We Have a Problem in the Construction Industry. This is Why we need TFWs.
In this week’s news MPs and some union leaders have raised concerns about the apparent use of a significant number of Temporary Foreign Workers for the construction of the NextStar Energy battery plant in Windsor. Those raising concerns say they are going to fight for Canadian workers’ jobs. This is all fine and good but there are important points to highlight here. The scarcity of skilled labour in the construction trades and in several other sectors is not a new issue and it is fixable. TFWs merely and necessarily bridge a gap.
Leading up to the 2008 global financial crisis Canada was experiencing a boom in capital spending and that activity was severely at risk because of the lack of available trades people. The pressure on the market quickly abated during the crisis as projects were delayed or cancelled and we all conveniently forgot that there was a problem with labour supply. It has taken several years for demand to return and for the market to reach a similar critical point, but there are no surprises here. We ought to realize that whatever corrective measures might have been taken were too few and far between.
There is no single set of players that could be held accountable for the situation nor the collective failure to find a remedy that actually resolves the problem. Rather there is plenty of fault to be shared amongst many actors. It is important to look at how we ended up where we are today because simply raising the “alarm” is not going to lead to any real solutions. We need a set of calm independent heads to look at the issue and find truly innovative solutions. Doing what we have been doing is not going to lead to better results. First priority is to recognize that there are political issues that stand in the way of fashioning viable plans and this has to be addressed head on.
It has to be recognized that in the construction sector workers can come from many different sources, each of which might represent a different labour model or labour posture. These include contractors who are signatory to the Building Trade Unions (BTU), those that are signatory to alternative unions (like CLAC, CUSW, CMAW, and UNA) and contractors who are non-union. The unions in this sector need to examine their practices and protocols and arrive at honest assessments regarding whether they are truly helping or getting in the way. Other stakeholders (e.g. government) have to remember that there are a significant number of non-
BTU players who need to be engaged in the solutions.
In the short-run Temporary Foreign Workers (TFWs) become necessary because the ability of contractors to secure the requisite number of skilled workers is impaired by shortage of local (regional or national) supply. However, it may also be impaired because of limitations on the sources of labour available to the given project. For example, in cases where the project owner has decided with their EPCM or General Contractor to exclusively use BTU contractors a significant portion of the domestic labour market is effectively cut-off[1]. The Building Trade Unions may argue that workers are free to apply for positions that are posted when their hiring halls fall short of meeting demand, but the reality is that there are very real practical and cultural impediments that make it unlikely for unionized contractors in the sector to attract people who work under other labour models, even at critical times. People who are members of alternative unions for example have made a choice to be represented by theseunions and are reluctant to make a change. The lack of mobility, therefore, between labour models is a real problem that is seldom articulated though it is widely known.
These market restrictions are exasperated by the protectionist approach of BTU contractors and their associations who strongly promote themselves as the only viable choice for the construction of large industrial and commercial (ICI) projects. At an extreme, the presence of Project Labour Agreements (PLAs) on a construction project, which creates a BTU exclusive claim over jobs, only further complicates matters and serves to restrict labour supply. In a market of oversupply protectionism may make sense. However, in the current and sustained predicament we are in, we need everyone to make sacrifices for the greater good. If everyone remains unwilling to accept the need for change, Canada is at risk of stifling industrial development.
When an operation is being built by BTU contractors, whether with or without a Project Labour Agreement, the reality is that the site effectively becomes exclusive to BTU contractors and BTU members. Others are not welcome and in fact feel that they may potentially be actively unwelcomed if they chose to work at such a site. The only avenue open to them is to wait until the Hiring Hall is empty and then to apply for a position hoping the local union will grant them a temporary permit to work on that site. If the individual had worked for a long time with BTU contractors in other jurisdictions they will be welcome with open arms. If their experience is largely with alternative unions (like CLAC) not so much so.
The elephant in the room is that there is a systemic bias in the construction market that has led to a highly imperfect labour market that is flawed to the point that not only is attraction and retention of new workers blunted as a result of certain cultural artifices, but the entire market is broken to the point where we absolutely do need to rely on TFWs to meet project targets despite the fact that there are available Canadians capable of doing the work. For those raising the alarm over TFWs it is strongly suggested that they confront the existing impediments and become part of the solution.
