By on November 14, 2013

Canadian Autoworker

The land of Canadian Tire, Tim Hortons and Michelle Creber has yet another thing going for it: Their auto workers have a cost advantage over their two-tiered brothers and sisters down south according to a study from Toronto, Ontario-based Scotiabank.

In the report, Scotiabank chief economist Carlos Gomes explains that, as a result of the recent Unifor contract, new hires to Canadian assembly plants are more cost effective than those brought on board in United States-based facilities. The price tag? $37 for a U.S. new hire versus around $30 (in USD) for a Canadian new hire.

Furthermore, while someone screwing together a Camaro will reach parity with older workers in 10 years’ time, a new hire building Escapes will remain below senior workers for the entirety of their career. A weaker Canadian dollar, pegged at 96 cents USD as of this writing, also adds to the Great White North’s competitive streak.

With the threat of overcapacity and bottlenecks looming over the North American auto industry, along with increased demand from global markets, automakers are looking at what they can do to keep the machine running. For Ford, it means a $700 million investment in the retooling of its Oakville plant to build crossovers for export markets, while for General Motors, it means delaying the shutdown of their Oshawa plant until sometime in 2016. And of course, according to Gomes, Canada can begin to diversify its automotive exports beyond the NAFTA zone, a result of signing a free trade agreement with the European Union.

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31 Comments on “Canadian Auto Workers More Cost Effective Than U.S. Workers, Study Says...”


  • avatar
    Wacko

    but I thought ford and GM where saying that it costs more in canada??

  • avatar
    skor

    Auto plants in Kommie Kanuckistan are more efficient than in the land of freedom fries? Blog Lim-bots to blow gaskets in 7,6,5,4,3….

  • avatar
    FunctionOfX

    It’s only cost effective ‘if’ you are able to hire those new workers. Oakville oldtimers will hang on until they get a buyout.

    The Loonie is the main thing here….the rest is generally propaganda.

    • 0 avatar
      18726543

      Judging by your avatar and screen name I’m sort of surprised you didn’t phrase that statement “It’s only cost effective ‘if and only if’… …”

      Engineering math classes are still haunting my dreams 3 years later.

      • 0 avatar
        FunctionOfX

        It’s all about the inputs to get the desired output….in these Unifor vs. UAW vs. Non-union fluff pieces, they all manipulate the inputs for THEIR desired output.

        The Canadian plants may be more cost effective if you take into account the value of returning the empty beer cans in the parking lot. This may be true in the US also, but not sure about each states deposit structure?

        It’s just math.

  • avatar
    mcarr

    So, a Canadian study says Canadian auto plants good.

    Move along, nothing to see here.

  • avatar
    Talegator

    Wages are just the icing on the cake. The real meat is how much of your hard earned tax dollars your politicians willing to give automakers to build in your backyard. At one time they had to build where they sell, now you have to pay them!

  • avatar
    billfrombuckhead

    What about the savings from Canadian healthcare system?

    • 0 avatar
      PrincipalDan

      Ohhhhhhhhhhhhh burrrrrrrrrrrnnnnnnnnnnnnnnnnn!

      Ever since attaining the age of work (roughly 15 to 20 years ago) I was troubled by being the only industrialized democracy without a universal system.

    • 0 avatar
      stryker1

      +1
      I could see a bump in productivity since:
      1) The company doesn’t have to provide health insurance.
      2) Robust social safety nets provide peace of mind, and so morale is better.

      Just a thought.

    • 0 avatar
      racer-esq.

      Healthcare being tied to work puts a massive drag on the US economy.

      Especially on startups.

      Morons believe that environmental regulations are a burden on startups and entrepreneurs. That is idiotic. This is an educated, professional country, not China. Nobody is not starting a company because they cannot dump benzene in a river.

      A lot of people are not starting companies because they cannot afford to provide the health coverage required to attract talented workers.

      • 0 avatar
        Lorenzo

        Start-ups almost never offer a full boat of health benefits, or high salaries for that matter. That comes later when it’s a success. There are fewer start-ups due to the costly, multi-step permit process and regulations with their massive associated paperwork. The latter is accompanied by an army of regulators applying rules and regulations on the fly, without oversight by anybody. Those applied rules can be incredibly petty, costly, and time consuming, with little or no real effect on protecting the public.

        • 0 avatar
          racer-esq.

          Cite one.

          Actually I will give you one, but it is a regulation that conservative, chamber of commerce member corporations lobby FOR to protect their business interests, and it only affects people trying to start up breweries, wineries or distilleries: Three tier liquor distribution – the burdensome requirement that alcohol producers sell to approved, politically connected distributors, instead of directly to stores and restaurants.

          Now cite another.

          For an American startup the founders living without health insurance, and asking employees, who, as you point out, are likely already being asked to accept low starting wages, to live without health insurance, is a HUGE barrier to entry.

        • 0 avatar
          ect

          I have worked for tech start-ups in both the US and Canada – typicaly, as CFO/CAO, so whatever regulatory burden was there was my responsibility. For small companies, the notion that there is a “costly, multi-step permit process and regulations with their massive associated paperwork” in either country is a myth.

