Is unemployment here to stay?

The recession’s over, but several hundred thousand Canadians —from free-loading frauds to serious distress cases—are drawing unemployment insurance. What’s more, says Maclean’s Ottawa editor, nobody is likely to do much about it. Here’s why

Blair Fraser August 29 1959

Is unemployment here to stay?

The recession’s over, but several hundred thousand Canadians —from free-loading frauds to serious distress cases—are drawing unemployment insurance. What’s more, says Maclean’s Ottawa editor, nobody is likely to do much about it. Here’s why

Blair Fraser August 29 1959

Is unemployment here to stay?

The recession’s over, but several hundred thousand Canadians —from free-loading frauds to serious distress cases—are drawing unemployment insurance. What’s more, says Maclean’s Ottawa editor, nobody is likely to do much about it. Here’s why

Blair Fraser

WHY ARE so MANY Canadians still unemployed, when the recession is over?

As early as last February it became clear that recovery is well established. Industrial production in Canada reached a new high after its two-year sag, and has been rising ever since. The 1959 national product will be greater than Finance Minister Fleming predicted in his budget speech, and he predicted an all-time record. The investment boom is again under way. bringing high interest rates and a threat of “tight money" but also a promise of new expansion.

All the figures look good—except employment. In June 234,000 Canadians were still without jobs and seeking work. 3.7 per cent of the labor force. This was well below the 324.000 or 5.2 per cent in the depressed summer of 1958 but unplaced applicants at the National Employment Service totaled 321,000. The industrial production index is

up by nearly two thirds over the 1949 base but the employment index is up barely a quarter. And even if unemployment goes down to normal for the later summer months, some government economists expect another high peak of seasonal unemployment next winter, perhaps almost as high as last.

They believe unemployment is here to stay. Not of course at the disaster level of 1933, when one in five Canadian workers had no job. Not even at recession levels w'e have known since World War II. But they think that in good times or bad we shall have more unemployment than we've been used to having, and enough to make it a serious national problem.

Thirty or even thirteen years ago, the cure would have been difficult but fairly simple —to make jobs. Lord Keynes’s theory of the anti-cyclical budget,

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“Some ‘unemployed* are women who work just long enough each year to be eligible for benefits”

with deficit financing in time of depression to let public investment take up the slack when private investment falls off, was the economic doctrine of postwar policy in Canada as in most western countries. It was expressed in the famous White Paper on Employment and Income published in April 1945, and followed in broad outline by both Canadian governments ever since.

It worked, too. None of the postwar recessions grew into a major slump. But this last one did have certain features quite new' in economic history. Never before had the threats of unemployment and inflation appeared at the same time. Nowthat recovery is here and the outlook for jobs continues to be somewhat gloomy, questions arise that would once have sounded foolish:

If unemployment is here to stay, what does that mean? What is unemployment nowadays, anyway? It's no longer the intermittent epidemic scourge that swept the world like a Black Death thirty years ago. Apparently it has now become chronic, or endemic. But is it still a deadly evil for its victims, like malaria in India, or is it now merely an economic nuisance like the common cold?

Nobody can give a firm answer because nobody, not even the minister of labor, knows the true figure of unemployment in Canada. We do know there are five or six grades of unemployed, from the outright frauds at one extreme to the real distress cases at the other. We know their plight has many different causes—automation, regional depression, sick industries like textiles and coal mining, as well as individual incapacity or bad luck or just plain laziness.

What we don’t know, and are not likely to know, is how many people are in each group. We’re not likely to know because both governments have found it politically inexpedient even to try to find out.

Two years ago when the present government was newly and precariously in office and everyone was talking depression, Labor Minister Michael Starr appealed to cabinet colleagues: Please don’t lay off any staff until it's unavoidable. Keep everybody at work as long as you can.

In mid-October he got a call from Alvin Hamilton, minister of Northern Affairs and Natural Resources.

“Mike. I've just heard from one of my park superintendents," Hamilton said. "He has a protest delegation in his office. They represent twenty-seven men who are normally laid off in October.

"This year 1 kept them on, as you asked, but they don't like it. They want to know why they weren't allowed to go heme October 1 as usual, and draw unemployment insurance."

Four months later Starr was campaigning at the Lakehead. As he shook one voter’s hand he asked what the man's job was.

"I'm unemployed,” was the reply.

“That’s too bad," said the minister of labor.

"It’s not bad, it’s good," the depression victim said with a grin. "I’m always off work at this time of year. In summer I work in the woods, and with overtime I do pretty well—seven thousand dollars last year. Then in winter I draw unemployment insurance."

