Unemployment in Canada - Essay Example

and number] in format: 12 May 2002] Unemployment in Canada The Interwar period is being understood in the Western culture to be the period between the end of the World War I and the beginning of the World War II in Europe, specifically it was from 11 November 1918 to 1 September 1939. During the interwar period, highest unemployment rate in Canada reached roughly around twenty-five percent. Since it was the most serious crisis in the Canada's history, thus this paper will examine the reasons which cause such horrible outcome, criticize the present situation and have a better understanding in unemployment for prevention. After the elaboration of the unemployment issue, one could say that such horrible events shouldn't happen in the future as one learns from previous evidence. Yet, that is not suggesting one to ignore the issues but rather focus on the better understanding of the past thus encourages others to raise more possible solutions to improve our society. Perhaps the Interwar period unemployment could not be treated as current events due to the unexpected crisis; still such unexpected crisis is seldom happening. Hence, prevention and preparation of possible crisis is often necessary. Society Background after World War 1 During the first years of World War I unemployment was high during 1914-1915 wherein many Canadians enlisted in the army to avoid the bleak effects of families suffering through hardships of lack of employment; but, by 1916 the "booming wartime industrial and agricultural economies combined to provide Canadians with other options and employers competed with recruiting officers for Canada's available manpower. The returning soldiers not only came back to few jobs in 1918, but, also returned to Canada with them a new disease which killed as many people as it did during the war. As Canada moved from wartime to peacetime and soldiers vying for jobs, another crisis emerged which was termed "One Big Union" that was formed in 1919. This concept was that all workers should be organized inside one large union entity. This focus on union organization was the Winnipeg General Strike of 1919 wherein striking workers, many of them returning soldiers that would find very few opportunities but yet many companies would experience surging profits from wartime contracts. This lack of employment found in the aftermath of World War I would find many of the returning soldiers and the public in general in an imbalance of power in favour of the elite and wealthy individuals who would profit immensely from the war effort, but, would find themselves in the middle of a power struggle between truth and fiction. As society fought for their rights of fair employment standards, the period that would be considered by many as the fall of the powerful few of their day, would find the country suffering even more hardships as they entered the Great Depression. Great Depression among North America Perhaps the hardest hit economy in western culture was Canada's. The Canadian economy would find that they were not only the hardest hit, but, also the slowest to recover which did not occur until the beginning of the Second World War. Unlike the United States, the boom period between 1900 and 1929 found Canada as the world's fastest growing economy with only a brief and sharp recession occurring at the end of World War I. The economy would also find an increase occurring in housing starts until May, 1929. Through the collapse of commodity prices in the United States in October, 1929 and the massive stock crash of Black Tuesday and as both the United States and Canada share economic links through gold standards, the collapse of the United States economy affected Canada as well. The prairie provinces were not the only affected areas of Canada, as both Ontario and Quebec would now face immense problems in the manufacturing district as massive lay-offs would occur and over production by industrial companies would collapse into bankruptcy. Although this collapse actually was not as sharp as what was occurring in the United States, it was still the second sharpest globally. Unlike the United States, Canada did have a stable banking system, but, this did not stave off the effects of trade between United States and Canada and as there was a reliance on trade with wheat and other commodities would find at the beginning of the depression, many states raising tariffs. This would find the Canadian economy suffering from the effects of tariff impositions. The economic results from the depression era would see not only manufacturing succumbing to the effects, but employment in general. "By 1933, it was reported that thirty percent of the labour force was out of work, and one fifth of the population became dependent on government assistance. Wages fell as did prices and the Gross National Expenditure (GNE) declined from forty-two percent from the 1929 levels. In some areas, the decline was far worse. In the rural areas of the prairies, two thirds of the population were on relief" (Answers.com). Further problems were occurring in the new venture business where large companies and individuals were unwilling and unable to invest into new venture capital programs. Industrial production was also fairing poorly where in 1932, industrial production was only at fifty-eight percent of the 1929 levels and the total national income fell to fifty-five percent of the 1929 levels. Government spending during World War I and prior to the hit of the depression included infrastructure and education expansions that occurred during the 1920s. When the depression occurred, the federal government then looked to trying to improve the economy, but, the Prime Minister, William Lyon Mackenzie King, felt the crisis would pass and thus refused to release federal aid to the provinces and only introduced moderate relief efforts. By 1932 there was a new Prime Minister in power and after spending money on make-work programs and increasing other social assistance programs such as welfare were invoked. Upon the government finding these programs and general federal programs becoming a burden on budgetary costs, the depression deepened through the