By Derek DeCloet
Nothing can stop Canada’s sizzling job market, and it’s not just an Alberta story any more. In every province but two, unemployment is lower today than in 2000, and in absolute terms, no province has enjoyed a bigger decline in the jobless rate than Newfoundland and Labrador.
Yes, this week’s employment data prove it: As Premier of the Rock, Danny Williams is an economic disaster. No, really. He is. The drop in Newfoundland’s unemployment rate to 12.9 per cent sounds good – it was nearly 17 per cent at the start of the decade – but the statistic hides as much as it tells. It flatters Mr. Williams.
A more meaningful figure is the employment rate, which tells you what percentage of the labour pool is actually working (as opposed to the number who are looking for work but can’t find it). The hard facts are these: barely half – 51.5 per cent – of working-age Newfoundlanders have a job, trailing everywhere else by a country mile. Forget Alberta. If only Newfoundland had the same employment rate as tiny Prince Edward Island (61 per cent), it would have 40,000 more inhabitants drawing a paycheque.
How can this be, in a province blessed with abundant oil reserves, during the greatest energy boom in a generation? I doubt that Newfoundlanders are that much lazier than other Canadians. It’s about opportunity, or lack of it. Newfoundland’s jobs boom is a mirage: Roughly the same number of jobs exist there today as in October, 2003, when Mr. Williams was elected. It’s the size of the labour force that has shrunk, because residents are moving to Fort McMurray and other points west.
“If [companies] want to deal with South American dictators, they can go to South America,” says Charles Cirtwill, acting president of the Atlantic Institute for Market Studies in Halifax. He’s referring, of course, to Mr. Williams’ latest gambit – to demand a 5-per-cent stake in all future oil and gas projects, at no cost to the province. A similar demand has put the brakes on Hebron, a massive offshore oil development led by Exxon Mobil and Chevron.
If that smells vaguely like expropriation, or perhaps extortion, we assure you that it’s merely Mr. Williams trying to get a “fair share,” to use the phrase that often accompanies Newfoundlanders’ grievances. Fairness is in the eye of the beholder, though. Wade Locke, an economist at Memorial University, found that government’s take of offshore oil projects is 51 to 55 per cent of pretax cash flow – “similar to the shares found in Alaska, Alberta and Australia.” The province gets a larger piece than Ottawa.
So lush are the royalties from energy that they could turn Newfoundland into a “have” province by about 2012, ending decades of equalization payments from the feds, Mr. Locke writes. Inconveniently, that would also bring an end to Mr. Williams’ popular stunts to protest that multibillion-dollar gifts of equalization are not enough. Politically, that’s magic. Mr. Williams’ Conservatives enjoy more than 70 per cent approval in recent polls.
But if extreme confrontation works for squeezing more dough out of Ottawa, it doesn’t work for business. When it comes to the Premier’s tiresome Danny Chavez routine, oil companies don’t know where the demands will stop. In Hebron, the government first demanded a 4.9-per-cent stake. Mr. Williams’ Natural Resources Minister is already warning that it will ask for more, once negotiations resume. “If you’re an investor, you’re not interested in finding a resource that may be nationalized four or five years from now,” says Mr. Cirtwill of AIMS.
Don’t laugh. That’s essentially what happened to Fishery Products International. The province didn’t reclaim ownership of FPI, but successive Liberal and Tory governments neutered the company. Twice since 2001, the province amended the FPI Act, obstructing a merger attempt and meddling in restructuring plans. John Risley, who was part of the investor group that took control of the company in 2001, remembers getting a phone call from FPI’s lead banker. “He said, ‘You guys don’t run this business any more. The government does.’ “
FPI is being sold now in pieces – only after the province imposed conditions that will force the buyers to prop up rural towns in Newfoundland. Mr. Risley says breaking up the company was the only way to get it out from under the government’s thumb. The quickest way to fix the poisoned business environment would be for voters to kick Mr. Williams out this fall, but Mr. Cirtwill just laughs at the idea. “The only real question is, is he going to win every seat?”