Business·Analysis

GM cuts will be painful, but better now than during a recession: Don Pittis

Autoworkers are no longer "nut tighteners," and while losing a job is always painful it would be worse in a recession. Now many skilled technicians and white collar workers will be well placed to find jobs.

While lives will be disrupted, experts say there's demand for GM's skilled workers

Two workers embrace before their meeting on Monday. (Eduardo Lima/Canadian Press)

"It could have been worse" will be of no comfort to those affected by the shutdown and job losses at General Motors. It has been a shock to affected families and to the communities where plants are closing.

"It's going to affect the province, it's going to affect the region," said Oshawa, Ont., mayor John Henry after hearing that the historic Ontario GM plant that his community has hosted and supported for more than a century will be closing. Thousands of workers will be laid off. 

"If you look out the window right now and look at the weather, that's the mood in the city of Oshawa," Henry told CBC Toronto radio host Matt Galloway on an overcast Monday, shortly before GM's official announcement. 

Silver lining

Despite the devastating impact on individual lives, the stormy grey clouds may have a silver lining. For the economy as a whole, the GM layoffs both in Canada and the U.S. could hardly have come at a better time.

For employees who are able and willing to move, experts in worker compensation said many people who are losing their jobs will be able to command good wages in an economy where many skills are in short supply.

"Canadian employers are indicating that labour shortages are becoming a growing issue," said Brendon Bernard, economist at online job search company Indeed Canada.

Oshawa's economy will suffer. But GM employees who can move will have better job prospects now than they would during a widespread economic downturn. (Carlos Osorio/Reuters)
 

While the automotive sector has been shrinking in Ontario over the last decade, and there will inevitably be damaging spillover effects on an already weakened regional economy, there is still strong demand for skilled manufacturing workers, especially in Quebec and British Columbia.

While previous layoffs have come in waves during recessions, General Motors has made their move not at the bottom of an economic cycle but near the top. And that will make a big difference.

"Recessions are an especially bad time to lose a job," said Bernard. Right now, unemployment remains at multi-year lows and the number of available skilled workers is actually shrinking.

"In both Canada and the U.S., the share of population reaching retirement age is rising," he said.

Too cheery?

While GM's news release may have been too cheery considering the lives of their employees at stake, there is no question that initiating changes now makes the best of something that could have been much worse.

"We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success," said GM CEO Mary Barra.

Following Western Canada's energy boom, a high loonie turned parts of Ontario's traditional industrial heartland into a rust belt as plants closed down leaving workers in the lurch. (CBC)

Making such changes can be dangerous for a company. But continuing to do the same thing in an effort to preserve existing jobs has also proven dangerous, as happened in the U.K. when a failure to modernize led to the domestic auto industry's downfall.

The theory of creative destruction insists that a strong economy must always be in turmoil, with vigorous companies stealing the workforce of those that are weakening.

One example comes from the early days of the Ottawa-based online retailer Shopify, when the company, hungry for experienced talent, brazenly scooped laid-off employees right off the front lawn of IBM's Ottawa headquarters, Shopify founder and CEO Tobi Lutke recalled in a 2013 interview.

"Why don't we get some people out to the [IBM] office and put a recruiting booth out," he remembers saying.

That's exactly what they did, and when they were chased off the property by IBM, "luckily there was a government owned sidewalk nearby," said Lutke.

Facing competition

In fact, with the increasing computerization of cars, the GM transition is part of a continuing move from metal bashing to something closer to what Shopify and IBM do, said Katie Bardaro, chief economist at PayScale, a company that monitors wages in the U.S. and Canada.

Based in Seattle, hometown of Amazon and Microsoft, she knows that GM in its quest to create automated and electric powered vehicles will be competing for expensive software and engineering talent.

But she said laid-off workers also have good prospects in the current tight labour market. While Canada's unionized automotive employees are well paid, they are not your grandmother's kind of automotive factory worker. Instead, she said, they are skilled in such things as safety compliance, electronics and the management of computerized machinery.

A display screen of onboard sensors in a Google self-driving vehicle. The most expensive part of auto manufacturing now is technology and software. (Stephen Lam/Reuters)

"There are a large number of skills that are far above nut tightening," said Bardaro.

The current economy is also hungry for experienced white collar workers with a wide range of back office experience including lower level managers, accountants, and engineers who can transfer their skills to other businesses, she said.

"Research has shown that for certain jobs, you actually see a bigger pay increase if you leave your job and move to another job, regardless of whether you left from your choice or you were laid off."

That's small consolation for workers now contemplating the uncertainty of losing well-paying jobs they thought were nowhere near an end point. But it's better than if the news had come a few years from now when the job market isn't so strong. 

Follow Don on Twitter @don_pittis

About the Author

Don Pittis

Business columnist

Don Pittis was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London. He is currently senior producer at CBC's business unit.

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