as workers protest at new austerity measures, while politicians have one eye on a general election due in April," said CMC Markets analyst Michael Hewson, pointing out why the talks are so difficult.
"No one in Greece wants to be seen to be tightening the austerity noose even tighter for fear of being punished at the polls," he added.
"Some measures have been agreed including a 20-per-cent cut in the minimum wage and 15,000 public sector job cuts," he said in a research note today.
"Disagreement remains over around €1.2-billion of around €4.2-billion worth of government spending reductions. Even if agreement is reached, given past experience it would be naïve in the extreme to believe that any of the new measures could actually be delivered in the face of such public opposition."
For now, many still see a Greek bankruptcy as inevitable, and the stakes are high as the clock ticks down.
"It's a classic case of gamesmanship as each party weigh up who has the most to lose," said Lauren Rosborough of Société Générale. "As with all 'public' items any benefit or loss is shared – the obvious loser if an agreement isn't satisfactorily reached will be the global economy."
- Greece faces crunch talks as unions strike
- Citigroup sees rising threat of Grexit (Greece euro exit)
- Greece edging closer to default
Glencore, Xstrata agree to terms Glencore International and Xstrata, which owns Canada's Falconbridge, unveiled their blockbuster merger today, a marriage that would create a global mining giant valued at $90-billion (U.S.), The Globe and Mail's Eric Reguly reports.
The deal joins Glencore, the world's biggest commodities trader, with one of the biggest producers of thermal coal, copper, zinc and nickel.
The merger has been expected for some time. Glencore already owns 34 per cent of Xstrata and has wanted to buy the rest since Glencore's initial public offering in London last spring.
As Reuters reports, the deal isn't necessarily in for smooth sailing given that two major Xstrata shareholders don't like it.
- Xstrata, Glencore agree to terms on merger
- Xstrata-Glencore deal a possible game changer
- Glencore-Xstrata deal meets shareholder opposition
Wal-Mart gets ready Wal-Mart Stores Inc. is sprucing itself up for the arrival in Canada of rival Target Corp. .
The Canadian arm of the world's largest retailer announced today that it plans to spend more than $750-million on more than 70 projects this year. That includes building new stores as well as expanding and overhauling others. Most of the Zellers stores it got the rights to will be included, and will reopen as Wal-Mart outlets. There are 39 of those.
Target promises to shake up Canada's retailing scene, which Wal-Mart did almost two decades ago, when it begins opening its outlets next year.
Building permits surge Permits for construction starts in Canada surged more than 11 per cent in December, reaching the highest level since June 2007 and suggesting that low interest rates continue to feed the industry.
However, much of the surge was due to condo development in Ontario, where the Toronto market is a concern. In Alberta, though, commercial construction added nicely to the numbers, Statistics Canada said today.
"Construction intentions for multi-family dwellings rose 28.9 per cent to $1.9-billion," the federal agency said. :It was the second consecutive monthly increase and the highest level recorded since December 2005. The growth was due to major condominium and apartment building projects initiated in Ontario."
Australia holds firm Australia's central bank surprised many market players today by holding firm on interest rates.
Most had expected the Reserve Bank of Australia to trim its benchmark cash rate by one-quarter of a percentage point, but policy makers held it steady at 4.25 per cent, citing Europe's troubles and new forecasts for slowing economic growth, but a "continuing moderate expansion" in the United States.
Governor Glenn Stevens did leave the door open.
"With growth expected to be close to trend and inflation close to target, the board judged that the setting of monetary policy was appropriate for the moment," he said. "Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy."
Charles St-Arnaud of Nomura in New York said he expects the central bank will now hold steady through to 2013.
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