It's springtime in Alberta, and signs of the new season are everywhere. Birds are flocking back, the ice is out of the river, and down at the Legislature, the government has unveiled Budget 2009, Building on Our Strength. Like most Alberta budgets, this one is as much about show business as it is about provincial finances.
The May 2007 issue of Labour Economic Monitor compared a booming economy to a party, where some of the guests have a bit too much to drink and get carried away. Well, the party is over, and it's time to clean up the mess. The crash of financial markets in 2008 pushed the whole global economy into recession, and no one knows how deep or how long this downturn will be.
These are odd times in Alberta. With oil prices on the spot market topping $130/barrel and natural gas prices on the uptrend, you'd expect the public mood to be giddy with delight. ... So why aren't Albertans swinging from the chandeliers, and ordering up more champagne? Well, there's an old Leonard Cohen song called "Everybody Knows" that talks about the unpleasant realities that everyone is familiar with, but that nobody wants to talk about.
These are turbulent times in the economic world, and tumbling stock markets are just a symptom of a much greater malaise. The so-called "sub-prime mortgage crisis" (which actually has more to do with the proliferation of financial derivatives than with a few bad mortgages) remains a threat to financial institutions around the world, and no one knows exactly how large the problem is, or where the risks lie. Derivatives and similar financial instruments do two things very well: they transfer risk and they can create leverage, spinning large amounts of paper wealth based on a relatively modest foundation of real assets. When they are abused, and in a deregulated financial system they are bound to be abused, this means that instruments initially designed to reduce financial risk by allowing "hedging," instead end up multiplying risk and generating economic volatility.
As the economic boom in Alberta reached its crest over the last two years, employers and the business media alerted the public to a new problem: the "labour shortage". At first this was described as a shortage of skilled labour, especially in the construction and health care sectors. Very quickly, however, the "hospitality sector" was identified as another area of the economy starved for labour.
Inflation Alert: Inflation in Alberta is seriously out of control. In June the Consumer Price Index for Alberta was 6.3% higher than one year ago. See the data and analysis starting on page 6.
In fact, the 2007 Budget demonstrates clearly that the government has no idea of how to proceed. The basic economic strategy remains unchanged: sell off as many of the province's resources as you can as fast as you can, and use the cash you receive to lower taxes. In the long run this will leave the province with depleted resources, underfunded public services, and an inadequate tax base, but that's a long way down the road. In the mean time let's all have another drink, and put some Beach Boys songs on the karaoke.
After over a decade of almost uninterrupted growth, Alberta is now entering the fifth year of an economic boom. Despite the mismanagement of the Klein government, which ran the province without any real economic plan, despite the ludicrously royalty rates and the obsession with tax cutting, our economy continues to churn out jobs.
The general picture of the Alberta economy is very positive: sources from the business press to Statistics Canada are celebrating the boom, and the data seem to bear them out. On the other hand, there are some serious questions about how much benefit average working Albertans are actually reaping from all this activity. Wages do not seem to be growing as fast as they should be, and inflation is eating up what gains workers do make.
So are we all getting rich? Apparently not. The story seems to be: huge profits for the corporate sector, and longer hours of work for employees. There's something wrong with this picture, and we will try to figure out what it is in the next edition of Labour Economic Monitor.
The following report is intended to give trade unionists reliable, current information on the provincial economy. The data is drawn from government sources, including Statistics Canada, the Government of Alberta, and the US Government (Energy Information Administration. Our current plans are to update it four times a year. The AFL hopes that this information will be of assistance to unions in the province. From time to time we will focus on issues of special interest to unions, such as income and earnings trends.