Canada's economic future

[KO2]

Canadas economic future?

What will it cost us?

Edited July 15, 2007 by KO2

[Pat Coghlan]

When you take the automotive job away from the high-school educated worker in Oshawa...and you close the plant - possibly others - what happens to those thousands of people who suddenly "have a lot more time on their hands"?

Is it the responsibility of government to bail out a company that made a wrong judgement on what product they make?

Who's fault is it that someone with a high school education has no skills except the skill of putting nuts and bolts on autos? Should they not take responsibility for themselves?

Do we owe these people a guarantee of a high paying non skilled job?

Automobiles are a consumer item and like any consumer items the consumer picks what they want.

If a consumer isn't convinced a product is worth purchasing,the manufacturer has two choices, get out of the business or make a product the consumer will buy.

You should read Lou Dobb's book, "War On The Middle Class".

As he states, US (and Canadian) workers are being put in direct competition with Asian and Mexican workers. How can we continue to expect free education, free health care, and all the modern conveniences we have here if we drive wages back down to $12K/year, as they are in those other countries.

Your example of Toyota is not a good example. In Japan, workers make wages comparable to those in Canada/US, not $12K/year as in China. It *makes sense* for them to build the cars here. Do you see China planning to build their Chery cars here? They couldn't compete if they did.

Make no mistake, we are being sold out by corporate interests in Canada/US, who don't care where they manufacture and sell their products.

The Conrad Black story illustrates how the guys at the top make off with millions or hundreds of millions of dollars - because the system allows them to.

Sure, we should have some competition from the far east. Heck, I bought a nice little piston air compressor at Costco on sale for $94 that was made in China. On the other hand, I have a friend who is a manager at Nortel and he's being asked to move work to China as fast as he can. In fact, he's been told to GO there for a couple of years...after which they'll probably lay him off.

I firmly believe that "everything in moderation" is a good rule to operate by, and that is NOT what is happening in the world of manufacturing and the outsourcing of jobs overseas.

[mikedavid00]

There's software development jobs in Canada paying $9 an hour and requires education.

BS. New grads start at 40K. See http://salarywizard.monster.ca if you don't believe me.

Okay, how about this fact.

I started my career in the 80's at a salary of $18K. Within 2 years I was making over $30K and bought my first new house (Ottawa) for $70K - or just over 2x my salary.

What does a high tech grad make after 2 years these days? $65K? Can you buy that same house for $140K? In fact, that same house costs about $270K now (I shoulda kept it and paid it off 10 years ago, but that's another story).

Can you see how buying power is being eaten away and that salaries are not keeping up? That's why you need 2 incomes to get by today.

YES THAT'S WHAT I KEEP TELLING PEOPLE!

And I feel this is almost soley because of Immigratoin. We have too much labor, too much education, which drives down salaries, and directly effects my quality of life.

And the grad makes around $37k after 2 years these days.

[Canuck E Stan]

We have too much labor, too much education, which drives down salaries, and directly effects my quality of life.

You don't live in Western Canada do you?

If you don't set a baseline standard for what you'll accept in life, you'll find it's easy to slip into behaviors and attitudes or a quality of life that's far below what you deserve.

-Anthony Robbins

[mikedavid00]

We have too much labor, too much education, which drives down salaries, and directly effects my quality of life.

You don't live in Western Canada do you?

If you don't set a baseline standard for what you'll accept in life, you'll find it's easy to slip into behaviors and attitudes or a quality of life that's far below what you deserve.

-Anthony Robbins

I meant to say white colar labor.

Job grown in the west is mainly low paying and part time jobs. Immigrants many of the time do not like to work these jobs.

We have the Labor, they are all sitting here in Ontario doing nothing. But since we don't have a functioning immigration policy, they never got to immigrate to where they are needed and with a job.

And that last quote is ideological, not reality. I was at a bbq on the weekend. Here you would whitness 6 adults sitting around a living room and each taking turns talking about how much school lied to us and how low paying all the jobs are in Canada. We all set high standards, we went to school and did well. We got nothing for it becuase Canada has far too much labor. Our house prices are out of wack also becuase of immigration. Someone working their lives in Dubai then coming here and buying a small house while they live off gov't old age welfare (true story) does not help us in the least. All it does is drive up housing prices.

