Combining immediate heartbreak with the promise of more to come, it was a 24-hour span that said all too much about the economic decline of the country’s largest province.
The dire outlook came first with the Conference Board of Canada predicting on Thursday that Ontario should expect no better than 1.9 per cent annual economic growth. On Friday morning came the jobs figures from Statistics Canada, which showed an uptick in an unemployment rate that remains above the national average. But it was the developments in London, around the same time, that resonated more than the raw numbers.
At the start of the day, several hundred Londoners were locked out of their jobs making diesel trains for Caterpillar Inc. By noon, they were simply out of work – the U.S.-based company responded to its ongoing labour dispute by pulling up stakes.
For this to happen in London, among the most hard-hit of Canadian cities in recent years, could hardly have been crueler. Nor could a single event have more strongly epitomized the reasons for the wrenching cost-cutting exercise that the province’s government is about to go through.
On Feb. 15, economist Don Drummond will release his long-awaited report on public service reform, expected to help guide that austerity exercise. His recommendations will be more sweeping and draconian than the government expected when it commissioned him last spring. That’s because he sees the Ontario’s economic growth prospects much the same as the Conference Board does, largely owing to the decline of the manufacturing sector.
That decline involves not just job losses, Mr. Drummond noted in an interview last month, but also a push toward lower wages. The events in London, where workers were laid off because they were unwilling to accept 50 per cent pay cuts, rather neatly encapsulated both of those phenomena.
Caterpillar is known for its hardball tactics, so not every case will be as extreme. But the reality is that much of Ontario, outside the Greater Toronto Area and a few other hubs, is starting to look a lot like rust-belt states south of the border – places like Indiana, where it’s rumoured those Caterpillar jobs will be going, to people willing to work for less.
As provincial officials rightly point out, growth projections five or 10 years down the road are hardly reliable, so the specific numbers being put out by Mr. Drummond or the Conference Board need to be taken with a grain of salt. But take into account the province’s aging population, its declining share of skilled immigrants and other pressures, and the pessimism is more than understandable.
That’s something the province’s political leadership is unlikely to accept openly. In power for more than eight years, Dalton McGuinty is reluctant to tell Ontarians their prospects have significantly dimmed on his watch.
Truth be told, it’s pretty facile to blame a single premier for Ontario’s struggles, which have more to do with the province’s relative lack of natural resources and its traditionally close economic ties to the United States. And Mr. McGuinty has done at least some of the things experts have been calling on him to do – investing in education to create more of a knowledge economy; cutting business taxes; harmonizing sales taxes; going out on a limb with a green-energy jobs strategy.
Yet for now, at least, the bad news keeps coming. And neither Mr. McGuinty nor his main political opponents, who recently ran for election on the simple premise that the path to prosperity is working hard and playing by the rules, seem to know what to do about it.
“The old model is broken,” says Peter Harder, who like Mr. Drummond is a former senior federal bureaucrat well-versed in the province’s troubles. “The politicians ought to know that, on the evidence available. But there’s no consensus how to address it.”
A year ago, Mr. McGuinty effectively acknowledged that he was at a loss over the budget crunch, and sought outside help in the form of Mr. Drummond. Now, Mr. Harder suggests, it might be time to launch another commission to address the root causes of those financial difficulties – the broader economic ones – if only to focus attention the way Mr. Drummond has.
The idea of studying the problem, at this advanced stage, might seem a little dubious – especially if you asked the folks in London. But unless the province can get a handle on it, the kind of pain experienced this week will be spread around Ontario for a long time to come.
What he didn't say, but is an alarming prospect, is that for the past year the province has been studying the wrong problem, or at least the less important one. After all, the depth of spending cuts Mr. Drummond will propose – or the alternative tax increases hinted at by the Conference Board – wouldn't be necessary if Ontario could figure out how to start growing again.