It’s been over 45 years since I started my career in industry as a newly minted graduate chemist, but it seems a world away in societal terms.
I began work in a research department of a major food company that was located right next door to a big bustling food factory. The products we developed were upscaled and produced right there.
Many of the folks working in the plant were moderately talented and educated individuals (Grade 10 was common, a few finished Grade 12.) Yet in most cases they were earning a larger paycheck than I was after 4 years of a tough university regime. Some of my professional colleagues resented this fact but I never did. In the long term I knew I’d do better, and besides these people paid taxes and built up the community the same as I did. It was good for the town and good for business.
Today both the R&D facility and the factory are gone. The opportunity for a decent blue collar income went with them. The story is much the same in many cities and small towns in Ontario and Quebec. If you consider that these jobs made up the foundation of the middle class in Canada, it’s no wonder this class has been hollowed out.
I recently read a TD Economics report about Income Inequality (and Wealth Inequality for that matter.) It’s a sobering document.
The same forces that have devastated the middle class in the US apply here, namely:
- Technological Change. There is a rotation from labor to capital when it comes to industrial production. That was easy to see even 10 years ago when I was still in the workforce. Productivity increases, jobs decrease with it. A computer replaces a machine operator.
- Globalization. Do the R&D in North America but when it comes to production, move to a lower cost venue in Asia or Latin America. No factory jobs left in Canada.
- Competition for top talent. The very high skilled jobs get paid more and this seems to be the way of the future. But there aren’t going to be many of them compared to what was out there in the 1970s.
So far Canada appears to be trailing the US a bit in these trends, but we are closely partnered with our Neighbor to the South so we can’t escape them completely. Our international companies will just relocate to “right to work” states in the US. I’ve seen that happen recently with Unilever as they are closing the factory in Brampton I worked in for 20 years.
One reason Canada has not had the same issues with income and wealth inequality as the US has (so far) is the fact that commodity production and real estate growth here have kept more of our middle class workers on the job. However both of those uptrends appear to be ending, or have ended.
TD Economics argues that income inequality has a bad effect on the economy and the underlying society – both in terms of current living standards for the majority, and the future opportunities for our children and grandchildren. I agree, but the solutions to the problem are not that easy to come by. Rather depressing thoughts on a cold January day.