Structural adjustment in Canada - Fisheries and Forestries (May 2001)

In Canada, CASA is being undertaken by a Steering Committee of non-governmental organizations from a number of sectors, including labour, development and anti-poverty organizations. As Canada does not receive structural adjustment loans from international financial institutions, the Steering Committee in Canada chose to focus on the 1995 budget, in which the federal government pushed through many structural adjustment reforms, reforms recommended to Canada by the IMF in its Article IV consultations. A first national forum was held, December, 1998 from which four research areas were chosen:

Quantitative and participatory research were undertaken over the following twelve months. Eight regional dialogues were held with the economically disadvantaged to discuss the fourth research area. A second national forum was then held in January 2000 to discuss the results of this research. Four sectoral consultations were held to address the other research areas. The research remains to be synthesized and published.

The Impact of Labour Market Restructuring on fisheries and forestry workers in Atlantic Canada in the 1990s

Assessing the impact of structural adjustment policies is difficult because causality is complex. These policies interact with each other in mutually reinforcing ways. They also interact with technological forces, corporate strategies and a web of institutional structures (production, labour market, social, cultural, fiscal, etc...). The impact of this interplay amongst policies and the institutional landscape on society is not only complex but also cumulative.

The fishery and forestry sector have been affected by structural adjustment policies such as lack of fisheries conservation and regulatory policies in the 80s; monetary policies that cause high interest rates thereby exacerbating under-investment economic stagnation, and unemployment and fiscal stress in the Atlantic region. Also federal spending cuts on social and public services, restructuring to unemployment insurance programme, and social assistance (welfare) transfers have had a devastating impact on fishery and forest workers.

The labour force of Atlantic Canada is very much dependent on primary and export-oriented manufacturing industries, including fish products, pulp, paper and wood products. This region’s resource industries have evolved over time due mainly to structural changes influenced by government policies and programs. The labour force participation rate in Atlantic Canada is 59%, considerably lower than the national figure of 65%.[1] The low employment rate is due to the rural nature of the region and the seasonal nature of general employment levels. However some research have shown that structural factors related to the region’s high unemployment include high transportation cost, weak urban structure, inadequate investment and low technological innovation rates.

This paper offers a brief description and state of forestry and fishing in Atlantic Canada’s economy, certain key factors such as seasonality problems characterising this sector and specific impact of changing labour market policies.

Many of the current regional problems of Atlantic Canada are associated with dependency on resource industries. The most acute problems have been related to the fishing industry where collapse of the groundfishery has spotlighted the problem of over-capacity. The forestry sector has also experienced setbacks related to global price fluctuations, rapid technological change and lack of competitiveness.

While the region’s economy still relies upon resource industries, the past few decades have witnessed the continued expansion of non-resource-based industries and their increasing contribution to Atlantic Canada’s gross domestic products (GDP). Since 1990, both the primary Fishing & Trapping and Logging & Forestry industry sectors’ contribution to GDP has declined from $964 million to an estimated $779 million for 1999.[2]

Almost half of the land base of Atlantic Canada is considered to be productive forest land. The dominant species are softwoods, which comprise over 75% of the total harvestable wood volume. The majority of softwood consists of spruce and fir. Hardwoods consist of a mixture of maple, birch and popular. There is little forestry in Prince Edward Island, even though woods cover about half the province. More trees are cut for fuel wood, although some pulpwood is sold to mills in Nova Scotia and New Brunswick. Forest and forest-based products industries have always been an integral part of Canada’s economy and account for approximately 3.7% of Newfoundland’s GDP, 3.6% of Nova Scotia’s GDP.

The forest resources provide jobs and incomes for more than 36,000 Atlantic Canadians.[3] However employment is declining each year. Resources, on which the forestry industry is dependent are becoming scarce. In addition technological improvements in equipment and harvesting techniques have slowed employment growth in these industries. As a result of the recession in the early part of the 1990s the industry undertook major restructuring. New environmental standards imposed by the government and customers required massive expenditures by the industry during the past few years. The sector is particularly sensitive to global pressures, as seen in the Asian crisis that sent demand spiralling downward in pulp and paper markets and lowered margins considerably.

The land ownership structure in Atlantic Canada also has significant impact on forestry management in the country. Unlike other regions where Crown owns the vast majority of the forestry resources, a large percentage of forestry land in Atlantic Canada is privately owned. Private woodlots account for 92, 47 and 30% of productive forest land in PEI, Nova Scotia and New Brunswick respectively. These figures are relatively high considering all private ownership in Canada as a whole is only 6%.

The Atlantic fishery is currently dominated by a shellfish industry, with this sector contributing for over 80% of total landed value. Employment estimates for this sector in 1992 totalled 58,021 fishers and 57,579 plant workers.[4] Overall employment levels have declined by almost 30% over a five year period from 1992 to 1997. While data on plant workers is not collected systematically, experts in the industry estimate a 25% reduction in employment over this period.

