What Strikes Are Costing The Canadian Economy

By Tim Begany | July 19, 2011 AAA
What Strikes Are Costing The Canadian Economy

Strikes and other labor disputes have been big news in Canada for several years. One of the latest incidents, a series of postal worker strikes in early June, led to a lockout of 48,000 unionized post office employees that essentially shut down Canada's state-run postal system. The government has since stepped in to resolve the situation, which began over issues like wages and workplace safety. The union has vowed to sue the government over laws it enacted to force post office employees back to work. (To learn more, check out Unions: Do They Help Or Hurt Workers?)

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The air travel industry in Canada has seen its share of such problems recently, too, like the strike by 3,800 Air Canada customer service agents in mid-June. The dispute was short-lived, with Air Canada and the agents quickly reaching an agreement after the government introduced back-to-work legislation similar to what it used to end the postal workers strike.

In February, disgruntled dock hands and other port workers in British Columbia came very close to striking over low pay and other issues, though that crisis - and the severe economic damage it would have caused - was averted. However, some 1,700 locomotive engineers with the Canadian National Railway made good on their threat to walk off the job in late 2009 after the railway began pushing an employment contract the engineers opposed.

Let's face it, strikes happen. And although they're often justified, they can negatively impact a country's economy. Here's a look at what strikes have been costing the Canadian economy recently.

The Postal Workers Strike
Besides substantially reducing mail volume for nearly two weeks, this strike resulted in lost revenue of more than $100 million for Canada Post. The service interruption also undoubtedly put some financial hurt on many mail-based businesses, though there aren't any official estimates of those costs.

The postal workers decided to strike after Canada Post sought lower wages for new employees. Canada Post also wanted new employees to work an additional five years before becoming eligible for a pension - a measure proposed to help address a $3.3 billion funding deficit in the existing pension program. (Professional sports is another industry where strikes are present; learn more in Pro Sports Unions: Do They Help Or Hurt?)

The Air Canada Situation
Here, too, official numbers are in short supply, so it's hard to say exactly how much the walkout by the Air Canada customer service agents cost. But it isn't hard to imagine a high price tag even though the strike only lasted a few days.

During that time, many domestic flights were delayed and all international flights were grounded. Thus, it seems fair to estimate losses of millions or perhaps even tens of millions of dollars considering a 13-day walkout by 2,100 pilots in 1998 did $133 million in damage to Air Canada's bottom line.

To get the customer service agents back to work and avoid government interference, Air Canada gave the agents a four-year deal believed to include 9% pay increases over the term of the new deal. It is also believed that Air Canada agreed to leave the agents' current pension plan intact, rather than switch to a cheaper (though potentially less desirable) alternative.

The Canadian National Railway Strike
No specific dollar value has been placed on the walkout in late 2009 by 1,700 Canadian National Railway engineers, which, like the Air Canada strike, was short-lived because of the threat of government intervention. However, a price tag in the millions or tens of millions is easy to imagine in this situation since the strike resulted in shipment delays for many commercial railway customers including automobile manufacturers, chemical producers, forestry firms and farmers. That sort of thing can really throw a wrench into the economic machinery.

The Bottom Line
Strikes have cost the Canadian economy some serious money recently. However, things seem to have quieted down for now and Canada fortunately appears to have avoided "the big one" - a strike by the British Columbia port workers.

Because those workers play a key role in international trade, having them off the job probably would have caused far more economic damage than the Canada Post, Air Canada or Canadian National Railway strikes. Whereas, the total cost of the postal workers strike was around $100 million, a port workers strike would have cost an estimated $100 million per day. The effect on Canada's economy could have been disastrous. (With the labor market changing, so too is the role of labor unions, to learn more read 6 Things Putting Unions Under Fire.)

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