2006 June Speech Canadian Institute's Resource Industry

Gil McGowan, President of the Alberta Federation of Labour,  June 13, 2006

Sometimes life proceeds as expected - sometimes you get thrown a curve ball

Getting an invitation to speak at this conference was a curve ball

It would be an understatement to say it's unusual for management here in Alberta to come to labour for advice - especially management in the resource sector.

But the truth is there are actually a lot of things we can agree on. For example, we all want the Alberta economy to remain strong. And we all want individual Albertans to benefit from that prosperity.

And despite the stereotypes about unions - that we're always spoiling for a fight and never want to cooperate - the truth is we want to be constructive.

In that spirit of constructive engagement, I'd like to do three things this afternoon:

First, I'd like to begin by talking about the nature of the challenge that we face in the Alberta labour market - for the obvious reason that if you don't have a clear understanding of the problem, you'll have a hard time coming up with solutions.

Second, I'd like to offer suggestions about what, from a union perspective, employers should be doing - and what they shouldn't be doing - if they want to attract and retain employees.

Third, I'd like to step back and look at the big picture. In particular, I'd like to address the question: what can and should government and business, broadly defined, be doing to help makes the challenges presented by Alberta's tight labour market more manageable?

I'm big on metaphors and analogies - so I'll describe my mission is nautical terms: what I'd like to do today is talk about just how choppy the waves are in Alberta's labour market; what individual firms can and should be doing to avoid getting swamped; and what we can do collectively to calm the waters and keep all of our boats afloat&

So just how high are the seas?

Looking at the Alberta economy from a distance, it looks like an almost entirely unblemished good news story.

There is unprecedented demand for our most important commodities: oil and gas. And all signs suggest that demand will remain strong.

In the past, oil producers like Alberta were almost entirely dependent on the U.S. economy. If demand fell there, world price would fall. But this time around things are different - U.S. is not the only game in town. China, and to a lesser extent India, have emerged as major forces. So even if the U.S. economy slows oil prices may dip, but probably won't collapse.

We're also bumping up against the reality of declining world-wide petroleum stocks in a way that was the case in the 70s or 80s.

The result for Alberta has been staggering amounts of money being invested in our economy - particularly in oilsands development. Depending who you talk to, more than $100 billion in energy projects are on the books.

At the same time, after years of neglect, the government is finally spending substantial amounts of money on public infrastructure. This spending is welcome, and many would argue long overdue. But in an important way, they're competing with the private sector for resources.

All of this has led to record employment levels, strong job growth, strong consumer demand. And after 15 years of virtually zero growth in average real wage, over last three years we've been seeing wage increases that have been keeping ahead of inflation.

Some critics in the business community have complained about the increase in average wages. But, from our perspective, the real test of an economy is if it's working for ordinary people. So we strongly believe that rising incomes are something to be celebrated, not feared.

But, despite first impressions, the Alberta economy in not all good news - there are downsides.

First, the truth is that prosperity in Alberta is not universally shared. Energy is king, but it is not everything. Prices have been going up for oil and gas, but not for many of the other things we produce. Livestock, agricultural products, forestry products & the Alberta Advantage has not included rising demand or prices for these things.

Just last week, Stats Can released a report showing that farm incomes in Alberta have fallen by 50 per cent - 50 per cent in one year. The price for cattle about the same as it was during the BSE crisis. And the price for wheat, barley and oil seed, lowest in decades

In forestry, I've been talking to our members in the Hinton pulp mill and our guys who work in saw mills. Their employers aren't talking about growth. In many cases they're talking about lay-offs.

Wage increases are also not universally shared. The AFL represents 31 different unions in all sectors. One of our big private sector affiliates is UFCW, which represents thousands of retail workers. Their employers - companies like Safeway and Superstore - are not giving out double-digit wage increases.

And just this morning, I was on the phone with a group of school board workers in the Pincher creek area who are looking at a wage offer of 9 per cent - over five years.

It sounds like what workers came to expect during the last recession - but it's still the reality for many.

So, like the broader economy, the Alberta labour market, is a complex beast. The headline in today's Calgary Herald screams about a labour shortage & a shortfall for the city of 30,000 workers over the next ten years. It sounds ominous. But the truth is much more nuanced.

