Industry Committee on Nov. 22nd, 2007

[Colleen Barnes]

Here, in Canada, there are very few sub-prime loans, and that is a good thing for us, but the institutions did invest in some securities where there was a bit of that. According to their recent results, the banks seem more or less comfortable and seem to be able to manage their investments, for the moment.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go now to Mr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

First I'd like to thank Ms. Barnes, Mr. Wright, and Dr. King for being here on such short notice.

I really enjoyed your presentation. Some of the things you stated were a bit of a surprise for me, the first being that 75% of jobs are in the service sector. I come from Oshawa, and there's a real concern with the manufacturing sector. There are certain job losses in the automotive sector. I know there is some rebalancing and some shifting there, but I was wondering if you could clarify some statements I've heard.

The first one is that if people lose manufacturing jobs, they are getting McJobs--jobs that really aren't secure jobs--in the service sector. Would you say that most service sector jobs are quality jobs and secure jobs?

[Tom Wright]

Well, I think it's always a dangerous game when you start to aggregate and average and make broad, sweeping statements. I certainly can't sign up to the notion that all of these are McJobs, because, no, they are not.

I think on slide eight I tried to pick up a little bit of that diversity. One of my key points was trying to suggest that the service sector is not homogeneous. We've talked a little bit about the engineering and the importance of that. There are jobs within the food and accommodation business that are at the lower end of the wage scale. Unambiguously, they exist; unambiguously, people end up going into some of those industries. We need people there, but in services there are quite a number of jobs in the higher end, and we have seen in here some growth in those areas.

Yes, there are changes, and yes, there are people exiting some elements of manufacturing. I would stop well short of suggesting that the only jobs they then get are jobs at the lower end of the scale. There are quite a number of skilled people in the manufacturing industry who are able to apply those skills elsewhere within the service sector.

[Colin Carrie, Conservative, Oshawa, ON]

We hear comments quite often that the service sector actually relies on the manufacturing sector. In other words, if you don't have people manufacturing products, there's not the money to buy and use these services.

Could you comment on that statement?

[Tom Wright]

I think there are two dimensions to your observation. One is the sheer magnitude of the service sector within the economy. At the end of the day, the goods-producing side of the economy wants a market to sell into. If we have 70% of the employed people in Canada doing well in the services sector, there's a piece of the market. Health there is good, and there is a symbiotic relationship on that front.

But also, when you take a look at the nature of the manufacturing industry and start to peel the layers of that onion, you're going to find that the manufacturing industry can't go very far very fast without the use of the service sector, be it in the ICT or the informatics end of the things, in logistics, in trucking, in engineering, in design. Their productivity, their efficiency, their fundamental elements of competitiveness can in some cases be found within the service sector. I think that relates to some of the questioning I had earlier.

There's very much a symbiotic relationship, and I don't think you can consider these in isolation. I'm not an economist, but in my experience, you have to take a look at how these elements of the market work together.

[Colin Carrie, Conservative, Oshawa, ON]

I've heard comments as well that Canada has great opportunities in emerging markets. One sector that is not doing as well as it could in emerging markets is the service sector. With the potential for export and opportunities worldwide, are there things the government could do even better to help promote global champions in the service sector?

[Tom Wright]

There are certainly opportunities. We are already exporting, but I think the observation is accurate. Our export of services has been fairly stable. It hasn't experienced the same levels of growth that some might expect. I think the deliberations of the committee might be able to shed some light on what might facilitate this.

In my experience, there are some areas where we have done quite well. Some of the financial institutions have made inroads into some of the new and emerging markets, be they in China or elsewhere. We have in Canada niche elements of expertise. If you were to talk, for instance, to the architectural community, green architecture at a point in time was making some tremendous inroads into China. The Chinese government was seized suddenly of green, and we had some expertise here in Canada. So there were opportunities.

In the marketing and trade promotions we do, as the government embraces a global commerce strategy, unambiguously there are ways in which we can continue to promote the services. We have expertise in a variety of these areas, and they can and should be promoted.

[The Chair, Conservative, James Rajotte]

Ms. Barnes, do you want to comment briefly? Then we'll go to Ms. Nash.

[Colleen Barnes]

Yes. It's on the financial services element.

We have companies like Scotiabank who are really active in some of the small emerging markets. There are the free trade negotiations we're trying to do, for example, right now with Peru, and we just finished a financial services chapter with Chile. These are things that Scotiabank really likes to have in place, because it gives them some legal certainty when they go into these emerging markets that there's at least some agreed international framework that, should things go wrong, they can rely on.

On the financial services side, you'll see in one of the charts that exports from the finance and insurance sector are very small. The reason for this is that many if not most countries require a physical presence when you want to go into a country, in China and all of these areas. What we're showing is that we don't have a lot of exports, but we have a lot of foreign direct investment in these emerging markets. So when you're looking at the financial services sector, bear that in mind.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you very much, Ms. Barnes.

