This article was originally published in Maclean's Magazine on February 22, 2010
Rebuilding the Middle Class: Part 2: Saving the Manufacturing Heartland
The process of rebuilding after the Great RECESSION has begun in earnest inside a dingy mall in Oshawa, Ont. There, some 200 men and women pass through the doors of an employment "action centre" each week in search of a new job and, in some cases, a complete reset of their lives. Many are former auto workers laid off after GENERAL MOTORS shuttered its Oshawa truck plant and scaled back production at a neighbouring car plant last year. Others worked at parts companies. Few have easily transferable skills and many don't even have a high school diploma.
Connie Snelgrove is the centre's coordinator. She briefly worked for a supplier that built car seats, but lost her job in 2008. "I was only there two years, so I knew what the real world was - that everybody else [without skills or an education] is making $8 to $10 an hour," says Snelgrove. "But these guys have been making good money and have been in the same environment for so long. I knew they were going to be in for a culture shock."
Once comfortably part of this country's large middle class - loosely defined as people who are neither rich nor poor and measured by things like a steady job, home ownership and a pension - thousands of Canadians are now turning to people like Snelgrove for help after losing their jobs and suddenly finding themselves on the margins of society. The fact that the employment upheaval, which cost nearly half a million Canadians their jobs over the past year, comes at a time when many households are carrying near record amounts of debt has only served to compound the financial pain, raising the risk of missed MORTGAGE payments and BANKRUPTCIES.
At the Oshawa action centre, the process of transforming former assembly line workers into tradesmen and other skilled workers is a move forward, but it can be frustratingly slow. High school diplomas need to be earned and trade certificates awarded. "It's devastating at first," says Snelgrove of the challenges facing some of the newly unemployed.
There are glimmers of hope on the horizon. After months of shedding employees, some sectors of the job market, such as construction and professional and technical services, are finally showing signs of life. Meanwhile, the number of Canadians receiving EMPLOYMENT INSURANCE benefits fell by 7,300 to 795,900, after peaking at nearly 830,000 in June. The easing of Buy American restrictions in the United States last week will allow Canadian firms and manufacturers to bid on billions of dollars worth of stimulus projects south of the border.
Still, experts warn that the road back from the recession will be a long one. The factory floor jobs that once played such an important role in supporting Canada's middle class will continue to be an endangered species, stalked by a rising dollar and an overall trend toward offshore manufacturing. Which raises the question of whether those jobs can ever be replaced and, if not, what happens to the families who once depended on them?
The recession hit Canadian workers hard and fast. Unlike previous downturns, job losses mounted quickly beginning in October 2008, with nearly 400,000 jobs being lost within 12 months (over half of them in manufacturing), according to STATISTICS CANADA. Already suffering from a decline in employment because of the rising loonie, companies that make everything from furniture to food products were dealt a final blow by the recession. Net job losses in the sector, which in 2008 accounted for 11 per cent of all employment, down from 15 per cent a year earlier, have totalled more than half a million over the past six years.
The good news is that the employment picture has stabilized relatively quickly compared to previous downturns. That has resulted in some hopeful signs in unlikely places, including the factory floor. Several big manufacturers have been calling back laid-off workers and hiring new ones in recent months. There are rumours, too, that GM could call back many of the 1,100 workers that are currently on laid-off status. Other sectors also appear to be picking up steam. There's buzz about new jobs being created in Alberta's oil sands, with several new projects being announced as companies move quickly to take advantage of higher oil prices and lower construction costs. B.C.'s mining industry is also on the mend, thanks to rising mineral prices, including gold and copper. And there's been significant job growth across the country in the construction sector in recent months, a response to Canada's hot housing market.
And yet, the unemployment rate continues to hover at over eight per cent as new job growth is offset by a growing number of people who are once again looking for work after giving up during the depths of the downturn. Employment is still down by 280,000 compared to October 2008, reports Statistics Canada. There has also been a whipsawing between job gains and losses in recent months, with 79,000 net new jobs created in November and a shedding of 2,600 positions one month later (economists had predicted 20,000 new jobs in December). Numbers were up again last month by 43,000, although most of the gains were from lower-paying part-time positions.