The construction labour market has been the subject of greatest attention lately. And there is no doubt that the industry is red hot & thanks mostly to oil sands development. But some important points need to be made about construction.

For example, construction is by its very nature cyclical. 60,000 trades people may be needed this year, but maybe only 10,000 the next year. That's the way construction works.

We're currently at or near the top of the cycle. But even here at the peak, within the construction labour market, we need to acknowledge that the situation is fluid.

The best you can say is that some trades are in shortage at some times & it depends on which trade and which time.

So right now for example, several major projects have recently been completed & the biggest example being the UE-1 expansion at Syncrude. The result is that hundreds of trades people who have been tied up in some cases for two or three years are now available for work.

The Alberta Building Trades Council just completed a survey of hiring halls around the province and what they found was that there are literally thousands of unionized trades people available for work.

So for those of us in the labour movement, something just doesn't compute. On one had we have employers screaming labour shortage and calling for desperate measures like radical increases in the use of temporary foreign workers. And on the other hand, we have thousands of unionized tradespeople people who are ready, willing and able to work - but who are still sitting on the sidelines.

That's why we have a hard time agreeing that there's a labour shortage in contraction - when the pool of unionized tradesmen is not being fully utilized.

Having said all that, there is no doubt that in many sectors and in many occupations we have a tight labour market.

As I said, this tight labour market is the natural result of a strong economy & and it's good for workers. But we recognize it does create challenges for some employers.

The challenge for employers - people like everyone in this room - is compounded by what I would describe as Alberta's labour market hierarchy.

There has always been a pyramid in the Alberta labour market & with the energy sector at the top.

They've always been able to pay more. But with oil at $70 barrel, the energy sector's ability to outbid other employers in other sectors has probably never been greater & and that's a challenge.

How, for example, do you compete with energy companies that are offering signing bonuses of up to $30,000; moving bonuses of $15,000 and annual retention bonuses of $25-30 thousand?

Interestingly, the challenge is no longer restricted to non-energy companies. Probably for the first time ever, energy companies are competing with each other. In fact, I don't think it's a stretch to say that the most popular past-time at Petroleum Conference around town this week will be staff poaching.

So how do you stay afloat in these stormy seas? You've been discussing this amongst yourselves for past day and a half & and I'm confident that you've identified many workable solutions. But for what it's worth, I'd like to present my list of do's and don'ts from a union perspective.

My first "do", perhaps not surprisingly, has to do with wages.

DO accept that the cost of labour has gone up & and DON"T attempt to defy the economic laws of gravity.

Not that long ago, I remember one of the buzz phrases used by employers was "cost certainty." They were always coming to the bargaining table and saying they couldn't proceed with this project or that project without guarantees that wages would stay flat.

That's was the rationale that the provincial government and Canadian Natural Resources gave when CNRL was granted special status under the labour code for the Horizon project. They said that government intervention to keep wages flat was warranted be Horizon was so important to the Alberta economy and because the company needed "certainty."

But as an acquaintance of mine, who happens to be an engineer and project manager for a big construction firm, pointed out: if you don't pay the going market rate, if you try to defy the economic laws of gravity, you loose out.

As he said, if you balk at paying the going market rate, workers vote with their feet & and you end up with what he described as the "bar stools and high schools" approach to recruiting.

This approach sets off a vicious cycle. In a tight labour market, with lower pay you get a lower quality of worker or no worker at all; you get declining performance; you get increased workplace accidents; you get delays and missed deadlines; you get angry clients, maybe lawsuits and you get lost business opportunities.

There was a time, not that long ago, when the Alberta economy and the broader Canadian economy was sluggish. In that kind of economy, employers could more easily get away with doing the minimum. They could more easily get away with layoffs and "outsourcing" & and with treating employees like Post-it-Notes, to be used and discarded.

But those days are over. Bragging about being the "low cost" provider doesn't mean being the smartest guy in the room anymore, if it ever did.

Now it means being the guy who is going to have chronic labour relations problems. It means being the guy who provides a sub-standard product. It means being the guy who's going to miss targets, disappoint investors and clients and who's going to loose out on the next contract.

