MA CLEAN’S/CTV POLL

FALLING EXPECTATIONS

IN AN ERA OF SLOW GROWTH, CANADIANS ARE LEARNING THAT THE FUTURE IS NOT WHAT IT USED TO BE

DEIRDRE McMURDY January 4 1993
MA CLEAN’S/CTV POLL

FALLING EXPECTATIONS

IN AN ERA OF SLOW GROWTH, CANADIANS ARE LEARNING THAT THE FUTURE IS NOT WHAT IT USED TO BE

DEIRDRE McMURDY January 4 1993

FALLING EXPECTATIONS

IN AN ERA OF SLOW GROWTH, CANADIANS ARE LEARNING THAT THE FUTURE IS NOT WHAT IT USED TO BE

DEIRDRE McMURDY

Eileen Oldford is a professional optimist. As the executive director of a business development program on economically depressed Cape Breton Island, Oldford has made a career of looking on the bright side of the bleakest conditions.

Over the past several years, the island’s key industries—coal mining, steel and fishing—have steadily eroded, driving unemployment in the region to more than 20 per cent—well above the 11.8-per-cent national average. In 1987, in an effort to create jobs and break the decades-old cycle of dependence on government handouts, Oldford and several associates helped to form a YMCA Enterprise Centre in Glace Bay, N.S. “People on Cape Breton aren’t looking to get rich quick—they’re trying to survive with dignity,” she says. But even the most determinedly positive attitude cannot eclipse the foreboding that Cape Bretoners feel about the coming year—a year in which another coal mine is scheduled to close, throwing 350 people out of work. “People here are used to economic hardship and the need to be resourceful,” notes Stewart Perry, chief executive of the Centre for Community Economic Development in Sydney, N.S. “But we all realize this time around is very different.”

MACLEAN’S/CTV POLL

Indeed, profound concern about economic prospects over the next decade is something that unites Canadians across the country. More than 61 per cent of those questioned in the Maclean 's/CTV poll by Decima Research expressed the conviction that Canada’s economy will remain weak, and the job market will be tight, throughout the 1990s. According to Lindsay Meredith, a professor with the faculty of business administration at Simon Fraser University in Burnaby, B.C., the protracted grind of Canada’s economic recession, highlighted by weekly reports of new layoffs and plant closures, has had a corrosive effect on the collective psychology of Canadians. “We’re on the verge of a national crisis of self-confidence,” says Meredith. “People are discouraged and demoralized, and that diminishes their capacity to respond to fresh opportunity.”

Just before it closed its own doors in June because of a lack of government funding, the Ottawa-based Economic Council of Canada released a study that helps to explain why Canadians are so uneasy about

the future. According to the council's report, Canada’s high industrial costs and lagging productivity mean that it now takes 35 years for real national income to double—twice as long as it took 20 years ago. The study added that while income per capita after inflation grew by four per cent annually a generation ago, increases over the past decade have been negligible. As well, a recent Statistics Canada survey revealed that the average Canadian family earned 2.6 per cent less in 1991 than in the previous year. The agency also noted that higher taxes and inflation had eroded about 40 per cent of the income gains made since the last recession in 1981-1982.

It was all a lot simpler in the 1950s and 1960s, when the baby boom generation was growing up amid unprecedented prosperity and economic growth. Thirty years ago, a single paycheque bought a house in the suburbs, a car and annual vacations for a typical Canadian family. But in the decades since then, the number of industrialized countries around the globe has expanded rapidly. And at a time when once-backward nations such as South Korea, Taiwan and Mexico are becoming efficient, lowcost industrial producers, North America’s traditional advantages are rapidly being eclipsed. “This is not just a cyclical production slump—it’s real loss of pricing leverage,” says Jayson Myers, chief economist with

United States moves out of recession we will experience an improvement.”

—Poll respondent Piyali Bagchee, 31 Research assistant, Toronto

How satisfied are you with your economic situation right now?

VERY DISSATISFIED ffEEEl

the Canadian Manufacturers’ Association (CMA) in Toronto. “Intense international competition has pushed prices down at the same time as Canada’s production costs have climbed.” In addition to high labor costs, Canadian companies have been saddled with steep tax increases and rapidly rising telecommunication and transportation costs. Until recently, that situation was exacerbated by an overvalued Canadian dollar.

