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Labour as a Competitive Advantage in the Canadian Automotive Parts Industry:

A study of Canada and Four Local Labour Markets (Brantford, Stratford, Guelph, Windsor)

Charlotte A.B. Yates and Sam Vrankulj Labour Studies Programme

McMaster University July 2006

Please do not cite without permission of the authors. This project was made possible as a result of funding from Auto 21, a Network of Centres of Excellence grant.

Revised October 31, 2006

Labour as a Competitive Advantage in the Canadian Auto Parts Industry i Yates and Vrankulj July 2006

Table of Contents

Introduction ..........................................................................................................1 Overview ..........................................................................................................2

The Automotive Industry in Historical Context .................................................4 “Shifting Gears”in a new decade..........................................................................6 Statistical Profile of Canada’s Auto Industry .....................................................8 Figure 1: Auto Industry Employment .....................................................8 Figure 2: Employment Distribution .........................................................9 Figure 3: Average Annual Income .........................................................10 Government Policy...............................................................................................11 Why Study Local Communities......................................................................................13 Municipal Government .......................................................................................14 Labour Force ........................................................................................................14 Institutional Capacity ..........................................................................................14 Community Profiles Brantford ........................................................................................................16 Insert 1: Brantford’s Major Employers ................................................18 Stratford ........................................................................................................20 Insert 2: Stratford’s Major Employers..................................................21 Guelph ........................................................................................................22 Insert 3: Guelph’s Major Employers .....................................................24 Windsor ........................................................................................................26 Insert 4: Windsor’s Major Employers...................................................27 Conclusion ........................................................................................................29 Tables Table 1 Selected Community Labour Force Statistics ...........................33 Table 2 Auto Parts Labour Force by Community by Census Period ...........................................................................................33 Table 3 Annual Average Income in Motor Vehicle Parts and

Accessories, Total Manufacturing Industries, and Total Provincial Labour Force, 2000 ...................................................34

Table 4 Hours of Work and Annual Weeks Worked in Auto Parts Industry by Community, 2001..........................................35 Table 5 Women as a Percentage of Auto Parts Workers by

Community and Census Period ..................................................36 Table 6 Immigrant Labour Force by Community and Length

of Residency, 2001........................................................................37 Table 7 Highest Level of Schooling as a Percentage of Auto Parts

Labour Force by Community and Census Period ....................38 Bibliography ........................................................................................................39 Web Sources ........................................................................................................40

Labour as a Competitive Advantage in the Canadian Auto Parts Industry ii Yates and Vrankulj July 2006

Figures Figure 1 Automotive Industry Employment in Motor Vehicle Assembly, and Automotive

Parts and Accessories, 1993-2003 p.8 Figure 2 Employment Distribution 1993-2003, p.9 Figure 3 Average Annual Income in Motor Vehicle Assembly, Automotive Parts and

Accessories, and Manufacturing, 1993-2003, p.10 Inserts Insert 1 Brantford’s Major Employers, p.18 Insert 2 Stratford’s Major Employers, p.21 Insert 3 Guelph’s Major Employers, p.24 Insert 4 Windsor’s Major Employers, p.27 Tables Table 1 Selected Community Labour Force Statistics, p.33 Table 2 Auto Parts Labour Force by Community by Census Period p.33 Table 3 Annual Average Income in Motor Vehicle Parts and Accessories, Total

Manufacturing Industries, and Total Provincial Labour Force, 2000, p.34 Table 4 Hours of Work and Annual Weeks Worked in Auto Parts Industry by Community,

2001, p.35 Table 5 Women as a Percentage of Auto Parts Workers by Community and Census Period,

p.36 Table 6 Immigrant Labour Force by Community and Length of Residency, 2001, p.37 Table 7 Highest Level of Schooling as a Percentage of Auto Parts Labour Force by

Community and Census Period, p.38

Labour as a Competitive Advantage in the Canadian Auto Parts Industry 1 Yates and Vrankulj July 2006

Introduction

In the spring of 2006, the automotive industry in Canada received a major boost as Toyota, Honda and Linamar corporations announced the investment of billions of dollars in Ontario. Toyota picked Woodstock, Ontario as the site for its new automotive assembly and parts plant. Linamar Corporation, Canada’s second largest auto parts maker, announced the investment of $1.1 billion to open new manufacturing facilities as well as a technology centre while Honda announced the construction of an engine plant close to its assembly facilities in Alliston Ontario. In all three cases, these corporations cited the labour force as pivotal in their decision to invest in Ontario rather than other locations, in particular the United States. These announcements came at the very moment when business and industry pundits were predicting significant erosion of Ontario’s manufacturing capacity, including the automotive industry. In October 2005, Delphi Corporation, America’s largest auto parts producer, had demanded significant wage and benefit rollbacks from its workforce in its efforts to remain competitive. This was followed in early 2006 with announcements by both Ford and General Motors of plant closures and production cutbacks across North America, including Oshawa, St. Catharines and St. Thomas. The result was an anticipated loss of approximately 5000 jobs (CBC, 2005). With the rise of the Canadian dollar to over 90 cents (US) and announcements of steady job losses in the manufacturing sector, the decline of the manufacturing sector in Canada seemed assured. Yet, as a result of particularities of the Canadian labour force, the automotive industry in Canada proved the pundits wrong with the announcements of new investment and expanded productive capacity. What is it about the labour force in Ontario that attracts such investment? Can this competitive advantage be sustained in the future, and if so, how? Given that the automotive industry is the lifeblood of many communities and thousands of working families, as well as a lynch pin in the Ontario economy, answers to these questions are critically important. In turn, such answers require sustained analysis of the labour force and labour markets as they affect the automotive industry. This report, which focuses its analysis on the labour force and labour market of the automotive parts industry in Canada and four local communities offers an important starting point for answering some of these questions. The key research questions that we seek to answer in this report are:

• What characteristics of the workforce and labour market make Canada such an attractive location for automotive production? How does the labour force contribute to the current and future competitiveness of the Canadian automotive industry? How can Canada sustain this competitive advantage?

• What is the impact and importance of the auto parts industry for employment and

income in Canada and local communities?


• How have changes in the automotive industry impacted on labour markets, and what institutions, if any, shape the particular labour market dynamics of different communities?

• What are the labour market challenges currently facing the auto parts industry and

local communities that are dependent on auto parts employment?

Overview Jobs and, hence, the labour market, are critical to the economic wealth and sustainability of local economies. The type of work, number of jobs, availability of labour supply, wages and benefits paid to workers and the level and type of investment in communities give shape to the type of communities in which we live and the future of individuals, their families and the business community. In turn, relative labour costs, the availability of and capacity to train suitably skilled workers as well as the organization of work impact on the competitiveness and hence viability of an economy, whether local or national. The automotive industry has long been a major producer of jobs in Canada, and therefore a mainstay of the Canadian as well as the Ontario and many local economies. Today, the automotive manufacturing industry continues to be a major employer, employing directly more than 170,000 persons as well as indirectly an estimated 505,000 more. Yet over the last 20 years or so, the industry has restructured in response to rising global competition, the adoption of new technologies and the changing policy and political environment. This restructuring has had considerable effects on the automotive labour market and labour force of today. Whereas the archetypical labour force from the late 1940s to the 1980s consisted largely of semi- and un-skilled men employed in large assembly operations, since the 1990s automotive employment in Canada has shifted from assembly to parts firms. More workers are employed currently in the production of parts than in the assembly of vehicles (See Figures 1 and 2). Consequently, workers are more likely to work in small non-union operations, owned by a mix of large multinational and small-locally owned firms many of which are relative newcomers to the Canadian automotive industrial complex. Wage levels across the industry are more disparate as are types of employment contract. Women are more evident in the ranks of the automotive employed, as are those who are ethnic or racial minorities. Yet, as this report will show, automotive employment continues to be better paid than other comparable work and is therefore sought after by local municipalities which engage in intense competition to lure automotive investment into their communities. With automotive investment and production in communities comes a broad-reaching transformation of local labour markets as the industry tends to skim the cream of the workforce. In some communities this also means drawing into the ranks of the automotive workforce a considerable proportion of newly arrived immigrants, often with high levels of education. The footprint of this industry on the Canadian landscape has therefore changed. The industry appears less and less as a single coherent industry and more as a stratified layering of multiple inter-dependent industries with widely divergent labour and production practices. If anything, the impact of the industry has spread across a wider range of communities. Whereas capital is relatively mobile, workers and their communities are not so mobile, seeking instead to bring work to them,


rather than having to move in search of work. For this reason, some communities may be winners as the automotive industry is restructured, whereas others may lose. Given the state of the restructured automotive industry, the assessment of the impact of industry change on working people and their communities as well as on the direction of future economic growth and Canada’s capacity for competitiveness requires that we pay attention to these changes. Whereas the bulk of existing studies of the Canadian automotive industry have tended to concentrate their analysis on vehicle assembly in Canada and/or Ontario, our report focuses its analysis on the auto parts industry, at the national as well as the local level, explored through an analysis of four local labour markets. There are two major advantages to focusing analysis on the local, as well as the national, levels of the automotive parts industry. Through such an approach, we gain a better appreciation of the diverse labour needs and expectations of those involved in the industry. Secondly, we can begin to identify the distinctive factors that lead some communities to specialize in lower wage, labour-intensive parts of the industry while others secure a place in the higher wage, more skilled sub-sectors of the industry. Understanding these dynamics has potential policy implications and also opens a discussion on the strategic means by which communities might push themselves from one path of development to another. Using time-series Census data, Statistics Canada data and information obtained from interviews with key stakeholders and documentary analysis, this report presents an analysis of changes to the labour market and automotive parts labour force between 1981 and 2001 in Canada. It offers both a macro and micro level of analysis, in an attempt to understand trends both in the national and community labour markets. To explore the latter, it presents detailed analysis of the impact and importance of this industry on four different communities. These four communities represent four different ‘types’ of labour markets, which allows us to tease out the differing impact that automotive investment has on different places. The four communities studied here are: Windsor, the heart of Canada’s automotive industry; Stratford, a small, rural industrial city that has relied economically on the automotive parts industry for the better part of forty years; Guelph, a new site for automotive investment; and Brantford, a brownfield site for automotive investment, that is a small city with a long industrial heritage but a more recent history of plant closures and deindustrialization following the shocks of the recession in 1980 to 1981. To answer our major research questions, the report begins with a brief historical overview of the Canadian automotive industry. This is followed by a more detailed analysis of the changing nature of the automotive industry in Canada since the early 1990s, paying particular attention to the differing development trajectories of the auto parts and assembly industries. This analysis is based on data available from Statistics Canada. This is followed by a comparative analysis of the changing labour market and labour forces in the four communities, situated within a context of manufacturing trends in Ontario, across four time periods. This discussion is based on a special run of Census data covering the 1981, 1991, 1996 and 2001 census surveys. The final section of the report draws on the preceding analysis to discuss the future challenges facing both the auto parts industry and the communities in which they have invested. We also discuss various policy options for securing the competitive future of the automotive industry in Canada.


