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Here’s a situation that’s not ideal: Between 9,000 and 10,000 union members at two railroads are on strike, costing the economy $341 million a day, or more than four percent of total GDP in a country of over 40 million people. And something else that’s not ideal: The federal government is interfering in agreements between employers and employees by mandating binding arbitration (which the union did not want) and ordering the end of the railroad’s industrial action.

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The first situation is not ideal because the economic damage is so great, especially considering the relatively small number of workers affected. The government’s commitment to binding arbitration measures is also not ideal because companies should have the right to lock out their workers and workers should have the right to organize and strike.

Why can’t we just have functioning railroads without the threat of major work stoppages? One answer – not necessarily the whole or only answer, but a very good one – is that the government gives unions far too much power in this country. Workers should have the right to organize and strike, but without government benefits and unbalanced labor relations laws, union formation and major work stoppages would be much less common.

The almost conclusive evidence that unions destroy economic value and could hardly survive in a competitive environment lies in the fact that in 2023, only 13.7 percent of Canadian private sector workers were unionized—down from 19.0 percent in 1997 (the earliest year with comparable data from Statistics Canada). In the public sector, by contrast, 73.5 percent of workers were unionized in 2023—up from 69.8 percent in 1997. In the United States, the Bureau of Labor Statistics reports private sector (excluding agriculture) unionization at 6.1 percent in 2023, compared to 32.5 percent in the public sector.

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The differences in union structure in the private and public sectors are notable, as are the significantly higher union rates in Canada compared to the United States. The differences in labour laws are largely due to differences. In 2014, the Fraser Institute published a ranking of the balance of labour laws in 61 jurisdictions – the 10 provinces, the Canadian federal government and 50 US states. The rankings took into account such issues as whether a secret ballot is required to recognise a union, whether workers who do not wish to join a union can be forced to pay union dues, whether temporary replacement workers can be allowed in the event of a strike, and so on.

Out of 61 jurisdictions, Canada’s federal government came in last place with the most union-friendly labour laws. This imbalance is exacerbated by the Trudeau government’s recent legislation banning replacement workers during strikes and lockouts in federally regulated businesses – including the railways. Ranked 51st to 60th were the 10 provinces, with Alberta ranked as the least bad province in Canada when it comes to labour laws, but having worse laws overall than any of the states (though it does better than the states in some areas).

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Unbalanced laws that grant extraordinary privileges to unions not only destroy economic value and increase the risk of work stoppages, but also fail to protect workers. It is well known that workers are protected not by unions or government regulation, but by employers seeking labor.

“The employers who protect a worker,” Milton Friedman aptly explained, “are the people who would like to employ him but for whom he does not work. The real protection a worker gets is the existence of more than one possible employer. That gives him freedom; that enables him to get the full value of his services. That is competition. That is a free market.”

The Canadian rail industry does not have too many potential employers: the two railroads, CN Rail and CPKC, which are engaged in industrial disputes with their unions, together own over 80 percent of Canada’s rail lines. Although railroad workers have some railroad-specific knowledge and skills, they are not as specialized as astronauts or neurosurgeons, and their skills are not as intransferable to other industries and other employers. Railroad workers, like those in other sectors, are protected by labor competition, not by unions.

For real worker protection, fewer economically damaging strikes and a more productive economy, we therefore need more competition, less government and fewer unions – in the rail sector and in all others.

Matthew Lau is a writer based in Toronto.

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