Canada’s situation is especially dire, according to Myers, because 45 per cent of Canadian production is currently geared for highly competitive export markets. At the same time, the global trend towards freer trade has forced domestic suppliers to compete with cheaper imported goods. Consequently, according to statistics gathered by the CMA, only 55 per cent of goods consumed in Canada are manufactured domestically, down from 73 per cent in 1980. With dwindling demand at home and booming markets abroad, Canadian companies are looking elsewhere for growth opportunities—opening plants and creating jobs in foreign countries, where labor is cheaper and demand is on the rise. In a recent interview, Wayne McLeod, chief executive of Toronto-based CCL Industries Inc., told Maclean ’s that his company, which manufactures cosmetics and cleaning products, “wants a toehold wherever there is growth in the consump-

Fercentage “dissatisfied” or “very dissatisfied”:

BY LEVEL OF EDUCATION:

STUDENTS PUBLIC/SOME HIGH SCHOOL HIGH-SCHOOL GRADUATE VOCATIONAL/TECHNICAL/COLLEGE ATTENDED UNIVERSITY

BY REGION:

BRITISH COLUMBIA 26 QUEBEC 39

PRAIRIES 33 ATLANTIC 33

ONTARIO 35

Respondents who said that the economy seems to be getting worse were more likely than others to say that:

• Brian Mulroney’s government is to blame for the slow recovery

• politicians are interested only in helping themselves

• their favorite political leader is Preston Manning or Bill Clinton

• children being born now will be worse off than their parents

• the behavior of young people is deteriorating

• they feel more threatened by crime now than five years ago

• they are afraid to walk outside alone at night

• the increase in non-white immigration over the past 20 years is a bad thing

Respondents who said that the economy seems to be getting better were more likely than others to say that:

• global economic trends are responsible for the slow recovery

• people expect too much of politicians • their favorite political leader is Brian Mulroney or Jean Chrétien

• they are more proud of Canada now than five years ago

• they would support new constitutional negotiations

• ethnic relations in their community have improved over the past five years

• they feel less threatened by crime now than five years ago

• the increase in non-white immigration over the past 20 years is a good thing

MACLEAN’S/CTV POLL

tion of consumer products.” He added, “It’s got absolutely nothing to do with free trade and everything to do with declining, mature markets.”

The inescapable result of that trend, however, is that many of the jobs lost in this recession will never return. Moreover, the sharp drop in investment at existing Canadian plants poses a future threat. Myers notes that where manufacturers are cutting costs, they are not reinvesting the savings in new equipment. “Because of the rapid pace of change, Canada is losing out on a whole generation of technology,” he says. “That means we’ll be in worse competitive shape than ever.”

Canadian companies are not alone in facing the fallout from global restructuring. In the United States, even though the manufacturing sector grew by 35,000 jobs in November, companies are increasingly shifting production offshore and awarding contracts for a variety of functions—from data processing to tool and die making—to independent suppliers at home and abroad. Technological advances have helped to reinforce that trend because outside suppliers can now easily be integrated into internal communications and production systems.

The current restructuring of Canada’s economic base may also leave behind a painful social legacy. Among economists, there is widespread talk of a polarization between skilled white-collar workers and unskilled blue-collar workers. Since 1989, more than 350,000 manufacturing jobs have disappeared—and to date, unskilled workers have borne the brunt of layoffs and salary rollbacks in Canada. Says William Watson, an economics professor at McGill University in Montreal: “It’s classic international trade theory at work. The act of removing trade barriers marginalizes the lower end of the labor force in more developed countries.”

The polarization between highand low-income Canadians is also reflected in their perspective on trade issues. In the Maclean ’s/CTV poll, 43 per cent of respondents blamed the federal government for Canada’s current economic problems, while 20 per cent blamed free trade. Significantly, opposition to free trade was highest among the least educated and lowest paid categories of respondents—groups that economists say are most vulnerable to the effects of globalization. Respondents with higher salaries and education levels—in general, the least likely to lose jobs to cheaper foreign labor— were more inclined to say that Canada has suffered because of worldwide economic forces and because its businesses and workers lag behind others in international competitiveness.

Another pronounced difference in economic views occurs among age groups. While the adjustment to slower growth clearly affects all Canadians, those born in the two decades following the Second World War, the so-called baby boom generation, have suffered the greatest psychological impact. Notes Meredith: “The boomers are bummed out. They grew up with expectations and they were well on the way to realizing them when we hit the wall.” He adds, “It’s always worse to have it taken away than to have never had it in the first place.” By contrast, Meredith says his current crop of business students have lower material expectations than their counterparts a decade ago—and they fully anticipate fierce competition for jobs after graduation.

