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Hill Dispatches: Keeping good jobs in Canada

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Caterpillar has picked up and left town.

Goodbye London, Ontario.

Hello Muncie, Indiana.

The lesson for the National Post's Andrew Coyne is that the Canadian Autoworkers, the union that represented the locomotive manufacturer's workers, did not play its cards right.

The draconian reduction in hourly pay rates that the employer offered may have been nasty medicine, Coyne wrote, but having rejected that, the workers now have nothing at all.

For the Toronto Star's Tom Walkom, the lesson is that there is an expanding war against unions in North America. It started in the U.S. south but is now spreading to places such as Indiana and Ontario.

The Harper government is becoming more than an active cheerleader in the anti-union movement. It is taking on the role of enabler -- witness its interference in the Air Canada dispute, and newly enunciated policy that the federal government can intervene in private sector labour disputes when the "interests of the Canadian economy" are at stake.

Hope. . . somewhere?

Neither Walkom's nor Coyne's analysis offers much in the way of hope for the laid-off London, Ontario workers, or similar workers throughout Canada.

Even Andrew Coyne's recommendation of total capitulation would not likely have saved the locomotive plant jobs for very long. Sooner or later, Caterpillar would have almost certainly jumped at the chance to move from supposedly "union-friendly" Ontario to "right-to-work" Indiana, regardless of the concessions the London workers and the CAW might make.

It seems that we're in a bad way, in Canada, when it comes to private sector jobs that are not in natural resources or services.

The urgent public policy challenge is to find the right mix of measures that will foster high value-added employment in Canada.

This country has a natural advantage when it comes to commodities of one sort or the other, and the federal government wants to play that card to the hilt. Just think: "tar sands and energy exports."

And the fact is that when it comes to secondary manufacturing, capital is extremely mobile and will frequently migrate to where labour costs are lowest. However, when there was a dispute at Vale-Inco in Sudbury, the foreign-owned company could not just pick up and move elsewhere. The nickel they need is beneath Northern Ontario soil.

We tried appeasing the market forces, and... ?

Should Canada simply forget about manufacturing and become a commodity-exporting economy? Is there no strategy or set of related strategies that would help build and maintain a vigorous, competitive and innovative manufacturing sector?

Both the current government and a number of economists who have looked at the question admit that a set of market and globalization-oriented measures Canada undertook over the past decade has not worked -- at least not worked to improve Canada's productivity.

Don Drummond is a former senior official with the federal finance department and former chief economist for the Toronto Dominion Bank. Currently he is advising the Ontario government as to how to rein in its deficit and debt.

Last year, Drummond wrote an article he entitled "Confessions of a Serial Productivity Researcher" in which he admits that most of the supposedly pro-productivity policies he has urged on government have not had any significant positive effect.

The sort of measures and outcomes Drummond favoured include lower corporate tax rates, free-trade agreements, a shift from taxing income to taxing consumption, low inflation policies, reduced public debt, removal of "work disincentives" in employment insurance and reduced regulation.

It is a long list, but Drummond reports that since the 1990s, governments have delivered on about 70 per cent of it. The measures Canadian governments have taken include the big Liberal and Conservative government cuts in corporate tax rates, the North American Free Trade Agreement, inflation targeting, and replacement of the old manufacturers' sales tax with the GST.

Time to "go down another road"?

And yet, Drummond writes in his piece for the Centre for the Study of Living Standards, Canada's productivity, measured by "output per hour worked," has not improved. It has, in fact, declined when compared to other similar countries.

In the 1950s and 1960s, Drummond tells us, Canada had the third-highest productivity among the original 24 OECD countries. It now stands 17th.

All that pro-business, pro-open market policy of the past two decades has not done the trick, Drummond now says. Maybe it is time to look elsewhere for the culprit.

As Drummond puts it: "When one is going down a road for a long time and finally realizes it is a dead end, one might as well back up and see if there is another route to getting somewhere."

Don Drummond now says we have to look not only at what governments do, but at "private sector business behaviour" as well.

"Let me use Canada's under-investment in information and communications technology (ICT) as an example," Drummond suggests. "Canada has less than one-half the stock of ICT per hour worked that the United States has. Those in the industry say the actual situation is even worse because Canadian firms tend to use the same equipment less productively than their American counterparts."

What could explain this? Drummond asks, rhetorically. His answer is that we don't actually know. He calls for more highly focused research to find out why Canadian businesses are so productivity challenged.

An industry-supported group called the Canadian Coalition for Tomorrow's ICT Skills has its answer. It focuses on the mismatch between education/training and the job market, in this case the so-called "high tech" job market.

On its website, the Coalition tells us that there has been a shift from "traditional" high-tech occupations such as computer programmers to "business/ICT specialists, highly specialized ICT areas, and multidisciplinary ICT occupations (such as bioinformatics and industrial design)." The problem is that students and educational institutions have not followed this shift.

The Coalition reports that during the year that ended in June 2010 -- at the height of the recession -- jobs in the business ICT-specialist category "grew 30% from a base of 200,000."

"Employers across Canada can't find enough people who know how to infuse businesses with technology," the Coalition argues. And that, they say, is a drag on Canadian productivity.

Education, training and effective incentives

If the Canada of the future is to be more than a hewer of wood (and carbon fuels) and drawer of water, it will have to focus intelligently and strategically on education and training. It is a sort of motherhood issue for politicians of all stripes, but we have not heard much in the way of original creative thinking on this issue from anyone, recently.

Still, dong something about education and job skills is, at best, a medium-term solution. Today's challenge is how to prevent future Caterpillar fiascoes.

What could have been done to stop the export of jobs from the former Electro-Motive plant in southwestern Ontario?

London-Fanshawe MP, the NDP's Irene Mathyssen, put it this way, in a note to constituents:

"Some of you have asked," Mathyssen wrote, "what would the NDP have done differently in regard to the Electro-Motive situation. That is a fair question."

Her answer is that "New Democrats (both federal and Ontario) have said ... [that they would offer] tax CREDITS (as opposed to $60 billion in blanket corporate tax cuts and additional subsidies) for job creation, capital investments in new equipment to keep jobs, training & skills development, etc. Tax credits require MEASURABLE ACCOUNTABILITY, and if conditions are not fulfilled, repayment can be required ... Further, changes to the Foreign Investment Act and Made in Canada requirements would have prevented a situation like this from developing in the first place if Caterpillar wanted to sell its products and/or do business in Canada."

That's at least part of the Official Opposition's alternative to current Conservative economic development policy -- although tax credits and a Made in Canada program do not an industrial strategy make!

And Ontario is not alone in seeing high value-added jobs flee.

Last week, Quebec NDP member Guy Caron asked the Minister of Industry about the bleeding of jobs in Montreal's important pharmaceutical sector.

Caron referred specifically to multinational drug company AstraZeneca closing down its Montreal research and development centre.

Minister of Industry Christian Paradis' response is revealing, mostly in how little it reveals.

"Obviously I empathize with the Montreal employees affected by this bad news," Paradis told the House.

"However," the minister continued, "as we know, AstraZeneca's cuts to research and development activities worldwide ... is a business decision based on the global situation ... I would remind members that we have invested more in research and development than any other government in Canada's history, and the party opposite has always voted against these additional investments..."

And so, in the end, this is where we are. We can have a serious and adult discussion. Or we can play never-ending political games.

Why carry on a serious debate when you can have so much fun taking partisan potshots?

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