Tag Archives: jobs

Bits and Pieces – 20170307, Tuesday

Commentary: One of the biggest problems facing us is the loss of jobs due to RAAI. Not only will we not be able to cope with the surplus labour but the double whammy of increased entitlement payouts and decreased revenue from income and sales taxes will lead to collapse in government finances. But there are other social implications as well: When Factory Jobs Vanish, Men Become Less Desirable Partners. This is another tear in our social structure.

Now view this 6-minute video also at the end of the article:

Automation is introduced to cut labour costs by displacing workers or increasing productivity. That is, automation enables an increase in production without hiring more workers. A company will do this to gain a competitive advantage or maintain one. Since competition is the dominant force in most markets, automation will only increase, particularly as its costs continue to drop while labour costs rise. When all humans have been displaced, the process will go on by replacing older robots with newer, more efficient ones. We are entering a future where there will be far fewer jobs, particularly well-paying ones. Simply put, we already have too many people in our societies.

Robotics In the Labour Market

 

We have been capturing references to robots and their impact on the labour market. We believe that the trend to displace human workers will continue across ever more industries. Targets are high paying  and simple routine jobs. The trend will continue as robotics costs decline and labour market costs – wages and benefits – increase. We are already seeing robots appearing in fast food restaurants offsetting increases in minimum wages.

People argue that low-paying jobs may be eliminated but high-paying highly skilled jobs will be created. While undoubtedly true, the numbers are asymmetrically biased against the low-paying jobs, the labour pool for which is growing due to our immigration policies and the decline of the educational system. The social impact is the area to be concerned about.*

People will buy a Big Mac served by a robot instead of a person if it is cheaper. And the people that argue we should simply boycott this trend are irrelevant. They lost the battle of Walmart against the downtown core of small-town America and they will lose this one.

Links are below:

Bits and Pieces – 20161117, Thursday

What We’re Reading Today

Commentary: The Trump tsunami has passed. Now it’s the cleanup phase, and I expect the MSM to discover that planet earth is larger than the US and other things are continuing on. Our attention will probably diversify.

Trump team: Building bridges within the Republican party: Romney Meets Trump This Weekend, Will Discuss SecState Role In New Administration? And one bridge that doesn’t appear likely: Newt Gingrich Confirms “I Will Not Be In Donald Trump’s Cabinet”.

Main Stream Media (MSM): Two articles on ongoing MSM bias: Zero Hedge Targeted On Liberal Professor’s List of “Fake News” Sources and Mike Krieger Rages At The ‘Fake News’ Debacle: “It’s An All Out Media War”. Are we seeing the impact of the biased reporting during the election: Huffington Post Owner AOL Lays Off 5% Of Staff: 500 Workers Lose Their Jobs?

Civil Unrest: This topic has become the current dominant one. Martin Armstrong’s model has a peak for unrest in 2021. We shall see. But disturbing trends are emerging, particularly the acquiescence of the liberal left to the social disorder and violence: Have the Democrats Unleashed a New Age Communist Revolution?.

Bits and Pieces: In the Democratic camp, Bernie Sanders Shuns Democrats: “I Will Finish This Term As An Independent”. The youth vote may follow Sanders wherever he decides to go. This is not good for the Democrats, just as the Trump vote was not good for the old Republicans unless Trump creates a new Republican party with his followers.

A recent discussion with friends involved the idea of repatriating jobs to America. Apple may be considering it: Trump Wins? Foxconn Looks To Make iPhones In America. This process actually eliminates jobs (not American) because companies that build new plants invest much more heavily in automation creating a net loss of jobs associated with the product. This has been going on for a couple of years.

The UN has just come out with a disturbing report backing this jobless reshoring: Two-Thirds Of Workers In Developing Nations To Be Replaced by Robots, Report Warns.