Last June C. F. Nodwell, managing director of Compressed Air Equipment Limited, Toronto, wrote to the newspapers:

“Our firm recently has been trying to hire construction equipment operators and mechanics . . . During the current season we have been unable to hire any employee whatever of this type. Our wage rates are comparable to those paid by other companies in our industry and we have never before experienced an employment situation of this kind . . . In case after case applicants have stated that construction jobs and overtime pay. with a layoff during the w'inter collecting unemployment insurance, are better than the year-round employment which we offer.”

A spokesman for the Canadian Pulp and Paper Association, explaining recent changes in the seasonal cycle of woods work, said: "Because of the ‘vacation’ feature of unemployment insurance there is a trend toward concentrations of operations in the summer and autumn. The worker is not available in the winter.”

This “vacation feature” has been enlarged by the so-called "seasonal benefits” paid during the winter months, and in some years as late as mid-June, to unemployed whose ordinary benefits have been exhausted. They make it possible for anyone who has worked as long as fifteen weeks in summer and autumn to draw insurance benefits all winter and spring, for a total of five and a half months.

T. C. Urquhart, of the Canadian Construction Association, who is on the advisory committee of the Unemployment Insurance Commission, told a parliamentary hearing in May: "Construction men and carpenters used to work with us all summer. When winter came, construction slowed up. What did they do then? They had no unemployment benefits in those days. They got other jobs. In the province of Quebec these unemployed fellows went into the bush. They’d work from mid-December right through to March. Today the operators in the bush can't get men. I think you’re making it too easy for them to sit at home.”

To the winter vacationists may be added the frauds, such as the married women who arrange to be laid off or dismissed when they quit work to have their first

baby. At a previous committee inquiry by the House of Commons the chief commissioner of unemployment insurance testified that married women drew three times as many benefit-days of insurance as single women, though only half as many married as single women are in insurable employment.

Some are only temporarily in the labor force at all, just long enough each year to be eligible for regular and seasonal benefits. Tho same applies to some of the older men, pensioners and the like, who are listed as applicants for “suitable" employment. One official of the National Employment Service who has handled thousands of cases in the Toronto-Hamilton region said:

“Less than half of the so-called unemployed in my area are really looking for work. We have no unemployment problem in this country.” (This was in spring, when the nominal unemployment figure was still near its postwar record.)

It's a safe guess, anyhow, that these doubtful cases number at least two hundred thousand for all Canada, because that's a normal spread between the National Employment Service list of “unplaced applicants” and the Bureau of Statistics’ estimate, based on a one-percent sample, of those "without jobs and seeking work.” The official reason for the gap is that the larger figure includes people who are changing jobs, and some who have got jobs but whose names are soil on the list, but this is euphemism. In the main, the marginal group is composed of frauds and frce-loaders.

The chances of getting rid of them are almost nil. Some years ago the Unemployment Insurance Commission tried to check one type of fraud by imposing a test of married women's continuance in the labor market. The test was ten weeks of continuous employment after marriage; it was applied to women claiming benefit within two years after marriage, if they had voluntarily given up the jobs they held before marriage. The test had to be abandoned in 1957. Women’s organizations and some labor unions made such a fuss about the "discrimination against women" that the government took fright and ordered it dropped.

Another large group of workers who certainly need help, but who are not true unemployed in the normal sense,

are the fishermen of the Atlantic provinces. Nine tenths of them are self-employed or share-croppers and only one tenth earn wages, but they include some of the poorest people in all Canada, anti three years ago they were brought under the coverage of unemployment insurance. It’s true they have no work for several months each year, but this is not an insurable risk, it's a certainty. They have never worked in that season; they have always lived on the scanty earnings of their months of actual fishing. Also, some fishermen are not poor at all—many in British Columbia make an excellent year's income out of their season's w-ork. All alike are now entitled to draw unemployment insurance benefits when they are not fishing, for a period now extended up to five and a half months. Unlike wage-earners, fishermen are not required to prove unemployment, or availability for suitable work.

Similar though not identical is the problem of the sick industry, or the economically sick region. Here are people w'ho genuinely want work but who want it on their own terms, in their own towns and preferably at their own trades.

After the disaster last year that closed the coal mines in Springhill, N.S., a Toronto group decided it could find new employment there for two hundred exminers and sent a man down to recruit them. After a door-to-door canvass he managed to find twelve who were willing to go. Springhill is on the government's list of “labor surplus areas,” which means anyone leaving Springhill to take a job elsewhere can move himself, his family and his household goods at government expense. Of the four thousand workers thrown out of employment by the Springhill disaster, the government so far has been asked to move forty-two workers, twenty-three dependents, and eight families' household effects.