The Automotive Industry in Historical Context Almost since its inception in the 1910s, the Canadian automotive industry was dominated by American multinational corporations that established branch plant operations in Canada. The Canadian automotive industry was export oriented and quickly became concentrated in southern Ontario, home to the largest segment of the Canadian consumer market and within reach of the American and overseas markets. Although WWII resulted in significant expansion of Canada’s productive capacity, it was the 1965 Auto Pact that marked a watershed in the history of the Canadian auto industry. The Auto Pact was the federal government’s response to automotive industry problems that emerged out of the recession of the late 1950s. Between 1957 and 1960, imports as a percentage of new car sales in Canada rose from 13% to 28%. The loss of market share meant cuts in production, the bankruptcy of many small parts producers and the layoff of approximately 20% of the total automotive workforce (Yates, 1993, pp.93-95). Beyond the devastating immediate effects of this crisis on the industry, workers and their communities, these events revealed some deep-seated problems plaguing the Canadian automotive industry. These included high costs of production, and hence high consumer costs, associated, in part, with short production runs of several vehicle models by multiple companies producing for a small consumer market. The solution to these problems came in the Canadian government’s successful push for a managed free trade agreement with the United States, called the Auto Pact. This bilateral agreement, combined with attached letters of understanding from the vehicle manufacturers to the Canadian government, laid out conditions under which freer trade between the two countries could be established in the automotive sector. In effect, automakers committed to certain levels of investment and specified levels of Canadian content in exchange for tariff free movement of parts and vehicles (Molot, 1993). This bilateral trade agreement had an immediate effect on the industry, encouraging cross border rationalization to reduce duplication and increase efficiency through specialization and the achievement of greater economies of scale. Between 1965 and 1970, Canada’s vehicle exports rose (Yates, 1993b), as did labour productivity and industry employment (Yates, 1993a, pp.119-20). The Auto Pact altered the profile of the Canadian automotive industry. Although Canada had never had a high proportion of research and development or national managerial control, the Auto Pact encouraged further concentration of these activities in the United States. Canada’s share of skilled labour fell. Foreign ownership in the parts sector increased dramatically as companies adjusted to the Auto Pact by making more parts in-house. Yet, overall Canada fared well from the Auto Pact. Companies consistently exceeded their minimum commitment to investment and Canadian content, and direct automotive industry employment rose significantly (Yates, 1993b; MacDonald, 1980). A hallmark feature of postwar automotive industrial development in Canada was the high level of unionization in the industry and the innovations achieved through labour-management negotiations. Canadian autoworkers negotiated some of the best industrial wages and benefits in the country, and were trendsetters in collective bargaining across the country, beginning with the 1948 collective agreement between GM and the UAW, often referred to as the Treaty of Detroit. Consequently, unions in the automotive industry had a significant impact on auto industry development, and ultimately national and local labour markets.


The economic bubble burst for the North American automotive industry in 1979 when Chrysler announced imminent bankruptcy. As Chrysler teetered on the brink of collapse, the Canadian and US economies plunged into recession. The North American auto industry suffered from heightened international competition, a weakened consumer market and a lack of responsiveness to changing consumer demand. Japanese imports captured between 25 and 30% of the Canadian and US domestic markets in the early 1980s, owing in large part to demand for small, energy efficient, high quality cars. North American automakers continued to manufacture large vehicles that were more expensive to buy, poor quality and guzzled gas at a time of high energy prices. Short-term North American corporate solutions to this crisis consisted of closing factories and demanding concessions from the union. Between 1978 and 1981, automotive employment in Canada dropped 12.6%. The centrality of the automotive industry to the Canadian and Ontario economies combined with mounting political pressure mobilized by the major automotive assemblers, the UAW-Canada and local communities led governments to scramble to restore industry fortunes. The Canadian government instituted import quotas on Japanese imports and in conjunction with the Ontario and Quebec governments, offered tax breaks and infrastructure improvements as incentives for new capital investments. In the wake of announcements that Japanese automakers intended to invest in North America, tariff reductions were offered to lure Japanese automotive investments to Canada. The fact that Canadian labour costs were considerably lower than those in the U.S. owing to the lower costs of benefits, especially health care, was an added attraction for new automotive investment in Canada. The success of these policies became clear once the economy began to rebound in 1984. In 1986, Honda announced its plans to invest $1.1 billion in an assembly plant in Alliston, Ontario; General Motors invested hundreds of millions to modernize its St. Catharines engine plant, the Oshawa Autoplex, and to build the new jointly owned CAMI assembly plant with Suzuki in Ingersoll in 1989; American Motors invested in a new facility in Brampton, that soon thereafter became a flagship Chrysler factory; Toyota invested the first in a subsequent round of investments to build its assembly plant in Cambridge, Ontario in 1988 (Yates, 1993b; Molot, 1993). The decade closed with Hyundai of Korea building an assembly plant in Bromont Quebec in 1989.

Investment by Asian automotive assembly operations brought with it subsequent waves of investment by automotive parts makers in their bid to supply components to Toyota, Honda, and Hyundai under conditions of just-in-time delivery and more tightly synchronized production. Capital expenditure in the Canadian automotive industry throughout the 1980s reflects a robust period of investment across both the assembly and parts segments. Between 1980 and 1989, the Motor Vehicle Assembly industry invested a total of almost 9 billion dollars in new and existing plants representing an average annual capital expenditure of over 890 million dollars per year. The bulk occurred in the period between 1986 and 1989 in which almost 7 billion dollars was invested, or 77% of the decade’s total. Capital expenditure in the automotive parts industry also grew considerably with a total infusion of approximately 4.7 billion dollars over the 1980 to 1989 period amounting to an annual average of 467 million dollars per year. Expanding Canadian owned firms capitalizing on emerging global markets for their products accounted for a significant proportion of this growth (Fitzgibbon et al, 2004). Vehicle output also increased significantly over the 1980s. Although total production decreased between 1980 and 1982, the industry rebounded with Canadian vehicle assemblers building over 16.5 million vehicles between 1980 and 1989. Canadian automotive plants assembled over 41% more cars in 1989 than they had in 1980, yet, employment


levels increased by only 24% over the same period. In contrast, employment in the automotive parts industry rose dramatically from approximately 52,000 to over 96,000 workers between 1980 and 1989. This represented an overall increase of over 85% in auto parts employment (See Figures 1 and 2). The relative distribution of automotive jobs continues to shift in favour of the parts industry at an accelerated pace (Industry Canada, 2004). The decade of the 1980s ended with significant expansion of the Canadian automotive industry amidst a booming Ontario economy. Yet a focus on aggregate economic statistics alone obscures from view the widespread restructuring that was taking place in the automotive industry throughout the 1980s. The automotive industry faced several challenges to which it needed to respond. Consumer buying patterns began to change, driven in part by changing consumer tastes and by the economic necessities associated with high energy and high borrowing costs. Automakers’ immediate solutions to these problems were cash incentives and low corporate-based interest rates. In the long-term, however, the Big Three North American automakers needed to enhance fuel efficiency, compete in the small car market and reduce the time from product and design innovation to vehicle production. Heightened competition internationally as well as from the newly established Japanese transplants in North America prevented companies from passing increased costs onto consumers and placed downward cost pressures onto automakers. The latter was met by reducing wage and benefit costs, increasing labour productivity through investment in technology and work reorganization and off-loading costs to other firms through contracting out. The latter engendered a massive reorganization of assembler-parts producer relations which had significant implications for the shape of automotive industry development in Canada in the 1990s. “Shifting Gears” in a new decade: the Canadian automotive industry in the 1990s Automotive assemblers, most notably General Motors, realized cost savings by shifting increased levels of production from in-house to independent automotive suppliers, a move that opened up markets for new independent automotive parts makers. The established business practice of building automatic price escalators into parts contracts was turned on its head, as assemblers began demanding annual price reductions if parts producers wanted to retain their contracts. Most auto parts producers met these downward cost pressures by squeezing more labour out of employees and exploiting industry volatility to leverage wage and benefit concessions from their workers. Others, such as Magna, adopted a more sophisticated and comprehensive strategy based on both technological and organizational innovation that was aimed at increasing productivity and profitability by capturing a greater share of the increasing auto industry demand for higher quality and lower priced auto parts. As Holmes and Anderson (1995), note, Magna’s strategy was multi-faceted and “predicated on a shift towards the production of high quality, higher-value added parts in highly efficient, non-union and relatively low-wage factories” (p.659). Assemblers across the industry demanded that auto parts producers deliver right-sized orders of specified parts to be incorporated into production ‘just-in-time’, a strategy that ultimately demanded greater planned integration of auto parts production with assembly. Just-in-time strategies also consolidated southern Ontario’s strategic advantage in the automotive industrial complex. Auto parts plants had to be situated within a day’s drive of assemblers that remained centred in the north-eastern USA in the 1980s. By the end of the 1990s, automotive assemblers began contracting out to


auto parts producers the design and assembly of entire vehicle modules. This further reduced the scope of work done in large assembly operations owned by the Big Three and placed new pressures on automotive parts producers to integrate more fully into the pre-engineering, design and component assembly facets of the automotive industry. This deeper integration of parts producers into the vehicle assembly process resulted in increased responsibility for parts makers to meet quality and cost targets established by vehicle manufacturers. The uneven spread of unionization through the industry has had a decisive impact on the restructuring strategies pursued by large automakers. Amongst the Big Three, where union density rates were about 95%, corporations had to negotiate changes to production and work reorganization. The result was a modification of corporate restructuring strategy. For example, the Canadian Autoworkers Union negotiated limits on the introduction of the team concept to automotive production in Canada in efforts to constrain corporate opportunities to reduce the workforce and increase output through “management-by-stress” (Parker and Slaughter, 1988; Rinehart, Huxley and Robertson, 1997; Pil and MacDuffie, 1996). At the same time, the growth in production of independent auto parts producers combined with the opening of Honda and Toyota assembly operations reduced the rate of unionization in the Canadian automotive industry and increased competition between unionized and non-unionized operations. In the medium term this constrained union capacity to negotiate innovations, especially in the parts sector, as the union had to be increasingly mindful of the impact of their gains on the competitiveness of firms vis-à-vis non-union competitors. These changes to the auto parts industry opened up the possibility for greater spatial dispersion of automotive production into new, often rural communities, albeit limited to the eight-hour travel-time limits imposed by just-in-time production requirements (APMA, 2003, p.4). As automotive parts producers went in search of locations with the right mix of inputs, municipalities offered incentives to entice corporate investment. This competition combined with declining provincial regulatory controls and labour standards, set the scene for divergent pressures on local labour markets, the effects of which has been the emergence of different models of automotive development. The next section picks up on many of these themes in a more detailed analysis. We initially trace the impact on the labour market and local communities of many of the changes in the automotive industry associated with restructuring in the 1990s, beginning at the national level and moving to the local community level. Underlying this analysis is an attempt to identify different patterns of automotive industrial development across locales, the factors that contributed to these divergent paths of development and the implications of different models of development for working people, their families and the communities in which they live.