cancelling of public works projects and laying off of government employees. Other burdens to the Canadian government included the Canadian National Railway (CNR) which had taken over the defunct and bankrupt railways during World War I and into the 1920s. Although the debt the government assumed as $2 billion was extremely high at that time, it was felt that this was manageable during the boom years; but, the depression would see an extreme slow-down in the exporting and trade in general and as such the CNR lost substantial amounts of money which required the government to further bail out the railway. The government did try to introduce many programs fashioned alongside the American policies of introducing such things as minimum wage, unemployment insurance and other social programs, but, was unsuccessful in engaging the public's support as well as business and political entities. "This effort was largely unsuccessful, the provinces challenged the rights of the federal government to manage these programs. Unlike Roosevelt, who simply threatened to stack the Supreme Court of the United States to defeat any constitutional challenges, Canada's supreme court at this time was the Judicial Committee of the Privy Council, an institution controlled by Great Britain" (Answers.com). Canadian Government's Unemployment Policy Problems Human Resources Development division of the Government of Canada does explain how Canada lags behind other economic changes in that the overall purpose of the program, as explained by the Minister 'was designed to help people who lost work by replacing their earnings while looking for another, similar job. Now, more and more people are finding that they haven't just lost a job, they've lost an occupation, career or industry, victims all to economic change. Many won't find a similar job again. Not only do they lose income; they are denied the dignity of work" (1994). One of the problems that the government faces stretches as far back as the 1970s and 1980s wherein the government revenue growth crept along and thus the government moved to borrowing heavily and as such the economy consumed more than it produced, all on credit. The Minister also pointed out the results of this "is one of the highest levels of government debt, proportionately, in the world. Combined, federal and provincial government debt is equivalent to over 98 per cent of the entire annual value of the nation's economy. The interest costs on that debt are choking governments' ability to deliver services that the public needs and depends on. Consider: in 1980-81, interest payments by the federal and provincial governments absorbed 15 cents of every dollar of revenues; today it has grown by two-thirds to about 26 cents. The larger the debt gets, the bigger the interest costs and the smaller the budget for services" (1994). The lack of government spending during this critical error in social reform programs has produced more of a "catch up and wait" philosophy where, although the social safety net experienced in Canada is one of the most successfully recognized globally, it is still well behind in ensuring it is self-sustaining. It is recognized that the government needs to do more in ensuring social programs simply does not share in the wealth and protecting those who are both deserving or disadvantageous, but needs to ensure opportunities are created for Canadians in gaining employment through training initiatives and career promotion. This is important to ensure economic growth and stability. Human Resources development division of the federal government has basically looking to reforming the entire unemployment division and as such looks to the following list as reform objectives meant to accomplish this1: 1. Jobs - helping Canadians get and keep work by ensuring that we have the knowledge and skills to compete with the best labour forces in the world. 2. Support for those most vulnerable - providing income support for those in need, while fostering independence, self-confidence and initiative, and starting to tackle child poverty. 3. Affordability - making sure the social security system is within our means and more efficiently managed, with a real commitment to end waste and abuse. The Human Resources Development department points out the following federal support programs initiated since the end of the Great Depression and the Second World War: Unemployment Insurance, introduced in 1942 and expanded significantly in 1971 Child benefits, principally the Child Tax Benefit (including the Working Income Supplement), which replaced Family Allowances and other tax measures in 1993 Canada Student Loans Program, introduced in 1964 Federal support for post-secondary education, which is delivered through financial transfers to the provinces (Established Programs Financing), and which expanded rapidly after new legislation in 1967 Canada Assistance Plan, created in 1966 to support provinces in the provision of social assistance and services Vocational Rehabilitation of Disabled Persons program, introduced in 1961 Federal support for employment, which expanded rapidly after new legislation in 1967, and more recently through Developmental Uses under Unemployment Insurance, and the Canadian Jobs Strategy Economic Structure in Canada The Report by the Canadian Economic Development department of Human Resources Department show the breakdown of the GDP within Canada as of 2001: Figure 1: Canada Economic Development Performance Report. source: www.dec-ced.gc.ca/Complements/Publications/RapportMinisteriel/en/tdm.html The two post concentrated poles of activity include the Central and Western provinces that account for respectively two thirds and one fourth of Canada's Gross Domestic Product (GDP) and population concentration. The GDP growth rate between 1981 and 2001 show an average pace of 3.6% per year in which all provinces recorded significant growth. The following figure shows the breakdown of GDP growth: Figure 2: Canada Economic Development Performance Report. source: www.dec-ced.gc.ca/Complements/Publications/RapportMinisteriel/en/tdm.html Economic Makeup of Canada The Atlantic provinces are a predominantly service-oriented community with