The bottom line is that you need to value you employees. Part of that means viewing paying the going market rate as an inescapable cost of doing business.

Of course, paying them well is not the only way to show your people that they're valued. It's necessary, but not sufficient. That leads me to the rest of my list of "dos" & and some of these may surprise you &

For example & DO make a point of having on-site HR people &

Delegating day-to-day hr responsibilities to you foreman may sound like a great way to save a few bucks & but it'll cost you & why? & because most of these guys couldn't tell the difference between the Employment Standards Code and the DaVinci Code & because you might get a foreman who wants to be everyone's buddy on the morning shift and a foreman who's Attilla the Hun on the afternoon shift.

Employees hate that kind of inconsistency and petty unfairness. And in a tight labour market where employees have options, you can't afford to loose people because one of your manager like to play job-site Rambo.

Also DO think of the other half of your employees life & the half that they spend away from work.

This is particularly important given that so much of the work that's being done in Alberta today is in remote locations & where people are forced to be away from their families for long stretches & and where they don't have access to amenities.

The good news is that Albertans are hard workers & they don't mind putting in a hard days work in exchange for their paycheques.

But given a choice & and in the current sellers market workers have choice & employees will choose those employers that do more to make it easier for them to live a real life.

Whenever I want to understand what trades workers in particular really want out of their jobs, I sit down with my brother in law.

He's a journeyman electrician & and for the better part of the last three years he worked in Fort McMurray on Syncrude's UE-1 expansion.

He made buckets of money & more than he every imagined. But it came at a price. He has a wife and three young kids at home. For three years, almost never saw them.

So a lot of people in our family used to rib him about his huge salary. But you know what he really wanted? To be closer to his family.

His dream job is not another stint in the camps. He may end up doing that & but his real dream job is to get on with Epcor, the Edmonton power utility. Because it would allow him to live his real life - instead of the half life that works live in isolated camps.

So those employers that are in the bigger centres & where people can actually settle and build lives & you have an advantage & which you should play up. For those who have no choice but do put people into remote locations & ever effort you make to that isolation more tolerable and the time away from family shorter will pay dividends.

Another important item on my DO list is training.

Your employees want to gain more skills, they want to get better at their jobs, they want to contribute and they want to advance. To put it in a nutshell they want the prospect of a better future & and training helps them get there.

Training & whether apprenticeship or some other kind of on-the-job instruction & makes sense for both the employee and the employer.

For workers it makes sense because with their improved skills comes confidence, self-worth and hope for the future.

And for employers training makes sense because you get a bigger pool of trained workers to draw from. Training also makes sense because you get that most of elusive things: loyalty. I've seen it time and again & employers who train, get employees who stay.

But there's a problem & and I think all of you know what it is. For years now, both governments and employers have been neglecting apprenticeships and training.

Only recently has the provincial government ramped up spending to fund new apprenticeship spots at technical schools like NAIT and SAIT. That's great, but those spots are only part of the solution. We all know that these young people can't get their journeyman's tickets without being indentured & they can't become an answer to your labour market shortages until they get on-the-job training from companies like yours.

And that's where the system is falling down. According to a study that was done recently by Skills Canada and the Canadian Apprenticeship Forum, only 18 per cent of Canadian employers take on and train young apprentices - although 41 per cent had the capacity to do so because they already had qualified tradespeople on staff who could supervise training &

The Construction Owners Assoc of Alberta came up with similar numbers. Of the 20,000 trades employers in Alberta, only 11,000 have apprentices.

This is what economists call the free rider problem. Most employers agree that it's desirable to train more apprentices. But too many of them don't want to bear the cost themselves.

Instead, they assume that "the other guy" will do it. Unfortunately, the "other guy" usually makes the same assumption and the number of apprenticeship positions available - even if Alberta's hot economy - fails to meet demand.

The energy sector is a particularly big culprit in this regard. A few years ago, the federal government - through the tripartide petroleum industry sector council - produced a report on training in the energy sector. As part of that consultation, the council's steering committee consulted with a number of big energy CEO from right here in Calgary. And do you know what they said? The petroleum big wigs said: "we don't have to train. We pay more, so we can just take the people we need from other sectors." That was only three years ago.