          The structure (and very high cost) of the US health care system discourages people from leaving wage slave jobs with health insurance, to become entrepreneurs without health insurance. I have known people who took or stayed in jobs they didn’t want, simply to be able to provide health care access to their family.

          This doesn’t apply in Canada, because everyone has health insurance, funded throught the tax system and searate from employment. Companies and individuals may buy supplemeantary coverage, but the cost is a fraction of what US companies pay.

    • 0 avatar
      ect

      “What about the savings from Canadian healthcare system?” Significant. Very significant.

      When family coverage costs an US employer over $1500 per employee per month, that’s a very heavy tax on the business.

      In Ontario, by contrast, businesses pay an Employer Health Tax on a graduated scale that tops out at 1.95% of payroll. Businesses with payrolls below $450,000 are exempt.

      Also, corporate income tax rates (combined federal/provincial) in Ontario max out at 25.5%, vs 35% federal (to which “net” state tax has to be added) in the US.

      For small private businesses in Ontario, the first $500,000 of profit is taxed at 15.5%. A US corporation pays federal tax of 34% on $500,000 of profit, plus state tax.

  • avatar
    racer-esq.

    Comparing the cost of a UAW worker to a UNIFOR worker is legitimate for Ford, GM and Chrysler, since those companies are stuck with UAW contracts.

    But it is not an accurate reflection of the cost to build a car in the US vs. Canada.

    The US has a number of right-to-work states, including Michigan now, where automakers are relatively safe from unionization, and the work rules and restrictions on lay offs that come with it.

    In addition, the non-union right-to-work manufacturers in the US use 401(k) programs instead of being burdened with pensions.

    The worst cost for any unionized automaker isn’t what it has to pay workers that are working, it is what it has to pay workers that are not.

  • avatar
    Conslaw

    Moral of the story: never underestimate the power of doughnuts and backbacon.

  • avatar
    Lou_BC

    Scotiabank funded this study…. why?
    A bank that wants to loan money to businesses is going to have a harder time doing that if there is a belief that Canada is not a good place to do business.

    One could factor in healthcare and even pensions as being “public” will lower costs but private companies and public agencies fund plans through organizations like BlueCross for medical and dental.

    I do get the impression that the Unifor contract was less generous than the UAW contracts. GMC/Ford/Fiat et al are going to say that Canada is a more expensive place to do business since they want to pressure the Canadian and Ontario governments for concessions. They also want to pressure unions for concessions.

    If Ford is investing in Canada, it probably has more to do with the recent FTA which will allow Canadian content vehicles to go to the EU duty free. I get the impression that if they are investing based on that premise, they must feel that the USA will balk at an EU FTA. Ford could end run USA tariffs by importing into Canada under the FTA and do final assembly to qualify for NAFTA importation into USA.

    • 0 avatar
      blowfish

      is very right it depends on who does the report.
      if u get a report from tobacco growers assoc on health topic, they would probably say smoking reduces stress and thats the biggest killer of them all.
      the big 3 will never admit canuckstan is a cheaper place to build cars, as the UAW will use it as an excuse to crank up the wage negotiations on the next round of wages talk.
      then again the local govt will throw in all kinds of incentives as more work to make the place boom and more taxes.

    • 0 avatar
      Dimwit

      All of our big banks own investment arms as well. They are always running studies and economic analysis of one sort or another. Pretty respectable. Some of the more controversial ones have gone on and made government policy.

  • avatar
    CGHill

    I admit here to being something of a fan of Scotiabank, not only for its curious history — as the name implies, it was originally the Bank of Nova Scotia, though the main office was relocated to Toronto at the turn of the century, and not this century either — but for the fact that they do pretty darn good customer service over Twitter.

    I also admit to being a fan of Michelle Creber, a justly-famed Canadian voice actress and singer, whom TTAC author Cameron Miquelon actually interviewed not so long ago. (This is why you should always read the byline, when there’s one beyond “TTAC Staff”.)

  • avatar
    Freddie

    Sorry, but I have to ask…
    Is Canada even a real country? Looks big on the map but most of the population snuggles against the US border, including the auto plants which are within spiting distance of Detroit. Even with metric road signs and a French speaking region, nothing about Canada – especially the Mayor of Toronto – seems particularly “foreign”. Hey, don’t get mad. Some of my favorite cars have had a VIN that starts with “2″.

    • 0 avatar
      Big Al from Oz

      @Freddie
      You can blame the European’s for that. Most maps are done in Mercator’s Projection.

      The Europeans’ preferred this projection because it made Europe appear larger than it really was.

      As you would know the further north (or south) of the Equator you position yourself on a Mercator’s Projected map the scale become larger.

    • 0 avatar
      Sooke

      No offense, but the reason we snuggle up against the border is weather. The further north you go, the colder it gets.

  • avatar
    Lou_BC

    @Freddie – are you a troll or just a complete idiot or both?

    If you spend any time in either country you will see similarities and will pick up on differences.
    Each country has a different history. why don’t you start there.

    • 0 avatar
      Big Al from Oz

      @Lou
      I think he’s confusing some of the cultural aspects or a ‘Western Society’ with that of the US.

      History? What’s that is it significant?:) As some would point out.


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