relatively large public sectors and the resource sectors are mainly made up of oil and gas inside of Newfoundland and Labrador, adding to its economic growth. Quebec is known more for its manufacturing-intensiveness and with particular importance relative to information, culture and recreation industries. Ontario's economy is probably the most diversified with contributions to all sectors including financial, manufacturing and trade; including the most internationally open economy in Canada with exports and imports as a percentage of GDP totally ninety-six percent in 2000, well up from fifty-three percent in 1990. The Western provinces are largely based on natural resources with Manitoba being the most diversified and the most service-oriented economy among the Prairies provinces. The primary sector is the largest contributor to Saskatchewan's economy (twenty-four percent of its GDP) and of this share about sixty percent comes from mining and oil and gas industries. Alberta's economy is still highly dependent on natural resources with the primary sector, mainly oil and gas, accounting for twenty-two percent of total GDP; and, the construction sector representing more than seven percent of the economy which is the highest ratio of all provinces. The financial sector accounts for about one-fourth of British Columbia's economy along with forestry and wood products industry. Standard of Living It has been found that the GDP income per capita trends have steadily increased since 1981 with fastest pace belonging to the Atlantic Provinces with British Columbia experiencing the economy underperforming the national average since the mid-1990s. Figure 3 and 4: Canada Economic Development Performance Report. source: www.dec-ced.gc.ca/Complements/Publications/RapportMinisteriel/en/tdm.html Along with increases in GDP come disparities in labour productivity levels increased but without an increase in standard of living. The highest standards of living are still reported in Alberta and Ontario and the Atlantic Provinces recording the lowest levels than other provinces. Figure 5: Canada Economic Development Performance Report. source: www.dec-ced.gc.ca/Complements/Publications/RapportMinisteriel/en/tdm.html The economic impacts of GDP throughout Canada play a direct correlation with the standard of living and unemployment in general. The employment growth by industry during 1996 to 2006 showed that in 'the ten period ending in 1995 the number of jobs in Canada increased by 1,764,000. The primary sector - which includes agriculture, fishing and forestry - lost 53,000 jobs over this period while the manufacturing sector lost 3,000, and public administration lost 20,000. These losses, however, were more than offset by major gains in the services, trades, financial, construction and utilities sectors. Figure 5: The "Demographic Lesson" source: strategis.ic.gc.ca/pics/ra/4foolo-e.pdf Table 1: The "Demographic Lesson" source: strategis.ic.gc.ca/pics/ra/4foolo-e.pdf Table 2: The "Demographic Lesson" source: strategis.ic.gc.ca/pics/ra/4foolo-e.pdf Mitigating Factors Causing Unemployment The Fraser Institute reports that many "still believe that insufficient aggregate demand is largely responsible for high unemployment levels; but, in reality, the magnitude and long upward trend of the unemployment rate cannot be explained by inadequate spending"2 (Grubel, 1997) Grubel (1997) further explains that "During periods of recession, the cyclical reduction in aggregate demand undoubtedly results in a temporary increase in the rate of unemployment. But in Canada's case, successive economic recoveries have not seen the unemployment rate return to its pre-recession levels. Instead, the rate has moved upwards and today remains high, despite a relatively strong economic performance in recent years" (Grubel, 1997). To strengthen long-term employment rates, there "will no doubt need to have legislation and institutions that govern labour relations and as rising and sustained high rates of unemployment within Canada would suggest that much of the problem may be structural in nature and that poor employment growth in recent years is a further testament to the fact that there are worsening structural impediments to job creation" (Fraser Institute, 1997). "While difficult to determine exactly what effect reforms would have because there are so many factors and variables involved, it is clear that comprehensive labour market reform would help reduce unemployment rates in Canada. The United States, which has one of the most flexible labour markets in the world, has an unemployment rate below 5 percent. Interestingly, the degree of unionization emerges as one of the most prominent differences between the two labour markets. In Canada, 37.5 percent of the workforce is unionized compared to only 15.5 percent in the U.S. One study estimates that the difference in unionization accounts for roughly 2.5 percent of the spread in unemployment rates between the two countries"3 (Henderson, 1997 Through the experiences of other major countries within the G7 group would find that major reforms to policies in the employment figures would point toward a basic overhauling of the system itself and look toward promotion of job prosperity through new program institution. Works Cited Answers.com. "Great Depression in Canada". http://www.answers.com/topic/great-depression-in-canada Footnote 1 "Canada Economic Development Performance Report". source: www.dec-ced.gc.ca/Complements/Publications/RapportMinisteriel/en/tdm.html Foot, D.K., Loreto, R.A., and McCormack, T.W. (1998). "Canada in the 21st Century: Demographic Trends in Canada, 1996-2006: Implications for the Public and Private Sectors". Industry Canada Research Publications. 1998 Nov. Paper 4: pp 18-24 Grubel, H. (1997). "Labour Market Rigidities and Canada's High Unemployment Rates". http://oldfraser.lexi.net/publications/forum/1997/august/FF-08-97.html Henderson, D. (1997). "Canada's High Unemployment Rate Is No Mystery". Wall Street Journal. 07 Feb 1997. Results of a study conducted by Lawrence Summers, Deputy Secretary of the U.S. Treasury. http://oldfraser.lexi.net/publications/forum/1997/august/FF-08-97.html Read More