Here’s why Alberta’s energy sector doesn’t need a bailout–yet

Compare the job losses in Alberta in the last 12 months to Ontario manufacturing’s sustained years of decline

An oil derrick belonging to Husky Energy, silhouetted against looming clouds

(Larry MacDougal/CP)

There is a meme floating around Canadian policy circles that if the job losses that are currently occurring in the oil and gas industry were happening anywhere else in Canada, we would see a bailout. Like many memes, it is difficult to precisely identify its origins. The most likely origin appears to be comments made by Saskatchewan Premier Brad Wall in late November:

“The energy economy of Western Canada has shed thousands and thousands of jobs, and there’s no prospect for immediate recovery… Were this any other sector in Canada’s economy, there would be a race to bail out the industry from governments and, frankly, much more coverage of the issue, but there isn’t.”

Industry bailouts are exceptionally rare in Canada, with the most notable being the auto bailout of late 2008-early 2009, where two of Ontario’s then six automotive assemblers received assistance from the federal and provincial government. Given the rarity of industry bailouts, I believe it is safe to assume Mr. Wall is alluding to the auto bailout.

If the decline in automotive (and manufacturing more broadly) is the standard for an industry bailout, does the recent employment decline in the oil and gas sector meet that standard? One test is to compare the downturn in employment in Alberta’s oil and gas sector and compare it to the downturn in Ontario’s manufacturing sector, prior to the bailout. Canada’s Labour Force Survey contains monthly job data by industry broken down by province. The category “forestry, fishing, mining, quarrying, oil and gas” (FFMQOaNG) shows a substantial decline in employment in 2015:

Chart showing change in Alberta employment in the Forestry, Fishery, Mining, Quarrying, Oil and Natural Gas sectors for the years 2011 through 2015

Unfortunately, we cannot break the data finer than this, so the inclusion of forestry and fishing creates some noise in the data, but it should be relatively minor given the size of the oil and gas industry relative to the size of forestry and fishing.

Roughly 4% of Alberta’s 4.2 million people are directly employed in the FFMQOaNG sector. The average employment level was 18,000 persons lower in 2015 than it was in 2014, representing 10% of the sector and 0.4% of Alberta’s population. Even with the 3% employment increase in the sector the year before, no one would deny that this has greatly affected the province’s economy and caused indirect job losses in other sectors as well.

To put this job loss into perspective, here are the employment levels in manufacturing (of all types) in Ontario between 2003 to 2008, from the same data series:

Chart showing Ontario employment in manufacturing for the years 2003 through 2008

In 2004, which saw a slight increase in manufacturing employment from the year before, almost 9% of Ontario’s 12.3 million people were directly employed in this sector, a concentration over twice that of “forestry, fishing, mining, quarrying, oil and gas” workers in Alberta. Year-over-year, Ontario’s manufacturing industry shed 42,700 jobs in 2005, 63,900 in 2006 and 57,500 in 2007 and continued losing jobs into the 2008 Great Financial Crisis. This represents sectoral employment reductions of 4-6% per year, every year. For a single year this is lower than the 10% reduction Alberta experienced in 2015. However, from the start of 2004 to the end of 2008, Ontario shed almost 20% of manufacturing jobs, whereas Alberta’s job decline has been over a single calendar year.

Ontario Manufacturing Alberta (FFMQOaNG)
Year Jobs Gained/Lost as % of Sector Year Jobs Gained/Lost as % of Sector
2004 +0.92% 2011 +7.82%
2005 -3.86% 2012 +16.46%
2006 -6.01% 2013 -1.58%
2007 -5.75% 2014 +2.92%
2008 -6.20% 2015 -10.14%
2004-2008 -19.38% 2011-2015 +14.29%

The numbers look more bleak for Ontario when examining jobs lost or gained as a percentage of the population, since Ontario has a higher proportion of manufacturing workers than Alberta does in FFMQOaNG.

Ontario Manufacturing Alberta (FFMQOaNG)
Year Jobs Gained/Lost as % of Population Year Jobs Gained/Lost as % of Population
2004 +0.08% 2011 +0.29%
2005 -0.34% 2012 +0.64%
2006 -0.50% 2013 -0.07%
2007 -0.45% 2014 +0.12%
2008 -0.45% 2015 -0.43%
2004-2008 -1.65% 2011-2015 +0.48%

As a percentage of the population, the manufacturing losses were higher in Ontario in each of 2006, 2007 and 2008 than they were in Alberta in 2015. Alberta has only experienced one year of loss, whereas Ontario experienced three and a half consecutive years of such losses, only to be rewarded with a global financial crisis, after which time two of six automotive assemblers received a bailout package.

These manufacturing employment declines arguably understate the collapse of manufacturing employment, as the job losses were disproportionately felt in southwestern Ontario. The four biggest manufacturing centres in the Southwest are the CMAs of Hamilton, London, Windsor and Kitchener-Waterloo. In the mid-00s, just under 2 million people lived in this area (which I will dub ‘Manufactura’), a population roughly half the size of Alberta. In 2004, 228,500 people were employed in manufacturing, representing 11.6% of the total population. Contrast this to the roughly 180,000 people who worked in FFMQOaNG in Alberta, a province with twice the population of manufacturers.

