High Dollar Sings The Blues For Auto Workers

Aug 14, 2012
Essential Research

What do auto workers in Canada and Australia have in common? A high dollar spells bad news for jobs—and, absent government action, is another dagger in the struggle to maintain a middle-class living.

Let’s start with Canada, where auto workers are locked in difficult contract negotiations. The main reason? The stronger Canadian dollar:

But the dollar’s high value, which most economists anticipate will continue, has more than obliterated the traditional cost advantage Canadian auto plants once enjoyed. In 2009, when contracts were renegotiated after the rescue of General Motors and Chrysler, the Canadian dollar was worth about 78 American cents. Last week, it traded briefly at just over $1.

Regardless of the outcome of those talks, the strong currency, and higher wages for Canadian workers, seem likely to continue the shrinking of the Canadian auto industry since its peak in 1999. The underlying issue is how much that decline will continue.

It’s a similar story with the Australian auto industry. The high Australian dollar, driven largely by the resource industry bubble, has eaten away at the Australian auto industry’s sales. But, the answer to that does not have to be surrender. It requires as Paul Bastian, national secretary of the Australian Manufacturing Workers Union, pointed out not to long ago, a national strategy of co-investment and a local purchasing strategy:

Co-Investment in the car industry provides supply-side support – but to properly realise the benefits of the Australian car industry we need to do more on the demand side.

In short, the co-investment scheme must be backed by a plan to buy Australian.

Over the next twenty years federal, state and local governments will purchase around 1.5 million cars. It’s obvious that these cars should all come from Australia – but that’s not the reality.

The bottom line is a question of values that go beyond the price of a dollar and brings one right to the doorstep of the government. Governments can do a lot to bring down the price of its currency. But, absent that willingness, governments can make it a national priority to make sure that industries providing good-paying jobs continue to thrive—no matter what the agenda of lower-wage seeking corporations might be.


@jonathantasini

Sign up for updates

Receive the Essential Report in your inbox.
  • This field is for validation purposes and should be left unchanged.

3Q: This week's episodes

» More Vision