Strike exacerbating economic slump

Sudbury’s economy, already suffering after layoffs at the city’s major mining companies, is now sinking even more because of the strike involving more than 3,000 members of Steelworkers Local 6500.

The strike against Vale Inco will be four months old as of Nov. 13.

John Caruso has spent the past six months studying the impact of mining layoffs on the Sudbury community.

He is the vice-chair of the Community Adjustment Committee, which was set up in May to identify actions that can be taken to mitigate the economic impact of last year’s slump in nickel prices, and the corresponding job losses in Sudbury.

In a few weeks, the committee will release a 28-page report on the subject.

When you add up layoffs at the community’s major mining companies, junior mining companies, and related job losses in the mining supply and service sector and other affected industries, 3,030 people have lost their jobs in the last eight months, he said.

Because these workers were making an average gross weekly wage of $880, these layoffs will cost the city an average of $133.5 million per year.

As of the end of September, the unemployment rate in Sudbury is sitting at 10.5 per cent, a striking rise in comparison to 6.2 per cent in 2008 and 5.8 per cent in 2007.

The strike is directly responsible for some of these layoffs, said Caruso.

“If we didn’t have the strike, we wouldn’t have as many people on layoffs. Many of these people have lost their jobs because of the strike,” he said.

“The mining companies aren’t buying services and products. The mining supply and service sector has been affected by the strike.”

Laurentian University business strategy professor Jean-Charles Cachon said he estimates Local 6500 members, by themselves, normally contribute $20 million a month to Sudbury’s economy.
Right now, the strikers are bringing home just $200 per week in strike pay.

Sudbury’s economy as a whole is worth about $200 million a month, said Cachon, so Local 6500 members usually make up about 10 per cent of that total.

Other than that, it’s hard to tell what the strike is doing to Sudbury’s economy, as there are few hard numbers, he said.

Cachon agrees with Caruso that the city’s economy was already suffering after plummeting nickel prices caused layoffs at mining companies.

The longer the strike lasts, the higher the likelihood that the strikers are going to start giving up and leaving Sudbury, said Cachon.

Because gold prices are good right now, he sees the strikers going to work for gold mines such as the one being developed in Malartic, Que. (near Rouyn-Noranda), or other industries in which their skills are in demand.

Strikers leaving for greener pastures is bad news, said Cachon. There is a shortage of skilled trades workers, and Vale Inco is risking losing these workers to other industries, he said.

Both the social and economic impact of layoffs and the Local 6500 strike is becoming increasingly evident, said Caruso.

Many laid off workers are coming to the end of their employment insurance eligibility period, and are now having to access social services. Ontario Works’ roster in Sudbury has increased by 12 per cent since last year, he said.

Demand for free credit counselling at the Sudbury Community Service Centre has skyrocketed, he said.

“Under normal circumstances, clients would not wait more than a week for their initial appointment. Right now they’re running three weeks.”

Many of the people accessing the service are young, and are having to move back into their parents’ homes, said Caruso.

“Because we went from such a high to such a low, a lot of these younger workers were making very good money, and they created a fair bit of personal debt, and now they can’t service that debt.”

The executive director of the Sudbury Community Service Centre, Linda Morel, told Caruso that many couples’ marriages are cracking under financial strain.

“As Linda says, when debt comes in the window, love goes out the door very quickly,” said Caruso. “It’s a difficult time.”

Caruso said the United Way, which runs a yearly campaign to fund various non-profit agencies in the Sudbury area, is in trouble because of the layoffs and strike.

“If there was ever a time if someone goes into a store, and they have a bin to put one or two dollars in, this is the year,” he said.

“People get complacent when they think ‘Oh, I don’t have to worry about the United Way because they’re going to get payroll deductions from the Vale Inco workers, and their budget will be OK.’ That’s not the case this year.”

Warren Philp, northern Ontario market analyst for the Canada Mortgage and Housing Corporation, said the number of homes sold in the Sudbury area dropped 25 per cent when comparing the first nine months of 2009 to the previous nine months.

The average house price, which was $212,920 last year, is now down to $199,593, which represents a 6.3 per cent decline.

“The strike and the economic slowdown are kind of working in concert in Sudbury to have caused a 25 per cent decline in sales,” he said.

However, brighter times may be ahead. The CMHC housing market outlook for the Sudbury area, released Nov. 2, said the housing market in the city is stabilizing after a period of weakened demand.

Because there are currently fewer listings, re-sale prices should firm up in 2010, according to Philp. Modest job growth, relatively low mortgage rates and some in-migration should also help the Sudbury housing markets, he said.
Jim Gordon spent 17 years as Sudbury’s mayor between the years of 1976 and 2003, was the MPP for Sudbury between 1981 and 1987, and is still a member of the Greater Sudbury Development Corporation.

Gordon, who was the mayor during Local 6500’s nine-month strike in 1978 and 1979, said Sudbury is in a much better position these days to weather labour strife.

“Is this (strike) as bad as that (the 1978-1979 strike)? Not at the moment. But these strikes are very, very hard on the people that are involved in them, and they’re hard on the other members of the community, because it means there’s not as much spending.”

Gordon said he worked hard to diversify Sudbury’s economy.

“It’s a layer that’s there that helps when things are rough,” he said. “If you only have one industry and one industry only, then you’ve got real problems.”

He said he convinced the Sudbury Hydro board to put in high-speed, broadband Internet so that call centres could be attracted to the city.

Although some local call centres have shut down recently, Gordon said the city still has a lot more jobs because of them.

“The other reason to put down this broadband was to attract and keep software companies in the Sudbury region,” he said.

“As a result of that, we now have people that do business with their software and with the technology that’s available in the city. A good example of that is Chilly Beach, which has a show on CBC (and is produced in Sudbury).”

Gordon also encouraged the government to implement a good telecommunications network across northern Ontario.

This network is partly responsible for the Northern Ontario School of Medicine, because the government saw that a good telecommunications network could connect medical students from across the north.

Gordon said he also lead the effort to turn Sudbury into “the shopping centre for northeastern Ontario,” bringing big box stores to town.

While Caruso has spent a lot of time lately examining the ways that Sudbury’s economy is hurting, like Gordon, he sees that diversification has helped.

“We’ve got about 4,500 people working directly for Xstrata and Vale Inco. But there’s 3,000 people working for Sudbury Regional Hospital. That doesn’t include the cancer treatment centre, the medical school, the university and the colleges.”

Hugh MacKenzie, an independent economic consultant who works out of Toronto, also spent time as the research director of the United Steelworkers of America.

He said the Local 6500 strike must be hurting the economy because there are “a pretty large number of pretty well-paid people who aren’t earning anything at the moment.”

But if the union isn’t successful in keeping the current structure for nickel bonuses and pensions, Sudbury’s economy will suffer anyway, he said.

Nickel bonuses are usually spent right in the city on big-ticket items such as vehicles, said MacKenzie.

As for pensions, he doesn’t want to know what would have happened when the workforce was being reduced at Inco in the 1980s, if so many hadn’t taken up offers of early retirement.

“It just happens that if the union were to lose both of the two big issues in the strike, it would have a negative effect on the economy of Sudbury in the long-term.”