Statistical Profile of Canada’s Automotive Industry: 1990s to Present The automotive industry is Canada’s largest single manufacturing sub sector representing 13% of total manufacturing GDP. In 2004, over 2.6 million vehicles (Industry Canada, 2005) were produced in twelve vehicle assembly plants owned by Daimler-Chrysler, Ford, General Motors, Honda, Suzuki, and Toyota. The automotive industry is especially important to Ontario as all of these assembly plants and a vast majority of parts producers are located along the 401 corridor in South Western Ontario. This region in turn is situated within a broader continental concentration that locates approximately 90% of the North American automotive industry within a day’s drive of Southern Ontario (City of Windsor, 2005). Capital expenditure in the automotive industry continued to grow throughout the 1990s. Between 1993 and 2004, capital investment has averaged over 3 billion dollars per year and has grown at an annual average rate of 5.2% since 1982 (Industry Canada, 2005). The vehicle manufacturing and parts producing industries accounted for a total capital investment of over 44.5 billion dollars since 1993, 33.4 billion of which was invested by assemblers. Although investment was robust in both the vehicle assembly and parts production industries, employment impacts have been relatively uneven. Employment growth has taken place exclusively in the parts sub sector. Parts industry employment has increased dramatically from approximately 68,000 workers in 1993 to 103,000 in 2004, an increase of over 51%. Employment in the vehicle manufacturing industry has dropped almost 11%, or a net reduction of 6,000 jobs over the same period, despite an overall annual production increase of approximately 400,000 vehicles. These figures represent a significant transfer in the location of jobs from assembly to parts plants and are consistent with a historic pattern in which the relative distribution of jobs between the two industries has been shifting in favour of the parts sub sector. In 1992, 63,000 or 54% of the 116,000 total automotive manufacturing industry jobs were found in the parts sub sector. By the end of 2003, 103,000 or 68% of total automotive manufacturing industry jobs were found in parts production, while only 49,000 or 32% were vehicle assembly jobs (See Figures 1 & 2). Figure 1

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Empl

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Automotive Industry Employment in Motor Vehicle Assembly (NAICS 3361) and Automotive Parts and Accessories (NAICS 3363),

1993-2003

Motor Vehicle AssemblyAutomotive Parts and Accessories

Source: Industry Canada, 2004, 2002


Figure 2

Employment Distribution in 1993

68,000 (55%)

55,000 (45%)

Automotive Parts and Accessories (NAICS 3363)Motor Vehicle Assembly (NAICS 3361)

Employment Distribution in 2003

103,000 (68%)

49,000 (32%)

Automotive Parts and Accessories (NAICS 3363)Motor Vehicle Assembly (NAICS 3361)

Source: Industry Canada 2004 Automotive industry wages have historically been among the highest in Canada with both parts producers and assemblers paying higher wages on average than the rest of the manufacturing sector. In 1993, assembly workers annual average income of $52,981 was approximately 43% higher than that of parts workers, and 48% higher than those workers in the rest of the manufacturing sector. Over the next decade, the gap between average annual income of assembly and automotive parts workers remained steady but the wage gap widened between wages in automotive assembly compared to those in the manufacturing sector as a whole. In 2003, assembly workers were on average earning approximately 40% higher wages than those in the parts industries, and 67% more than those in the broader Canadian manufacturing industries. For auto parts, whereas wages in the early 1990s were initially comparable to those in the rest of manufacturing, a decade later a considerable wage gap had emerged. In 1993, parts workers were earning on average $36,839 or 3% more than workers in other manufacturing industries. By 2003, however, annual average income in the parts industry had grown to $51,314, approximately 19% more than the average annual manufacturing income of $43,186. Between 1993 and 2003, average annual income in the automotive vehicle assembly industry grew by 36%, with parts manufacturing incomes increasing on average by approximately 39%, while corresponding income in the broader manufacturing sector has grown by only 21% over the same period (See Figure 3).


Figure 3

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Average Annual Income in Motor Vehicle Assembly (NAICS 3361), Automotive Parts and Accessories (NAICS 3363), and

Manufacturing (NAICS 31-33) 1993-2003

Motor Vehicle Parts ManufacturingMotor Vehicle ManufacturingManufacturing

Source: Industry Canada, 2006 Wage levels in the parts industry vary significantly across firms and regions. Unlike the vehicle manufacturing industry in which wages are uniformly high, wages in the parts industry range from very low paying jobs with little job security to those that are relatively secure and pay wages comparable to those in vehicle assembly plants. Factors that influence wage rates are numerous. Unionization and local union density rates tend to have a positive impact on wage rates with many parts plants located in close proximity to unionized assembly and other parts firms. Firm skill requirements can also influence wage rates, especially if auto parts firms are competing with other industries for the same pool of skilled labour. Levels of technological sophistication also vary dramatically across the parts industry. Unlike the more homogeneous vehicle manufacturing industry in which firms share many similarities, “the automotive parts industry consists of a number of distinct sub-industries that simply share a common set of customers” (Fitzgibbon et al, 2004, p. 15). Underscoring the relative heterogeneity of the parts industry, Fitzgibbon et al argue sub-industries “exhibit significantly different industrial organizational characteristics, such as capital intensity, degree of technological complexity of products, and skill requirements.” (p.15). This results in highly variable wage rates within the industry. Wage expectations, which are shaped by regional unemployment rates and wage levels in other areas of employment, also vary across locales and influence the relative wages that firms must pay in order to secure the appropriate workforce. To illustrate this latter point, our research on the four communities identified that whereas workers in Brantford which has experienced higher than national average levels of unemployment for more than a decade considered $12.00/hour to be a ‘good’ job, workers in Windsor considered this to be at the bottom range of the industrial wage. Other pronounced differences exist between the automotive parts and the vehicle assembly sub sectors of the Canadian automotive industry. Unlike the vehicle manufacturing sector which is uniformly composed of large foreign owned multinational corporations devoted to the production of a common consumer product, parts manufacturers exhibit a more diverse character. Auto parts firms have a high degree of Canadian ownership and vary significantly on the basis of size, ranging


from small single site enterprises devoted to the fabrication of a single automotive part to large multinational firms employing several thousand workers spread across various locations and occupying multiple tiers of the automotive manufacturing supply chain. Current estimates indicate that auto parts are being produced in over 900 different locations in Canada (Industry Canada, 2004, p. 3). A central defining feature of the parts sub sector is the relationship between individual enterprises. This is an intensely competitive industry, where individual firms compete with one another to secure contracts with automotive assemblers that expect annual cost reductions, high quality parts and prompt delivery. Yet, as supplier-assembler relations are re-ordered to include sub-assembly of large components and elements of design, first tier suppliers are responsible for the coordination of production amongst multiple second and third tier suppliers. This requires high degrees of integration and coordination amongst competitor parts makers. The industry therefore becomes characterized by complex and often contradictory relations of competition and coordination. Labour force considerations are increasing in strategic importance as auto parts producers look to their own workforces as a source of competitive advantage. As Fitzgibbon et al (2004) note, continuous cost and performance pressures are often met through a process of “incremental innovation” (p.22) which relies heavily on an active involvement of plant workers in product and process improvements. Given that training and other human resource development strategies in the auto parts industry were minimal throughout the 1990s (p.22), firms have tended to recruit workers with already well-developed literacy and technical skills. This trend is reflected in above average education levels within Ontario’s auto parts plants that have increased over the twenty year study period forming the focus of this research. In recent years, and with some variation across communities, the need for a well educated and trained workforce has been met by firms through the recruitment of immigrants. Government Policy As firms compete amongst themselves for contracts, so governments compete with one another for automotive investment. Although the automotive industry is global, competition for investment in Canada has been concentrated within North America for much of the 1990s and 2000s. These competitive pressures have played out at multiple levels of governments, from the national to the local. The Canadian and Ontario governments’ policy options have been constrained by provisions in the North American Free Trade Agreement and other trade agreements that dismantled the Auto Pact and restricted the use of procurement policies, tariff incentives or direct subsidies. The response to these policy constraints has varied, depending upon the political-ideological orientation of different governments. The Ontario Liberal government of 1985-90, followed by the NDP government under Bob Rae, pursued a competitive strategy based on securing high skill, high wage jobs and investment. The government’s role in this lay in expanding and reorienting post secondary education, building a training infrastructure and encouraging bi-partite peak level coordination of technology and training needs (Bradford, 2003). While subsequent analysis challenged the foundations and success of this model of development, especially the failure of training bodies to identify and deliver the appropriate skills development for future needs, it seems likely that this strategy has had some long-term benefits. Toyota’s recent decision to invest in a new assembly and parts plant in Woodstock,


Ontario has been touted as hinging on the comparative advantage of a highly educated labour force that are perceived to be easier and less expensive to train. Comparatively high skill and literacy levels have been cited as key reasons for recent investment decisions by Toyota, Honda and Linamar and ended up trumping the multi-million dollar subsidy offers from several U.S. states (Hamilton Spectator, July 2, 2005). The federal government’s immigration policy which targets immigrants with high skills, has contributed further to the development of a highly skilled pool of labour in Ontario where the bulk of immigrants come to reside. Analysis in subsequent sections points to the high levels of employment of immigrants in the auto parts sector. Government development strategies abruptly changed with the 1995 election of the Conservative Party under Mike Harris. This was a government that believed in the capacity of unfettered markets to allocate resources appropriately. This meant a dismantling of much of the training infrastructure, including a push towards a greater role for the private sector in training and education, the introduction of restrictive labour laws that reduced the scope of union influence in the labour market and downward pressure on wages by freezing the minimum wage and initiating widespread restructuring of the public sector. The federal government added momentum to many of these changes with cuts to funding for post-secondary education and training initiatives. The Conservative Ontario government eschewed financial support for business, arguing that the role of government was not to support inefficient businesses. Overall, this government strategy tended to foster a low wage, low skill development model. It also placed Ontario at a disadvantage vis-à-vis U.S. states that were willing to ante up cash incentives and other subsidies to entice automotive investment. Yet, simultaneously, the Harris government pushed local governments to play a greater role in active economic development. According to Neil Bradford, Harris became enamoured with city and/or locally-based development strategies. His government’s reorganization of municipal governments alongside the downloading of a series of responsibilities to local governments were crucial steps towards building the government architecture necessary for encouraging locally inspired development. According to some of our interviews with mayors and municipal economic development officials, these added municipal responsibilities combined with the stripping away of provincial labour standards, forced local governments to begin pursuing more active development strategies, including forming partnerships with other mayors and cities in efforts to coordinate attempts to lure investment. Local governments therefore became increasingly important players in the competition for automotive investment, often times putting together packages of incentives that included serviced land in industrial parks, the availability of skilled, cheap labour, willingness to negotiate public transportation routes to meet the needs of employers and tax breaks. Since the defeat of the Conservative government in 2002, the newly elected Liberal government under Dalton McGuinty has restored a more active role for the provincial government in luring investment, but local governments and communities continue to play a significant role in economic development. Each community has distinct comparative advantages that form the basis for the type of development strategy pursued. In turn, the particular development strategy combined with the economic and institutional characteristics of different communities attract different types of investment with differential effects on working people, their families and the long-term growth of the community. There is therefore good reason for focusing our analysis on local labour markets. It is to an analysis of local labour markets that we now turn our attention.


