Monday, October 6, 2014

Say goodbye to the "employee's market"

The 'employee's market' was perhaps one of the last saving graces of the middle class and workers in general. It was always inevitable that when wages stagnated allowing businesses to expand that eventually the labour market would have to balance out. Eventually demand for employment would outpace the availability of workers and in this event worker's were then given the upper hand. Expanding businesses and the resulting currency creation meant inflation would rise and inflation rising and the availability of jobs meant workers had the upper hand in negotiating their pay. Sooner or later any business that wanted to retain good labour was forced into a position where they would have to up the ante and the cycle would repeat.

But now - in what may be one of the final breaking points between crony capitalism and outright feudalism and usury - the government is working to ensure that the labour market remains an "employer's market", perpetually, forever and who better to examine as an example than Alberta's newest industry insider masquerading as a public servant, Jim Prentice.

So a few weeks ago Norwegian oil company Statoil called off one of it's Canadian startups for three years citing:
Statoil said it decided to delay construction because inflation was pushing up the cost of labor and materials, while tight pipeline space to the U.S. market was pushing down the price of its oil.  
"Costs for labor and materials have continued to rise in recent years and are working against the economics of new projects," Staale Tungesvik, Statoil's country manager for Canada, said in a statement. "Market access issues also play a role, including limited pipeline access, which weighs on prices for Alberta oil, squeezing margins and making it difficult for sustainable financial returns."
 Inflation? Hmm. Yet the governments and central banks all around the world have been insisting that "inflation is weak". Perhaps not *that* weak, it would seem. Take note of the problem here, it's not "market access" as Alberta has been claiming, these problems do not exist because of limited market access and up until recently limited market access hasn't been an issue. Market access was never a problem or was never even mentioned during the era of the "Alberta Advantage". No, market access is actually being promoted as a supposed solution for a different problem: Rising inflation which is pushing up material costs, labour costs, and isn't seeing a similar rise in the price of oil. That is the real problem here and the hope (and I can't stress that enough, that it is a hope without any data provided to prove that the claim is true) is that increased market access will increase the price Alberta receives for bitumen (which is not oil). Also take note Alberta was warned about this situation of increasing costs years ago and I've been warning about it longer.

When it comes to oilsands, and the economy in general which by the way is still on central banker life support with cheap currency pushing up inflation even more, this all derives from the real problem were facing as a society: energy is a fuck load more expensive than it used to be. Ok? Like, so many tons of fuck it's nearly unquantifiable especially in an economic environment which has not adjusted to nor has accounted for higher energy prices, and continues to bury it's head in the sand thinking if we just print a little more currency everything will be like it was when energy was cheap, it won't! We've gone from what used to be well over a 100:1 energy invested on energy returned ratio to what is now regularly around 5:1 (3:1 for oilsands surface mining, yippee!)

So, back to this Statoil thing.. Jim Prentice is very concerned.
"Underlying the kinds of capital investment that are being made in the oilsands is the needed assurance that we can access global prices," said Prentice. "If we cannot and people do not have a line of sight on infrastructure and tidewater access, it's going to start to affect our prosperity as a province."

Last year, Statoil president Stale Tungesvik said the company
might have to choose between developing projects in the Alberta oilsands and the offshore sites near Newfoundland due to the industry's rising cost.

The costs of oilsands projects are rising because of construction and labour costs, while the price of oil is
20 per cent lower than it was six months ago, making large investments less viable.
See what he did there? He didn't address the problem at all in his solution did he? remember back when oil was $40 / barrel and Alberta upped it's target price to $70? Then when we finally hit $70 it just wasn't enough either so the target was pushed up to $90? and so on? Alberta has always had this problem of the cost of production approaching returns and when that happens alberta always has a new excuse ready to go. When the price of oil still had upwards mobility that was a lot easier to accomplish, but now that it doesn't "access to global prices" has become the new tune. So when the cost of production due to ever rising inflation then approaches "global prices" what will be the next excuse? We need access to Martian markets? Universal prices? No, probably not.. Alberta's public relations is shitty, but not that shitty, but rest assured there will be a new excuse why the province's prosperity on the end of the stick keeps moving further and further away.

However, Prentice may be concerned, but he's also very excited for Alberta's "red hot economy" (you know, red hot as in project shutdowns are becoming a regular thing as the Alberta government was warned they would be).
Alberta Premier Jim Prentice says time is becoming a critical factor in solving the temporary foreign worker shortage, but he dismissed criticism that an exploitative province is to blame.

“I’ve never agreed with the suggestion that really this is about Alberta business people trying to underpay. That is not my experience. That’s not what I’ve heard. That’s not what I’ve seen,” Prentice said in an interview.

“To be sure, there are always going to be people taking advantage of any government program.

“But by and large the employers I’ve met across Alberta just want hands and feet. They just want people to fulfil these jobs.

“They’re quite prepared in most of the cases I’ve seen to pay a premium to get people here. They just can’t find people given the red hot economy.”

Prentice plans soon to meet with Prime Minister Stephen Harper to discuss, among other issues, the temporary foreign worker changes that he says have hit Alberta’s roaring economy hard.
So on one hand you have Prentice concerned about project shutdowns that are directly related to "the rising cost of labour" and on the other you have Prentice claiming that Alberta's need for TFWs has nothing to do with employer's wanting to "underpay" employees, in fact they're willing to pay a premium! Bullshit. Companies are laying people off left, right, and center. Projects are shutting down one after the other. And all of them.. ALL OF THEM, cite rising labour costs as the reason which is the same reason provided to the Albertan government in the confidential memo back in 2012 that warned that projects would be shutting down due to inflation and the rising costs of labour. Hmm.

If the demand for labour is so high, then what the government is citing as a problem is the fact that the labour market is an "employee's market" and not an "employer's market", but why is this a problem? It's a problem because "growth" or what we now like to claim is growth has been completely financed by cheap loans and free currency to the top 1% but real consumer spending isn't moving. That's why the price of oil just can't manage to breach $110 / barrel and why when the market tries to "growth stalls" and the cycle repeats. We have ever increasing amounts of currency representing the same or perhaps even less wealth. You can cut a pie into 2 pieces, or 100 pieces, but at the end of the day you still have just 1 pie.

The government's focus on the "need" for temporary foreign workers is to perpetually tilt the market in favour of the employer's filling their pockets. An "employee's market" no more, and the changes to employment insurance and the government's "any job is a good job" attitude reflect that. This is deliberate, and orchestrated in an attempt to permanently stagnate the wages of Canadians to continue the status-quo and the illusion of growth. Sure, you might not believe me, but what I ask you is: can you really afford to find out?

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for CenturyLink

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

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