Greater Sudbury’s economy is expected to benefit from a huge influx of cash over the next few weeks when the men and women working for Xstrata and CVRD Inco cash their bonus cheques.
One thousand members of Local 598 of the Mine Mill/CAW signed a new collective agreement two weeks ago which included a $8,000 signing bonus.
By the end of month, more than 3,000 workers with Local 6500 of the United Steelworkers employed by CVRD Inco, will cash their nickel bonus cheques, as will Xstrata employees who are members of Local 598.
Experts estimate the bonus will be in the range of $5,000 due to the highest nickel price in history.
Some quick math indicates the nickel bonus cheques alone will produce $20 million in revenue on top of the $8 million introduced into the economy with the signing bonus cheques for Local 598 members.
“The signing bonus cheques are due on the 26th of the month, about the same time our members should be getting their nickel bonus cheques,” said Rick Grylls, president of Local 598.
And while a lot of union members put their bonus money into RRSPs or pay for trips out of country, many spend a large portion locally, said Grylls.
“I think history shows many of the workers tend to spend a large part of their nickel bonus and signing bonus on large ticket items,” he said. “I’m sure people who sell things like cars, boats and ATVs are going to be very happy.”
Between 40 and 50 percent of that money will be eaten up by income taxes.
Grylls points out another 215 workers with Local 2020 of the United Steelworkers, representing office, clerical and technical workers with Xstrata Nickel, are expected to sign a new three-year contract before the end of the month. A signing bonus is expected to be part of any package that might be signed.
Mining companies prefer to offer a bonus incentive program in contracts rather than large wage increases, said Laurentian University economics professor David Robinson.
“These signing bonuses and nickel bonuses are a huge advantage for the local economy,” said Robinson. “That’s mainly because this is cash that flows directly into this community and doesn’t leave.”
The bonus system is also beneficial because it allows mining giants such as Xstrata Nickel and CVRD Inco to keep wage increases down when nickel prices eventually drop, said Robinson.
These minimal wage increases in large part ensure there aren’t massive layoffs if and when there’s a dramatic drop in the price of nickel, copper and other minerals, said Robinson.
“You get this huge pay off when times are good like they currently are...and things aren’t nearly as tough when things turn around and aren’t so good.”
Robinson said workers feel more financially secure when a new collective agreement is signed and tend to spend the vast majority of bonus money in a hurry.
“The tendency for a lot of these people, especially the younger guys, is to spend this money on big ticket items,” he said.
Anca Rintala, a travel consultant with All Seasons Travel, said she had her best week in 2007 following the signing of the new deal by members of Local 598.
“Things were looking pretty bleak” when it looked like there would be a strike at Xstrata Nickel’s Sudbury operations, but that pessimism quickly turned into great news with a new three-year deal in place and confirmation of an $8,000 signing bonus, said Rintala.
“We had a lot of people making inquiries about travelling while negotiations were going on, but they said they would cancel if there was a strike,” she said. “As soon as the new deal was signed, many of them came in and finalized plans for their trips.”
John Fera, president of Steelworkers Local 6500, said his union’s policy is to not reveal the amount of the nickel bonus.
However, he acknowledged there should be record numbers as nickel prices have never been higher.
“There’s no doubt that the nickel bonus always means a nice amount of cash will be infused into the local economy,” he said. “It’s called a bonus and that means all our people are still getting paid. It’s human nature to want to spend that bonus on things you’ve been waiting to purchase.”
When the concept of nickel bonus was introduced in the early 1990s, the mining giants tried to “fudge numbers” to reduce bonuses to workers, but union’s like Local 6500 worked hard to ensure “earnings based incentives” were used to pay out bonuses, said Fera.
“The bonus system works well for the company and our guys because when things are good like they have been, everyone wins,” he said. “When times get tough, we’re all going to have to share the pain, but that’s easier when wages are lower.”
Greater Sudbury’s economy has come a long way in the past 100 years, but still relies heavily on the mining industry to survive, prosper and grow, said Fera.
