Bad Policies Come Home to Roost

Photo: Michellle Siu/THE CANADIAN PRESS

That wailing and gnashing of teeth you hear is the sound of unions, some politicians and others on the left bemoaning the exodus of well-paid manufacturing jobs from Ontario, and Canada for that matter, as detailed in a new study released this week.

Anyone paying attention for the last few years knows that the manufacturing sector in Ontario has shrunk significantly, and this phenomenon was quantified in a recent analysis by Statistics Canada. The study looked at the period from 2000-2015, and found that the share of the workforce represented by manufacturing declined over that period by 6.8 per cent in Toronto and 9.8 per cent in Oshawa.  As men predominate as workers in manufacturing, they have been disproportionately affected, with men in Toronto not having experienced an increase in their wages since 2000.  In Windsor, where the auto industry has shrunk dramatically, the average man’s wage has declined by 14 per cent over the 15-year period, while male workers in Chatham-Kent saw a 10 per cent drop.  Results were similarly dire for other parts of the province.  Overall, the Statscan study found significantly fewer men working full time over the period examined than in previous years.

Unionists and opposition politicians blamed free trade agreements for the decline in manufacturing and, although there is no doubt that opening up trade had some impact, as has technological change that reduces the number of employees needed to maintain a certain level of output, you can’t ignore the effects of many other policy choices by the previous Liberal government.  Does anyone actually believe that doubling the cost of hydro, hiking the minimum wage by over 20 per cent in one year alone (which ratchets up wage levels right through the economy), increasing various taxes, imposing more costly regulation, fees and red tape on businesses and implementing anti-business labour legislation would have no impact on manufacturing in the province? In the auto sector alone, auto company executives warned McGuinty and Wynne many times how their Green Energy policies that were responsible for massive increases in hydro costs were making the industry uncompetitive in Ontario.  Did people think they were fooling? Auto union Unifor loves to make life as difficult as possible for car manufacturers to remain competitive in a challenging global marketplace, but claims to be shocked when these companies choose to downsize in Ontario for more attractive jurisdictions.

When the minimum wage was increased sharply in Ontario at the beginning of 2018, proponents of higher minimum wages claimed it would have no impact on jobs.  The same crowd that endorses higher taxes and prices on carbon, alcohol, tobacco etc on the basis that this will reduce the demand for these commodities seem to think that the labour market is somehow magically exempt from the law of supply and demand. Of course, the facts suggest otherwise, and this recent study is yet one more example of the reality that when the cost of labour increases, businesses will seek to remain competitive – and therefore remain in business – by looking to reduce their labour costs by reducing their employment complement or moving elsewhere. This major wage hike, plus the many other sizeable cost increases that were imposed on Ontario businesses during the Liberal reign, were bound to take their toll.

It is common that the impacts of government policies – good or bad – take many years to fully manifest themselves, and often the government that brings in these policies is long gone before the full effect of what they did becomes apparent. This study ended its analysis in 2015, when the Trudeau government first came to power in Ottawa. As that Liberal government has pursued many of the same policy directions as did the Ontario Liberals, it isn’t rocket science to assume we will see exactly the same negative effects on the manufacturing sector across Canada as we have seen in Ontario. That’s not something that Canadians should be looking forward to.

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