A reality check for Hillary Clinton
Hillary on Medicare
Hillary Clinton, meet Canadian unit labour costs.
The Democratic presidential candidate argued this week that good American jobs were going to Canadians because of lower health care costs.
But medicare isn't enough any more to make Canadian labour a good deal for American employers. The culprit is the Canadian dollar.
Factoring in the loonie
Over the past five years, Canadian workers have become relatively more expensive than Americans, when the currency and amount of production is taken into
account.
Unit labour costs (which measure the cost of production per worker, factoring in both wages and productivity) in the United States have risen a total of 2 per cent in the past five years. From an American point of view, unit labour costs in Canada have skyrocketed a total of 52 per cent, once the loonie is converted to U.S. dollars.
Ms. Clinton zeroed in on the scheduled closing of a Ford
assembly plant in Wixom, Mich., which is shifting some production to St. Thomas, Ont.
"It's a job issue as well as a health issue," she argued. "We've got to get those health care costs under control because that's one of the excuses people use for moving jobs."
However, while the St. Thomas plant may have added some of the Wixom production, St. Thomas actually cut jobs by eliminating one out of two shifts, and its own future is precarious.
So, deal or no deal?
Indeed, it makes little economic sense for American companies to be shifting either production or employment to Canada these days, says David Wolf, chief economist at Merrill Lynch Canada. Not only are Canada's unit labour costs soaring in U.S. dollar terms, but Canada's economy is generally running at full capacity, and prices are generally rising. In the United States, the dynamic is the opposite. The American economy has spare capacity, inflationary pressure is diminishing, and unit labour costs are only creeping ahead.
"It used to be that Canadian workers were much, much cheaper than their American counterparts. That's not as true any more," Mr. Wolf said.
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