Avery Shenfeld, the chief economist at CIBC, says the jobs recovery may not be as sturdy as it first appears. In part, that's because it so far doesn't seem to be underpinned by much in the way of actual economic growth. After weaker-than-expected GDP numbers in the third quarter, the Bank of Canada is now predicting fourth quarter growth of just 3.3 per cent, and has lowered its expectations for the current quarter to 3.5 per cent compared to a previous forecast of 3.8 per cent. While there's been much talk about a "jobless recovery," Shenfeld says the Canadian economy has so far experienced the opposite phenomenon. "We've had not much growth, but more jobs than you would normally think."
That raises concerns about whether the current rebound is sustainable. Shenfeld argues that an inevitable hiking of interest rates by the BANK OF CANADA is likely to cool the housing sector, taking construction jobs with it. The job market is also likely to suffer from cutbacks in public sector positions as governments try to rein in deficits. As for the manufacturing sector, he says the recent spurt in employment is likely the result of idled plants rushing to refill depleted inventories, as evidenced by a more recent paring of jobs in the sector. The reality is that many of those coveted, middle class manufacturing jobs lost during the recession are gone for good, according to Shenfeld. And they won't be easily replaced by service sector jobs.
Many have pinned Canada's job hopes on the notion of a new "knowledge economy," built around companies that provide "value-added" services, as opposed to physical products. "It is the knowledge economy that will pull us out of this crisis," Liberal Leader Michael Ignatieff recently told reporters while talking about the need to prevent cuts to post-secondary education and research.
But what, exactly, is the knowledge economy, and how do we go about building one? Michael Haan, an assistant professor of sociology at the University of Alberta, says the term is frustratingly vague and, as a result, has sometimes paved the way for poor policy decisions. He points to the legions of skilled immigrants who end up working on loading docks. "We sort of delude ourselves into thinking we need well-trained people to contribute to the knowledge economy," he says. "But we're not ready for them when they get here." While it's difficult to predict what will replace factory jobs, Haan suggests aging baby boomers will create a growing need for health care and various retirement services in coming years.
Making the transition from factory worker to value-added service provider is also easier imagined than done. Liz Scougal, 49, lost her job on one of GM's assembly lines last year. With few prospects, she went into business for herself, cleaning homes. She is now so busy that she has to turn down potential clients. But while Scougal managed to avoid slapping a "for sale" sign on her house, as many of her former co-workers were forced to do, she makes a fraction of what she did before. She is also worried about what will happen when she becomes too old to vacuum other people's floors. "It's not just about wages. It's about your pension and benefits, too."
That's why some say it's poor economic policy to simply give up on the manufacturing sector: it's a key source of high-paying jobs. "And if you're not paying a decent wage and paying decent taxes, then there's going to be a squeeze on public programs," says Ken Lewenza, the president of the Canadian Auto Workers union.
One potential avenue to keep manufacturing jobs in Canada could be to focus on "green" industries, say experts. That appears to be the thinking behind a recent $7-billion deal between the Ontario government and a consortium of South Korean partners, including Samsung, to provide green energy for the province by building wind turbines and solar equipment. The deal is expected to create up to 16,000 jobs, including 4,000 permanent positions.
Others have called for the need for more homegrown success stories, such as Research In Motion, which has created a high-tech centre in the city of Waterloo, Ont. and manufactures some of its BlackBerry devices in Canada. In an op-ed piece last year, former cabinet minister David Emerson wrote that the country needs to do a better job turning cutting-edge university research into viable businesses. Precisely how that might happen is a long-standing challenge.
Back in Oshawa, Snelgrove says one of her co-workers does nothing but fill out application forms for people all day. "It's heartbreaking to see fathers who are 50 years old and are used to taking care of their family, but now they can't find a job and they feel humiliated," she says. "Eventually you feel like giving up." It might not technically be a jobless recovery in the eyes of economists, but for workers with little education and few skills, it might as well be.
Maclean's February 22, 2010