We'll go now to Ms. Nash for six minutes.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Mr. Chair, and thank you to the witnesses for your presentations.

I'm interested in employment in the service sector. I noticed on slide six of your presentation, Mr. Wright, that the composition in terms of employment starts off with retail, health care, education, and accommodation as the largest sectors of employment.

I'd like to ask you about the private service sector. If we look at, say, the first five sources of employment, three of them are in the public sector, not exclusively but primarily in the public sector. That would be health care, social assistance, education, and public administration.

If we set those aside for a moment and look at the private sector, which would be the retail trade and accommodation, this accounts for--it simply is a guesstimate, looking at the graph you have here--roughly 25% of the employment. Could you tell us what would be the average wages in the retail sector and the accommodation and food sector in Canada?

[Tom Wright]

We tried to capture some of the averages of the salaries in those sub-sectors on, I believe, slide eight. You'll find accommodation and food there, and you will find the retail trade. Accommodation and food is at the lower end, and retail trade is the third one from the bottom.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Looking at your chart on page eight, accommodation and food is maybe around $11 or $12 an hour--this would be an average wage--and retail trade looks to be just over $15 an hour. Again, this would be an average wage, so some would be higher and some would be lower.

I'm thinking about people who are losing their jobs in the manufacturing sector. I had the opportunity to be part of the finance committee yesterday. What we heard there was quite chilling--namely, that the more than 300,000 manufacturing jobs that have been lost so far reflect fiscal conditions of two and three years ago. The incredible rise in the value of the dollar and other factors will have an impact on the manufacturing sector that we will only see over the next couple of years. So while we've had significant job losses, we're about to face much more.

I ask you, given that the average wage in the manufacturing sector is, as you have said, higher than the service sector; given that not only the largest source of employment but the fastest growing sources of employment is in retail; and given that by your own chart here, retail and food and accommodation are among the lowest-paying jobs in the service sector, do you not think it's reasonable to assume that many workers who lose good-paying, secure jobs in the manufacturing sector could be faced with jobs that bear a relatively low wage in the service sector? More importantly, rather than being full-time jobs with benefits, and in many cases pensions, these jobs are precarious jobs, where one can never count on the hours of work. These jobs offer no security or benefits to support the workers or their families.

[Tom Wright]

I understand the issue, and I wouldn't dispute that this in fact has happened. Equally, I would not dispute that we may well see some more of that.

I don't have data to quantify that observation. I get nervous about the clarity of my crystal ball, looking forward, but--

[Peggy Nash, NDP, Parkdale—High Park, ON]

I'm not asking you to project job losses. At the finance committee yesterday, that's what witnesses said.

[Tom Wright]

Indeed, and I wouldn't refute that there is a degree of that. I just can't quantify that. But I do take your point, unambiguously.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Do I have one more minute?

[The Chair, Conservative, James Rajotte]

You have about a minute left.

[Peggy Nash, NDP, Parkdale—High Park, ON]

The question I would ask you, then, is do you not think it is of concern to Canadians, and to us as parliamentarians on this committee and in the House of Commons, that we are losing manufacturing jobs and the security of those jobs, and that the growth in employment is in the parts of the service sector that are relatively less secure and low-paid?

[Tom Wright]

There will be a dimension of that, and yes, I think the committee wants to be aware of that. But I think one also has to have the context of the overall employment levels. One also has to take a look at the balance of growth elsewhere within the service sector.

If your initial starting point is manufacturing, I think you have to go back and consider and understand manufacturing in all of its various aspects. Again, that will bring you back to the services sector, and comparative advantage, in more and more of these companies, coming from a high level of productivity--of technology, the engineering--of a number of those services at the higher end of the wage scale.

I think there is growth in some of those areas as well, albeit not as high a rate of growth. But I think there's opportunity, and that's where we want to grow. So the opportunity for the future is to see how we can move into some of those areas.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Ms. Nash.

We'll go to Mr. Simard, please.

[Raymond Simard, Liberal, Saint Boniface, MB]

Thank you very much, Mr. Chair.

I'd like to thank our witnesses for being here this morning.

Given that the service sector accounts for approximately two-thirds of the GDP in employment, I'd like to know if we also have some idea of how this split compares with other industrialized countries. It would seem to me that given that you have an average lower wage in the service sector, 70% may not be a good figure to have.

If the States are at 50:50 or if the European countries are somewhere closer to 50:50, maybe that's where we should be.

Could you give us an idea of where we stand there, please?

[Tom Wright]

I don't have the international comparisons. As I was going through the deck this morning, it was a question I was putting to my colleagues.

Taking the suite of data that I have here--your question included--and how we look vis-à-vis the United States, Australia, the G-7, and what that tells us in terms of where we're at....

My apologies.