I felt bad the couple had a baby and was struggling 30,000 in debt barely surviving. 2 Univerisy grads in a shoe box house worth 300k barely able to survive becuase they were victim of living in modern Canada and our INSANE immigration policy.

[Canuck E Stan]

Here you would whitness 6 adults sitting around a living room and each taking turns talking about how much school lied to us and how low paying all the jobs are in Canada. We all set high standards, we went to school and did well. We got nothing for it becuase Canada has far too much labor.

I felt bad the couple had a baby and was struggling 30,000 in debt barely surviving. 2 Univerisy grads in a shoe box house worth 300k barely able to survive becuase they were victim of living in modern Canada and our INSANE immigration policy.

"If you could kick the person in the pants responsible for most of your trouble, you wouldn't sit for a month."-author unknown.

[August1991]

YES THAT'S WHAT I KEEP TELLING PEOPLE!

And I feel this is almost soley because of Immigratoin. We have too much labor, too much education, which drives down salaries, and directly effects my quality of life.

And the grad makes around $37k after 2 years these days.

What an utterly depressing thread.

Baby boomers are about to retire and I read that there is "too much labour".

In other threads, I read about "uneducated, non-white hordes" and then supposedly educated posters post complain about their fear for the future. Rare, educated, smart Canadians should do well, no?

Montreal's official unemployment rate is lower than Toronto's official unemployment rate and both are at 30 year lows. Canada's GDP per capita has never been higher and its Gini coefficient is respectable. (Why is anyone complaining about anything? Karl Marx is dead - get over it.)

IOW, real GDP per capita is at an all time high, if we travel abroad, our dollar hasn't been as valuable since 1977, our unemployment rates are the lowest for 30 years or so and our wealth is generally shared equitably.

The debate really seems to be about the 37" Daytek or the 32" Sony Bravia.

How American.

[bush_cheney2004]

IOW, real GDP per capita is at an all time high, if we travel abroad, our dollar hasn't been as valuable since 1977, our unemployment rates are the lowest for 30 years or so and our wealth is generally shared equitably.

The debate really seems to be about the 37" Daytek or the 32" Sony Bravia.

How American.

Agreed, except that the Americans are debating 46" vs. 50".

[Pat Coghlan]

What an utterly depressing thread.

Baby boomers are about to retire and I read that there is "too much labour".

In other threads, I read about "uneducated, non-white hordes" and then supposedly educated posters post complain about their fear for the future. Rare, educated, smart Canadians should do well, no?

Montreal's official unemployment rate is lower than Toronto's official unemployment rate and both are at 30 year lows. Canada's GDP per capita has never been higher and its Gini coefficient is respectable. (Why is anyone complaining about anything? Karl Marx is dead - get over it.)

IOW, real GDP per capita is at an all time high, if we travel abroad, our dollar hasn't been as valuable since 1977, our unemployment rates are the lowest for 30 years or so and our wealth is generally shared equitably.

How can you reconcile that against the fact that most families now require two incomes to survive?

The unemployment rate is low, true, but that's because people have jobs that pay less. Last night I got an e-mail from a former colleague who used to be a high tech manager but now works for himself installing furnaces for 50% of his former salary. I know another EE who's been unemployed for 5 years. Many people in my neighbourhood (Ottawa) have to work in Toronto and commute on the weekends.

Our dollar hasn't really changed relative to the Euro over the past 5 years. It's the US dollar that has collapsed. See http://quotes.ino.com/chart/?s=NYBOT_DX&v=d12. The US dollar index has NEVER been below 80, but it's almost there now.

You can't have a successful country without a successful middle class, and the latter is being beaten up from all sides. Just wait a couple of more years. In the mean time, read Attack On The Middle Class by Lou Dobbs.

[Riverwind]

How can you reconcile that against the fact that most families now require two incomes to survive?

The cost of housing is largely to blame. The family home is the biggest investment that any family will make and each family will typically buy as much as they can afford. In the 70s and 80s dual income couples quickly realized that they could out bid their neighbors on the best housing which, in turn, triggered an increase in price. This increase in house prices encouraged more families to rely on dual incomes to keep up which, in turn, triggered bigger increases in housing prices. This vicious cycle has created the overheated market we have today where most families must have two incomes to pay for housing.

