This is part of The Globe's Wealth Paradox series, a two-week examination into how the income divide is shaping Canada.
Marc Lagerway is one of the lucky ones.
When he retired last year from Canadian Pacific Railway Ltd., he belonged to a group that is fast becoming an endangered species – unionized employees who spend their entire working lives with the same company, earning handsome wages and a healthy guaranteed pension.
For most of his 34 years at CP, he was an engineer riding in the cabs of locomotives hauling freight from Calgary to Medicine Hat, Red Deer and Field, B.C., and back. During the last decade of his career, he was making about $85,000 a year, about double the median pretax income of Canadian men. “It was quite easy to go on a holiday or buy a vehicle or buy a house,” Mr. Lagerway says. “You never had a problem getting credit.”
The Canadian Pacific job brought with it other benefits – a sense of upward mobility, enough money to send his daughter to university, and now, a $6,000-a-month pension cheque. But as he settles into retirement at the age of 56, the colleagues he left behind at the railway are the focus of one of the more radical restructuring plans any major Canadian company has tried in recent years.
Hunter Harrison, a brash, hard-driving Tennessean who was credited for the turnaround at Canadian National Railway Co., was brought in last year by CP’s new board to make it more profitable. Mr. Harrison’s promise is to cut 4,500 jobs by 2016, or nearly one-quarter of the work force.
CP, some say, is merely catching up with its industry, and with the times. Long before CP’s cost-cutting push, Corporate Canada had embarked on a drive for efficiency that has helped to reshape the country’s economy – all to deal with a new environment of freer global trade and less government protection.
The move toward leaner companies has produced economic dividends. It has helped Canada retain its position as one of the world’s most competitive economies, ranking 14th in the World Economic Forum competitiveness index. In some cases, including CP’s, it has created tremendous gains for investors.
But the benefits of greater efficiency have not been evenly distributed. In manufacturing, forestry, mining, transportation and other sectors, globalization and increased efficiency led to the elimination of hundreds of thousands of high-paying unionized positions in Canada.
That drop in unionized jobs – and the resulting loss of blue-collar bargaining power – appears to be a major reason for the disquieting increase in inequality in Canada. About 18 per cent of private sector jobs are now unionized, compared to 21 per cent in 1997, and the proportion was declining even before then.
Anemic economic growth and pressure on wages and benefits have combined to deal a severe blow to a concept long cherished by Canadians – that the next generation will be better off than the one that preceded it.
“It just took that final knockout punch of the Great Recession to tilt everything away from easy progression up the socio-economic ladder for new labour market entrants or for someone who had lost a job in a displaced industry,” says Rafael Gomez, an associate professor of employment relations at the University of Toronto.
“The relative decline in private sector unionization is the biggest institutional factor behind the rise in inequality.”
The drop in unionized jobs ripples throughout the economy – in part because when enough workers are members of unions, their wage and benefit levels set standards that non-unionized companies usually have to meet. Prof. Gomez points to the auto sector in Ontario, where non-union Honda of Canada Mfg. and Toyota Motor Manufacturing Canada Inc. effectively match what the Canadian units of the Detroit Three auto makers pay their unionized workers.
Higher-wage unionized jobs have traditionally been a ticket to the middle class – especially for those without university degrees, such as Mr. Lagerway – and all the spending on consumer and other goods and services such a lifestyle entails. But the path to those jobs has been getting more difficult.