Why study local communities To review, there are several reasons for studying local labour markets:

• Focusing analysis on the community level helps more clearly identify and understand the factors that make certain communities more attractive to automotive investment than others. These local economic dynamics become more important as the growth in outsourcing of automotive production to auto parts producers increases the likelihood of some spatial dispersion of production.

• Each community has unique labour market and institutional characteristics that appeal to

particular segments of the automotive parts industry • Competition for automotive investment has shifted downward to the community level in the

absence of a strong coordinating and regulatory role for federal and provincial governments

Auto parts producers require adequate supply of appropriately skilled and disciplined labour force. Based on analysis of commuting distances by workers, auto parts producers rely largely upon local sources of labour, defined by us as within 10 km of the community in which the factory is located.1. Local labour market dynamics are therefore a critical part of our understanding of why auto firms invest where they do and the implications for employment levels, workers and their communities. The four communities we examine - Brantford, Stratford, Guelph, and Windsor - are in ideal locations for luring automotive investment. The APMA considers parts producers within an 8-hour drive of destination plants (APMA, 2003, p.4) to be JIT capable. This means that these four communities, as well as many other small communities along the 401 corridor, are in a geographical position to supply and source vehicle assembly plants and other parts producers along the production chain. While the four communities have several characteristics in common, there are important differences between them that help explain why some of these communities have been more successful in attracting higher quality auto parts jobs than others. In the following discussion, we examine three sets of factors that arguably distinguish these communities:

1 Similar considerations influence investment decisions for assembly plants, although auto assemblers can draw labour from a wider geographic area due to high wages and benefits. For example, the recent announcement of a Toyota assembly plant investment in Woodstock illustrates the above point. Woodstock has a total labour force of only 17,190, yet Toyota is confident in its ability to recruit 1,300 (5-10% of which will be skilled trades) workers for its new plant. Figures supplied by Woodstock’s Economic Development Office boast that over 800,000 people live within a 30 minute commute.


Municipal Government Municipal governments have become increasingly active in soliciting investment through the provision of indirect subsidies. These subsidies take varying forms including:

• Availability and cost of serviced property • Taxation subsidies • Development fees • Building permit fees • Tipping fees • Zoning variance • Availability and cost of housing

Our discussion points to the differing ways in which municipal governments use these incentives to attract investment. Labour Force Over the last twenty years, the character of the labour force available for employment by firms has become increasingly important as a competitive advantage or disadvantage in attracting investment. Local communities increasingly market their labour force. To understand the distinct labour market dynamics of each community we examine:

• Unionization (rate, type, and history) • Industrial heritage • Unemployment rates • Workforce education/skill levels • Proximity to other low/high wage areas • Demographic characteristics including gender, age, immigration • Community economic profile

Institutional Capacity Institutional Capacity shapes the ability of local municipal governments to form collaborative economic development relationships and strategies with local institutions. Different local regions have distinct institutional characteristics that shape the likeliness that different types of economic strategies will be pursued. We have identified several different types of institutions that are important in understanding this local strategic capacity. These include:

• Post-secondary education institution i.e. College or University. For example Guelph and Windsor’s University of Windsor/St. Clair College Automotive Engineering Programme.

• Unions – as important economic institutions that can wield considerable political influence, unions can play a critical role in the choice of particular path of economic development.


• City Hall – different local governments have differing degrees of strategic sophistication and institutional capacity that in turn influence the kinds of economic relationships and strategies they develop.

• Local network of experts or industry leaders that have the capacity to foster synergetic economic relationships that attract new more diverse forms of investment and growth.

Communities vary on these dimensions, with some local governments nested within a cluster of mutually supportive institutions that enhance their strategic capacity and others with fewer resources and institutional relationships upon which to draw. Communities without dense institutional networks of collaborative partnerships tend to adopt a more narrow competitive strategy based on offering automotive parts producers relatively low start up and operating costs, as well as low wage expectations. The combination of the character of local labour markets and the availability of institutional resources therefore shape the economic development trajectories pursued by different communities. The four communities that we investigated varied along these dimensions. The auto parts industries in both Guelph and Windsor pursued an advanced manufacturing model characterized by greater utilization of skill, relatively high levels of technological investment and innovation and a clustering of first tier firms involved in the production of such parts as engines, transmissions and those relying on high precision machining. These communities pursue sophisticated economic development strategies in which firms and other stakeholders, in particular post-secondary education institutions, are integrally involved in planning and development. Technological innovation in these two communities is fed in part by the institutional presence of post-secondary institutions that have committed considerable resources to building the appropriate research and training infrastructure necessary to support the automotive industry. Stratford has some high precision machining, but tends to be dominated by firms that have lower rates of skill utilization and low to medium technology. Brantford is somewhat anomalous, in part because of its relative newness to the auto parts industry and the small size of the industry in this community. Although the Brantford auto parts workforce is highly educated, the auto parts firms operating in the community tend to be labour intensive (stamping, injection moulding, etc), with low levels of technological innovation. As will be evidenced in the following discussion, wages do not necessarily follow from levels of technology and skill utilization, being influenced by additional factors such as local labour supply (including unemployment rates) and rates of unionization. We now turn to an examination of the data upon which we base these conclusions about different community development models. The bulk of the data presented below comes from a special run of Census data on the employed labour force in each community for four census periods, 1981, 1991, 1996 and 2001. This data has been supplemented with data from various public sources, including Statistics Canada, additional Census information and local community economic profiles. We garnered additional information on the local labour markets from interviews with mayors and development officers in each of the four communities, temporary staffing agencies, employers and workers.


Data and Explanations Much of the data contained in this discussion of local labour markets comes from a special run of Census data ordered by our Auto21 research team. Census data was bought for the years 1981, 1991, 1996 and 2001 for four communities, designated as Brantford CA, Guelph CA, Stratford CA and Windsor CMA. Given our interest in labour markets and employment, the population for which we ordered data was determined on the basis of the Employed Labour Force 15 years and over for “place of work geography” as opposed to “place of residence geography”. Such a designation also allowed us to explore some aspects of commute to work. Other data used in this report includes publicly available data from Industry Canada, Statistics Canada and Census data. Comparability of data across different time periods has been complicated by the 1997 change in industry classification from Standard Industry Classification (SIC) to the North American Industry Classification System (NAICS). NAICS provides enhanced industry comparability among the three North American Free Trade Agreement trading partners (Mexico, Canada, USA). However, the NAICS variable ‘Industry’ does not permit direct comparison with census data from previous years. Such comparisons must be done using the SIC data, which for 2001 means using the NAICS_SIC Concordance data sets. In this report when data is compared across local communities and across time, we have used SIC 325 data for 1981, 1991and 1996 and the NAICS_SIC Concordance data for 2001. However, in the case of data on immigration status which was only available for 2001, we chose to use the NAICS 3363 data for Motor Vehicle Parts Manufacturing in order to ensure that this data was comparable to Industry Canada data that uses NAICS classifications. It should be noted therefore that NAICS 3363 data sets generate smaller numbers than those generated using SIC 625 due to the narrower definition of which firms qualify as being involved in production for the auto parts industry. Readers will likely note some inconsistencies in the aggregate numbers reported in the report due to the differences between NAICS and SIC. However, we have checked to ensure that trends remain the same regardless of which industry classification that we use.

Community Profiles Brantford

“We went back to what we know (industrial)…you don’t leave your core competency…we’re good at it, we’ve got generations of people that know how to work…we’ve got generations of people that have worked in the automobile or heavy metals industries” Chris Friel, Mayor of Brantford, Tuesday August 12, 2003

Brantford is a mid-sized city with a population of approximately 90,000 located in south western Ontario. Of the four local labour markets under investigation, it relies the least on automotive employment with only a few hundred workers employed in auto parts. The significance of this industry, however, has grown in Brantford between 1981 and 2001. Historically, the City of Brantford has been one of Ontario’s major agricultural and industrial centres. Economic expansion was facilitated by its ideal location along the goods transportation corridors of the Grand River waterway and the railroad system of Southern Ontario. Growth depended largely on the agricultural


implement and machinery industries. Until the 1980s, farm equipment manufacturers like Massey Ferguson and White Farm Equipment provided stable unionized jobs, which anchored a period of sustained economic expansion based on high paying industrial employment which lasted most of the 20th century. Changes to the farming industry along with negotiation of the free trade agreements resulted in rationalization of machinery manufacturing, and Brantford’s agricultural implement industry closed as did a number of other manufacturing operations. This deindustrialization, and associated economic recession, lasted throughout the 1980s and into 1990s. Consequently, Brantford had high rates of unemployment, an aging workforce and growing levels of abandoned brownfield industrial sites. Over the twenty year period of our study, Brantford’s economy suffered the most severe economic contraction. This was the only one of our four local labour markets that experienced a reduction in the labour force from 39,400 persons to 37,450 between 1981 and 2001. This reduction was likely the result of an aging workforce many of whom retired as industries shut down or downsized, along with a loss of new labour entrants to communities with more economic opportunities. In the mid-1990s Brantford’s economic fortunes began to turn around. Expansion of the 403 highway system in the 1990s linked Brantford to the 401and was instrumental in kindling economic revitalization and diversification. Development was also aided by the sitting Liberal member of Parliament, Jane Stewart, who was the Cabinet Minister in charge of Human Resources Development from 1999 to 2003. Brantford qualified for a series of government re-development and job training programmes. Recent successes in attracting firms in the food processing, warehousing and distribution, and light manufacturing industries as well as call centres reflect the active efforts of a city government that has pursued a local economic development strategy with an emphasis on broadening Brantford’s industrial base away from one focused exclusively on heavy manufacturing (See Insert 1). Brantford has attracted investment by offering access to inexpensive serviced land in the heart of Southern Ontario’s transportation infrastructure as well as promoting an experienced, hard-working industrial workforce. Presumably in an attempt to counter its image as an old-industrial city with expensive labour, the city website advertises the declining rate of union density in manufacturing in Brantford (from 27.2% to 21.1% from 1998 to 2001) which is lower than the provincial average of 28% union density in manufacturing in 2001 (City of Brantford, 2006a).