There has been ongoing chatter for the last couple of years about a cashless society. It is moving forward by taking larger bills out of circulation on the pretext of fighting money laundering and illegal activities of all sorts. Pity the poor girl guide wanting to sell you cookies: Sweden Begins Planning Transition From Cash To Digital Currency.

The Ontario Jobs Picture in March: Treading Water – Sharks Nibbling

This month we change our reporting format to more of a streamlined summary. For data we use the Ontario labour market component  from Statistics Canada: CANSIM Table 282-0087, Labour force survey estimates (LFS), by sex and age group, seasonally adjusted and unadjusted monthly, and CANSIM Table 282-0088, Labour force survey estimates (LFS), employment by North American Industry Classification System (NAICS), seasonally adjusted and unadjusted.

The Lies My Mommy Told Me, Part III

We review employment in Ontario periodically. When we saw the Toronto Star article Ontario leads Canada with 19,800 new jobs in January, we decided to see if the headline was true considering that several macro events have occurred: Canada is in recession, the oil market has collapsed and so has the Loonie. We might expect the first two events to decrease employment while the third event should reflect an increase in manufacturing jobs for the export market in particular. Let’s take a look.

In this report we present our analysis of the Ontario labour market component of the total Canadian market using two sources of data from Statistics Canada: CANSIM Table 282-0087, Labour force survey estimates (LFS), by sex and age group, seasonally adjusted and unadjusted monthly, and CANSIM Table 282-0088, Labour force survey estimates (LFS), employment by North American Industry Classification System (NAICS), seasonally adjusted and unadjusted. Data selection methodology is in the Appendix. The data we use is not seasonally adjusted* (also read our view of seasonal adjustment in The Lies My Mommy Told Me, Part II). All terms are explained in the CANSIM table footnotes and are not reproduced here.

It’s Worse Than You Think

The Fraser Institute came out with a new report today titled Ontario vs. the US Rust Belt: Coping With a Changing Economic World. The report challenges the political narrative that a high dollar and deindutrialization due to global forces are the main factors driving the deficit in Ontario. It does so by comparing the economies of the US “Rust Belt” states to Ontario’s.

In terms of the Canadian dollar vs. the US dollar, the repot notes that:

… the appreciation of the Canadian dollar versus the USD of the 2000s was a reversal of the unusual weakness of the 1990s.

and

… the exchange rate is currently near its long-term average,
so Ontario policymakers cannot continue to cite this as an excuse for
chronic budget deficits.

In other words, exchange rates are not a major factor in Ontario’s deteriorating fiscal position and industrial decline. So let’s look at the issue of the deindustrialization of Ontario.

Canada: Whither Goest Thou?

A section in John Mauldin’s weekly eletter, Thoughts From the Front Lines, caught our attention. In particular he showed this chart:

The point here is that manufacturing costs (mostly labour) in Canada are 15% higher than in the US. This means that Canada needs the Loonie at 0.87 to be cost equal. To persuade manufacturing to move north however we need a marginal advantage which might be on the order of 5-10%.
This is what unions want of course because the competitive advantage is not achieved by labour cost adjustment and market reform but by currency market adjustment. The real issue to become competitive is to reduce the labour costs. This can be achieved by introducing technology such as robotics or by reducing wage and benefit costs. Unions will fight either approach.

Failure to make the adjustments means a continued loss of manufacturing jobs with a corresponding decrease in the collective standard of living. This will continue until living standards have declined to the point where the labour market will adjust internally to a point of competitive advantage again. Of course if this decline is happening broadly in the developed economies, the adjustment may take a long time and become severe. Can you say third world country?

The Economy As a Complex Adaptive System

We are not ready to address this topic in detail but we came across this TED talk that we capture below (20 minutes):

We have thoughts bubbling below the surface that are beginning to fix on the interactions or feedback loops between agent behavior and emergent behavior.

