Canadian Elections: No thanks, we'd rather not vote

Updated December 10th, 2012

Now that Canadians are being subjected to further election irregularity news relating to potential fraud during the 2011 election, I thought I'd take a look at voter turnout since Confederation.  Fortunately, the information is readily available on the Elections Canada website.

There have been 44 elections and referendums since Confederation in 1867.  Here's a table showing the date of the election (note that early elections took place over a period of weeks or months), the population of Canada that year, the number of electors on the list, the total votes cast and the voter turnout as a percentage:

According to the Voter turnout hit a low of 44.6 percent for the referendum of September 29th, 1898.  This is a wee bit misleading because this was a referendum rather than an election.  As history goes, this referendum is rather interesting because it was held to determine whether Canada should impose Prohibition and it ended up being a turning point in the issue of the temperance movement in Canada.  In this referendum, the Prohibition side won but Prime Minister Laurier refused the will of the people who voted 51 percent in favour of Prohibition because such a small majority of the total number of adult Canadians (51 percent of 44.6 percent) were actually in favour of Prohibition.  It’s interesting to see how the Prime Minister of the day actually stepped in to overturn what a slim majority of voters wanted.

Back to the subject at hand.  In regular elections, voter turnout hit a high of 79.4 percent in the election of March 31, 1958 and a low of 58.8 percent in the election of October 14, 2008.  Here is a map from Elections Canada showing the percentage of voter turnout by riding for the May 2011 election:

In 2011, the region with the highest overall voter turnout was Northern New Brunswick and Prince Edward Island.  The province with the lowest voter turnout was Alberta, particularly the north and east portions of the province.  I find this particularly interesting because Alberta is the home province to both the Reform/Conservative movement and Canada’s right-leaning Prime Minister.

While voter turnout in some elections during the 1890s and 1920s was in the mid- to low-60s, the trend of voter turnout since the 1980s has been strongly downward.  Here's a chart showing average voter turnout for all elections by decade (excluding the 2011 election) since the 1950s:

There is no doubt that the trend of voter engagement in the process of electing Canada's federal governments is headed lower, from a peak of 77.2 percent over 4 elections in the 1960s to a low of 61.3 percent in the new millennium when the 2011 election is included.  While many Canadians are griping because of the frequency of federal elections in the last decade (2000, 2004, 2006, 2008 and 2011), things were no better in the 1960s when four elections were held in the years 1962, 1963, 1965 and 1968.  In fact, over a period of less than 10 months between June 18, 1962 and April 8, 1963, there were two elections and yet 79 percent of eligible voters exercised their franchise in both elections, among the highest in Canadian political history.  I can hardly imagine that happening today.

According to the statistics, in the November 1988 election, 13.281 million Canadians voted out of a total country-wide population of 25.309 million with a total of 17.639 million eligible voters.  In the May 2011 election, 14.823 million Canadians voted out of a total country-wide population of 31.612 million with a total of 24.258 million eligible voters.  Despite the fact that over the 30 year period, the number of eligible voters rose by 6.619 million for an increase of 37.5 percent, only 1.542 million additional Canadians participated in the voting process for a pathetically small increase of only 10.4 percent.

The problem with low voter turnout compounds when Canada has a succession of minority governments.  Here is a table showing the Official Voting Results for the 2011 election by Party:

The Conservatives received 39.4 percent of the valid votes cast.  Since only 61.1 percent of Canadians voted, they actually received the approval of only 24.1 percent of eligible Canadian voters and, with that insignificant approval rating, went on to form a majority government.  

When a Party can run Canada after receiving approval from less than one-quarter of the country's eligible voters, the political system is showing unmistakable signs of stress.  Sure, we often hear the mantra "If you don't vote, you can't complain" but the unfortunate part of that is that it doesn't matter whether we vote or not, our MPs and their leaders seem to develop a case of impaired hearing when they arrive on Parliament Hill.  What is happening is that a subset of a minority of Canadians is ruling the country.

