'Costs could be staggering': How businesses, Bay Street are reacting to the PSAC strike

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The reaction from business to the decision by the Public Service Alliance of Canada (PSAC) to trigger one of the biggest strikes in Canada’s history was universally negative, as various lobbies called on the federal government to end the strike quickly, while economists warned that the labour action could have a material impact on the economy. Here’s what some of them are saying:

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Small business: Ready back-to-work legislation

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The Canadian Federation of Independent Business (CFIB), which represents smaller companies and ranks among the most powerful lobbies in Ottawa, issued a press release to register its concern that the strike could have a disproportionate impact on its members.

“A strike by the (Canadian Revenue Agency‘s) unionized workers, in the middle of tax season, will cause significant stress for small businesses and taxpayers,” said Dan Kelly, the group’s president. “The work stoppage could result in penalties and interest for small businesses and the inability to get their important questions answered.”

Kelly also expressed alarm over PSAC’s wage demands, saying the “costs could be staggering, ensuring endless deficits, future tax hikes and exacerbating inflation.” Kelly added: “Wage hikes of this size also put pressure on the private sector to do the same — making the shortage of labour an even bigger challenge for small businesses.”

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The CFIB urged the federal government to “ensure all departments maintain full service to small businesses,” negotiate with an eye to getting a “long-term and affordable” collective agreement, and prepare back-to-work legislation if the strike lasts more than a few days.

Wheat farmers: Keep the grain moving

Wheat farmers called on the federal government to “ensure” employees of the Canadian Grain Commission return to work immediately, as the spring planting season is weeks away and producers are sill working on emptying bins after one of the biggest harvests on record. Failing that, the Wheat Growers lobby said Ottawa should grant immediate exemptions so farmers can pay third parties to conduct mandatory grain inspections.

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“Farmers need to continue to deliver last year’s crop before spring seeding to run their businesses and purchase inputs for the 2023 crop,” Gunter Jochum, president of the Wheat Growers lobby, said in a press release. “A stoppage would be devastating to the industry, and ultimately to consumers.”

Slower inspections of imports and exports at Canada’s ports likely would cause traffic jams, as vessels line up to load and unload. Grain growers are doubly vulnerable because federal law requires an inspector from the Grain Commission to sign off on shipments.

Jochum used the strike to re-up Wheat Growers’ demand that the federal government loosen restrictions on grain inspections and allow private inspectors to do most of the work. He said 70 per cent of Canadian grain currently is inspected by both the Grain Commission and a private inspector because customers insist on the later. The “double inspection” costs farmers some $60 million annually, the Wheat Growers press release said.

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“With efficiencies paramount in any business, is it time for (Grain Commission) services (to) be moving to a regulatory oversight model like the United States? While we recognize that would require a legislative change, until then we expect government to ensure that (Commission) staff not in the PSAC union be available to pick up, bag and tag samples provided by a third party for (Commission) grading, thereby ensuring vessel loading and movement impacts are minimized because of the strike,” the press release said.

Bay Street: ‘Cannot be dismissed’

Bank of Nova Scotia economist Derek Holt advised his clients that the strike could have a material effect on the economy and therefore investors should pay attention.

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The impact depends on the duration of the strike, of course, but Holt said a “crude back-of-the-envelope” calculation would show that for every day one-third of the federal workforce remains off the job, the hit to government spending would be about $200 million. It isn’t inconceivable that a one-month strike could reduce nominal gross domestic product by one per cent. Since the Bank of Canada projects growth at an annual rate of only about one per cent in the current quarter, the risk of a contraction “cannot be dismissed,” Holt said. Still, the central bank likely would “look through the effects as an inter-temporal shock with activity punted to the next period, although it could cloud the data,” he said.

Holt added: “I’m not optimistic that this walkout could be short lived, but it’s not impossible assuming that the government’s chequebook hasn’t run out of cheques!”