Every day in the media we hear that Canadian industry has to cut costs to get more competitive internationally. This is not necessarily a good thing.
 

An employer in a third world country has to pay almost nothing except a very low wage to its workers. A Canadian employer has to pay:
 

- Part of employment insurance costs

- Part of Canada Pension Plan costs

- Workers Compensation premiums

- Vacation pay

- Medicare premiums

- Overtime

- Higher wages

- Etc., etc., etc.
 

Now we tell the Canadian employer he has to compete with Chinese producers?
 

We tell the Canadian worker he has to compete globally, including with workers in Mexico. Let's compare a few things.
 

WAGES

The Mexican, Chinese or other third world worker works for as little as a dollar a day in Canadian currency. The Canadian worker is prohibited by law from competing. The Canadian worker is forced to get a minimum wage which is not even adequate to live on in Canada.

For example, in 1990 the average industrial wage in China converted out to about $20.00 Canadian per month. The question is, how can these people even live? The answer is that that amount of money in their currency buys a standard of living almost equivalent to what the Canadian worker would have if they were getting the minimum wage.

How can this be? They get $20 a month, yet the minimum wage here is more like $900. Yet, the Chinese worker gets enough to eat, has a small and shared apartment, is able to take public transit to work and is usually able to get married and raise a family.

Chinese workers feel their lives are just as precious as ours, yet they get far less "hard currency". While they can buy enough domestic goods to live, they are locked out of the international market. The thing is that the Chinese worker cannot buy any imported goods.

They are just as smart as we are. They love life just as much. An hour of their lives spent in toil for others should be worth at least as much as one of ours at the lowest acceptable rate of pay. However, they are paid far less. The thing is, their pay still buys a halfways decent life, though not quite up to our level. How then does $20.00/month buy the equivalent to a $600/month living here. It is due to distortions in the exchange rate for various currencies. The money traders have given a value to Chinese and other third world currencies based on how little we can pay and get away with it for the goods and services of a country. It has nothing to do with the value of the hours of a person's life. Because of this, distortions have come into play where we can buy a month's work in China for less than half a days work in Canada.

Basically, employers who take production out of Canada and move it to China or other third world country are exploiting the workers of that country. The Third World worker's time is just as valuable to him as my time is to me, especially those with the same level of training as myself. Yet we pay them what is a pittance in comparison to our workers.

As a society, Canada has determined that to maintain minimal human dignity, workers need a pension, workers compensation, unemployment insurance and most of all a decent minimum wage. Yet, we are rapidly exporting our manufacturing jobs to countries where these basic things are denied to the workers. Then you tell the Canadian worker she has to compete!
 

HOUSING

Chinese workers live in concrete high rises with primitive hole in the floor toilets at the end of the hall, with communal kitchens. A building like that could be built for around $10,000 per suite in Canada. However, if I applied to build such a structure in Canada, no community would let me. It does not meet minimum standards. Exclusive of land, a minimal living unit apartment costs $50,000 to $80,000 per unit to build.

Then, since the housing in China is state owned, they don't pay for the land. The developer has to pay hundreds of thousands for an apartment building site. The Chinese worker, paying about 10% of his income for rent, spends about $2.00 per month for their dwelling unit because of distortions in the exchange rates. The Canadian, renting a minimal unit that meets Canadian zoning standards has to pay at least $500 per month. Now, you say we have to compete!

Then, if we try to reduce our housing costs to compete, the zoning laws stop us. We try to add three suites to a house to provide low cost housing and we are told that is a non-conforming use and cannot do it. Then you say, the Canadian worker has to compete!
 

TRANSPORTATION

Then, the zoning people don't allow only apartment construction. Most land is set aside for space wasting single family urban sprawl. Also, residences are kept well away from industry. This means that jobs and homes end up farther apart.

Add in transit service that costs up the $3.00 Canadian but only $0.05 to the Chinese worker. Transit service is only available reliably in rush hour in Canada and only to the downtown area. In he suburbs, where most manufacturing is done in Canada the transit service is spotty, forcing many workers to use their cars. Add in poor investment in transit infrastructure where that if everyone in their cars wanted to take transit, the service is not there anyway and tell the Canadian worker to compete. It costs the Canadian worker more to get to work everyday than we pay the Chinese worker. Yet, there are those who say we must compete
 

PRODUCTIVITY

The Canadian worker is very productive compared to the Chinese worker. However, the Chinese workers are just as smart as we are and are catching up rapidly. There is nothing the a Canadian worker can do to further his productivity that the Chinese cannot duplicate. They are capable of working as hard and smart as we are. The only reason they have been less productive is that they are making a later start at it than we are and were prevented from improving much under Mao's communism. However, it won't take them 100 years to match us. It will be done before the year 2010.