This helps explain why thousands of the young people who enroll in the trades never finish. The numbers on non completion are actually staggering. Less than half of those who enroll are completing their apprenticeship in the expected timeframe & and more than 40 per cent have still not earned their certificates after 10 years.

Given the current nature of Alberta's labour market, this is a travesty. And it's direct result of employers shirking their responsibilities when it comes to taking on apprenticeships.

And unfortunately, it's not just apprenticeships. Employers in Canada spend less on on-the-job training than almost any other OECD country & including the US.

So when it comes to my list of DOs training is a big one. In fact, I present it to you as a challenge. We're all suffering because, employers have shirked their obligations in training & it's time to start holding up your end.

That leads me to my list of don'ts.

DON'T be afraid of unions & and don't allow yourself to fall prey to the snake oil salesmen, often dress up as reputable sounding lawyers, who promises fool-proof "union avoidance" strategies. Those strategies, make the snake oil salesmen money. But they often leave you with a legacy of poisoned labour relations. And for what? So you have bragging rights?

The truth is that in tight labour markets, having a union in your workplace can be a big advantage. The record clearly shows that there is lower turn-over in unionized workplaces. Unions can also be useful partners in recruitment. Build trades unions have formal connections with hiring halls in other parts of the country where there are higher rates of unemployment. Industrial unions don't have hiring halls with guys sitting on lists & but we do have networks.

Unions can also be important partners in developing retention strategies that are tailored to your workplace. And a union contract can actually help you achieve that elusive goal of "cost certainty" & at least in the short term.

At the beginning I promised to do three things & I promised to talk about how rough the waters were; how you could avoid getting swamped and finally; I promised to look at the big picture. In particular, I talk about the importance of understanding what has been causing all the waves in our labour market. And I promised to make some suggestions about what, collectively, we can do to calm the waters.

As I've said, a big part of the problem is the failure on the part of government and employers to invest in trades training.

But I also think at least part of the problem is that the provincial government has deliberately been administering steroids to our economy & in the form of unreasonably low royalty rates.

The interesting thing about steroids is that they work - at least in the short term. They can greatly improve performance. But in the same way that steroids are ultimately bad for the human body, economic steroids can be bad for the economy.

What I'm talking about of course is the Alberta government's now famous one-per-cent royalty rate for the oil sands.

Like the steroids that athletes use, the one-per-cent royalty rates have worked. Coupled with record high oil prices, the one-per-cent royalty has set off a gold-rush of development. Oil companies are flocking to the oil sands - and why not. With the one-per-cent rate the provincial government is essentially giving away ours resources. None of the big oil companies want to miss out on the party.

Why you might ask is this of concern to a union leader. This is a labour issue because these low rates - all this development comes after years in which government failed to invest in trades training and employers failed to hold up their end by taking on adequate numbers of apprentices.

The result is as frustrating as it was predictable. Because of the steroids, demand goes up for trades people, but because of the inattention training the supply struggles to keep up.

The bottom line is that the Alberta government and the Alberta business community are authors of the tight labour market they are now complaining about. They are reaping what they have sown.

And what do they offer as a solution? More of the same on training and temporary foreign workers, that's what.

We think a better approach would be to get business and government to make commitments to ensure our apprenticeship system actually works. In particular, we need to squarely address the reality that employers are not holding their end up when it comes to providing jobs and placements for apprentices.

It's probably also time to revisit the one-per-cent royalty. These kind of fire-sale incentives were never prudent - even when oil was at $15 a barrel. And they are certainly not justifiable when it's at $70 a barrel.

It's also important to keep in mind that the oil sands is a resource that we, as Albertans, own collectively. It's fine for the Premier to say we'll get our pound of flesh eventually. But with all due respect, he's wrong. Once that oil is gone at one-per-cent, we'll never see it again - and we'll never get another chance to get money for it.

And we're not talking about pennies here. We're talking about tens of billions of dollars lost. That's money that could be spent on public prorities like health care, education and infrastructure.

We're short of like a junky. Not only are we taking a drug that ultimately hurts us & we're flushing our money down the drain to get it &

Thank you.


Be the first to comment

Please check your e-mail for a link to activate your account.