This book explains this mechanism in more detail: http://www.msnbc.msn.com/id/3079221/

Edited July 17, 2007 by Riverwind

[M.Dancer]

How can you reconcile that against the fact that most families now require two incomes to survive?

The cost of housing is largely to blame.

Absolutely. In the mid 60s my father, with overtime had a take home pay of $60 a week. We lived in montreal and rented a 3 bedroom flat which had a front and backyard, a basement and an attic.

Our rent at that time ranged from $16 to $18 per month.

[Pat Coghlan]

How can you reconcile that against the fact that most families now require two incomes to survive?

The cost of housing is largely to blame.

Absolutely. In the mid 60s my father, with overtime had a take home pay of $60 a week. We lived in montreal and rented a 3 bedroom flat which had a front and backyard, a basement and an attic.

Our rent at that time ranged from $16 to $18 per month.

Okay, so we agree that 2-income families have pushed up real estate prices to unaffordable levels. This can continue as long as these families remain in the market and can "trade". What happens when they start exiting the market? There's gonna be a collapse.

[M.Dancer]

How can you reconcile that against the fact that most families now require two incomes to survive?

The cost of housing is largely to blame.

Absolutely. In the mid 60s my father, with overtime had a take home pay of $60 a week. We lived in montreal and rented a 3 bedroom flat which had a front and backyard, a basement and an attic.

Our rent at that time ranged from $16 to $18 per month.

Okay, so we agree that 2-income families have pushed up real estate prices to unaffordable levels. This can continue as long as these families remain in the market and can "trade". What happens when they start exiting the market? There's gonna be a collapse.

No we don't agree. I do not for one second blame the necessity of two incomes for the rise of real estate prices. The factors affecting real estate are more complex than a pat answer allows. There is of course inflation in general, interest rates and the lasting effects of a speculative market in the 70s and 80s. On top of that the market saw new houses being built on a much larger scale than our parents would have thought proper. I have seen so called "starter homes" with foyers of more than a 100 sq ft and with ceilings over 20 ft tall. The reasons for this expense and extravagance is that they appeal to the eye of the first home buyer. Second home buyers it follows don't want wasted space or 20 ft ceilings to heat in winter......

[Pat Coghlan]

How can you reconcile that against the fact that most families now require two incomes to survive?

The cost of housing is largely to blame.

Absolutely. In the mid 60s my father, with overtime had a take home pay of $60 a week. We lived in montreal and rented a 3 bedroom flat which had a front and backyard, a basement and an attic.

Our rent at that time ranged from $16 to $18 per month.

Okay, so we agree that 2-income families have pushed up real estate prices to unaffordable levels. This can continue as long as these families remain in the market and can "trade". What happens when they start exiting the market? There's gonna be a collapse.

No we don't agree. I do not for one second blame the necessity of two incomes for the rise of real estate prices. The factors affecting real estate are more complex than a pat answer allows. There is of course inflation in general, interest rates and the lasting effects of a speculative market in the 70s and 80s. On top of that the market saw new houses being built on a much larger scale than our parents would have thought proper. I have seen so called "starter homes" with foyers of more than a 100 sq ft and with ceilings over 20 ft tall. The reasons for this expense and extravagance is that they appeal to the eye of the first home buyer. Second home buyers it follows don't want wasted space or 20 ft ceilings to heat in winter......

Well, if you think about it, in the 60s most families had just one income. You could buy a house for $12,000.

In the 70s, families started having 2 incomes. This trend really hit its stride in the 80s as the boomers started working.

Which families do you think are buying these $400K+ homes today, single-income?

[M.Dancer]

Well, if you think about it, in the 60s most families had just one income. You could buy a house for $12,000.

In the 70s, families started having 2 incomes. This trend really hit its stride in the 80s as the boomers started working.

Which families do you think are buying these $400K+ homes today, single-income?

I don't think that one necessarily follows the other.

In m neighbourhood that average price for a home approaches 2 million. That up almost $700,000 in 2 years. Also in my neighbourhood many households are single income with either no kids or just a couple. Of the two income families in my neighbourhood I know usually both are professionals. That particular model has changed much in 40 years. A doctor doesn't stop practicing just because the husband has been accepted to the bar.

[Pat Coghlan]

I don't think that one necessarily follows the other.

