The closure by U.S.-based Greenbrier of the TrentonWorks railcar plant is a major setback for the local economy. Company officials claim they had no choice, and governments seem to think there is little they can do but throw more money at the corporation in hopes that it will stay in the province.
Manufacturing is the most productive sector of the provincial economy and has the highest rate of productivity growth. The manufacturing sector also provides among the highest wages and the highest portion of permanent, full-time jobs. It is precisely the kind of industry we can’t afford to lose.
Nonetheless, manufacturing has been declining as a portion of overall economic activity in the province. Investment in manufacturing machinery and facilities has been declining, along with jobs in the sector. The Trenton closure is one more indication of this trend.
The parent company was seeking to reduce wages, stating the plant "simply (didn’t) have a productive labour agreement" and Greenbrier will therefore be moving production to Mexico. Gerald Regan, former premier of Nova Scotia and chair of the TrentonWorks board, says Mexican workers would probably make $6 an hour while those in Trenton were earning $20, plus benefits. Mr. Regan did not comment on the greater productivity of the Trenton workers.
Greenbrier is either unaware of, or is unconcerned with, the significance of the plant to Pictou County residents. According to its CEO, the closure "will have some short-term pain in terms of the cost to the community." It will have a lot more than some short-term costs for the workers, their families and the local economy.
The province’s response to the crisis has been to offer more subsidies to the parent company. But subsidizing the profits of transnational corporations is not sustainable: Companies become reliant on the subsidies and are prone to move when the subsidies end, or when another jurisdiction offers better subsidies.
To date, the province’s approach to economic development has been piecemeal. What is needed is a plan that ensures industrial development is sustainable, and not subservient to the strategies of corporations that seek subsidies, ever lower wages and tax breaks.
We need local economic solutions that focus on developing businesses and entrepreneurs with a stake in the communities where they are located. In some strategic industries, local and/or public control may be appropriate. We must focus on developing a highly skilled, healthy workforce, and efficient transportation and communications infrastructures that connect communities, workers with their workplaces, and businesses with suppliers and markets.
Businesses need to do their part by investing more of their profits in the machinery, facilities and training that are essential to increase productivity and maintain profitability. Businesses also need to pay the taxes needed for governments to provide services and infrastructure, that in turn support productivity and community sustainability.
As it stands Nova Scotia is not investing enough in its workers and economic infrastructure. For the past five years, the governments of Nova Scotia and New Brunswick have spent the least, per citizen, of all provinces on public services and economic infrastructure.
Confronted with this situation the newly elected government of New Brunswick recently increased investments in the economy and increases in corporate taxes. These tax hikes reverse a long-standing pattern of lowering taxes as a strategy to make the province attractive to businesses. The corporate tax cuts contained in recent Nova Scotian budgets indicate that we are still stuck in the low-tax, low-service strategy.
Either by default or design, our provincial government also seems to be following the low-wage route of economic development. A disproportionate number of jobs created by the private sector are in industries that rely on low wages and part-time, temporary jobs.
We are facing the consequences of the low-wage economy, as skilled workers leave the province for much higher-paying jobs in other parts of the country. Over the long term, caving in to demands for lower wages by companies such as TrentonWorks exacerbates the situation and hurts the economy. If wages and working conditions are not comparable with other regions, skilled workers will continue to give up the benefits of living in Nova Scotia and leave for higher paying jobs.
Public support to keep the Trenton plant operating is needed, but such support should prioritize local solutions. This could take the form of ownership by provincial entrepreneurs, the workers and/or the government. And it could include increased emphasis on rail as an environmentally sustainable response to provincial and national transportation needs.
We clearly need an industrial development strategy. The major economic challenge is shifting to a more environmentally sustainable footing, while ensuring the growth of well-paying, productive employment. A central component of such a strategy is the need to be proactive, enabling our industries to innovate and take advantage of the opportunities in this transition.
The Trenton railcar plant might be a good place to start. The provincial government has stated its intention to make Nova Scotia one of the greenest places in the world. Establishing efficient, environmentally friendly rail transportation links will be key to the success of such an initiative. Investing in railway infrastructure is good for the environment, good for the economy and could be particularly good for the residents of Pictou county.
John Jacobs is director of the Nova Scotia office of the Canadian Centre for Policy Alternatives (www.policyalternatives.ca), an independent public policy research institute. A version of this column originally published in the Chronicle Herald.