I honestly don't know how to solve the problem of low voter turnout.  Perhaps part of the apathy we feel is because we sense that it really doesn't matter what we think, our elected officials will press forward with their agenda despite our protests.  Perhaps we have become disillusioned about our country's political process when we watch snippets of Question Period where we see grown men and women acting like elementary school children in a playground at recess (my apologies to elementary school children everywhere for the comparison) with the vague notion of scoring a few political points at the expense of the other.  Perhaps its the "I must win so you must lose" mentality that has pervaded the House; rather than seeking compromise, MPs and Ministers seem to go out of their way to create controversy and dissent.  

It is such a shame that Canadians are becoming increasingly disillusioned, disenfranchised and disappointed with Ottawa.  More is the shame because it is our inattention to the political process that is allowing the federal governments of both major Parties to foist their disagreeable agendas on Canada in an attempt to remake the country in their own image. 

In closing, I would ask one thing of Canadians.  Please voters, pay attention to what is happening in Ottawa and involve yourself in the process and remember that Canada does not belong to any particular political party, politician or Prime Minister.  Paying attention to our political process is the only way that we can keep our Canada from slipping away.

Fiscal Space and Fiscal Path - How long before sovereign debt reaches crisis levels?

The Comeback America Initiative (CAI), a non-partisan, non-profit organization that is dedicated to fostering discussions around fiscal challenges and solutions.  CAI recently released the findings of its Sovereign Fiscal Responsibility Index (SFRI), a "new fiscal indicator that incorporates a wide range of fiscal, economic and political factors into ranking a country’s fiscal responsibility and sustainability."  This Index provides an insight into the fiscal sustainability of countries around the world by incorporating a wide range of important factors.  The SFRI is the result of a Master's Thesis completed by a team of Stanford University graduate students under the guidance of David Walker, former Comptroller General of the United States.  The index was created to illustrate the current fiscal standing of the United States, where it is headed and how the United States compares to other nations around the world in the area of fiscal responsibility and sustainability.

Here's a quote from one of the team members:

"For many years, people have argued that U.S. government debt is the safest investment out there. Similar arguments were used until 2008 for AAA companies and home prices. We need to understand as a country that while one cannot predict a fiscal crisis, it could be just a few years away if we do not act soon. I was stunned as our team conducted our analysis to find that in only two to three years, the U.S. overall fiscal score will be the same as Ireland or Portugal today.

On the other hand, to see the progress of Australia, New Zealand and emerging markets like Brazil and Mexico was great. Through disciplined spending and legal reforms, these countries have put themselves on solid ground. It shows that countries can change their future through political will. I hope that the United States acts before we hit a painful crisis, rather than after."

The SFRI was constructed by defining each country's sovereign debt level and how much debt that particular country could safely manage by incorporating both qualitative and quantitative metrics.  The results of the SFRI show how countries compare in fiscal responsibility and sustainability.

The SFRI defines fiscal responsibility as a measure of government controls on spending and debt level management.  Three factors are considered; a government's current debt level, the sustainability of that debt over time and the degree of transparency and accountability for their fiscal decisions.  The SFRI also considers the existence of institutions, regulations, procedures and enforcement that regulate the budget process.

Once the SFRI is derived from this information, it has three major components; fiscal space, fiscal path and fiscal governance.  For the purpose of this posting, I'm just going to look at two of these components, fiscal space since it is a really fascinating concept that I've not seen before and fiscal path.  I may post on the overall rankings of each country in the future but including that data in this posting made for a very long read.

Let’s deal with fiscal space first.  Fiscal space is basically answering the question "how much debt is too much?".  It represents the amount of additional debt that a given nation can issue before the level of debt creates a crisis, in other words, the difference between the current debt and the debt crisis level which is termed the "debt ceiling".  The concept of fiscal space is an estimate rather than a hard number since each nation's economy has varied ability to sustain high levels of debt.  The researchers used a term "weighted-average debt level" which consists of gross sovereign debt, intra-governmental debt holdings such as social security, sub-national government debt and public debt held by foreigners to level the playing field between nations so they could get a more complete look at the total amount of a country's debt.  Their overall analysis of the nations in the study show that nations should maintain a space of at least 50 percent of GDP between their debt level and their debt ceiling to reduce the risk of a fiscal crisis.  Nations such as Japan, Ireland, Portugal and Greece all have current fiscal space that is less than 50 percent of GDP.

