Harper Meets Labour Leaders

Ken Georgetti and leaders of major manufacturing unions just finished meeting with the Prime Minister about Canada’s ongoing manufacturing crisis. The Canadian Labour Congress briefing note quoted by The Globe and Mail online follows:

The Manufacturing Crisis

Overview

Canada’s manufacturing sector is in crisis. High energy prices, a high dollar, and worsening trade deficits with Asia have caused many Canadian plants to reduce output, layoff workers, or close altogether. Despite a seemingly strong economy, the value of Canada’s manufacturing capital has declined since 2000 because business investment has not even covered depreciation. Despite a steadily growing workforce, the number of Canadians employed in manufacturing has fallen to its lowest level since January 1998. As a result, Canada’s economy is increasingly focused on the extraction of raw, non-renewable resources and more Canadians must make do with unstable, low-paid jobs in the service sector.

Job Losses

Manufacturing Job Losses (Gains)

First Period

Nov. 2002 – Apr. 2004

Second Period

Apr. 2004 – Feb. 2007

Cumulative Total

Nov. 2002 -      Feb. 2007

Quebec

33,000

91,100

124,100

Ontario

17,000

124,600

141,600

Rest of Canada

(27,500)

9,100

(18,400)

All of Canada

22,500

224,800

247,300

Source: Seasonally-adjusted Statistics Canada figures.

 

Canadian manufacturing employment peaked in November 2002. Outside of Quebec and Ontario, manufacturing employment peaked in April 2004. Between these two peaks, more than half of job losses in central Canada were offset by gains in other parts of the country. After April 2004, employment losses accelerated in central Canada and spread to other regions.

Since 2002, Canada as a whole has lost 247,300 manufacturing jobs, about one in ten positions. Ontario has lost 141,600 manufacturing jobs, about one in eight positions. Quebec has lost 124,100 manufacturing jobs, about one in five positions.

Declining Job Quality

Increased employment in other sectors has more than offset the number of manufacturing jobs lost, even in Quebec and Ontario. However, most of the jobs created in recent months have been part-time and/or self-employed positions as opposed to full-time, paid positions. The jobs created in other sectors pay lower wages, on average, than manufacturing jobs.

Statistics Canada recently concluded that Canadian workers displaced by firm closures and mass layoffs who find other jobs suffer an average decline of 25% in annual earnings, implying a loss of about $10,000 for a typical manufacturing worker. Given the disappearance of one-quarter of a million manufacturing jobs, the total loss of Canadian earnings is now probably around $2.5 billion annually.

The capital-intensive resource sector provides some high-wage positions, but not on the same scale as manufacturing. The total number of jobs in mining and in oil and gas extraction is less than the number of jobs lost in manufacturing. Increased employment in resource extraction has not, and will not, compensate for decreased manufacturing employment.

The service sector has created huge numbers of jobs at below-average wages. Many of the better jobs in this sector involve providing services to manufacturers. Manufacturing is important because of its potential to sustain relatively large numbers of relatively well-paid jobs. However, between November 2002 and February 2007, the proportion of the workforce employed in manufacturing declined from 18.6% to 14.4% in Quebec, from 18.2% to 14.8% in Ontario, and from 9.4% to 8.8% in the rest of Canada.

Last month, CIBC World Markets revealed that its Employment Quality Index has fallen to “its lowest level since the early 1990s” because the new “jobs were mainly in low-paying sectors such as personal services, repair and maintenance, retailing and textile while high-paying sectors such as paper and printing manufacturing, mineral manufacturing and public administration, in fact, lost ground during that period.”

Other Implications

Manufacturing jobs are relatively well-paid because they are relatively productive. While manufacturing employs 12.6% of Canada’s workforce, it produces 15.7% of Gross Domestic Product (GDP). However, manufacturing makes economic contributions that far exceed its share of GDP. As Finance Canada notes, manufacturing accounts for “a large share of Canada’s inbound foreign direct investment” and sixty-five percent of all research and development. Manufacturers provide more than sixty percent of Canada’s gross exports. Even factoring out their use of imported inputs, manufacturers account for more than forty percent of exports. It will be very difficult for Canada to significantly increase productivity, investment, research and development, or exports if the manufacturing sector continues to shrink.