In m neighbourhood that average price for a home approaches 2 million. That up almost $700,000 in 2 years. Also in my neighbourhood many households are single income with either no kids or just a couple. Of the two income families in my neighbourhood I know usually both are professionals. That particular model has changed much in 40 years. A doctor doesn't stop practicing just because the husband has been accepted to the bar.

Prices will also go up if families have more disposable income, and the best way to have more income is to have both spouses in the workforce.

As a result, the birthrate has gone down significantly. See the stories in the media today about how rapidly our population is aging, with a predicted shortfall in new workers to replace those that will retire in 10 years.

People had better enjoy their big houses now, because when they go to sell them there won't be a next generation with the numbers or incomes to purchase them.

[mikedavid00]

How can you reconcile that against the fact that most families now require two incomes to survive?

The unemployment rate is low, true, but that's because people have jobs that pay less.

I agree.

But you can't convince people who base our economy off newspaper bytes.

[Pat Coghlan]

Here's a weekly podcast which is really well done and which deals with economic issues facing North America:

http://www.financialsense.com/fsn/main.html

[ScottSA]

Well, if you think about it, in the 60s most families had just one income. You could buy a house for $12,000.

In the 70s, families started having 2 incomes. This trend really hit its stride in the 80s as the boomers started working.

Which families do you think are buying these $400K+ homes today, single-income?

I don't think that one necessarily follows the other.

Yes, one necessarily follows the other. Without available and widespread purchasing power, the market wouldn't support the prices. The kind of family surplus necessary to afford that kind of purchasing power isn't generally available from one income.

[M.Dancer]

Well, if you think about it, in the 60s most families had just one income. You could buy a house for $12,000.

In the 70s, families started having 2 incomes. This trend really hit its stride in the 80s as the boomers started working.

Which families do you think are buying these $400K+ homes today, single-income?

I don't think that one necessarily follows the other.

Yes, one necessarily follows the other. Without available and widespread purchasing power, the market wouldn't support the prices. The kind of family surplus necessary to afford that kind of purchasing power isn't generally available from one income.

I'm sorry but this is basic economics. Available wealth doesn't cause prices to rise, demand casues prices to rise. The swell of baby boomers buying their first homes coupled with speculaters has more tp do with rising real estate than anything else. The entry of the second wage earner is a response to rising home prices, not the cause.

[Riverwind]

Available wealth doesn't cause prices to rise, demand casues prices to rise.

The price of houses is extremely sensitive to affordability and behaves differently from other goods. The more people can pay - the more house prices rise. The recent property valuation increases have been driven by low interest rates. Increased household earnings due to a second income are another factor.

That is why allowing mortgage interest deductability is a dumb policy - all it would do is trigger an increase in house prices that benefits current owners but will not make housing any more affordable in the long run.

Edited July 18, 2007 by Riverwind

[ScottSA]

I'm sorry but this is basic economics. Available wealth doesn't cause prices to rise, demand casues prices to rise. The swell of baby boomers buying their first homes coupled with speculaters has more tp do with rising real estate than anything else. The entry of the second wage earner is a response to rising home prices, not the cause.

Well, you're partly right about demand, but capital availability is every bit as strong a determinant as demand. All the demand in the world won't drive prices if no one can afford the prices, and in fact the Law of Demand determines at what point demand and price are optimized. Purchasing power is one of the determinants of that relationship. To claim that the entry of the second income is a response to rising prices is foolish, since the increased purchasing power of the second income is a determinant of the price in the first place. You're in effect claiming that a horse pulling a roman war chariot is the size he is because his foal is big.

Edited July 18, 2007 by ScottSA

[M.Dancer]

I'm sorry but this is basic economics. Available wealth doesn't cause prices to rise, demand casues prices to rise. The swell of baby boomers buying their first homes coupled with speculaters has more tp do with rising real estate than anything else. The entry of the second wage earner is a response to rising home prices, not the cause.

Well, you're partly right about demand, but capital availability is every bit as strong a determinant as demand. All the demand in the world won't drive prices if no one can afford the prices, and in fact the Law of Demand determines at what point demand and price are optimized. Purchasing power is one of the determinants of that relationship. To claim that the entry of the second income is a response to rising prices is foolish, since the increased purchasing power of the second income is a determinant of the price in the first place. You're in effect claiming that a horse pulling a roman war chariot is the size he is because his foal is big.