Here is a bar graph showing the fiscal space for the nations involved in the study highlighting the 50 percent of GDP danger point:

The nations with the greatest fiscal strength in terms of fiscal space are Chile and China with space of 193.3 percent and 184.9 percent of GDP respectively.  Australia and New Zealand are also in very good shape with space of 168.2 percent and 163.6 percent of GDP respectively.  Canada comes in right in the middle of the pack with fiscal space of 106 percent of GDP.  The United Kingdom is in the bottom third with fiscal space of 90.8 percent of GDP and the United States is in the bottom quartile with fiscal space of 62.4 percent of GDP.  Nations in danger of being overwhelmed by their debt include Japan, Belgium, Ireland, Portugal, Italy, Iceland and Greece.  Many of these nations have been in the news lately because they have or will require restructuring of their sovereign debt. 

Fiscal path is simply a projection of future levels of sovereign debt for a given nation.  Nations with relatively low overall debt today but rapidly rising debt levels may be on a poorer future footing than countries that have high but very slowly rising debt.  By using projections for future government spending from the IMF, the study projects sovereign debt for each year into the future up to the year 2050 and then estimates how many years it will be before a country reaches its debt ceiling.

Here is a bar graph showing the fiscal path for the nations involved in the study:

Many nations have over 40 years of time before they hit their debt ceiling once again noting that the study only projected out to the year 2050.  The nations with the longest fiscal path are those developing nations with the fastest growing economies and those nations that have already implemented fiscal reform that limits government spending.  These include Chile, China, Sweden, Australia, India, Korea and Canada among others.  New Zealand is near the top with 38 years, the United Kingdom comes in at 27 years and the United States comes in at 16 years before these countries reach their debt ceiling.  Several nations hit their debt ceilings very soon, among them Greece (already there), Portugal and Japan both at 5 years, Ireland at 6 years, Italy at 7 years and Belgium at 8 years.

What I find particularly interesting about this study is that so much hinges on GDP growth.  Should the world hit another major economic speed bump (i.e. The Great Recession Part 2), all of these countries will have to take on additional debt in an attempt to stimulate their local economies.  The addition of debt and the coincident shrinking of national economies will work together to shorten the time before many of these nations reach their debt ceilings.

The authors of the study feel that time is of the essence, particularly for the United States.  Their analysis suggests that the United States could well be only three to five years away from a debt crisis like the one that is currently facing the PIIGS nations.  They note that tax levels within the most fiscally secure countries varies widely with Sweden having high rates and Chile having low rates meaning that national fiscal responsibility is not related to a given country's level of tax revenue, a lesson which could be learned by Washington.  Nations, particularly in Europe, where demographic changes are anticipated as baby boomers pass into their expensive years should be reducing deficits sooner rather than later to prevent long term fiscal pain.

Let's hope that at least someone in government reads this report and decides to make positive changes now before we read about additional and even more massive sovereign debt near defaults in the future.

Canada Election 2011: Is there a difference between a coalition and co-operation?

This weekend, the mainstream media finally got around to covering an issue that has been commented on many times by those who take the time to express their opinions as commenters in the online versions of Canada's newspapers.  I don't know how many times I've read the comment about Mr. Harper's attempt to form a coalition back in 2004 when Prime Minister Martin led a minority Liberal government but reference to this letter appeared very frequently without any physical evidence that it actually existed.  Finally this weekend, Gilles Duceppe, leader of the Bloc Quebecois brandished a copy of the letter for the media.

Here is what the letter addressed to Canada's Governor General, Adrienne Clarkson and dated September 4th, 2004 said:

Interestingly enough, now that the Canadian public has been presented with a physical copy of the previously elusive letter, the Conservatives have been forced to respond.  They now maintain that the letter did not constitute a coalition agreement because it does not use the word coalition.  According to the CPC, the supposed intent of the three parties was to seek "co-operation".  You say tomato, I say tomahto.