Seasonal jobs are non-permanent paid employment that will end at a specific time once the seasonal peak has passed. Seasonal variation in employment is the degree to which employment increases or decreases because of seasonal patterns caused by climatic and resource availability conditions.

There has been a steady decline in seasonality of employment in all the provinces in the Atlantic region since 1976. Between 1990 and 1998 data on an industry level shows seasonality of employment within the Logging & Forestry sector declined from 84.8% to 50% in Newfoundland.

There is a widespread notion that those in seasonal jobs work only the minimum amount required to qualify for maximum Employment Insurance benefits. Another myth is that all seasonal workers are concentrated in the primary resource sectors. According to a Human Resources Development Canada survey, primary sectors had the highest rate of seasonal claims by sector. However, claimants in the primary resource sectors accounted for less than 10% of all seasonal claims.[5] Yet the seasonal activities, while rendering some fishery and forestry workers jobless at a certain point in time, generate year-round activity in many other sectors considering the related manufacturing components of the primary products.

A number of policy changes have drastically affected the fishery and forestry sectors of Atlantic Canada. Some of these policies include cuts in federal government spending, trade regulation, removal of freight subsidies, changes to the EI programs, and budget cuts and restructuring of DFO services to the industry. In effect these changes have led to a labour market reform in the fishery and forestry sectors of the country’s economy. Key federal structural policies affecting fishery and forestry workers and communities include: Lack of fisheries conservation and regulatory policies in the 80s; monetary policies causing high interest rates exacerbating under-investment economic stagnation, unemployment and fiscal stress in the Atlantic region; and federal spending cuts.

The following are a few direct impacts on the industry resulted from the contraction of federal spending:

  • removal of Atlantic freight transportation subsidies ($100 million annually)
  • elimination of funding for community wharves
  • reduced funding for research, fisheries management and enforcement at Department of Fisheries
  • NF and Nova Scotia fisherman also expressed a concern with the lack of money for DFO research. Of particular concern was a lack of funding to provide support and research for community initiatives.
  • cuts to federal silviculture and forestry management programs (eg. elimination of federal-provincial forest resource development agreements and cuts to forest extension services) NF Forestry workers indicated that the problem stems not only from these cuts but from the allocations. Currently, large pulp and paper companies are given first access to cut allocations, leaving reduced cut allocations and infrastructure support for small, independent operations (sawmills).
  • further exasperating the problem is the combining of the provincial Forestry and Wildlife Department into Conservation, resulting in a reduction in enforcement. Much of the enforcement focuses upon small companies as it is difficult to enforce regulations on company land. One forestry worker indicated that of 360-80 fines for breaking forestry regulations only two were against large companies, the remaining fines were against small companies.
  • TAGS program for ground fishery (1994) -- worker adjustment and training, fishery renewal and sustainable management, and community economic development -- was terminated in 1997 and funds for adjustment and CED were diverted to income support.

Trade and investment agreements:

  • FTA: 1989
  • NAFTA: 1994
  • GATT/WTO (Uruguay Round)

The seasonal nature of its resource-based industries and a general shortage of work means Atlantic Canada must depend on income support systems, particularly Employment Insurance. Employment insurance became a source of income support for many workers in seasonal industries, however it became increasingly seen as a major impediment to labour market productivity, mobility, economic growth, and structural change. As a result several changes were made which resulted in federal cuts to social programs, among them the EI. Coverage for unemployed workers between 1989-1997 declined by 58% in Newfoundland, 35% in PEI, 49% in Nova Scotia and 43% in New Brunswick. For youth (15-24) the decline in coverage was 72% in Newfoundland, 46% in PEI, 69% in Nova Scotia, and 57% in New Brunswick.

The IMF bluntly accused Canada’s Unemployment Insurance system (UI) of reducing “incentives to work” and called for “cuts in the UI benefit rate and regional extended benefits”. (IMF 1993:3)

The changes to the employment program introduced in 1995 caused an estimated overall 15% reduction in benefit payments adversely affecting economics of the Atlantic fishing communities. The cuts forced many unemployed workers and families in the fishery and forestry sector to become dependent on the welfare system. Participants estimated that in an area of 80 thousand people, 12 hundred of these people have been forced on to the food bank roster to help supplement UI/EI or welfare payments. For instance welfare benefits were also cut dramatically. For a single employable person during the period 1990-98 they fell 75% in Newfoundland, 55%in Nova Scotia, 40% in PEI and 6% in NB (NB in spite of the smallest drop has the second lowest benefits rate in the region).

Women were disproportionately disqualified as 'fishers' and had difficulty accessing unemployment programs.

