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Chapter 8. The Economy since 1920

8.12 The Postwar Settlement in Canada

Peter McInnis, Department of History, St. Francis Xavier University

Canadian workers have long struggled to achieve improved job and living conditions for themselves and their families. Most efforts to organize unions faced the combined might of employers and the state, and the resulting discord often led to harsh repression and violence. Traditionally, only the most highly skilled craftsmen had opportunities to influence their working environment through collective action. Leverage was achieved, however, by ensuring that the trade unions were inherently exclusive and limited only to those with specific training — often excluding racialized and gendered minorities. This rudimentary system of union organization functioned with limited success, but during times of economic downturn or overt oppression from employers and governments, these early trade unions declined.

With the outbreak of the Second World War, Canada was forced to initiate a massive program of military expansion to contribute to the Allied cause. A vital aspect of this project was enticing new workers to cooperatively join in this rapid industrialization. The accelerated economic transition was especially challenging as the “ten lost years” of the Great Depression had left Canada’s industrial sector in disarray. In Ottawa, the Liberal government of William Lyon Mackenzie King, equipped with extraordinary authority under the War Measures Act and following the lead of earlier American legislation, introduced a series of measures to spur wartime industrial growth. One such measure was Privy Council Order PC 1003 (1944) that, for the first time, allowed unions to engage in widespread organization and bargain collectively for job contracts. This change was advantageous to the many workers drawn to wartime jobs and seeking representation from new unions (modelled on the concept of large sectorial or “industrial unions”) that brought together members regardless of skill levels. As the numbers of unions and union members increased exponentially, organized labour quickly assumed a higher profile in public deliberations.

After the victory over Nazi Germany looked certain, the federal government started to scale down its war-related industrialization. Wartime labour protections, such as PC 1003, were thus scheduled to end. The question before many Canadians was whether unions would be once again forced to struggle (or even lose ground) to retain the gains they had achieved during the war. In the immediate postwar period, many Canadians spoke of a desire for a reformed nation that embraced greater fairness for all its citizens. Aware of this debate, most political parties veered toward satisfying this progressive mood, whereas others sought to retrench conservative values. This volatile atmosphere shaped the framing of the postwar settlement.

An important strike in late 1945 at the Ford Motor Company in Windsor, Ontario resulted in a landmark legal ruling by Mr. Justice Ivan C. Rand. The Rand Formula (1946) provided unions with a pathway to gain legitimacy and long-term stability if, but only if, they agreed to conduct themselves “responsibly.” In exchange for receiving obligatory union dues (the “check-off”), labour groups promised to take charge of their membership and ensure worker militancy was regulated strictly.[1] For the most part unions were amenable to play by the rules of the game and balance their rights against a set of procedures and obligations. This agreement was the foundation of the postwar settlement, since it set out the semi-formal accord between labour, business, and the state to secure workplace harmony in the years following the end of the Second World War. Workplace discord, in the form of strikes and lockouts, continued sporadically during the 1940s-1950s, but labour’s postwar settlement appeared to have achieved a decisive compromise between organized labour and business.

In the broader context, this postwar settlement also involved the widespread public consensus that Canada ought to develop a mixed economy under the auspices of Keynesian economics and the introduction of a limited welfare state. The achievement of unemployment insurance, child benefits, pension reforms, and publicly-funded healthcare were indicative of this expansive civil society, which invited unions to play an ongoing part in Canadian society. This approach was in stark contrast to the rightward shift in the United States, where stridently anti-labour legislation sought to curtail the growing power of unions.

Canadian unions, wary of invoking a conservative backlash, were careful to reinforce their hard-won legitimacy by adhering to the federal and provincial labour regulations that made spontaneous, mid-contract “wildcat” strikes illegal. This pragmatic stance alienated some of the more seasoned workers whose Depression-era experiences taught them to use unions as a springboard to achieve far-reaching social reforms. This regime of bureaucratic “industrial legality” may have also excluded recent converts to unionization who resented a top-down labour hierarchy. Throughout the 1960s, a series of protracted wildcat strikes in both the public and private sectors led to a formal inquiry — the Task Force on Labour Relations (1968).[2] This inquiry marked the beginning of a plan to reset the initial terms of the postwar settlement, described by a some as the shift from “consent to coercion.”[3] By the 1970s, Canada was facing the dilemma of stagflation — stagnant economic growth coupled with persistently high rates of inflation. Limits applied to global petroleum production resulted in several “oil shocks” that shook the confidence of many Western nations. Governments at all levels were under intense political pressure to reign in unruly unions and redistribute the balance of power to employers and the state. The postwar settlement, along with some components of the welfare state, started to unravel.

In the decades following the initial economic crisis of the 1970s, both governments and employers have acted to limit the fundamental rights of unions to organize, negotiate collective agreements, and when necessary, strike to compel a resolution to an impasse. Increasingly, unions have been forced to accept harsh concessions or have been driven into dissolution. The postwar settlement as an expression of expanded workplace activism, and the engagement of labour as a progressive force in Canadian society have been undermined and eroded consistently, which has continued into our contemporary era under the mantra of neo-liberal austerity. Despite this, the accord, remarkably, remains influential in its broadest contours and continues to exert a working-class perspective in the ongoing campaign for a fair and equitable Canadian society.

Key Points

  • Wartime demands led to PC 1003, which stimulated the growth and influence of unions. The return of peace raised fears that the new rights enjoyed by organized labour would be withdrawn.
  • In 1946 the Rand Formula staked out a new relationship between labour, capital, and government, which confirmed a post-war settlement that stabilized industrial relations.
  • This post-war settlement also entailed greater state interventionism and the establishment of a welfare state.
  • By the 1970s economic and industrial conditions had changed and there was increasing pressure on the state to regulate labour. Although some elements of the post-war settlement were abandoned, others survived.

  1. Peter S. McInnis, Harnessing Labour Confrontation: Shaping the Postwar Settlement in Canada, 1943-1950 (Toronto: University of Toronto Press, 2002).
  2. Stuart Marshall Jamieson, Times of Trouble: Labour Unrest and Industrial Conflict, 1900-1966 (Ottawa: Task Force on Labour Relations, 1968), 395-451.
  3. Leo Panitch and Donald Swartz, From Consent to Coercion: The Assault on Trade Union Freedoms, 3rd ed. (Aurora, ON: Garamond, 2003).

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8.12 The Postwar Settlement in Canada by Peter McInnis, Department of History, St. Francis Xavier University is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

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