I was recently in Toledo, Ohio, a city in the so-called U.S. Rust Belt.
Why the rust? This is the region spanning the Northeastern U.S., the Great Lakes region and the U.S. Midwest that has suffered urban decay, economic decline and the mass exodus of people with the contraction of a once-mighty industrial sector.
The legacy of a rich history in shipbuilding is evident in Toledo. I spent time at the National Museum of the Great Lakes, where they have docked what was the world’s largest freighter when it was built. That industry has slipped far from its peak.
These days, Toledo is trying to offset the loss of jobs in the automotive and other industrial sectors by taking advantage of opportunities in solar energy.
Recent indicators suggest Toledo’s economy as a whole is on an upswing as the state pulls itself together. In July, Ohio’s unemployment rate sank to 4.7 per cent, compared to the national average of 5.1.
Employment has risen over the past year, with the largest gains seen in manufacturing, leisure and hospitality, trade, transportation and utilities, and local government.
But local commentators paint a somewhat different picture.
Stagnant wages, rising costs
An editorial this past week in the Toledo Blade noted that, according a new report from the U.S. Census Bureau, the nation’s median household income was $53,700 in 2014. When adjusted for inflation, that figure is 6.5 per cent lower than the median income in 2007, before the recession.
Ohio’s median last year put it in 36th place among the states. When adjusted for inflation, it’s lower today than it was in 1984.
“The typical Ohio household continues to earn less than the average U.S. household . . . while Ohio working families are squeezed by stagnant wages and rising costs,” read the editorial.
This raises a valid question: “Just what is economic recovery?”
Charting an increase in employment tells only part of the story. Unemployment can go down because people left town to find better opportunities elsewhere. Real economic growth should be measured by an increase in employment associated with an increase in household income.
New jobs that pay less than the old jobs leave households worse off. It’s harder for them to pay taxes and keep the machinery of local government going. In Detroit, a city that suffered such a loss to its manufacturing base and saw so many people leave it had to declare bankruptcy, is now struggling to cover its pension obligations to former city employees.
Canada has its own rust belt
The fallout of the recession may not have been as dire for Canada as a whole, but there are commonalities with the U.S. Rust Belt if you look outside Canada’s largest six cities.
Take St. Thomas, Ont., further up the Lake Erie shore from Toledo.
This region of southern Ontario lost its two largest employers in the space of two years, a Sterling heavy truck plant and a Ford plant. In late 2009, the local unemployment rate nudged past 11 per cent. In 2011, Ford put its plant up for sale at the bargain price of $22 million.
According to the Globe and Mail, Elgin County, which stretches from Lake Erie’s north shore to the city of London’s south side and includes St. Thomas, had the largest increase in Canada of people seeking access to social assistance in 2008. Local community agencies saw increases in incidents of domestic violence, child abuse and neglect in the years that followed.
According to a BMO Nesbitt Burns report, while total employment in the London area fell 4.7 per cent between 2007 and 2011, high-paying manufacturing jobs plunged by almost 15 per cent.
Now fast-forward to the latest economic forecast for what’s dubbed the London Economic Region by the Ontario Chamber of Commerce.
Employment slipped in 2014 from 2013 and was only 1.8 per cent higher since 2009. Little of the ground lost during the recession has been regained. In fact, if you take a closer look at the numbers in the report, you will see that part of the reason the unemployment rate has gone down is because there are fewer workers out there looking for a job – 351,000 in 2015, versus 356,200 in 2012. (The Ontario Chamber didn’t have comparative data for 2007-08).
Key data is absent
Now, let’s take a look at those all-important household income numbers, and see how much income residents of the London Economic Region have versus prior to the recession, when adjusted for inflation.
Looking . . . looking . . .
They’re not to be found. With all the economic indicators tracked, household income is a no-show, never mind a comparison that takes into account the impact of inflation on household budgets.
But how we can we measure “economic recovery,” or lack thereof, if we don’t have a firm handle on the impact on the pocketbook of the taxpayer?
I’m sure these numbers are out there, somewhere, but if they can’t be found with an hour of hard web crawling, I have my doubts they rate highly in the thought processes of politicians as we drive toward election day next month.
Which means we must ask the question: What’s really happening behind any high-level declines in the unemployment rate that suggest an economic recovery in Canada’s own rust belt?
If Canada’s sky-high consumer debt levels and reliance on cheap credit are any indication, Canadians in St. Thomas and other towns and small cities hit by the decline of our manufacturing sector are still stuck in a hole.
As I wrote back in August, that means municipalities with new spending needs remain stuck in a tight spot. Their residents may not be able to pay their current taxes, let alone more, and with some communities showing overall population decline, local government sees a steady erosion in its tax base, but won’t necessarily see a drop in the town’s operating costs.
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