• A strike by British Columbia’s beleaguered coastal lumber producers 17 years ago illustrated the fatalism that infected the forest industry, reported Jim Bowden in September 2007.
Most companies have not enjoyed more than a few consecutive profitable quarters for at least a decade. Few have covered their cost of capital over that time, resulting in a massive destruction of wealth … and jobs along with it.
Mills have closed and there hasn’t been new investment in productivity-enhancing technologies for many years. The industry has been hammered by the Canadian dollar approaching parity with its US counterpart, pummelled by high logging and stumpage costs, and the collapse of the American housing market.
Last year’s softwood lumber agreement was a forced capitulation to the protectionist US Congress. Canada surrendered to extortion; and without the $4 billion in cash refunds much of the lumber industry would have been forced into bankruptcy.
Less than 20 years ago, British Columbia’s coastal forest industry was responsible for more than 32,000 direct jobs. Today, it’s about 500. To many observers, this decline looks irreversible, and the sector is told it’s something it must accept as inevitable.
Steve Hunt, the United Steelworkers’ representative, drove that mindset home in an opinion piece published July 11. In it, he said, “the industry and government don’t care about workers, their families or their communities; they plan to run their mills into the ground and close them.”
Reasonable people can agree that this is preposterous and irresponsible rhetoric, particularly coming from an industry leader. The only people anxious to see the death of the forest industry are Canada’s global competitors. But the frustration, anger, and fear at the core of those sentiments are understandable. Workers’ job security and retirement dreams and many communities have been ravaged.
The current dispute isn’t fundamentally over wages. With benefits included, the average entry level hourly cost of work in the expired collective agreement, is $35. That jumps to more than $50 an hour with seven years’ seniority. The fully loaded compensation for a sawmill worker, essentially a low-skill material handler, is out of whack with what the work is actually worth. This is by no means a new phenomenon. The unions have been extracting a punitive economic rent on the forest industry for decades now. For too long, management has caved to wage and benefit demands that defy sound economics.
More significant perhaps have been the handcuffs that collective agreements have imposed on management’s ability to make common-sense decisions. Flexibility and contracting out non-core functions? Absolute non-starters. And matching jobs with skill and competence? Forget about it. Seniority is the Holy Grail of union politics.
The union is looking for some guarantees against the onslaught of an industry in apparent freefall. While no one can fault it for that, it’s not going to happen. That kind of certainty no longer exists.
The forest industry remains vital to Canada’s economy. Yet economic policy makers treat it as a historical anachronism. It’s tough to blame them.
Meanwhile, Canada’s beleaguered forest industry has seen better days. Weakening demand in the US for newsprint and lumber, the latter attributed to the housing crisis set off by the subprime mortgage crisis.
This has cut sales to the US, by far the most important export market. For the first time in 30 years, the Canadian dollar is approaching parity with the US dollar, further reducing the competitiveness of Canadian exports. Export duties under the recently concluded softwood lumber agreement add to the pain.
Meanwhile, competitors in developing countries such as Indonesia and Brazil have taken advantage of technological change to dramatically increase output and challenge Canada’s dominance in forest products.
The difficulties facing the forest industry are compounded in British Columbia, where the pine beetle epidemic will have killed 40% of the province’s pine forest by the end of the year, according to the latest timber supply report from the Ministry of Forests.
By 2015, 78% of the 1.35 billion cub m of pine in the province will be dead. Over the next two decades, 445 million cub m of unharvested dead pine is expected to be left in the woods, representing a $32.5-billion loss to the forest industry and up to $6.5 billion in foregone government revenue through stumpage fees.
The picture is no brighter on the coast where the sawmilling sector ranks among the worst performing in the world. due to high labour costs and a lack of investment. The human cost of this decline is incalculable. Resource-dependent communities are already witnessing population migration and falling real estate values.
Jim Girvan, executive director of the Truck Loggers Association of Canada, said 70% of logging contactors in a survey in the west coast were earning less than 4% on return on revenue, while 15% aren’t making any money at all.
The coastal BC forest industry is in a fight for its life. According to truckers, the average efficient operator logging 175,000 cub m annually needs to invest (on his own without any shareholder input) $10 million in road building and logging equipment to get the job done.
About 90% of BC wood is exported, mainly to the US.
The province has also allowed companies to contract out more work, again contributing to higher accident rates. In 2005, 43 workers died working in British Columbia’s forest sector. On the coast, most of them were in contracted-out logging operations.
With a Forest Fatalities Summit in December 2005 and a Forest Fatalities Lobby in Victoria early in 2006, the Steelworkers Union publicised the carnage and pushed for action. The fatality rate has fallen but there are still far too many serious accidents, especially in non-union operations.
Meanwhile, along the West Coast, about 7000 forest workers are on strike in towns that have spent years grappling with job losses and economic change.
Since 2004, when the most recent settlement was imposed on the coastal forest industry, 26 forest companies have gone out pf business and about 5000 loggers and sawmill workers have lost their jobs.
And that’s just the latest decline in a long-term process. Employment in the coastal forest industry has dropped from more than 30,000 in the early 1980s to less than a third of that today.
The key issues in the forest dispute include contracting-out language, severance pay for partial mill closures, hours of work and shift scheduling. The union claims the companies are creating safety hazards by forcing workers to work longer hours and more days in a row.