Manufacturers’ job losses were relatively modest in 2005, shedding 8,200 manufacturing jobs over the year. Things escalated quickly, however, as the region lost over 17,000 manufacturing jobs in 2006 and more than 15,000 in 2007, again in a population half that of Alberta. This was well before the Great Financial Crisis of 2008-2009, where another 28,300 manufacturing jobs were lost over those two years. The percentage of jobs lost in the sector in 2006 and 2007 are in line with Alberta in 2015 and are twice as high when measured as a percentage of the population.

Year Jobs Gained/ Lost (% of Sector) Jobs Gained/Lost (% of Population)
2005 -3.72% -0.41%
2006 -8.58% -0.87%
2007 -8.10% -0.76%
2008 -10.09% – 0.85%

The oil and job losses in Alberta in 2015 look quite similar to, and are arguably smaller than, those in manufacturing in London, Hamilton, Windsor and Kitchener-Waterloo in each of the years of 2006 and 2007. Despite this, there was no “race to bail out the industry from governments” in 2005 or 2006 or 2007. The two employment declines have similar sources, namely substantial movement in the world price for a barrel of crude. Ontario is hit twice by rising commodity prices, from paying more for oil to being less competitive due to a rising petro-dollar. Alberta, on the other hand, sees the impact of lower commodity prices cushioned by a lower dollar.

Despite Mr. Wall’s claims to the contrary, there was no race to bailout Southwestern Ontario when oil prices rose between 2004 and 2007. Why should there be a race to bail out Alberta when they fall?

The context of the auto bailout was very different than the recent slide in commodity prices, as the bailout followed four years of significant job losses and a financial crisis which seized up global credit markets. Neither of those things have yet to happen in Alberta, but if they do talk of a bailout would be quite reasonable.

A single year of job losses? Hamilton and Windsor wish they were that lucky. When thousands of oil sector jobs are lost in Western Canada, it’s called a collapse. When thousands of manufacturing jobs are lost in southwestern Ontario, it’s called Tuesday.


16 comments on “Here’s why Alberta’s energy sector doesn’t need a bailout–yet

  1. It really doesn’t matter how S.W. Ontario suffered. Westerners always felt alienated from the rest of Canada. If they don’t get special treatment now, we will never hear the end of it.

  2. Must have been written by someone from central Canada. I think you missed that the 2004 to 2007 auto job losses were also due to far too high wages and pensions in Canada compared to competitive markets in Mexico etc.. GM deserved to go under after the management drove one of the best companies in the world into bankruptcy. Ford certainly was not in nearly as bad of shape and did not really need a bail out. Like usual, bail out bad managed companies in Ontario at the expense of the rest of the country.

    • Well Gerry I’d be willing to bet my second born that your wage is substantially higher than the average Mexican. Are you suggesting that people in the ROC should accept wages and benefits of a third world nature while only Albertans deserve to get above average compensation for below average work. In case you have had your head in the sand for the past 30 years Alberta happens to be one of the most uncompetitive oil producing states in the world. A province where a highschool dropout can rake in 50 – 100k/yr for unskilled labour and you have the gall to suggest that others in the ROC are overpaid. The low oil price will force Alberta companies to be competitive or go out of business just like the rest of the country functions. Alberta’s days of living high off the Saudis control over artificially high oil prices is over. Time to shape up. Maybe you should set an example by taking an 80% pay cut. How about it Gerry?

      • Actually I am from Windsor and I work for GM, so not sure why you are so upset.

        • I’d wager Mookie there hasn’t much clue about what happens in Alberta.
          50k-100k a year for a dropout? Maybe, in some cases.
          For below average work? I dare you to try it. I dare anyone in this country to do what these guys do. It isn’t like what you see on TV.
          Living off the Saudi’s oil prices? Sure. And then when they decide to screw with it we lose quicker because the oil in Canada isn’t worth the same as the oil Saudi’s produce.
          Unskilled labour? You really have no idea. Sure, there’s some unskilled positions, but fewer and fewer.
          Want to talk about living off someone else’s work or efforts? Talk about most of Canada sucking off of Alberta and then whining when the province that gives the most per capita back to the rest of the country asks for a little help.
          Uncompetitive oil producer? Give your head a shake. Sure, we can’t compete with the middle east or Africa, but we’re held to a vastly different standard when it comes to health concerns, safety, and the environment.
          Finally, these stats don’t include the office jobs lost, restaurants hurt, hotels sitting empty, car lots sitting full, retail store sales down, etc. The Alberta oilfield workers keep so many other businesses alive.

          I suggest you do some homework about how the rest of Canada sucks Alberta dry. It takes a lot of nerve and dishonesty on your part to say that the province that gives the most, takes the least, and probably works the longest hours is a bunch of unskilled, overpaid dropouts. I dare you to come to Alberta and say that.

