Need for a FWP in a modern economy suspect at best .
The 103rd Annual General Meeting of the Ontario Chamber of Commerce (OCC) was held in Chatham from May 3 to May 5, 2013 and John Sturuup, Vice President and Bob Malcolmson, CEO of the Greater Oshawa Chamber of Commerce attended. During the policy session on Saturday May 4th, the delegates from over 130 Chambers of Commerce and Boards of Trade in the province of Ontario, representing 60,000 businesses of all sizes, in all economic sectors and from every area of the province, debated over thirty resolutions that impact business in building a 21st Century workforce and improving the way government works. Delegates overwhelmingly adopted the Greater Oshawa Chamber of Commerce (GOCC) resolution calling on the province to Phase Out Ontario’s Fair Wage Policy.
“The Chamber’s resolution outlined how Ontario’s Fair Wage Policy distorts the labour market and increases public sector procurement costs and why it should be phased out,” stated Bob Malcolmson, CEO of the Greater Oshawa Chamber of Commerce.
Ontario’s Fair Wage Policy (FWP) was last updated almost twenty years ago by an Order-in-Council in 1995. The stated purpose of the FWP was to ensure that employees of private sector employers who contract with the government to perform construction or provide building cleaning or security services are accorded “fair wages”.
A “fair wage” is considered by the Ontario Ministry of Labour to be the current, generally accepted wage paid to a competent worker in the region where the work is performed. The FWP applies to contracts made directly by the government’s ministries and certain government agencies and corporations with private sector employers in the following instances: Construction projects in the industrial, commercial and institutional sector valued at $100,000 or over; Road building projects where the contract value is $160,000 or over; Sewer and watermain projects, regardless of value; and Janitorial and security contracts, regardless of value.
FWP contracts also require contractors to ensure that any subcontractors they retain fulfill the obligations under the contracts awarded by the government. Many jurisdictions across the US and Canada, including British Columbia, rescinded their fair wage policies on reasons that it increased public spending while yielding questionable benefits.
In October 2012, the Greater Oshawa Chamber of Commerce (GOCC) appeared as a delegation at the Durham Regional Council meeting regarding Report 2012-J33—an Update on Fair Wage Policies (FWP) for Industrial Commercial Institutional Construction Contracts. The joint Regional committee report before council called for the set up of a FWP, saying it would “level the playing field” for all companies bidding on a construction contract. The Chamber argued that a FWP result would result in higher costs to the Region, increases the capital costs on a project; and would negatively impact the sub contractors who are medium to smaller business in Durham; and it would have a negative financial impact in dollars to the ratepayers of Durham. After listening to the delegations and after a lengthy debate, the policy that would have set wages and benefits contractors would have had to pay employees while working on a Regional project was defeated.
The Chamber argued that there were several problems with maintaining a FWP in a 21st century economy and in light of Ontario’s fiscal challenge.
• The FWP adversely impacts small and medium sized businesses (SMEs) by limiting their ability to bid on government contracts. While larger companies are able to capitalize on economies of scale and find savings outside wages to outbid their competitors, SMEs lack the same capacity. As such, the imposed requirement to pay higher than market-based wages has artificially infringed SMEs’ competitiveness.
• The requirement to pay higher than market-based wages increases public sector procurement costs as vendors are forced to adjust their bids to accommodate higher wage costs.
• The need for a FWP in a modern economy is suspect at best. Market forces, not legislated regulations, are the most suitable and strongest determinants of prevailing wages across industries.
• Finally, the FWP sets a precedent for local governments to accept similar criteria on municipal government contracting, putting further pressure on already constrained municipal budgets.
The OCC’s mandate is to advocate strong policies on issues that affect its membership throughout Ontario’s business community. The recommendations adopted by the delegates urged the Government of Ontario phase out its Fair Wage Policy.