The Conservatives have been using the Liberal-Bloc-NDP coalition of 2008 as one of their key campaign platform issues in an attempt to scare Canadians from what they term the "separatist coalition" bogeyman.   As some of us are aware, and since the Conservatives so dearly love to dredge up history, Mr. Harper, as President of the National Citizens Coalition, penned this letter which has become known as the "Firewall Letter" to Alberta Premier Ralph Klein advising that "...It is imperative to take the initiative, to build firewalls around Alberta, to limit the extent to which an aggressive and hostile federal government can encroach upon legitimate provincial jurisdiction.".  Apparently Mr. Harper, it takes a separatist (NCC President, Conservative or Reform) to know a separatist (Bloc Quebecois).

Late last week, the National Post so kindly published this article where they noted that the 2008 document signed by Michael Ignatieff et al in their attempt to form a coalition had been removed from the Liberal Party website.  The Post went so far as to post a link so that their readers could still access the document.  I'll do one better – here’s the text from the entire document:

“December 1, 2008

An Accord on a Cooperative Government to Address the Present Economic Crisis

This document outlines the key understandings between the Liberal Party of Canada and the New Democratic Party of Canada regarding a new cooperative government.

1. Role of caucuses

The Liberal and NDP caucuses will continue to meet as distinct caucuses. They will receive briefings and be consulted as appropriate. Both are entitled to offer advice to the government. The two caucuses may meet jointly as agreed from time to time to jointly address issues. The caucuses will sit next to each other on the government benches.

2. Cabinet

Nothing in this Accord is intended to diminish or alter the power and prerogatives of the Prime Minister.

The Prime Minister will be the Leader of the Liberal Party of Canada. The Minister of Finance will be appointed from the Liberal caucus. The cabinet will be composed of 24 ministers plus the Prime Minister. Eighteen of these ministers will be appointed from within the Liberal caucus.Six of these ministers will be appointed from within the NDP caucus, plus six Parliamentary Secretaries, sworn in as Privy Councillors, will also be named from the NDP caucus. In the event the Prime Minister chooses to appoint a larger cabinet, the NDP proportion will be maintained.

The specifics of these cabinet appointments will be made by the Prime Minister in appropriate consultation with the Leader of the NDP.

The rules and practices of cabinet confidentiality and solidarity will be strictly maintained. Normal processes of cabinet appointments and governance in the Canadian federal government will be respected. The cabinet is jointly and collectively accountable to Parliament for its work, including in daily question period.

3. A “no surprises” approach

Within the limits of common sense and the needs of cabinet government, the two parties agree they will work together on a “no surprises” basis.

Furthermore, upon its formation, the government will put in place a permanent consultation mechanism with the Bloc Québécois.

4. Appointments

Both parties are committed to restoring the integrity, transparency and efficiency of the appointments process in the Public Service and in federal bodies like the Supreme Court, the Senate and Commissions like the CRTC.

The Prime Minister will consult the Leader of the NDP as appropriate on appointments.

5. A standing managing committee of the Accord

A standing managing committee of the Accord, chaired by the Prime Minister, will be struck.

It will be composed of the Prime Minister, the Leader of the NDP, and such other persons as the leaders deem appropriate from time to time.

The committee will meet regularly to ensure the good order of the Accord; to deal with key issues that have arisen; to consult on key appointments; and to resolve any disputes which might arise from the Accord (for example, by referring issues

relating to the Accord to a trusted committee of experienced, distinguished Canadians).

6. Term of this Accord

This Accord will expire on June 30, 2011 unless renewed. Agreed on December 1, 2008.

Hon. Stéphane Dion Leader, Liberal Party of Canada

Hon. Jack Layton Leader, New Democratic Party of Canada”

Thanks to Scribd, the original document signed by all Liberal, Bloc and NDP MPs is available here.

There's no doubt about it, the Liberals, NDP and Bloc were going to form a coalition but it is interesting that they too, use the word “co-operative” when referring to forming the government.  I also find it fascinating that, in the interest of journalistic balance, the Post did not even mention the 2004 letter in its coverage, isn’t it?  Perhaps that’s because it doesn’t make for a fun news item when both sides are guilty of the same thing!