Even at today's miserable Chinese rates of pay, there is work that a machine can do better than manual labour in China. In 1987, when the writer toured a TV assembly plant in Chengdu, China, some work was being done robotically. However, the point I am trying to make is not that robots are going to take away jobs. The point is that the third world worker can take advantage of every productivity enhancing thing that comes along, almost as fast as we can.

On one hand, we can never stop trying to get more productive as the foreign competition will eat us alive if we do stop. On the other hand, with the distortion in currency values, no amount of boosting productivity will make the Canadian manufacturing worker competitive.
 

So you say "Who needs manufacturing anyway?" We live in a service economy. My answer is to look around you. Sure some services pay well. Computer servicing, legal services, etc. However, most of the service jobs are at the low end of the wage spectrum. Also, services only serve to move the wealth around. SERVICES DO LITTLE TO CREATE WEALTH.

Yet, however, we need constant new creation of wealth to replace things that wear out and to buy things which we do not make (almost everything now). Wealth is created in two ways:
 

1. When something is taken from the earth. This is either mining or agriculture. We dig something up or we grow it.

2. When things taken from the earth or grown are combined in such a way that the resulting assemblage is worth more than its raw materials
 

Services can keep wealth from dissipating as fast as they would otherwise, by keeping a car in good repair or by keeping your carpets clean, enhancing the value of your house for example. However, without new wealth coming into a society, it is inevitable that the society will run down. Every time you put another kilometre on your car, it depreciates and you wealth goes down. The wealth in that society may go back and forth due to services, just like a pendulum goes back and forth in a grandfather clock. However, once new wealth no longer comes into the system, the economy will run down just like a pendulum will if you don't wind the grand father clock.

Like a grandfather clock's pendulum that gets constant kicks from the spring in the clock (as long as some one winds it), the economy also needs constant injections of new wealth. However, in Canada, the extraction of resources alone does not generate enough wealth to keep our standard of living at what we consider a civilized level.

Consider the countries where the economy is winding down. Western Europe, the USA, Canada and Australia. Note that these are all countries where manufacturing is getting weaker. Note the countries that are strong or getting strong now. Japan, Taiwan, Korea, Singapore, China. Note that all of these are getting into manufacturing in a big way. Note that Western Europe, the USA, Canada and Australia were big into manufacturing from the 40's to the 60's. That is when the economy ran well. As manufacturing declines, so goes the wealth of a country. The poorest countries are those where almost no manufacturing is done at all. Africa, Southeast & Central Asia, South America, etc. The USA has only shown some recovery in the late 1990's because they are increasing the amount of manufacturing being done though in a far smaller scale than before.

Don't let the soaring Dow Jones fool you. That's only make believe money based on the hugh amounts boomers are pouring into mutual funds because they don't believe in government pensions any more. It will evaporate as soon as the boomers start to sell off mutual funds to pay for their retirement.

Manufacturing is where its at. Manufacturing in Japan alone creates far more wealth than all the resource extraction in the world. We must stop the slide in manufacturing here. Now, this is not to say we must raise tarriff walls to all imported goods. To do so merely invites a repeat of the 1930's where the depression was made far worsw due to protectionism and would have never ended if not for the war.

Canadian workers can compete against workers in other countries where the playing field is level. It is the unfair competition against workers where their wages are being arbitrarily discounted by the money changers that the writer protests. While those workers need the opportunity to raise their standard of living, it cannot be at the cost of ours.
 

The solution is as follows:
 

While many manufacturing jobs that were lost were meaningless, dull and repetitive, these jobs meant a lot to those who held them. The people who are the movers and shakers in the economy can't seem to realize that there are people who like that sort of thing. After all, the very traits that make a person a mover and shaker, makes them completely unsuitable for most manufacturing work. However, very few of us have that "fire in the belly" needed for being a mover and shaker.

