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Unions want protection from GST-caused inflation; government calls for restraint.

Unions want protection from GST-caused inflation

When it comes to the proposed goods and services tax, the federal government and trade unions are calculating the potential impact differently.

Ottawa is asking for restraint in labor talks and says the GST's impact on inflation will be limited

On the other side, unions are concerned about the impact and are calling for protection in contracts up for negotiation.


Rick Doyon, senior communications officer with the Department of Finance in Ottawa, said Finance Minister Michael Wilson has called for restraint in negotiations.

Doyon noted that there has also been a call to the business community to pass on the savings from the switch from the manufacturers' tax to the GST.

If they do that, there's a very good chance that the one-time inflation rate impact of the GST will be kept under 1.25 per cent, he said.

"We've had a very good response to that," he said, noting that such major companies as GM, Ford, IBM and Sears have voiced their support.

Doyon said companies realize that, if they can save from the switch in taxex, it would reduce the cost of business and make their products more competitive.

It is really up to business and the labor unions when they are at the negotiating table to adopt an attitude to get through the transition, said Doyon.

"It's in everybody's interest to hold down demands."


On Aug. 13, 250 auto mechanics in Thunder Bay settled a strike after a month and a half off the job.

Although the GST was not directly mentioned in the new contract, it played a role in the negotiations.

"It certainly did," said Robert McMuldroch, business representative of Local 1120 of the International Association of Michinists and a member of the negotiating team for the auto mechanics.

McMuldroch said the GST was naturally on the minds of everyone.

The mechanics settled for "raw dollars," without having any specific GST protection in their contract, he explained.

The contract calls for a $5.50-per-hour raise over four years, bringing the wage to $34.25 per hour at the end of the deal.

McMuldroch said the workers were hedging their bets that the cost of living would not rise more than 11 per cent per year, which would be the break-even point.

However, he said his crystal ball could not predict the inflation rate for the coming years.

"We feel we are reasonably safe," he said. "Who knows?"

The contract also included a doubling of the pension contributions made by the employers, a long-term disability provision and an expanded medical plan.

However, the main issue in the negotiations was wage parity for mechanics with the building trades, such as carpenters and construction workers.

Another union, the Canadian Paperworkers Union, started out this year's negotiations wanting protection from GST-caused inflation.

However, a spokesman at CPU headquarters in Montreal said a GST protection demand has been dropped because it wasn't obtained in negotiations with Stone-Consolidated in the St-Maurice Valley of Quebec.

The demand had been a main issue in the negotiations.

The Stone-Consolidated contract will be used as the basis for 80 per cent of the CPU contracts in Eastern Canada which are up for negotiation this year and involve 30,000 workers.

The spokesman said part of the union's main agenda was to have fully indexed wages.

Only some CPU contracts have indexed wages now.

The spokesman said there are many theories concerning the effects of the GST.

Noting that the federal government estimates a 1.25-per-cent one-time effect from the GST, the spokesman said, "The government essentially has an extremely optimistic view. Almost no one agrees with them, not even the business community."

The worst-case scenario is that inflation will increase by an additional 3.5 per cent

The CPU spokesman said the union believes the increase will be somewhere between the two figures.

The spokesman noted that the tax will increase inflation by increasing the cost of doing business. In Britain, he noted, it was estimated that a similar tax added .25 per cent to the inflation rate.

He said the CPU is 100-per-cent opposed to the GST as a regressive tax that penalizes those with the least money.


John MacDougall, the Progressive Conservative MP for Timiskaming, said unions are using the GST as a bargaining tool.

"If I were in their shoes, I certainly would," he admitted.

MacDougall said, if Canadians want to bring interest rates down, they must be realistic with their wage demands.

"If we price ourselves out of the market, we won't have to worry about jobs. They'll be gone," he warned.

MacDougall said the GST is not something that the government wanted to implement.

"It's done through necessity," he said, explaining that the tax is needed to keep Canadian goods competitive in the marketplace.

"If we price ourselves out of the market, who's going to buy our products?" he asked.

Foreign-made goods currently have an advantage over exported Canadian products because of the manufacturers' sales tax.

The MP believes the predicted bad effects of the GST will not materialize.

"All the horror stories we heard are not going to be there."

"The only way it will be sold to Canadians is when it is in place, and they're going to buy a fridge or a car and they see the difference in price," he said. "That's the only time the vast majority of Canadians will understand."

As for predictions that prices will increase as a result of the GST, MacDougall said, "I think it's going to be policed by the consumer. Consumers are very wise shoppers today."

The MP also noted that the government has created a safety net for lower-income Canadians with a GST tax credit.

The MP said Northern Ontario will not be affected by the tax any more than other regions of the country.

In fact, he said, "It should be beneficial to the mining, lumber and agricultural communities."
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Title Annotation:goods and services tax
Author:Bickford, Paul
Publication:Northern Ontario Business
Date:Sep 1, 1990
Previous Article:Provincial election falls short of generating expected business.
Next Article:Forest industries tighten belts for pending recession.

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