A Peterborough employer last year made a special request to the National Employment Service to send him men from Springhill. Three came. They went out in a taxi at the employer’s expense to look at the job, decided they didn’t like it, went back to Springhill.

In June one family that did move, all the way to Brandon, Man., and stuck it out there for more than half a year, decided they couldn't bear exile any longer. With warm thanks to all concerned and much appreciation of the help they had got, they pulled up stakes once more and went back to Springhill.

What has happened in such places as Springhill would happen elsewhere if nature was allowed to take its course. Cape Breton coal costs more at the pithead than the Ontario consumer pays for American coal delivered to his door. The federal government pays a subsidy to make Nova Scotia coal competitive with American in the Montreal and eastern Ontario market. Under the new assistance act passed at the end of June, the government hopes to provide two hundred and fifteen days’ work per year for the Nova Scotia coal miners, but this can only be done at a high cost per ton in subsidy.

Even with these props, certain regions of Canada become pools of acute distress whenever the economy sags a little. In April St. John’s, Nfid., had about the same number of unplaced applicants for

jobs as had Hamilton, Ont. — though Hamilton is five times as big as St. John's, and Hamilton itself was suffering from what it considered to be fairly severe unemployment.

Just as ill-favored areas are vulnerable, so arc ill-favored groups within the population. There is no clear proof yet that automation, the replacement of men by machine, has made any great reduction in the total number of jobs available. It has. however reduced the demand for unskilled labor and greatly increased the demand for skilled, or at any rate educated, workers.

Four years ago the National Employment Service conducted a survey of the people applying at its offices for jobs. Nearly two thirds of the unplaced applicants had less than a grade nine education. In the population as a whole, half of all workers have grade nine or higher. All the employers to whom I spoke indicated that this disparity has increased since 1955, when the survey was made, and will increase still further in the future. Last spring we had the anomaly of high unemployment, even in well developed industrial regions, while at the same time employers were feverishly canvassing high schools and business colleges for competent clerical help.

This problem has been aggravated by two relatively new conditions: the high employment level that's been considered normal in Canada since World War II; and the high minimum wage that labor unions have been able to establish in prosperous industries. Boys have found it easy to leave schoo' for well-paid factory jobs, often earning more than their skilled fathers earn in less prosperous plants This is marginal employment. At the first onset of recession these lads, having no skill and no seniority, are the first to be laid off and the last to be taken back on. Too old by now to go back to school, and often with young families to feed, they go on unemployment insurance.

Two summers ago an employee of the Steel Company of Canada, Hamilton, made a strange request. His son wanted a job for the school vacation; the father's request was that the boy be paid less than the company's minimum wage, then about $1.85 an hour. The company said no. it was bound by contract to pay no less than the negotiated minimum.

All right, said the father; in that case, could the boy be put to work at the hardest job available? This could be arranged, and was. The youngster took one of the few really hard, hot jobs left in modern steel-making and stuck it out for the summer, but he was glad to go back to school in the autumn. When he enters the labor market for good, his chances of avoiding the ill effects of automation will be vastly improved.

I he full impact of automation has not yet been felt in ( añada, nor indeed in any country. Examples from the tew industries which have adopted automatic processes are rather startling:

McKinnon Industries. St. Catharines, Ont., which makes engine blocks for General Motors, carries out all eight hundred operations on each block with only twenty-seven men. Seventy blocks an hour are turned out with less than one third of a man-hour of human labor on each.

The new CIL polyethylene plant in Edmonton, almost fully automatic, has an output of forty thousand dollars per worker per year.

Canada Packers in Toronto can skin as many steers in an hour, with new' machinery and forty-seven men, as it used to do with ninety-eight.

The CPR in Montreal has a computer able to handle five million way bills, nine million passenger tickets, one million, eight hundred thousand requisitions on stores and many other marvels of semiskilled clerical work, replacing a variable but colossal number of manhours.

These are random examples from Canada—they could be extended a hundredfold with others from the United States. But to talk of “replacement’" of manhours is misleading; so far. automation and other forms of technical progress have meant in most cases not that fewer people are employed, but that more work is done by the same amount of effort.

In the Canadian electrical supply industry. for example, the amount of production went up by 90.9 percent between 1947 and 1957, and the number of employees only fifty-three percent. But the company’s payout in salaries and wages tripled in the same ten years, and wages per capita doubled.