The crash of economic expectations has provoked changes in the political arena, as well. Among the most important is a newfound willingness on the part of Canadians to reject the directives of those in authority. “The notion that governments have the ability and the wisdom to steer the economy is being dispelled,” says Richard Woodward, a finance professor at the University of Calgary. “The growing view is that the government is just an economic facilitator that provides the appropriate infrastructure for prosperity.” In fact, 53 per cent of poll respondents indicated that they look to the business sector to safeguard their economic interests, while only 27 per cent look to government and 13 per cent to unions. That pattern has held more or less steady in Maclean ’spoils since 1989, before which the largest number of respondents looked to governments to care for their interests.

The loss of faith in political leaders has extended, in some cases, to labor. As the economic picture has darkened, adversarial labor-management relations have given way to voluntary wage and benefit reductions, as workers—and their leaders—struggle to preserve jobs. In August, just six months after the employees of troubled Canadian Airlines International Ltd. of Calgary refused management pleas for salary concessions, they took

How do you feel about your future economic prospects?

VERY PESSIMISTIC PESSIMISTIC OPTIMISTIC VERY OPTIMISTIC

Percentage “pessimistic” or “very pessimistic,” by age:

Over the next few years, what do you think will happen to the economy?

THE ECONOMY WILL REMAIN WEAK AND JOB OPPORTUNITIES WILL REMAIN LIMITED

THE ECONOMY WILL BECOME STRONGER AND JOB PROSPECTS WILL IMPROVE

MACLEAN’S/CTV POLL

the initiative themselves to rescue the company from bankruptcy. In recent weeks, workers at an Ottawa-based bus line, Voyageur Colonial Ltd., voted to take a 50-per-cent cut in scheduled pay increases to help reduce costs and foot the bill for a pricing complaint against Via Rail Canada Inc. of Montreal. At the same time, 2,400 steelworkers at Montreal’s Sidbec-Dosco agreed to 10-per-cent pay cuts and the elimination of 300 jobs to keep their employer afloat.

For his part, Myers says that he detects a shift away from the entrenched “entitlement mentality” of Canadians, a trend that suggests they are more likely to depend on their own efforts rather than the direction of others. “We’ve turned too often to government and labor leaders for basic answers,” says Myers. “We are too inclined to resist change.”

The Bank of Montreal’s chief economist Lloyd Atkinson voiced similar concerns in mid-December when he released his 1993 forecast. Atkinson bluntly characterized one of Canada’s primary economic problems as “too much pogey, too little training.” He also noted that “a huge change in thinking” about unemployment insurance, welfare and regional development will have to take place before fundamental economic problems can be addressed.

Despite the bleak and increasingly unfamiliar economic landscape, some experts say that the current mood of collective despair may be more constructive than continued denial. They add that as Canadians finally accept that economic conditions will not return to their previous state, and that government initiatives can no longer be relied on to solve deeply rooted problems of competitiveness, conditions will gradually begin to improve. Meredith, for one, notes that business students are now flocking to enrol in courses about entrepreneurship and small business. “Lifelong security with a big company is no longer an option. Students realize they’ve got to be creative to survive,” he says. He and others say that today’s young generation, along with retrained workers from the industrial sector, will likely go on to create a more diversified—and less vulnerable—Canadian economy. Perhaps, in time, even the ranks of economic optimists, like Eileen Oldfield, will gain new members.

DEIRDRE McMURDY

What is the main reason for Canada’s slow recovery from the recession?

w

ho do you look to most to look after your economic interests?

GOVERNMENT

BUSINESS

UNIONS

NONE OF THE ABOVE/ NO OPINION

BY AGE: GOVERNMENT

BUSINESS

UNIONS

The federal government has done a poor job of managing the economy:

43%

The free trade deal with the United States has hurt our economy:

20%

Our major trading partners are also experiencing slow growth:

20%

Canadian businesses and workers are not as competitive as they should be:

13%

No opinion:

4%

Percentage of respondents who attended university that blamed either the federal government or the Canada-U.S. Free Trade Agreement:

46

Of those without a high-school diploma:

74

Percentage of those earning less than $40,000 who said that Canadians are not as competitive as they should be:

Of those earning more than $70,000:

20