Insert 1: Brantford’s Major Employers

Despite recent attempts to diversify the economy, Brantford remains heavily dependent upon manufacturing for employment. In 2001, 27% of the labour force was employed in manufacturing. Given the higher average wages paid by the manufacturing sector this employment strategy is perhaps not surprising (See Table 3). Although our Census data reveals that automotive parts employment accounts for 1,370 jobs or less than 4% of total employment in Brantford, this industry is viewed as a key component of a broader revitalization of the Brantford economy (See Table 2). Jobs in this sector offer higher incomes than average incomes in the local economy as a whole, and comparable earnings to those in the rest of manufacturing. What stands out most in the income profiles offered in Table 3 is the much higher than average income for women employed in the auto parts industry, compared to women’s earnings in manufacturing or in the economy as a whole. In short, these jobs are good jobs, especially for women. As seen in Table 4, these jobs also tend to be full time jobs, with the large majority of the workforce in Brantford working at least 40 hours per week for an average of 49 weeks per year. Interviews with several employers reveal that auto parts employers are also more likely than other private sector employers to offer benefits such as pensions, dental and drug, often as a way to attract a high quality labour supply and retain good employees. Average wages in an industry as diverse as automotive parts can be deceiving, however, as averages mask the range of wage rates across different parts of the industry. Interviews with temporary staffing agencies in each of the four communities as well as a statistical analysis of advertised job openings in each of the four communities offered a more complex and slightly different wage picture than emerges in Table 3. Auto parts workers employed in Brantford on a temporary basis tended to be paid between $9 and $12 per hour, compared to Windsor where temporary staffing agencies cited the starting wage at approximately $12/hour. This suggests that Brantford may be competing for investment on the basis of low wage local labour costs, a strategy that can have deleterious effects on the quality of life in the community. Although women account for slightly more than half of Brantford’s total labour force, less than a third of all auto parts jobs are held by women. Between 1981 and 2001, women’s presence in auto parts plants decreased by 12.5%. Of the four communities studied, Brantford was the only one in which female employment in the industry dropped in both total and proportional numbers, although one must keep in mind that this industry is a relatively small employer in the community (See Table 5). Less than 6% of Brantford’s total male workforce was employed in auto parts plants in 2001. This masculinization of the auto parts workforce is likely the effect of two factors. Higher than average wages make these jobs especially attractive to men who may have few alternative, good employment opportunities and men crowd into this sector, having the effect of ‘pushing’ women out

Brantford’s Major Employers

Approximate No. of Employees (Current)

NCO Financial Services 2,000 Brantford Charity Casino 1,045 Raymond Industrial Equipment 520 Lumsden Brothers Ltd. 500 S.C. Johnson and Son Ltd 415 Storeimage Programs Inc 407 ITML Horticultural Products 350 Apotex Pharmachem Inc. 319 Hartman Canada 300 Maidstone Bakeries 300 Source: City of Brantford, 2006


of this work. Second, Brantford has tended to attract investment by ‘heavy’ auto parts manufacture that continues to be associated with men. Of the four communities, Brantford’s auto parts workforce is the youngest. In 2001, 44% of auto parts workers were under 35 years of age. This likely reflects the relative newness of this industry to the community. As a small European-based community with a recent history of economic decline, Brantford has not tended to attract recent immigrants. Not surprisingly, therefore, the automotive parts workforce tends to be Canadian-born or long-standing immigrants who immigrated to Canada before 1996 (See Table 6). Although there is a sizeable Canadian Aboriginal population in Brantford and area, the auto parts workforce is overwhelmingly (90%) white. The only concentration of visible minorities employed in the auto parts industry comes from the South East Asian community. Looking at Table 7, over the twenty year study period, education levels among Brantford’s auto parts workforce have climbed steadily and are higher on average than those found in the wider local workforce. For example, in 1981, 50% of the auto parts workforce did not hold a high school certificate whereas this was reduced in 2001 to 22% of auto parts workforce in Brantford. Currently, almost three quarters of Brantford’s auto parts workers have at least a secondary school diploma, while approximately one in six has some university education (See Table 7). These high levels of education are consistent with the younger age of the Brantford workforce. Although Brantford’s workforce is increasingly educated, the community has until recently lacked any local post-secondary education institution. Since 2001, Wilfrid Laurier and Nipissing University, as well as Mohawk College, have set up branch campuses to offer a limited number of education opportunities to local residents. The limited presence of post-secondary education institutions restricts the capacity of Brantford to form collaborative partnerships with local universities and colleges or ancillary research institutions in an effort to increase its capacity to attract high tech industry with associated spin off benefits of higher wages and greater demand for related support services. This limits Brantford’s economic trajectory and may help explain why it continues to rely so heavily upon labour intensive industries. Other institutional capacity in Brantford is also limited. Unions have been on the decline and play a diminished role in community economic development. The community also lacks an industrial champion, such as Linamar in Guelph. The city of Brantford also seems to work largely on its own in pursuing economic development, seeing other communities as competition for investment and jobs. As will be seen below, this contrasts with Stratford, the other small city in our study, which is part of a network of municipalities involved in promoting development. This likely limits the resources and strategic capacity available to Brantford in soliciting investment and expanded economic opportunities. Brantford is therefore unlikely to generate the type of automotive parts investment that yields higher research and development components or synergetic economic activities of clusters of firms that produce better long-term benefits for the community. Nonetheless, it is likely that Brantford will benefit from some of the economic spin-offs expected from the recently announced investment in Woodstock by Toyota.


Stratford

“One of our biggest competitive advantages is our labour force…our labour/management relationship…very free of strikes and labour turmoil” Larry Appleton, Director of Economic Development, Tuesday August 12, 2003

Stratford is a small city with a population of approximately 30,000 people located between Kitchener and London within a half hours drive of the 401. Although tourism associated with the Stratford Festival accounts for the largest single source of employment in this city, the manufacture of consumer goods and automotive components constitute the bulk of Stratford’s employment with seven of the top ten employers falling into the manufacturing sector (See Insert 2). The diversity of economic activity sustaining this community has arguably provided this community with relative economic stability. Stratford’s economic development strategy is focused on the promotion of its natural and historic strengths of close proximity to the 401 corridor, its historic industrial tradition of non-union light manufacturing and its high quality of life. Economic development literature put out by the city promotes its labour force as central to its competitive success, including a low rate of unionization (over 70% of Stratford’s present industries are non-union), rarity of work stoppages and the highly qualified pool of labour as positive industrial indicators (City of Stratford, 2005). Stratford prioritizes attracting firms engaged in light industrial manufacturing, especially auto parts which are perceived to offer relatively high wages and better working conditions compared to other industries. The following comments made by Economic Development Officer Larry Appleton in our 2003 interview illustrate the positive perception of auto parts employment:

“They create respectable jobs, relatively clean, skilled and semi-skilled, administrative as well as production jobs” “… a lot of cities went into attracting call centres…a lot of call centres. I’m going to be honest, are trash…they want great facilities, lots of parking and the best people in the world…they sign a one year lease and pay 8 bucks an hour” Larry Appleton, August 12, 2003

The goal of Stratford’s community economic development was to increase the number of ‘good’ jobs, as city officials clearly identified the importance of decent wages for sustaining local businesses and high standards of living. Like other communities, Stratford’s civic officials view an availability of inexpensive serviced industrial land, low development fees, well developed infrastructure and a willingness to accommodate potential auto parts manufacturers as essential to securing economic growth. Stratford’s Director of Economic Development stated,

“so it costs you a few hundred thousand and you dropped the land prices and maybe you had to do this and maybe you had to do that in the negotiations but council…recognize that [ it’s] two or three hundred jobs.. and three of four thousand dollars in taxes, there’s a pretty good payback…so whatever you can do legally, you do” Larry Appleton, August 12, 2003


Insert 2: Stratford’s Major Employers Stratford’s economic development profile promotes the city’s central geographic location, in terms of access to other Canadian and American economic centres of activity. Distinct from the other communities that we study, Stratford promotes its high quality of life, including cultural and recreational activities, as an important feature in labour force retention. Local officials have adopted a coordinated regional economic development strategy with other area municipalities to counterbalance the greater influence and resources of larger municipalities in Ontario. Stratford is part of the south western Ontario Marketing Alliance (SOMA), an organization created in 2001 to coordinate business promotion amongst eight south western Ontario cities, one of which is Stratford. The automotive industry is one of four industries targeted for promotion by SOMA. Stratford’s economic development office participates in trade missions to various parts of the world, most recently to Japan to entice investment by automotive parts producers. This initiative as well as the lobbying organization known as the Ontario Mayors for Automotive Investment are evidence of the greater role played by local government in economic development as well as the move by communities such as Stratford to enhance their strategic capacity through pooled resources and coordination and cooperation, rather than cut throat competition. Through the Ontario Mayors for Automotive Investment, the mayor of Stratford has lobbied provincial and federal governments for greater investment in research & development, training and building of infrastructure such as an enhanced rail transportation system. As in other communities, Stratford has increasingly marketed its labour force to prospective employers. Karen Haslam, mayor of Stratford from 2000-2003, argued that the high quality and skills of the workforce were Stratford’s key to competitive advantage with Mexico and China. In 2001, approximately one half of all local manufacturing jobs in Stratford or 2,965 workers were employed in auto parts production. Auto parts employment has grown steadily since 1981, and represents slightly more than 15 % of the total local workforce of 19,555 individuals (See Table 2). Almost 43% of Stratford’s auto parts workers are women, which is the highest concentration of female employment of the four communities studied (See Table 5). In total, almost 13% of Stratford’s total female and 17% of the total male workforce were found in auto parts production. Stratford’s auto parts producers recruit heavily from the local labour market as approximately two-thirds of the auto parts workforce lives within 10km of their workplaces.

