Reading the newspapers these days, you would think it’s a great time to be a worker. The national unemployment rate is down to a level we haven’t seen for decades. There are articles about labour shortages, skill shortages, desperate employers.
On the other hand, something isn’t quite right about this picture. According to classical economics (the old law of “supply and demand”), if the labour market were really that tight, we should be seeing wages going up, as employers bid for scarce labour. But while average hourly wages have gone up a bit more than inflation, most of that increase comes in the overheated Alberta economy, where the higher wages probably don’t cover the extra costs of trying to live in that oil-boom economy.
In the rest of Canada, there is no boom. In May, 2006, there were still over a million workers unemployed. East of Ontario, the unemployment rate starts at 7.9% and goes up. Youth unemployment is still above 11%.
Particularly disturbing is the continuing freefall in manufacturing employment. Manufacturing employment is dropping monthly, down by 200,000 (over 8%) since 2002. Ontario and Quebec, the manufacturing heartland, have been most severely hit, but manufacturing is in decline across the country. Manufacturing now accounts for less than 14% of the Canadian workforce, compared to over 20% as recently as 1980.
There are several reasons for the erosion of Canada’s manufacturing base. Most recently, the energy price boom (and an acquiescent Bank of Canada) have inflated the Canadian dollar, making Canadian manufactured goods increasingly uncompetitive. Rising energy costs also undermine energy-dependent manufacturing sectors.
In the longer-term, Canadian manufacturing has been hit by the growth of low-wage manufacturing facilities in China and other low-wage countries (aided by worker exploitation and environmental degradation) and their increasing integration into world markets.
International agreements, the Canada/U.S. trade deal, NAFTA, the WTO, have restricted active public policies that have historically encouraged and sustained domestic manufacturers, like import duties, Buy Canadian preferences, support for investment, export loan guarantees, support for technology, R&D and training, sectoral initiatives and direct public investment.
We are seeing damage across all of our manufacturing industries – auto, aerospace and other transportation equipment, forest products, machinery and equipment. In smaller communities, the devastating impact of a shutdown is clear. In larger cities, the impact may be less traumatic, but the damage is long-lasting.