That might be true for a luxary item but a homes is a pretty big motibvator even if the cost is morethan you would want, hence the second wage......but high costs of buying a home are not the only super inflationary thing ......the cost of renting has also skyrocketed in the last 30 years. When I moved out the rule of thumb was that you rent should be less than a weeks salary. A decent 1 bedroom in Toronto approaches $1000 a month.

On an aside, there was this interesting little book 20 or so years ago by Tama Janowidtz (or sumpting like that) called the Slaves of New York. One of it's conceits was that renting was so expensive in manhatten that you had to shack up with someone wealthy or famous to live there....or be famous and then you can have your own slave......

[Pat Coghlan]

Well, if you think about it, in the 60s most families had just one income. You could buy a house for $12,000.

In the 70s, families started having 2 incomes. This trend really hit its stride in the 80s as the boomers started working.

Which families do you think are buying these $400K+ homes today, single-income?

I don't think that one necessarily follows the other.

Yes, one necessarily follows the other. Without available and widespread purchasing power, the market wouldn't support the prices. The kind of family surplus necessary to afford that kind of purchasing power isn't generally available from one income.

I'm sorry but this is basic economics. Available wealth doesn't cause prices to rise, demand casues prices to rise. The swell of baby boomers buying their first homes coupled with speculaters has more tp do with rising real estate than anything else. The entry of the second wage earner is a response to rising home prices, not the cause.

Yes and no.

Thinking about it, Nixon taking the US off the gold standard opened the floodgates on inflation, and I agree that rising prices forced many families to have both spouses in the workforce.

That said, it has always been a rule-of-thumb that a family can afford to buy a house which costs approximately 2 1/2 times their gross annual income. I think this rule is more or less still true today.

If the average house price in an area is $300,000, I think you can rest assured that it isn't because the "average" family found itself with a single $120K income.

What I'm saying is, if house prices have moved up to this level, it could only have happened if family incomes also rose up into 6 figures. In general, that can only happen if most families have two incomes totalling $100K or more.

Let me add that I'm talking "sustainable" housing prices here. Anything can happen in a boom (e.g. Calgary), but show me a stable housing market with an average home price of $300K, and I'll maintain that prices rose to that level as a result of high family incomes. If the majority of the families were all single-income when the average home price was $150K, the average price didn't gravitate up to $300K, requiring the second spouse to join the workforce. They gravitated up because the family incomes were already quite high.

[August1991]

People had better enjoy their big houses now, because when they go to sell them there won't be a next generation with the numbers or incomes to purchase them.

Pat, you are a pessimist. You believe that the future will be bad and you believe anyone who tells you what you want to believe.

Lou Dobbs knows his market and he appeals to people like you.

Pat, it's wise advise to ignore people who pander to your prejudices.

----

This thread lacks simple common sense, and some basic data.

First, the common sense. When a woman (excuse my sexism) chooses to work outside the home, society gains what she can produce extra - but it loses the efforts that she previously devoted to housework. Is society better off? Well, I suppose so because the woman freely chose to enter paid employment (and get taxed for her efforts).

IOW, this discussion above about double income families "driving up the price of housing" is entirely beside the point. Would you say the same if the women entered the paid labour force to become construction labourers to build new houses? (And in effect, that's what happened.)

Sure, you'd have higher family incomes, but you'd also have more houses. Overall, it's a wash. Now, if the women prefer paid employment to staying at home, then there must be a net gain to society.

Second, the data. The average price of a house in Toronto in 1953 was around $11,500 (in 1953 dollars). The average price of a house in Toronto in 2006 was around $350,000 (in 2006 dollars).

In 1953, minimum weekly wage in Ontario was around $19 or 40 cents/hour (in 1953 dollars). In 2006, minimum wage was around $7.25 per hour (in 2006 dollars).

In 1953, a starting elementary school teacher would earn around $1200 annually (in 1953 dollars) whereas a starting teacher now would earn around $40,000 annually (in 2006 dollars).

Do the math. You'll realize that a single person of similar status has more likelihood to buy a house in Toronto now than in 1953.

---

A few last points to mention. In 1953, a one week holiday in Cancun was impossible because 747 jets didn't exist - nor did Cancun. In 1953, people died in car accidents because there were no air bags. And in 1953, a B&W TV cost about $100 (in 1953 dollars). You could get a colour Admiral for $1175.