Government Response

Machinery and equipment used in manufacturing and processing is typically subject to a 30% Capital Cost Allowance. Budget 2007 raises the rate to 50% until the end of 2008, allowing manufacturers a two-year writeoff of eligible machinery and equipment against taxable profits. This temporary measure is welcome and may induce profitable manufacturers to make greater investments in Canada before 2009. However, it provides no incentive for the many manufacturers that have become unprofitable.

Note: Except where links are provided, figures are from Statistics Canada data.

5 comments

  • The first thing is to get out of NAFTA and all phoney “free trade” treaties and negotiations, like the GATS, SPP, NAU and the WTO. Not “agreements”, but “treaties”, designed to deprive society of its democratic decision making rights.

    Then rebuild what we had in the 50s and 60s for the greatest degree of self sufficiency and diversification, with the necessary potential for everybody to find jobs and professions suitable for their inborn talents .

    Canada should be the leader and show the rest of the world the way to do it, by helping, instead of competing against them.

    The purpose of crime, war and economic competition is the forced acquisition of benefits against the owners’ will.

    Economies built for exports will ultimately burn out and self destruct and we can see what is happening here how it is done by the carpetbagger mafia in control of our economy.

    The next step is to get rid of foreign investment. Pay them out and goodbye!

    Foreign investment is the temporary inflation of the money supply of another country, followed by endless exploitation.

    It is like a bottle of water borrowed to prime a pump, which is then the first to come out of the tap, once the water starts flowing.

    But should it entitle the loaner to the ownership of the well? Like hell!

    Right now, deregulated banks in certain countries are permitted to create imaginary capital for the expropriation of the properties of others, using the foreign properties as a collateral.

    This shows that no country needs any foreign investment, because they can create their own capital against their own resources and build their own economies for the best interest of their own citizens.

    Ed Deak, Big Lake, BC.

  • Tax cuts and subsidies delivered through the tax system have surely gone to companies now leaving the country or killing jobs. This shows the folly of Republican economics, benefits through tax reduction. We should at least argue these have to be paid back, or become conditional on not taking the money and then going out of business in Canada or reducing presence in Canada.

  • What do you propose that we do to encourage investment in Canada? I hear people oppose tax cuts, or other tax incentives. But how will companies invest, they need money.

  • Companies borrow to invest large sums, because the service charges are tax deductible, therefore are paid for by the public, which is good business and leaves their own capital for more money market speculation.

    With deregulation, banks are now “creating” any amount of capital, using the properties of the borrowers, or the planned acquisition of properties, as collateral, accounting them as their own and then create more capital against their own loans, charging interests and making huge profits on nothing, while firing thousands as “efficiency measures” and “productivity”.

    The best racket in human history and they can get away with it because of the stupidity of the public and bought politicians, with directorships waiting.

    Canada never needed a penny of foreign investment, even in the gold standard and regulated money creation days, because we have all the collateral and all the gold to use for capital ansd real money creation, for the benefit of our own peoples.

    What goes on today is a crime wave by imaginary money, like the fraudulent accounting of the export of resources, in other words, the sale of capital, as “income” and GDP, without deducting the losses and depletion.

    We’ll be going to town, Williams Lake, for our biweekly shopping this morning. In the first 30 km we’ll meet several huge, empty and overloaded ore trucks, taking our wealth abroad, at about $500,000 per truck from the Polley Mtn. mine near Likely.

    Apart from the wages and taxes, BC and Canada get no benefits from this daylight robbery, yet, our politicians and economists are calling it a “booming economy”.

    The public swallows this garbage and our opposition politicians are too scared to talk about it, trying to remain in the “centre”. Whatever baloney that means.

    Ed Deak, Big Lake, BC.

  • Public investment is a good choice and has been greatly neglected since the 1970s. We could use some public sector energy companies for sure, alternative and conventional sources.Recreation, arts, culture, and amateur sport could use public money properly invested via Crown corporations.

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