One company in central Ontario has in its plant a dramatic contrast between two mills producing the same item. The new mill, standing right beside the old one. produces more than the old with only one third as many men—an obvious threat to employment, one might think. But the point is that hath mills are working full time, with a backlog of orders waiting for them. The actual effect, so far, is that this particular operation employs thirty-three percent more men than before and produces more than twice as much.

An American executive, testifying at a congressional hearing four years ago, said: “It would be wrong to regard the electric light as replacing gas or kerosene lamps. What it chiefly replaced was unlighted streets and roads, and going to bed at dusk. The automobile did not exactly replace the horse and buggy. What it chiefly replaced was staying at home."

Nor is it true, as many people think, that large numbers of skilled workmen

arc being thrown out of jobs because their skills are obsolete. I asked a Toronto employment official whether he had anyone on his list who was unemployed for that reason.

"One,” was the reply. "He's a man who makes fancy plaster bases for chandeliers."

Employers say their skilled men can be taught new skills when new techniques are introduced. They find, in general, that the man who has energy and aptitude to acquire one skill has energy and aptitude to learn another. In some industries, though, labor union seniority rules are a serious obstacle to re-employment of this kind. The railways. in particular, have found difficulty adjusting their working staff to such changes as the switch to diesel engines. Not only the locomotive firemen but various trades in the shops have been affected.

Donald Gordon, CNR president, explained to the House of Commons railway committee a drop of ten thousand in CNR staff between 1957 and 1958:

"In round figures we can attribute thirty-eight hundred to decline in traffic, four thousand to technological changes, and fourteen hundred that we credit to improved supervision and organization of work methods; also about fourteen hundred that are not identified for a specific cause, but represent among other things a more rigorous staff control. In other words there has been a tightening up all through our employment picture, to bring our working force into relation with our traffic position."

Other employers have had similar experiences. One company which for obvious reasons doesn't wish to be identified. but which has plants in several provinces, provides a dramatic example.

Almost continuously since the war, this company has been going at full capacity. Its various operations are closely interrelated. "We just couldn't afford

a strike.” said one executive, "because a strike in one plant would tie up others. It was always cheaper and easier to give what was asked, and keep going."

Last year this situation changed. The market for this company's product became temporarily glutted. One of its plants did go on strike, partly for higher wages but more particularly on an issue of discipline, a conflict of authority between foreman and shop steward. The strike went on for many weeks, but in the settlement it was the foreman's authority that prevailed.

The strike is over, the market glut is not: the company is still operating below capacity. But the reduction in staff is much greater than the drop in production.

"We've put in no new machinery and we haven't changed our methods." an executive said, “but there has been a general pulling up of socks. I should say our productivity per man-hour has gone up about twenty percent. Roughly speaking, we've got four men producing what five men produced before the strike."

Even while this squeezing-out process went on, and unemployment figures were high across Canada, there were still jobs available of two sorts, the highly skilled and the unpleasant. The highly skilled people needed included not only electronics workers but also stenographers, well-educated clerical workers and nurses. Unpleasant jobs included domestic work and some kinds of heavy labor. At a time when unemployment was still near its peak I asked an official of the Immigration Department whether their program would be sharply cut this year.

"Our placement officers say they're having no difficulty." was the reply. The immigrant’s high mobility, willingness to go anywhere and do anything (in some cases at substandard pay) gave him enough advantage over the Canadian to assure him a job. Also, many immigrants have skills that are scarce in Canada.

In seven out of the ten provinces the National Employment Service has organized re-training schemes for unemployed who can't find work in their old trades, and the results among those who have taken the training have been excellent. However, these totaled only about four thousand for all Canada in the past year—about half of one percent of the unplaced applicants on NES rolls during the winter.

Evidently no one program can be devised to meet all these problems. Something different is required for each—for the depressed region, the under-trained individual, the sick industry, and also for the fakers and winter vacationists who deliberately milk the unemployment insurance fund each year.

A first step would be to find out how many of our unemployed fall into each category—information that the National Employment Service people could obtain. they say. if they were asked to do so. They have not been asked, and are not likely to be.

It is apparent, to politicians of all parties, that Canadians don't really want to know about unemployment, and inquiry makes more enemies than friends. No part of the country wants to be identified as a depressed area. Nobody wants to be required, or even urged, to learn a new skill. Nobody wants his motives or qualifications challenged when he applies for unemployment insurance, and not many seem to mind if the fund is being robbed. So the chances are that we shall just go on as we've been going, at least until the next recession brings unemployment back into the news. ★