Stratford’s Major Employers Approximate No. of Employees (Current)

Stratford Festival 1,200 FAG Bearing and Aerospace (Automotive) 1,126 Stratford General Hospital 1,100 Cooper Standard Automotive (Automotive) 1,050

Honeywell Consumer 600 Dresden Industrial (Automotive) 560 Hendrickson Spring (Automotive) 470 Steelcraft Industries Ltd. 450 City of Stratford 325 Dura Automotive (Automotive) 310 Source: City of Stratford, 2006


As in Brantford, jobs in the automotive parts sector in Stratford pay about the same as those in manufacturing in general (See Table 3) and are slightly better paid than the annual average income from all employment in the community. But once again it is women who do much better from a job in the automotive parts sector. Women employed in all forms of manufacturing in Stratford, but especially in automotive parts, make almost $10,000 more per year than average annual incomes for employment in all sectors combined (See Table 3). This wage premium has an especially significant impact on women’s standard of living given the large number of women employed in automotive parts in this city. Work in the automotive parts sector is also more likely to be full time, full year employment (See Table 4). Only 11% of Stratford’s auto parts workers are drawn from the local immigrant population, with approximately half of these arriving since 1981(See Table 6). Immigrants originating from Eastern Europe and South East Asia are the two most prominent ethnic communities working in auto part production. Approximately 5% of Stratford’s auto parts workers are identified as members of a visible minority group. Stratford’s auto parts plants recruit a relatively educated workforce, with a quarter possessing a secondary school diploma and almost 13% having at least some university education (See Table 7). These figures have climbed steadily over the study period. Yet of the four communities, Stratford also has the highest proportion of auto parts workforce with less than Secondary School Graduation Certificate. Like Brantford, Stratford has neither a Community College nor a University, although Conestoga College from Kitchener has set up a branch campus in Stratford. In many ways, Stratford is similar to Brantford in so far as it lacks the cluster of institutions as well as a ‘home-grown’ industrial champion that would encourage certain types of investment and growth. But, its city council is more strategic in its role in economic development, evidenced in the collaborative relations and pooling of resources the city has undertaken with neighbouring communities through SOMA and the Automotive Mayors lobbying group. Stratford has also built on the economic synergies of a vibrant cultural/tourist industry combined with a strong manufacturing tradition by promoting the city’s high quality of life to potential investors and linking this to labour force retention. Guelph

“We have a skilled base in tune with the automotive sector… I think we have an advantage with respect to some of our labour skills…certainly we have a base of people here with skills that are used in the automotive market and I think that is a plus for us…I certainly think because of the educational institutions that we have in Guelph and very close by for some of the higher order skills …there’s a good pool of graduates…” Jim Mairs, Economic Development Officer, Guelph

Guelph is a mid-sized city with a population of slightly over 113,000 people situated on Highway 6 a few kilometres north of the 401. Historically, Guelph’s economy was rooted in agriculture and light manufacturing industries with an industrial base dominated by US branch plants. Although


Guelph’s economy is highly diversified with vibrant biotechnology and advanced research sectors, the city’s largest single employer is Linamar Corporation, a maker of precision machined automotive components, which employs approximately 8,000 auto parts workers in over twenty plants in Guelph and the surrounding area (See Insert 3). Guelph’s civic officials have adopted a multi-faceted economic development strategy that is articulated around growth in three targeted sectors; these are manufacturing, with particular emphasis on automotive, life sciences and agro-business and environmental technology. Guelph has gone through two identifiable phases of local economic development in the last twenty years. In the first phase from the early 1990s to early 2000s, the City focused on attracting investment to expand the local high technology and advanced manufacturing sectors. Guelph partnered with Cambridge, Kitchener and Waterloo in a regional promotional strategy known as “Canada’s Technology Triangle” to lure those industries most reliant on a highly skilled workforce and the research and technical capabilities associated with the region’s universities and colleges. Those segments of the auto parts industry considered technologically advanced were targeted as they provide relatively skilled and high paying employment. The four cities pooled their resources and expertise to increase their effectiveness in attracting investment and economic development opportunities. By around 2000, however, Guelph pulled out of this organization, with the Economic Development Officer offering three main reasons for this decision:

1) the province’s proposed amalgamation of the four cities threatened Guelph’s self-identity and distinct strategic advantages, thereby posing a threat that Guelph’s economic interests would be sidelined to those of the larger communities;

2) whereas Guelph had benefited from pooled resources in the early years of collaboration, city officials felt that by the end of the 1990s they were no longer getting the “bang for their buck” and that the city could better promote economic development on its own; and

3) Guelph found that it was running out of land to use as an attraction for new investment and this pushed the city to shift its economic development strategy with a higher priority placed on retention of existing businesses, with a particular focus on Linamar. As part of this strategic shift, the city articulated a new development plan around six objectives, including developing the downtown, improving the quality of life in Guelph and helping small businesses.

It is likely no coincidence that Guelph re-oriented its development strategy towards retention and a ‘go-it-alone’ approach at the same time that Linamar Corporation began taking off in terms of growth and economic success. With deep roots in the Guelph community, Linamar has primed the manufacturing sector in Guelph, and become an increasing focus of the city’s development strategy. City officials meet regularly with leadership at Linamar to keep abreast of the corporation’s needs and the ways that the city can meet these. In turn, this means that the auto parts sector has a significant impact on the dynamics of the local labour market. Most recently, Linamar Corporation has announced the expansion of its operations in Guelph which is estimated to increase employment by 1000 workers. The City of Guelph has recently expanded its economic development strategy to include an innovative municipal twinning program aimed at establishing mutually beneficial economic


relationships with other communities, both nationally and internationally. Guelph City Council established a Twinning Committee in 2003 comprised of representatives from the local Chamber of Commerce, University of Guelph, education, multicultural organizations, sporting organizations, service clubs, and members of the general public. The committee meets monthly and is charged with identifying and developing twinning relationships focused on both economic and other more general criteria. Economic criteria include the potential of developing trade, investment and business alliances. Cities which are considered economically comparable to Guelph in terms of economic and political stability, industrial base, and share complimentary development strategies are targeted. Prospective cities must have an established economic development structure, and should have local business associations capable of coordinating a range of economic and commercial activity. Insert 3: Guelph’s Major Employers In 2001, slightly more than a quarter of Guelph’s total workforce of 65,548 was found in the manufacturing sector. Of these, 6,735 or approximately 10% of total local employment was found auto parts manufacturing. Auto parts employment grew dramatically between 1991 and 2001 with an overall increase of 4,145 jobs corresponding with a growth rate of 160%. Guelph’s auto parts sector grew in overall economic significance over the same period increasing from slightly over 2% of total local employment to over 10% in 2001(See Table 2). Approximately 4% of total provincial auto parts employment is located within the municipal boundaries of Guelph. Women accounted for slightly less than a third of total auto parts employment in 2001, representing an increase of approximately 30% over the twenty year study period (See Table 5). Almost 7% of Guelph’s total female workforce and 14% of males in 2001 were employed in local auto parts plants. Over two-thirds of those women employed in auto parts plants lived within 10km of their workplaces and slightly more than half of men did. Over 40% of Guelph’s auto parts workers commute greater than 10km to work, representing the highest proportion of the four communities studied. The fact that Guelph automotive parts employers are able to attract labour from a wide geographic area reflects the belief that many of these are good jobs that pay well, offer benefits and full-time employment in an industry with seemingly excellent economic prospects. It is also likely that the greater commuting distances reflect the movement of workers from farms and smaller rural communities as auto parts firms have identified rural labour as a desirable labour force due to a strong work ethic, physical strength and hands-on technical skills developed by working with

Guelph’s Major Employers Approximate No. of Employees (Current)

Linamar Corporation (Automotive) 8,087 University of Guelph 3,723 Upper Grand District School Board 3,400 The Corporation of the City of Guelph 1,500 Guelph General Hospital 1,150 Polycon Industries (Automotive) 1,000 The Co-operators Insurance 814 Better Beef Ltd. 800 Blount Canada Ltd. 800 Guelph Tool Inc. (Automotive) 800 Source: City of Guelph, 2006


machinery. For their part, workers from smaller surrounding communities and farms tend to be drawn to work in auto parts firms as few comparable opportunities exist in their own communities. Of the communities studied, Guelph auto parts producers rely most heavily on drawing workers from local immigrant communities. Approximately 46% of Guelph’s auto parts workers in 2001 were identified as immigrants, with 22% arriving in Canada after 1991. Those arriving from Asian and South East Asian countries constitute the largest immigrant group in Guelph’s auto plants and are recruited heavily by local producers. Approximately 37% of the total population of this community is employed in the auto parts industry. When compared to the other communities studied, Guelph’s auto parts industry is the most racially diverse with approximately 27% identified as a member of a visible minority group in 2001. The recruitment of immigrants fills two employer needs. First, our Census data suggests that the more recent immigrants being hired by auto parts firms in Guelph have fairly high levels of education. Immigrants’ inability to gain formal recognition of their skills in Canada limits their ability to be hired in their own field. Auto Parts firms offer well paid, steady work and, in return, garner the indirect productivity and economic benefits of a highly educated workforce. Secondly, with a low unemployment rate of 5.3% (See Table 1), Guelph has tended to experience a labour shortage problem, which either has the effect of driving up wages or forcing employers to find an alternative source of labour. By recruiting their labour force amongst immigrants, the auto parts industry has addressed their labour supply problem at a reasonable cost. This conclusion is borne out by reference to Table 3 which shows that average annual incomes of auto parts workers in Guelph are modest relative to manufacturing as a whole and when analyzed in the context of the ratio of annual average incomes for auto parts workers to manufacturing in the other communities under investigation. Almost 19% of Guelph’s auto parts workers have obtained a secondary school diploma, and over 17% have completed at least a partial university level education (See Table 7). At the same time, Guelph has a relatively large employed labour force that has not completed high school. The City of Guelph is quite distinct from the two other communities discussed so far as it has a dense cluster of institutions that have facilitated Guelph’s pursuit of an economic development strategy that has encouraged growth in high tech and advanced manufacturing with a relatively highly educated and skilled workforce whose incomes and full-time employment status contribute to Guelph’s high quality of life. Guelph is home to Linamar Corporation where the bulk of its operations are located. Guelph is well serviced by post-secondary institutions, with University of Guelph and Conestoga College offering a wide range of courses in Engineering and technology. The University in particular is a key institution in the city. It fuels development in the areas of agri-business and food sciences, while also contributing to necessary skills development that sustains industry. Universities are also associated with the creation of a research and development infrastructure and culture that has spin-offs for the local economy and industries. The city is highly strategic in its role in economic development, building on its competitive advantages and pursuing a sophisticated development plan.


