Canada’s Heartaches by the Numbers


crude oil boomingOur dollar depreciated more than 2 cents on Wednesday, and is now worth .81 of the U.S. dollar, the lowest level since 2011. The Harper government put all Canada’s eggs in one basket by banking on North American crude oil, our top export, but the commodity has plunged from a high of $85 US a barrel in October of 2014, to a low of $46.US on Tuesday.

Finance Minister Joe Oliver announced this week that he would be delaying his budget from the usual February-March date until at least April, due to “market instability.”

Unable or unwilling to admit Canada’s damaged economy, Prime Minister Stephen Harper told reporters yesterday that “These things are creating some shocks that will impact us but they’re not going to throw us off our fundamental growth path or undermine the very strong fundamentals of the Canadian economy.” He added that “The government has complete confidence in the Bank of Canada in the actions that it has taken.”

The Bank of Canada cut the rate on overnight loans between commercial banks by a quarter point to 0.75% on Wednesday, in a response to the recent drop in oil prices. The previous rate had been at 1% since September 2010.  market failure

“The drop in oil prices is unambiguously negative for the Canadian economy. Canada’s income from oil exports will be reduced, and investment and employment in the energy sector are already being cut,” BoC’s Governor Stephen Poloz explained.

Many, including NDP finance critic Nathan Cullen, think Harper is in denial. The Conservatives had hoped to sail into 2015 on a high of oil fumes and the elimination of the$2.9-billion federal deficit , but it looks like their plans may be tanked as predicted federal tax revenues could be reduced by several billions of dollars thanks to global oil price shake-ups.

No worries, though, as Harper is relying on the annual $3 billion contingency fund built into the budget for “unforeseen circumstances.”

He also said that “The oil industry isn’t remotely the entire Canadian economy.” So … what is the Canadian economy?Canadian economy

Our population of 36 million boasts a 6.6% unemployment rate, with approximately 62% employed (16-64 years of age). (The United States, with 316.1 million, is at 5.6% unemployed, and 59.2% employed, while the United Kingdom, with 64.1 million people, has an unemployment rate of 6.0%, and 73% of people are employed.)

In Canada, wealth inequality, while an issue, is not quite as visible as in America; our Canadian 1% holds 12.5 per cent of Canada’s total income. 29 per cent earn $135,000 or more. But our incomes are generally lower – 95 per cent of working Canadians earn less than $100,000 a year. Our definition of ‘wealthy’ begins at $150,000.00 per year – chump change for wealthy Americans.

One of the reasons Canadians have not felt as impacted by wealth inequality is that, beginning in the late 1970’s, women surged into the workforce in record numbers. A household with two incomes could manage quite well. With the inclusion of children into the family, however, things got shakier financially. If one of the two wage earners has to stay home with the kids, they’ve effectively halved the family income, in order to raise children and run the home. As baby boomers aged, that child care burden lifted for a large portion of the middle class.

canadian workforceEducation, and it’s inevitable costs, are a factor. In order to succeed in a technological society, we need workers with complex skills and higher education. 64.1% of adults aged 25 to 64 had post-secondary qualifications in 2011, with women aged 25 to 34 holding a larger share of university degrees. 8 in 10 Registered Apprenticeship certificates were held by men.

In 2011, Almost two-thirds of adult Canadians had post-secondary qualifications, Stemwhile 2.1 million adults had a post-secondary certificate, diploma or degree in STEM (science and technology, engineering and engineering technology or mathematics and computer sciences) but half of STEM university degrees were held by immigrants who have lived in Canada for many years, and Canadian newcomers.

waiterUnfortunately, Canada has the third-highest proportion of low-paying jobs in the world, with only the U.S. and Ireland having a higher percentage of low-paying jobs. Canada is becoming a ‘nation of part-timers’; part-time employment may still outgrow full-time employment for some years as the baby boomers reduce their working hours or retire.

But the big, well-paying manufacturing companies have left Canada to take advantage of lower labour costs abroad. What’s left for those with or without special skills are low-wage service and retail jobs, which generally lack the benefits associated with higher paying positions, and are becomingly increasingly insecure.

StatsCan released this information in January 2015:statscan

In December (2014), Canada lost 4,300 jobs as full-time employment rose by 53,500 while there was a decline of 57,700 in part time jobs… Employment gains in 2014 amounted to 186,000 (+1.0 percent), with increases in the second half of the year accounting for most of the growth. Compared with 12 months earlier, the total number of hours worked increased by 0.7 percent.”

“There were 24,000 fewer women aged 25 to 54 employed in December. Their unemployment rate was unchanged at 5.2%, as fewer of them participated in the labour market. Employment among men aged 25 to 54 increased by 23,000 in December and their unemployment rate declined 0.2 percentage points to 5.5%, their lowest rate since 2008.”

This month, however, it was announced that five large retail companies will be closing Canadian operations. Lured to Canada by massive tax breaks, cuts and incentives, they’ll be leaving more than 21,000 unemployed by March or April.

Stephen-Harper-CowboyIn Alberta’s tar sands, Suncor cut 1000 jobs last week as oil prices crashed. They also announced that they’d decrease their capital spending program by a $1-billion, and reduce operating expense s by another $200 million.

Canada’s largest growth sector in jobs has been in service and retail industries. Only Alberta has seen respectable job growth. Mr. Harper’s blithe suggestion that the current oil crisis will fail to impact the economy as a whole, sounds very much like a man whistling past the graveyardcanada bleak future

Update Jan 24/15: Last week on Global TVs The West Block, Jason Kenny (MP, Canada’s Minister of Employment and Social Development and Minister for Multiculturalism) told host Tom Clark, “We won’t be using a contingency fund. A contingency fund is there for unforeseen circumstances like natural disasters.”