For the majority who are content to do the work that others organize, manufacturing jobs work out very well. Look at GM in Oshawa in early 1995. Over 20,000 people lined up on the rumour that GM might hire some assembly line workers.

Most people want a job that they can do to the best of their ability, one that brings enough for a decent standard of living and a comfortable life. They are happy with a dignified amount of pay, knowing that working for others will never make them rich. The opportunity to get rich is available for the mover and shakers and if they start a business that makes them piles of money through having others do the work, that is free enterprise.

However, the movers and shakers have to realize a few things:

1. Their responsibility to make money for themselves and their share holders is double edged. They also have to hire enough workers and pay them well enough that they also create customers as well.

2. That most people are not like them. While they are a mover and shaker and associate with others like themselves, most people are not movers and shakers. Most of us have had the fire in the belly put out long ago by our educational system, our parents, our churches, etc. Pay the little people here decently and they will be the best customers you will ever see. Far better than some poor guy in a third world country who is more concerned with eating than buying a new car this year.

3. That by laying off people now to improve the next couple of quarters, you profits will fall in the long run as you are also laying off your future customers. As an example, AT&T announces 40,000 layoffs. Therefore almost all 400,000 AT&T employees start to worry about their jobs. They stop buying houses and cars. After all, who is so stupid to go into a long term obligation if your income may fail soon. 400,000 people not buying cars is 25,000 fewer new cars sold this year. This costs the car makers alone about $500,000,000 in lost sales. Since the car makers have the same fixed costs regardless of volume (until they lay off more workers), that alone drops the profits of the car makers by at least $100,000,000.

This loss to the economy as a whole is greater than the amount AT&T would have saved by laying off the original 40,000 workers. The result is a big hole in the economy. The car makers lose $100,000,000 in profit and their suppliers and workers lost another $400,000,000 in business. The government, while having to pay around $50,000,000 per month in unemployment to those AT&T workers, they lose the $40,000,000 per month in tax revenue they would have paid. In addition, the loss of car sales would hit the government for another $20,000,000 in lost tax revenue. By the time the repercussions of the layoff announcements and actual layoff reverberate through the economy, the governement has lost over $400,000,000 in revenue as well as the private sector losing over $1,000,000,000. If you add in the probable 10,000 lost housing unit sales, the figures could double or triple. All those people with reduced incomes are going to make a lot fewer AT&T long distance calls. To keep in touch they will have to go to the lower priced, discount competition.

The lesson here is not to lay off willy-nilly buy only with the greatest of hesitation. You must have hired those people for a reason. Re-assign them. You are a mover and shaker. Find something else profitable for them to do.
 

In conclusion, while the market place is getting more global, customers cannot move around like production can. As long as working people cannot freely emigrate en mass to other countries and as long as we are paid in different currencies, based on the country where we live, there has to some system to equalize costs between countries. That means that until Chinese workers and Canadian workers are paid in the same currency and the costs for food and housing for each are about the same there have to be some means in place to equalize things.

As much as I hate to pay them, duties have to be imposed on goods from "low wage" countries that are sold in high wage countries. However, these have to be bases on the differences in currencies. For example, in Canada, the minimum wage is around US$700 per month. In China, the average industrial wage which buys a similar standard of living is about US$20 per month. That is, Canadian wages are at least 35 times higher.

Since the labour portion of most manufactured goods is about 1/6 of the retail of about 1/4 of the import price. This means that for an item selling for $150.00 the import cost would be about $100. Of this $25.00 is labour. This $25.00 of Chinese labour would be worth about $800 Canadian. While we cannot put an $775.00 tax on the item, we should place a tax of at least $20% of this amount. The reduced amount is to make up for China's poorer infrastructure, etc.

The tax would be zero only if the average industrial wage in a manufacturing country is at least 33% of the average Canadian minimum wage. This tax could also be waived if the manufacturer is able in some way to prove that the workers, at least for the production batch sold to Canada, received at least 33% of the average Canadian minimum wage for that work. What they received for production to other countries is of no concern to us. Possibly the Canadian Standards Association could be employed for this purpose as they visit overseas production plans all the time anyway and they would have the expertise to do this certification.
 

Regardless, until currency inequality is addressed, there is no way the Canadian or American worker can compete with Mexico, China, Brazil, etc.