As part of an effort to get first hand accounts of the impact of government policy changes on workers of the fishery and forestry sector, a number of fora were orgainised that brought together quite a significant number of participants. Of particular concern to participants in Newfoundland has been the double combination of cutbacks which reduced the amount of money receivable through unemployment insurance, while at the same time increasing the number of weeks required to qualify for benefits. One forestry worker indicated that EI will only provide support for thirty weeks, but many forestry workers are seeing their weeks of work decreasing to a current average of 20 weeks per year.

Decline in Income & a Rise in Unemployment: Workers in Atlantic Canada in the fishery and forestry sectors have experienced a stagnation/decline in their incomes in absolute terms and relative to Canadian society as a whole. Income inequality within Atlantic Canada has grown and so too has poverty. The proportion of people living in poverty (LICO) grew in all Atlantic provinces during 1990-97. The poverty rate grew from 14.9% to 16.1% in NF, from 10.1% to 11.3% in PEI from 11.4% to 15.4% in NS and from 13.1% to 13.5% in NB.

Due to the tendency to compete globally, there has been a focus on technological improvement and this has also had a devastating impact on the quality of standards of living for the workers of the forestry and fishery sectors. Participants from Newfoundland were particularly unhappy about spending on machinery rather than on human capacity development. They indicated that one of the reasons the labour market has failed to provide decent full-time employment is that money (public and private) is spent on technology and machinery rather than people and real employment. Money on machinery puts people out of work. Forestry workers cited a loss of union work in the logging industry. An increasing amount of harvesting is being done by sub-contractors, allowing companies to avoid paying union wages and providing benefits as well as allowing companies to by-pass the need for environmental assessments.

For example in NF the proportion of part-time workers in the work force grew from 12.4% to 16.4% during 1990-97 the proportion of self employed workers grew from 12.1% to 14.7% and the participation rate ( the ratio of those in the work force to the working age population) dropped dramatically from 56.2% to 52.5%. And of course unemployment, the highest in Canada, grew from 17.1% in 1990 to 18.8% in 1997. NF participants indicated that the increase in the number of self-employed workers does not reflect the difficulties in setting up an independently operated business or operation. The government policies in the fishing, forestry and tourism industries in particular are supportive of large companies rather than small, independent businesses and operations. Participants expressed that more people could be employed in small businesses if policies were better suited to address the needs of small operations, not large corporations.

In Nova Scotia the proportion of part-time workers stayed roughly constant at about 17% and the proportion of self-employed workers rose from 12.7% to 15.9%. The participation rate fell from 62.3% to 60.2% and the unemployed rate rose from 10.5% to 12.2%.

The growing gap in market income was also reflected in the decline in the average number of hours worked in a week. In NF average hours worked fell from 12.7% to 15.9%. The participation rate fell from 62.3% to 60.2% and the unemployment rate rose from 10.5% to 12.2%.

The hourly minimum wage increased throughout the region during the 1990s, in NF from $4.25 to $5.25 during 1990-97; in PEI from $4.50 to $5.40; in NS from $4.50 to %5.50; and in NB from $4.75 to $5.50 this however did not have the effect of mitigating the growing gap in market income. NF participants indicated that a real and substantial increase in the minimum wage is one part of the solution to ending poverty in NF, especially as an increasing number of workers are forced to take on part-time and low-paying service work.

The changes discussed above do not only have a negative economic impact on workers of the fishery and forestry sectors of Atlantic Canada. The social costs of such changes are devastating. Participants from across NF indicated that the tragedy of the family could be seen in the increasing numbers of home fires (arson), suicides, drug and alcohol abuse and domestic violence. These tragedies extend beyond families into the community resulting in a break down of community programs due to lack of funding and volunteer time. Impacts have also been observed in schools, as levels of conflict and drop-out rates increase. NF participants also indicated that since the cod moratorium people's participation in community programs, meetings etc... has declined, as people are tired and fed-up.

NF participants are also concerned about a marked increase in outward migration, as thousands of people leave for the mainland in search of jobs and better opportunities. Forestry industry workers estimate that between 34% - 64% of loggers have moved out of Newfoundland. As one young participant expressed, for many young, educated Newfoundlander the only choice of finding a comparatively secure job is to leave the area. Participants estimate that 5/6 young people leave Newfoundland for greener pasture elsewhere in the country. This outward migration has a significant impact on families.

[1] Statistics Canada Labour Force Survey, 1998.

[2] Source: Atlantic Provinces Economic Council, Statistics Branch.

[3] Data from Canadian Council of Forest Ministers states total employment in 1997 for Newfoundland, Nova Scotia and New Brunswick is 36,000. No data is provided for Prince Edward Island.

[4] Task Force on Incomes and Adjustment in the Atlantic Fishery. Charting a New Course; Towards a fishery of the future (Ottawa: DFO, 1993) pp. 140, 147.

[5] Report to the Minister of Human resources Development from the Working Group on Seasonal Work and Unemployment Insurance. HRDC. March 1995. p.24.