Windsor

“Windsor has been industrial since 1856…so it's a long, long history. People don’t flinch here about shift work. We’ve got plants that run 24 hours a day, six days a week. Some who run 7 days a week never stopping so there's a certain mentality associated with that life and certainly people see … the automotive industry isn't like a sweatshop.” Paul Bondy, Commissioner of Economic Development, Friday September 12, 2003

With a population of over 200,000, the City of Windsor is the largest of the four communities studied. Windsor’s automotive heritage dates to the early 1900s and is considered the hub of Canada’s automotive industry. Located across the border from Detroit, Windsor is ideally situated in the heart of the continental automotive industry and is within a day’s drive of over 90% of North America’s vehicle assembly plants (HRDC Web). Over 900 manufacturers (Paul Bondy, 2003)), 500 of which are automotive related, employing over 40,000 workers are currently located within the broader Windsor-Essex County (HRDC, 2003). DaimlerChrysler, Ford, and General Motors currently operate several plants and are among Windsor’s largest employers. Their unionized workforces negotiate wages that exceed those in the broader manufacturing sector and establish wage pressures that reverberate across the various tiers of the local automotive industry. The historic presence of the “Big Three” underscores the inextricable link between Windsor’s automotive industry and the development of Canadian industrial unionism. The signing of the Auto Pact in 1965 consolidated Windsor’s pre-eminence in the Canadian automotive industry. Windsor’s proximity to Detroit and its ideal location has made it a logical location from which North American vehicle and parts producers could rationalize production in order to capitalize on the liberalized trade opportunities facilitated by the Auto Pact. Growth in Windsor’s automotive sector since the 1970s has occurred largely in the parts and tooling segments. Automotive manufacturers across the secondary tiers of the automotive supply chain continue to be drawn to the Windsor area by its access to automobile production markets and the availability of a skilled workforce attuned to the needs of the light industrial manufacturing sector. More recently, Windsor has become a centre of technologically advanced innovation, particularly in the plastics, tooling, and machining segments of the automotive sector. A high level of consultation and coordination between government, industry, labour, and other local stakeholders is the basis of an economic development strategy that is aimed at the twin goals of maintaining and expanding Windsor’s traditional automotive producers, while simultaneously attracting and securing emerging opportunities in the advanced manufacturing segments of the automotive production industry. The recent opening of the Ford Centre for Excellence in Manufacturing at St. Clair College provides an example. This $32 million initiative is jointly funded through a cost sharing arrangement between the automotive sector, provincial, and local levels of government and is aimed at enhancing the competitiveness of the local automotive industry through the establishment of industry focused educational programs driven by the requirements of the higher skilled segments of the local automotive industry.


“It's much more complicated than just a parcel of land because there's a whole host of other issues that come into play…well I think a lot of the initiative comes from the local scene.” Paul Bondy, 2003

Local officials believe that an active role for local government is also key in attracting automotive investment to the Windsor area. Like other Ontario communities, Windsor provides serviced land, infrastructure and coordinates access to training dollars to entice investment. Ongoing consultation between local officials and the automotive industry is cited as crucial in understanding and responding to industry needs. A local official argues, “…we have to be brought into the picture because we're the ones that have all the detailed information about the local scene” (Paul Bondy, 2003). Active consultation provides local officials with the information necessary to more effectively respond to the specific needs of the industry. For example, Windsor develops industrial parks to meet the parts distribution requirements of the automotive sector by locating and constructing them in ways that facilitate JIT delivery between the various tiers of the industry.

Insert 4: Windsor’s Major Employers The city of Windsor has benefited for decades from the political leverage associated with the city’s pivotal role in the Canadian automotive industrial complex. Both federal and provincial governments recognize the centrality of the automotive industry to Canada’s economic performance, and these governments have joined with Windsor officials in offering incentives and other strategic supports to secure continued investment and growth. The Canadian Autoworkers union (CAW), which is especially powerful in Windsor, plays an important political role in this community, lobbying governments and promoting an industrial policy that secures long-term viability for the automotive industry. The political mobilization of the CAW has tended to constrain Windsor’s chosen path of economic development to ensure that it does not rely upon a low-wage, anti-union strategy. In 2001, Windsor had a total workforce of 143,580. Of this total, 16,885 jobs were found in the auto parts industry. The total number of auto parts jobs has doubled from the 1981 total of 8,315. Employment in this sector has grown in local significance from approximately 8.3% of total local employment in 1981 to 12% in 2001. Windsor’s auto parts employment amounts to slightly over 10% of total provincial automotive parts employment (See Table 2). There were 4,715 female auto parts workers in 2001. Although women’s presence in auto parts plants grew over the twenty year period between 1981 and 2001, this figure represents approximately 28% of total employment which is the lowest female participation rate among the communities studied (See Table 5). Three

Windsor’s Major Employers Approximate No. of Employees (Current)

Daimler Chrysler (Automotive) 7,000 Ford Motor Co. (Automotive) 5,060 Windsor Casino 4,000 City of Windsor 3,819 Greater Essex District School Board 3,523 Windsor Regional Hospital 2,415 Windsor Essex Catholic School Board 2,252 Hotel Dieu-Grace Hospital 1,800 General Motors Corp. (Automotive) 1,700 University of Windsor 1,600 Source: City of Windsor, 2006


possible explanations for this emerge from the data and interviews. First, the proximity of auto parts and assembly producers in Windsor means that these two industries are more intimately tied together than in the other communities. Many workers we interviewed in Windsor hoped that a job in the auto parts industry would act as a segue into a job in assembly. This, combined with the ‘male’ culture surrounding work in automotive assembly, encourages men to crowd into this sector, therefore pushing women into other sectors. Second, work in the automotive parts sector pays a high premium, especially for men, and this is likely to attract male applicants for work. Finally, much of the work being done in auto parts in Windsor is skewed towards heavy industry which continues to be associated as better suited to men. This is reinforced when jobs require certain types of skills (such as welding) that are more likely to be acquired by men. In 2001, slightly more than 7% of Windsor’s working age women, and approximately 16% of men were employed in the auto parts industry (See Table 5). Approximately 40% of auto parts workers commute more than 10km to work suggesting that auto parts manufacturers in Windsor have a greater capacity to draw workers from a relatively wide geographic area. This is not surprising given the high wages paid in the automotive sector relative to the rest of the economy (See Table 3). The city of Windsor attracts a considerable number of immigrants, with about 5.7% of the total employed labour force having immigrated between 1991 and 2001. The proportion of recent immigrants, defined as those who arrived after 1991, employed in the auto parts industry is only slightly higher than those in the labour force as a whole (See Table 6). It is likely that recent immigrants have greater difficulty gaining employment in this industry because of seniority rules in older unionized plants as well as the crowding out of immigrants by non-immigrant workers due to the high rates of pay in this sector in Windsor. Approximately 12% of local auto parts workers are classified as members of a visible minority with the bulk of these drawn from the Asian and South East Asian Communities. One in four of Windsor’s auto parts workers has a secondary school diploma and one in five has at least a partial university education (See Table 7). This reflects a steady growth in the level of education found amongst auto parts workers. The one exception to this is the declining proportion from 1981 to 2001 of workers who are skilled trades. In many instances, graduates find that work in an automotive parts factory pays better than other opportunities, including those that may better fit an employee’s area of expertise. In Windsor, in particular then, the automotive parts industry, along with automotive assembly, tends to skim the cream of the labour force, posing challenges for employers in other sectors. Windsor has a comprehensive and multi-faceted approach to economic development that is in part explained by the nesting of a dense network of supportive institutions and a strong political base. University of Windsor is host to the federal government’s Auto21 project, a network of hundreds of researchers engaged in research designed to strengthen the competitive position the Canadian automotive industry. It has a well developed Engineering School along with other industry supportive programs. Similarly St. Clair College works closely with industry. Windsor is also the most highly unionized of the four communities, with the Canadian Autoworkers (CAW) as the most powerful union in the city. The CAW is a sophisticated organization that has played a key strategic role in lobbying provincial and federal governments for support of the automotive industry. The CAW also pushes the community and industry players to adopt smart, technological avenues for competition, and resist the adoption of low wage competition. This has a significant effect on the


wages in the automotive industry and the high standard of living for its workers, and their communities. Finally, Windsor has benefited economically from the synergies of multiple industry players nested in one community. In particular, Windsor has since the early 1980s hosted a flagship plant for the Chrysler Corporation, which has played a critical strategic role in the city.

Conclusion

The high quality of the Ontario labour force is a major competitive advantage for the province in attracting automotive parts investment. This comparative advantage is rooted in the interplay between local and provincial labour market factors, and differing institutional capacities and levels of support. Although incentives offered by the provincial and local governments were important in luring automotive investment to particular communities, these alone were insufficient to secure investment in competition with U.S. States that have a track record of offering rich incentive packages. Rather, automotive corporations were attracted to Ontario due to several labour market factors. As labour markets become increasingly tight, automotive companies search for locations where there is an adequate available supply of the right kind of employee who is well-disciplined and has a strong work ethic. According to several interviews we undertook, these qualities were tied to a community’s industrial heritage whereby people had a history of production work and were willing to work hard, often involving long hours and shift work. The federal government’s policy on immigration has contributed to the available supply of labour. Interestingly, wage levels seemed less important in determining automotive investment, although wage levels did vary considerably across different local labour markets. With the exception of Guelph, automotive parts companies tend to pay higher than average wages, thus skimming the cream of the local labour force. Wages tended to vary according to local labour market conditions, including rates of unionization, rates and duration of unemployment and wages paid by competitors. It also seems likely that wage levels were influenced by the proportion of immigrants employed in the local automotive industry. Yet labour market factors alone were not the reason for the labour force becoming a comparative advantage. Institutional capacities and level of support for the industry were also crucial to creating labour as a competitive advantage. Much of the institutional capacity of local labour markets comes from provincial and federal policies and practices. Incentive packages and an activist industrial policy were important in helping attract investment. The investment in public education is also important as it ensures that students acquire the necessary numeracy, literacy and analytical skills required to work in modern automotive factories. As discussed in more depth below, communities with resident post-secondary institutions had an advantage over other communities in attracting certain types of investment and generating spin-off economic benefits. Local institutional factors influenced the variable capacity of local governments to enhance their competitive advantage. Cities with well developed planning structures and practices were better able to engage in strategic planning, and partnering with other governments and research and education institutions, to enhance their competitive advantage. Local labour markets were also aided by the capacity of local firms to get involved in collaborative ventures with government, educational institutions and other agencies. This issue is likely to have increased in importance since the beginning of the 1990s due to the increased number of small Canadian-owned automotive parts firms. In the remainder of the conclusion we develop some of these points in more detail. Throughout this discussion it is crucial


