Why Canadian Jobs Are Disappearing
It's not for nothing economics has been called 'the dismal science.'
Which brings us to Canada's employment picture, and the direction it appears to be taking. 2003 was a bad year for jobs. We ended up with half the amount of employment growth compared to gains in the previous year. Now we have the January and February numbers in: can you say 'discouraging?' Instead of an increase, we're down overall. 27,000 jobs in the private sector have disappeared!
One of the most troubling areas is manufacturing, which employs close to 2.4 million of us. It's declining alarmingly: down 83,000 (-3.5%) since November 2002, when the sliding trend began. Last month alone saw a loss of 12,000 jobs in this sector.
What's behind these unsettling figures? Is it the dreaded 'off-shoring' we've been hearing more and more about these days, especially from the U.S.? Is Canada losing its competitiveness in a globally cutthroat marketplace? Are there other, more complicated forces at work?
The answer is yes. To all three. At least to some degree, that is. Let's start by looking at what's going on in Canada. Then we'll shift to the U.S. And finally, some highlights from around the globe will help put things in context.
First, the domestic picture. One main reason for our stalled job market is what economists like to call 'increased productivity.' Put simply, employers are getting more output from existing employees, and are benefiting from technology. No need to hire when you've got machines and a labour pool being worked to the max.
David Dodge, Governor of The Bank of Canada, is big on productivity. He's been jetting around the country exhorting companies to boost productivity even higher if we hope to compete globally. Guess he hasn't walked into a typical company lately. Wonder if the people in his office are staying late, coming in early, and giving up holidays, nights and weekends -- just to stave off being downsized.
Another factor impacting employment is the rise of the Canadian dollar. It's having a negative effect on our exports. For the last few years, our dollar had been worth 65 cents or less compared to the U.S. greenback. That meant other countries who bought our products got a break if their currencies were strong. Today, with Canuck bucks at more than 75 cents to the U.S. dollar, our comparative advantage has shrunk. The result is reduced foreign demand for our goods.
And since we're looking at exports, here a mind-boggler for you: Fully 40% of the entire Canadian economy is based on shipping our goods to other countries. One in four jobs here depends, either directly or indirectly, on foreign trade.
Which wouldn't be so bad, except for another sobering number: more than 85% of our exported goods go directly south of the 49th parallel -- to good ol' Uncle Sam.
Yep. More than a third of Canada's total Gross Domestic Product (GDP) is tied to the fortunes of our ailing neighbor.
Why do I say that the U.S. is ailing economically? To quote the sign hung outside Bill Clinton's office in 1992, the year he defeated George Bush senior for president, 'It's the economy, stupid.' More specifically, America is teetering on the brink of a major slowdown. They've lost a startling 2.3 million jobs since the last dimpled chad was tallied three and a half years ago, barely putting Bush jr. in office. Now he's faced with creating 300,000 jobs per month until the November election. If not, he'll be with the worst job record since the Great Depression.
You would think this would motivate the incumbent government to pull out all the stops. What's shocking is that they already have -- to almost no avail. Bush jr. took a $200 billion surplus and turned it into a half trillion dollar deficit, a fair sized chunk of which was used to stimulate the economy. And the Federal Reserve has held its interest rate to 1%, the lowest it's been in 40 years. Add to that massive tax cuts and endless rounds of mortgage refinancing that put money in the hands of consumers. Never mind how the American dollar plunged 30% on world exchanges last year, making exports cheaper.
Thus far, all it's added up to is the euphemistically titled 'jobless recovery.' February's additions to U.S. job figures? Not 300,000. Not even 150,000. A dreary 21,000!
You might well be wondering what's holding the U.S. economy at bay. The greatly over-simplified answer boils down to two words: India, and China. India is where a whack of U.S. jobs have gone in order to save costs. It started with telemarketing centres and moved on to software programming. Now it's spreading to tax returns and diagnoses of American x-rays.
From the hue and cry of outraged North American workers, you'd think India was siphoning off millions of jobs. In truth, a couple hundred thousand positions have been lost to Bangalore and New Delhi. What's less known is that the States outsources more than $8 billion (U.S.) in services per year to would you believe, Ireland? And how about the $4 billion they've been spending in good ol' Canada for things like telecentres and IT support?
So the culprit isn't entirely India. Nor is it Japan, with its moribund growth. Certainly not Western Europe, where employment hovers at 9% and the engine of the European Union, Germany, is gasping like a car on its last drops of gas, lagging behind the other lackluster members.
It's to China we must turn, because the great 'sleeping giant' has awakened. And how. Ten straight years of GDP increases near 9% (compared to the 3% growth predicted for Canada this year). Today China stands as the sixth largest economy in the world. It has a population of 1.3 billion. And a ruthlessly autocratic government to keep wages at a fraction of Western standards. No such thing as a trade union in the land of the Beijing dictators.
As evidence of the Chinese juggernaut, consider this: it bought and used up more steel in 2003 than any country in history; its hunger for other metals has already raised prices for copper 40 per cent and lead 55 per cent on world markets; and the country plans to create nine million jobs in 2004.
When you come right down to it, what we're seeing is nothing less than extraordinary: The beginnings of a shift in the world economy itself. The West, which has long relied on superior technology, human grit, and relatively captive markets, is now being challenged by its Eastern rivals. Together India and China possess 1/3 of the globe's total population. They exercised their clout in September 2003, when -- along with 20 other 'less developed' nations -- they stormed out of World Trade Organization talks in Cancun, Mexico. The reason? They were fed up with being pushed around!
What does all this bode for the future? Well, come sit in my parlor (decorated with fabrics imported inexpensively from Ecuador), and gaze into my crystal ball (made in Mexico and brought here duty free courtesy of NAFTA). I will tell you this, my friend: all trends point to dislocation in the West for the next few years, absent some unknown cavalry.
Here at home this could well mean higher unemployment, more downward pressure on wages, increased personal borrowing (already at the highest level in over a decade), even lower interest rates, and a fall in consumer optimism that leads to reduced spending -- hence lower demand for goods, and increased deflationary pressures.
Then again, I could be completely wrong.
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