Related Links on This Site

Beauty and the Beast: Mom’s Latest Child

The Ontario Government released a statement on August 8th titled Ontario Gains 15,100 Jobs in July. In The Real Job Situation in Ontario: Ugly we analyzed the employment numbers for Ontario for June, 2014. Overall we noted:

First we look at the last year’s worth of data in CANSIM Table 282-0087, Labour force survey estimates (LFS), by sex and age group, seasonally adjusted and unadjusted monthly. From June 2013 to June 2014, the number of people employed increased by 22,000. This is composed of an increase of 31,200 full-time jobs and a loss of 9,200 part-time jobs. This reflects a modest improvement, year over year, in the job situation with a net increase and a likely conversion of part-time into full-time jobs.

Now we get a look at Kathleen Wynne’s latest child, the July numbers. Turns out that June was Beauty and July is … well read on.

Jobs in Ontario

added emphasis ours

Three Case Studies

The H.J. Heinz Company built its first factory located outside the US in Leamington Ontario in 1909. It became their second largest factory. They closed the plant in Feb. 2014 and sold it to an investor’s group (Investor group to acquire Ontario Heinz plant) in May 2014. This followed Warren Buffet’s acquisition of Heintz, taking it private through his company Berkshire Hathaway. Such privatizations are generally followed by pruning or consolidating marginal and unprofitable operations. As Global News notes in Buffett keeps word, Heinz strikes ‘fair’ deal with Ont. ketchup workers:

A soaring loonie in recent years has made plants across the country ripe for cutbacks or closures by multinational firms who can easily shift production to cheaper regions. More than 30,000 factory jobs were lost in Ontario alone in 2013.

We would note that during the plant’s 104 year history, the Canadian dollar has been as high or higher on several occasions and the plant was not shut down then. The key issue is the second point – there are many regions in the US where labour, taxes, energy and regulatory costs are lower than in Ontario. Further to this, Blackburn  News reports in Heinz Plant In Leamington Closing that:

The letter says the decision is not a reflection of the commitment of employees or quality of product, but primarily based on excess capacity in its North American manufacturing system. Leamington Mayor John Paterson says consolidation and efficiency are the reasons he’s been given from Heinz for the closure.

The second case is that of the 89-year old Kellogg Co. plant in London Ontario. The company announced its closure in Dec. 2013 as noted in Canadian Business (The province is partly to blame for Kellogg’s plant closure in London, Ont.: Mike Moffatt). The article points out several reasons for the plant closure:

On the surface it would appear that at least some of the lost London production went to Belleville, Ont., thanks to a $9.7-million interest-free loan in 2008 from the province and $4.5 million in additional provincial funding in 2011 … from higher wage employees in London to lower wage employees in Belleville

With the U.S. population gradually moving south and west, Ontario lacks a geographic advantage when it comes to mass consumer manufacturing. … Ontario’s transport-cost competitive advantage over areas such as the U.S. southeast and Asia diminishes, making those areas more attractive due to their lower labour costs.

It would appear that in the Kellogg case, economics favoured moving production from an old London facility to a new Belleville plant. London may be marginally closer to markets in the south and west but both have good rail and road links to the US. That leaves labour costs as the other Belleville advantage. The Winsor Star summarized the reasons (Kellogg, Heinz plant closures part of a trend) for the closure of Kellogg and other agribusinesses as:

the fallout of corporate consolidation, changing consumer tastes, labour costs and government regulations that have conspired to create a $6.5 billion trade deficit in the Canadian food processing industry.

“When the Heinz owners, for example, see a plant operating at 30 per cent of capacity, it’s an easy decision to absorb that production elsewhere, shutter a plant and save millions of dollars,” said Boecker. “There’s a great deal of global competition in every marketplace and anytime there are dollars to be saved, those are relatively easy decisions.” Economies of scale also play a role in production decisions, he said.

integration of the North American economy left Canada with little more than branch plant status and a decline in capital investment made some Canadian plants less competitive.

The final case is the closure of the Unilever Brampton plant

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Fix, Build or Burn

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