to keep in mind that the determinants of success in luring automotive-generated growth reside in the interplay between local labour market factors and institutional characteristics and capabilities. Those communities with the capacity to form collaborative partnerships with local universities and colleges to promote and develop desired “human resources”, and research and development capabilities (for example Guelph’s “Canada’s Technology Triangle” of Kitchener/Waterloo, Cambridge, and Guelph and Windsor’s University of Windsor/St. Clair College Automotive Engineering Programme that support the Windsor Essex Tool Die and Mold industries) are better suited to pursue an advanced manufacturing strategy for the auto parts industry based on technological innovation and high skill utilization. Smaller communities such as Stratford have successfully collaborated with other municipalities to secure investment, thereby overcoming some of the disadvantages associated with a more remote location, fewer resources to offer firms incentives and a lack of institutions associated with research and development or technological innovation. This contrasts to Brantford which has adopted a go-it-alone strategy that has generated growth but usually in the lower paid, more labour intensive parts of the automotive industry. The history and capacity of local officials to draw federal or provincial government agencies or ministries into their strategic deliberations and to commit resources shapes the type and success of development strategies pursued. Communities vary on these dimensions, with some local governments nested within a cluster of mutually supportive institutions that enhance their strategic capacity and others with fewer resources and institutional relationships upon which to draw. The latter tend to adopt a more narrow competitive strategy based on offering automotive parts producers relatively low start up and operating costs, and typically, low wage expectations. Unions play a critical, although declining, role in development strategies. In Windsor, where unions are more powerful, and have the capacity for concerted political mobilization, unions play a greater role in shaping the chosen development strategy. This is partly the result of the inclusion of unions in economic development consultations, but it is also a ‘veto’ effect that unions have on municipalities that may entertain low wage, low skill strategies. On the other hand, recent growth in the auto parts as well as automotive assembly industries tends to have occurred disproportionately in non-union firms such as Linamar, Toyota, Honda and Magna. This points to a declining role for unions in shaping the automotive labour market, with the possible effect of allowing wages and benefits to drift downwards. Although communities such as Stratford and Brantford currently promote their low rate of unionization as a competitive advantage, the declining role of unions will likely have deleterious effects on family incomes and ultimately the standard of living in manufacturing communities. Unions are only one factor influencing wage and benefits rates however. Current low rates of unemployment combined with inter-firm competition for an adequate labour supply of ‘good’ workers are mitigating factors that will likely slow any downward trends in wages and benefits. Incomes in the auto parts sector tend to be higher than average, and comparable to those in the manufacturing sector more broadly. The exception to this trend is seen in Guelph where average incomes in the automotive parts sector are considerably lower than those in manufacturing as a whole and only slightly higher than annual average incomes for all sectors. This is likely the effect of the relative recentness of automotive investment and job growth in Guelph, the effect of which is to reduce the effect on wages of long-term seniority. Guelph’s automotive parts sector, however, is also dominated by a single non-union firm, which likely also has an effect on overall wage rates in


the area. Finally, Guelph’s automotive parts producers rely much more heavily upon recent immigrants for their labour supply, a group that tends to be paid comparably less than other groups in the labour force. In all the communities, recent immigrants (defined in this report as those arriving after 1991) are slightly more likely to be employed in auto parts sector than other sectors. In Guelph this trend is much more pronounced; immigrants that came to Canada between 1991 and 2001 constitute only 6.5% of the total labour force in Guelph but fully 22% of the automotive parts labour force in this community. In all four communities, a disproportionate number of immigrants from Asia and South East Asia are employed in the auto parts industry. The proportion of women employed in the automotive parts sector tends to be higher than in automotive assembly. The proportion of women employed in auto parts has increased between 1981 and 2001, although most of this increase occurred between 1981 and 1991. Since 1991, when employment in the automotive parts sector expanded exponentially in Canada, and in our four communities, the proportion of women employed in the industry has remained steady at about 1/3 of the workforce. In aggregate terms, this means that a growing number of women are employed in this sector. Jobs in the automotive parts sector are good jobs for women. They tend to be full-time, permanent jobs that pay wages considerably higher than what women can earn elsewhere. Stratford, which has the highest proportion of women employed in this sector, is especially striking in this regard. Women employed in the automotive parts sector earn almost $9000 or 25% more than the annual average income women earn from all sectors. The education level of auto parts workers has increased steadily over the twenty years from 1981 to 2001. A declining proportion of workers have less than high school while the number with some post-secondary education has increased dramatically. Between 40 and 50% of the labour force in the four communities under investigation have either University or other post-secondary education. The automotive parts industry is able to attract a workforce with such high levels of education and training, in large part because of the high wages and steady full-time hours of work. At the same time, continued widespread accessibility of University and College education to the population owing to the well-developed public education system in Canada, combined with Canada’s immigration policy that prioritizes the immigration of highly skilled workers ensures the availability of a highly educated workforce. Two of the four communities we investigated, Guelph and Windsor, had a competitive advantage over the communities of Brantford and Stratford due to the tight economic synergies they were able to build with Universities and Community Colleges in their own communities. Local governments were able to work with these education institutions to build greater capacity for innovation, the effect of which was to position both of these communities as leaders in Advanced Manufacturing. These relationships and capacities are likely to continue to have long-term benefits for these communities. Yet, recent changes to community college practices may broaden the range of communities who can build such synergies and positive economic spin-offs. In more recent interviews with auto parts managers, we have noted that Community Colleges, occasionally in partnership with Universities, are willing increasingly to go into smaller, often rural communities to offer tailor made education courses to particular workforces, upgrading a range of skills from English as a Second Language to more technologically sophisticated skills. Continued government funding of the education sector, a commitment by post-secondary institutions to long distance and


flexible learning strategies and building the appropriate institutional capacity at the provincial and local levels are likely to be critical variables in the sustenance of Ontario’s comparative advantage in the automotive industry.


Tables NOTE: Unless otherwise specified, statistics on local communities come from the above cited special run of Census data. Table 1: Selected Community Labour Force Statistics Location Brantford Stratford Guelph Windsor Total Labour Force 44,540 16,645 60,585 105,365 Males 23,260 8,640 31,440 57,225 Females 21,280 8,005 29,145 48,140 Total Population (15+) 67,890 23,670 84,120 166,180 Employment Rate (%) 93.2 95.2 94.7 92.5 Unemployment Rate (%) 6.8 4.8 5.3 7.5 Participation Rate (%) 65.6 70.3 72.0 63.4 Manufacturing Labour Force 12,220 4,900 15,460 29,145

Source: Statistics Canada, 2001 Table 2: Auto Parts Labour Force by Community by Census Period 1981 1991 1996 2001 Brantford 590 565 495 1 370 Stratford 1 330 2 205 2 995 2 965 Guelph 265 1 075 2 590 6 735 Windsor 8 315 7 630 11 615 16 885

Source: Canadian Census data, 1981, 1991, 1996, 2001. Special run by Yates research team.


Table 3: Annual Average Income in Motor Vehicle Parts and Accessories, Total Manufacturing Industries, and Total Provincial Labour Force, 2000

Annual Average Employment Income (All

Sectors)

Annual Average Employment Income Parts and Accessories

Industries NAICS 3363

Annual Average Employment Income

Manufacturing Industries

NAICS 31-33

Men Women Men Women Men Women 35 562 44 725 41 782 Ontario

43 113 27 201 50 120 31 750 47 273 29 255

30 031 38 043 37 732 Brantford 36 919 22 483 41 713 34 373* 42 020 26 412

30 739 35 636 36 549 Stratford

37 039 23 897 38 635 32 086 39 442 31 098

34 160 36 638 49 970 Guelph 41 995 25 686 40 257 29 282 45 692 30 445

38 158 54 196 52 903 Windsor

48 051 26 551 60 502 36 830 58 666 34 692 Source: Statistics Canada, 2001


Table 4: Hours of Work and Annual Weeks Worked in Auto Parts Industry by Community,

2001

Source: Statistics Canada, 2001

Ontario Total (All Economic

Sectors)

Brantford 3363

Stratford 3363

Guelph 3363

Windsor 3363

Percentage Working a Min of 40 Hours

33.3 62.6 67.3 59.7 49.3

Men Women 36.0 30.1 60.5 66.7 65.3 69.7 54.6 69.2 45.6 60.1

Percentage Working 41-49 Hours

11.0 14.0 16.3 13.0 22.9

Men Women 13.6 8.5 13.2 16.7 16.3 16.4 22.5 14.1 24.7 17.8

Percentage Working 50 Hours or More

17.9 19.7 7.4 13.0 19.7

Men Women 24.9 9.9 19.7 0 10.9 3.3 15.4 8.3 22.8 10.5

Average Hours Worked 38.8 42.8 41.6 41.9 44.5

Men Women 43.7 41.0 43.3 41.4 41.9 41.1 42.3 41.1 45.4 42.1

Average Weeks Worked 46.5 47.7 47.4 47.8 48.3

Men Women 48.3 46.9 47.4 48.4 48.5 46.1 48.1 47.2 48.8 46.9


Table 5: Women as a Percentage of Auto Parts Workers by Community and Census Period

1981 1991 1996 2001 Brantford 77.1 54.9 52.5 29.2 Stratford 37.2 45.1 46.7 42.8 Guelph 22.6 34.9 31.8 30.7 Windsor 11.9 27.6 26.3 27.9

Source: Source: Canadian Census data, 1981, 1991, 1996, 2001. Special run by Yates research team.


Table 6: Immigrant Labour Force by Community and Length of Residency, 2001

Source: Canadian Census data, 2001. Special run by Yates research team.

Ontario Brantford Stratford Guelph Windsor

Total NAICS 3363 Total

NAICS 3363

Total NAICS 3363 Total

NAICS 3363

Total

NAICS 3363

Employed Labour Force 5,252,735 92,120 37,450 560 19,55

0 2,065 65,485 5,045 143,575 13,445

Employed Immigrant Labour Force 1,502,630 32,660 5,180 65 1,950 230 14,940 2,535 28,445 3,710

Immigrant Labour Force Arrived Between 1991-2001

465,835 10,050 980 25 330 65 4,310 1,110 8,235 940

Percentage of Labour Force Immigrated Between 1991-2001

8.8 10.9 2.6 4.4 1.6 3.1 6.5 22.0 5.7 6.9


Table 7: Highest Level of Schooling as a Percentage of Autoparts Labour Force by Community and Census Period 1981 1991 1996 2001 Brantford Less than Secondary School Graduation Certificate 66.6 49.6 46.5 25.7 Secondary School Graduation Certificate 18.0 17.7 21.2 19.4 Trade Certificate or Diploma 2.6 1.8 4.0 4.4 Some University 1.7 14.2 7.1 15.4 Other Non-University 11.1 16.8 22.2 35.5 Stratford Less than Secondary School Graduation Certificate 53.4 49.1 39.0 30.9 Secondary School Graduation Certificate 13.9 18.6 22.9 25.6 Trade Certificate or Diploma 7.1 3.4 4.1 3.2 Some University 7.9 6.8 9.8 12.7 Other Non-University 17.7 22.1 23.7 27.7 Guelph Less than Secondary School Graduation Certificate 56.6 48.6 34.4 27.3 Secondary School Graduation Certificate 13.2 13.1 18.9 18.8 Trade Certificate or Diploma 5.7 5.6 3.9 4.8 Some University 5.7 13.6 12.2 17.8 Other Non-University 20.8 19.2 30.3 31.4 Windsor Less than Secondary School Graduation Certificate 42.8 34.3 26.8 20.5 Secondary School Graduation Certificate 12.8 21.6 21.2 23.3 Trade Certificate or Diploma 5.8 3.5 4.8 3.4 Some University 14.0 16.1 18.0 21.0 Other Non-University 24.6 24.6 29.3 31.8

Source: Canadian Census data, 1981, 1991, 1996, 2001. Special run by Yates research team.


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