But during an interview for this week’s episode of The West Block, Canada’s Finance Minister, Joe Oliver told Tom Clark, “The contingency fund is there for unexpected and unavoidable shocks to the system and, you know, the oil price decline – which was a dramatic one – would fall in that category. I’m speaking as minister of finance so I’m sort of current on the thinking here.”

The Short-Sightedness of Corporate Greed


In the midst of those post-holiday, January credit card blues, the Toronto Star business section headline on New Year’s Day trumpeted, “CEO pay returns to ‘glory days.’ Canada’s top 100 CEOs earned an average of $9.2 million in 2013, hitting pre-recession highs.”

While I’m sure the 100 families who benefited from those riches preened in delight, I thought the timing a little harsh for the rest of the country. The average Canadian worker has received little to no raises in the last ten years, and even those on a yearly review schedule can rarely bank on more than a pitiable 2-4% increase.

The average Canadian earned $47,358 in 2013.  ceo-salary-cdn

“The list of high-flying executives was led by Gerald Schwarz, CEO of Onex Corp., who earned $87.9 million in 2013, most of it in stock options. Nadir Mohamed, who was then CEO of Rogers Communications Inc., earned $26.7 million. Michael M. Wilson, of Agrium Inc., earned $23.8 million. All five CEOs of Canada’s biggest banks were in the top 30.(Toronto Star, Jan 1, 2015)

I don’t begrudge anyone a good income. But these figures are insane by any measure. While it must be said that the CEO’s earning these high wages did so through stock options, and hopefully, good corporate leadership, there is another side to their recompense; the people who work – or used to work – in the companies they manage.

“Canada’s highest-paid CEOs earned 195 times the average Canadian in 2013. That’s up from 105 times in 1998, the oldest date for which comparable figures are available. … However, even the lowest-paid CEO on the list earned more in 2013 than in 2008. While little data is available on CEO pay prior to the 1990s, it is generally accepted that the ratio of executive pay to average pay in the late 1980s was 40:1 in the U.S. and somewhat lower in Canada.” (Toronto Star)

There are only a few ways that a business can continually increase profit over previous years, which increases the value of the stock, and thereby compels the Board of Directors to approve a CEO’s earnings (which include options and bonuses); by introducing a new product so fantastic and coveted that consumers flock to purchase the item, or by reducing assets and/or staff and/or increasing prices.

That’s where the human toll comes in.

(In the 1990’s) “compensation experts came up with the idea of granting a portion of CEO pay in stock options, in which executives are granted options to buy shares at a “strike” price, usually the current market value of the share. Executives can’t “exercise” the option until a future date, at which time the share might be worth more or less than the original strike price. If the shares are worth more, the executive can opt to “buy” the stock and then immediately sell it at the new, higher value. If they are worth less, he or she can simply let the option expire at no cost to them.

Boards of directors were sold on the idea that options would more closely link executive pay to company performance. Instead, the practice encouraged share price volatility at the expense of long-term value, critics say. Among other things, they say, stock options have encouraged executives to cut costs, lay off staff, sell assets and merge with other firms — all to boost the share price in the short term, often at the expense of the company’s future value. They have also led to the rise of activist investors and hedge funds that buy shares in companies with the goal of splitting them up in order to unlock shareholder value.” (Toronto Star)

I suppose the greed is understandable, even though at that level, money becomes little more than paper to be shuffled about. Greed, accompanied by hubris and a massive sense of self-satisfaction, coupled with a belief that the party will never end, and bolstered by his/her cronies in the same tax bracket, good lawyers and accountants, and a taxation system that treats stock options as capital gains, despite stock options carrying none of the risk associated with normal stock purchases.

A dollar earned through a stock option is worth two dollars of salary income. The difference amounts to a public subsidy paid to these already highly compensated executives.” (author, economist Hugh Mackenzie, Canadian Centre for Policy Alternatives)

These executives would also have superior benefits, perks befitting their pedestaled positions, and a golden handshake agreement that would see them being even better recompensed should they ever be asked to leave the corporation. In contrast, the staff remaining after deep cuts and asset sales would find themselves clinging desperately to their jobs, despite usually having to shoulder the additional responsibilities of their now dispatched former co-workers.

In the long term, that corporate greed that has created such high unemployment in Canada (about 6.6% as of November of 2014, which will drop after seasonal positions are gone,) translates to nearly 1.3 million potential clients and customers who no longer have the income to purchase goods or services from the purveyors. 90% off store

(That figure only includes Canadians who continue to actively seek employment. It does not include those who are underemployed, or who have given up on ever finding another salaried position. To put it yet another way, in a population of 35.16 million, only 17.7 million have jobs.)

Between the shrinking job force, smaller cash reserves available for purchases, and an aging population, the wealthier of whom may move to a warmer country or the poorer who may have to rely solely on government support during their old age, it soon becomes clear that the highest paid executives are playing a zero-sum game.

working-man-vs-parasite

(added Jan. 7/15 – from Huffington Post: “Some 70 per cent of businesses expect growth this year, but only half of them will hire. The result? Stress and burnout for workers…

National Bank chief economist Stefane Marion says Ontario’s growth will be slowed by the fact that the manufacturing sector was gutted during the financial crisis and recession. During previous economic recoveries, Ontario had excess capacity in its factories and could quickly benefit from an increased demand for exports.However, much of that capacity was lost after the last recession and will take some time to rebuild, Marion says.”

http://www.huffingtonpost.ca/2015/01/06/hiring-canada-employee-burnout-hays_n_6424332.html