          • “Uncompetitive oil producer? Give your head a shake. Sure, we can’t compete with the middle east or Africa, but we’re held to a vastly different standard when it comes to health concerns, safety, and the environment.”

            Exactly.. You can’t blame auto workers in Ontario for being too expensive compared to Mexican workers, who make dollars a day and don’t have the same labour laws and safety regulations, and then complain about being called uncompetitive compared to Saudi oil. It’s a fact that their oil is much cheaper to pull out of the ground than ours, just like it’s cheaper to manufacture cars in Mexico than in Canada.

            The fact of the matter is that the auto bailout cost us taxpayers billions that we’ll never get back, and the manufacturers are still shutting Canadian plants. I’m sure the Harper government thought that was the best thing to do at the time, but GM has proven that corporations can’t be trusted. I don’t think giving billions to foreign-owned companies is going to do much for our oil sands. They might save a few jobs for a year or so, but at the end of the day the corporations are just going to take the money and run. It’s simply not possible to make money at these oil prices, and they are in the business of making money. We’ve seen that the 2009 auto bailout was a disaster. Why would we want to repeat that? Let the free market decide which businesses stay in business and end corporate welfare for every sector.

          • So true, they should try 12 hour days, 3 weeks work, 1 week off.

          • Well other than working for 30+ years in the oil industry in 2 provinces and 1 territory no I guess I don’t know as much as you do, Chris. If you have ever experienced a downturn in the oil industry you would know that these sort of things shake out the inefficiencies and get rid of the fat. And yes there are (were) drop-outs making 50-100k for menial labour. As a skilled professional I was well paid over my career and am thankful to the industry for the standard of living it provided me. But don’t for a moment be so smug and arrogant as to suggest that you or I or anyone else in this industry works harder than folks in other industries. Go tough it out on a fishing trawler, sweat your nuts off around a blast furnace, or spend your day underground in a mine or out in forestry, etc. We are paid well because the price of oil is high. Now that the price has dropped the average salary is also dropping. As our total GDP and GDP per capita declines are Albertan’s worth less today than last year? Are we now lazier because the value of our prime commodity dropped? You have no knowledge at all about how the world works. You don’t even know how the oil industry functions. You certainly don’t have a clue about how the “equalization” system works. You obviously don’t know how to read either. Of course there are hard working Albertans. There are hard working Ontarians, and Newfoundlanders, and Quebecers too. But most other industries don’t pay the absurd amounts of money for labour that oil does. Professionals are also very well paid. That is a fact buddy. Those wages will come down, the industry will become more efficient and life will go on. By the way the only statement that is true, in your otherwise laughable rant, is that Alberta contributes more per capita than any other province. Why is that? Everyone across the country pays the same fed tax rates. Alberta contributes more because we make more. We are in the higher tax bracket and our corporations make money hand over fist. WHEN THE PRICE OF OIL IS HIGH. It’s all about the price of oil. When the price was high and we were all living high off the hog there was no planning for the day when oil corrects. Bad government and poor corporate planning. It’s not like we haven’t seen this before. But we never learn. Now the province that prides itself on less government wants more government. And that’s okay, but don’t dump on other regions of the country that have been through even greater turmoil and suffered through greater job losses due to global changes. We are all in this together and the provincialism of people like you, Chris, is a disservice to both Canada and Alberta.

    • The auto companies got bailed out because each auto job created 7 spin off jobs. I imagine the same can be said about the oil industry, which would support some type of special treatment. I also imagine that the big oil companies don’t need any federal buy out. If that happened we could call it NEP2. Whatever the federal government does must be weighed on those conditions and I’ll stand by my never hear the end of it comment.

      • Not sure people get it. Could you please clarify your comment Darlene…

        • I’m in favor of giving oil producing provinces special treatment.. The oil industry supports the same spin off jobs as the auto industry did. But the climate right now is quite different from what we had back then. Improved E.I benefits, large infrastructure projects such as flood protection. No oil company really faces the same problems as the auto industry, so no bail out is required. From my understanding, Westerners want to get their product to market which means completing pipelines. The problem is that it has to be approved by individual provinces, not just by the federal government..
          Because this is a damned if you do or don’t situation. We will never hear the end of it from already an already jaded westerner or the overzealous environmentalists.

  3. very poorly researched article.

  4. I’m curious to know if the FFMQOaNG numbers include all the office workers in downtown Calgary who have lost their jobs or didn’t get contracts renewed. There’s more to the energy industry than just the people who are directly working in the field.

  5. No mention of Bombardier bailouts???

  6. Yup we starved up in northern ontario for the last ten years and we never bitched. Where did all the big oil profits go.Did u think it was going to last forever. Welcome to the real world. Now learn to adapt. Im shure Steven is sleeping sound tonight. Ha ha the cons have scewed you all. Lucky theres still tar left in the sands . Pitty the rivers and the forests though..

  7. And we still pay above 1.02 for a liter of gas