At the core of the issue is an acceptance of the status quo as if we have no other alternatives to solve this issue. We seem to rely on mythical assumptions about the nature of the labour market. There is a grudging reluctance to consider a change to adopt a different perspective. For example, amongst many engineers and construction management people (including and in particular EPCM personnel) there is an over-riding belief that only BTU contractors have the ability to mobilize and manage a craft workforce capable of completing work in the Industrial-Commercial-Institutional (ICI) space. More specifically they will claim that others (non-BTU contractors) may be able to perform work with respect to the civil trades but are incapable of doing mechanical work. This is simply nonsense.
Many other beliefs about who is capable and who is not capable abound in the marketplace. There is sufficient evidence however to prove that there is no exclusivity in any portion of the construction market when it comes to the capability to get the work done. The existence of biased perspectives such as these and other more deliberate barriers to the free flow of labour across projects and across labour models leads to an untenable situation.
In economics there is a point in terms of market potential known as Pareto efficiency or optimality when an economy has its resources and goods allocated to the maximum level of efficiency, and no change can be made without making someone worse off. Pure Pareto efficiency exists only in theory, though the economy can move toward Pareto efficiency. The Canadian labour market in the construction sector cannot approach greater efficiency because of the long-standing beliefs, norms and constructs that stand in the way of a more open marketplace. This is reflected in the perception of scarcity when one of the real issues is the distribution of resources. It is also reflected in other adverse effects such as poor productivity (which increases the need for more labour) which is enhanced by the lack of competitiveness in many parts of the construction market. Exclusive arrangements such as those created by Project Labour Agreements or other legal conventions as well as those created by the reluctance to open up access to work packages to alternative contractors have been shown to result in project owners paying premiums, and in sub-par performance in terms of the completion of projects on time and on budget.
In Alberta we have seen these norms disrupted by the wide acceptance of CLAC contractors in Fort MacMurray and Wood Buffalo amongst oil and gas projects. Those contractors, who do not insist on any form of exclusive right to the jobs (e.g. CLAC contractors) have captured a 65-70% of the construction market share and have created environments that are far more productive and safer. This has happened because the project owners insisted on a change. The people paying the bills were collectively unhappy with the traditional approaches and pushed for something different. This is not to suggest that there are not problems and issues in the Alberta market. However, the increased contractor competition has led to a more vital marketplace and demonstrates the possibility for more innovative work solutions across the country. It stands to reason that in a more open and competitive market there will be parties who will find solutions in order to develop a competitive advantage. This does not happen when energy is spent protecting a market segment and promoting an outmoded monopoly position.
Wewe have a long-standing set of structural issues that have created a complex cultural problem that has deterred people from choosing or successfully staying in a career in the construction trades. TFWs may be needed in the short-term but will not help fix the underlying issue. Nor will we see any degree of fundamental change by having the different levels of government fund various industry players to increase training. What is needed is a transformation of the industry which is only possible if we acknowledge and confront the real barriers to moving forward and we are willing to break them down.
Members of Parliament and Unions may lament the need for and use of TFW on Projects like NextStar Energy’s Windsor plant but their pleas are not helpful without making suggestions regarding how we can fix the structural issues. We suggest there is definitely a set of viable solutions and these options will only be possible if all the key players in the industry are up for constructive criticism and are willing to seek common benefit and in doing change their views and practices.
In the near term we strongly suggest any project owner contemplating building in Canada ought to consider developing a comprehensive project strategy that examines the interactions of constructability, contracting, community engagement, and labour relations strategies to address labour risks. The owners that put together the right proactive strategies will be successful, meet their budget and scheduling targets and will not experience a problem with labour supply. Project owners should seek to educate themselves on Canada’s labour market and to solicit independent advice before committing to a labour posture that may result in the very real problem of getting enough skilled people to do the work.
[1] For example, The BTU represents approximately 15% of workers in the construction trades in the B.C. (35,000 of the 236,000 people in the construction trades in the province) with the balance mostly non-union and a small proportion represented by alternative unions in all-employee units.
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