On the National Post website, many readers (quite frequently the same ones over and over again) post their comments on various news articles, most particularly those of a political nature.  After the above mentioned article, several commenters (obviously left-leaners) posted comments referring to the 2004 "co-operation" document as noted above.  It was interesting to read the rebuttals from those who are quite obviously leaning to the right.  Here's one:

"That was not a coalition doc lad it was a letter of interest to the GG. Check the UK for a real coalition."

It really is interesting to observe how history, even when presented in all of its glory, can be rewritten according to what one wants to see depending on one's political leanings, isn't it?

In closing, I don't know how many of you have read George Orwell's marvelous novel "Nineteen Eighty-Four".  While it is a work of fiction, it is a prime example of life imitating art.  In the book, the "Party" rules Oceania, one of three world super-states, with an iron fist.  Oceania is at constant war with other groups of nations and the Party uses their propaganda machine as a means of controlling their citizens.  Every so often throughout Oceania's history, their enemy becomes their ally and their former ally becomes their enemy.  The Party has formed the 'Ministry of Truth" whose purpose is to control information (propaganda) and to destroy and rewrite history to reflect the state's current situation.  This historical revisionism is used to control the citizens of Oceania since they very rapidly forget the past truth when presented with a newer version.

In many ways, I see rather striking similarities between what is happening in Canada's political sphere today to what George Orwell so profoundly recorded in his novel.  In the case of the 2004 and 2008 documents, the Conservatives (and to a lesser extent the Liberals) are rewriting history to their own advantage.  The Conservatives pretend that the 2004 document was not an attempt to form a coalition even though that was quite clearly its intent had the Governor General agreed to their request and have pretty much denied or, at the very least, ignored  its existence.  On the other hand, the Liberals have removed the 2008 agreement from their website in a desperate attempt to distance themselves from their own past.  As if that weren’t enough, they’ve posted a copy of the 2004 Conservative document.  One can only conclude that both parties are showing nothing but contempt (pardon my use of that much over-used word) for Canadian voters; in their estimation, they can invoke historical revisionism to cajole voters into swallowing their propaganda simply because we aren't smart enough to think for ourselves.  Our best option is to prove them wrong and to make them account for their past actions because we're not so stupid as to forget what they've been up to.

Mouseland - A Commentary on Canada's Political Scene

Now that it appears that Canadians are about to be forced to hold their noses, pick up a pencil stub and mark an "X" beside the name of a person that may or may not be qualified to act as their representative in Ottawa, I thought I'd take a look at Canada's political scene from non-party standpoint.  I firmly believe that Canada badly needs a new centrist, populist, non-geographically-specific grassroots movement with a vibrant and electable leader who has the best interests of all of Canada and Canadians at heart.  This leader must be palatable to average Canadians and he or she must have a vision for change because Canadians have had enough of the "system" as it has existed for decades.  Unfortunately, the four leaders of the major Parties that we have today are driven to seek office with the sole aim of imposing their own personal and political agendas and beliefs on Canada and Canadians.   This new party should not be dogmatically centrist, rather, it should adopt policies from both the right and the left of the political spectrum so that Canada has a firm and stable  foundation for the future.

Before I rant any further, let's take a step back in time.  In 1944, Tommy Douglas, the first CCF/NDP Premier of Saskatchewan and founder of Canada's universal health care system, gave his famous "Mouseland" speech. Historically, Saskatchewan had been governed by an endless succession of Liberal and Conservative/Progressive-led governments that did not necessarily have the best interests of Saskatchewan residents at heart.  Rather, like today's politicians in Ottawa, they were looking out for themselves and doing everything in their power to ensure that they kept the system that granted them that control, in place.  In brief, in his speech, Tommy Douglas describes a place called Mouseland where the mice had a parliament that elected big, fat, black cats every year.  Now on with the story.

Those poor, little, uneducated mice elected cats year after year to represent them and took the attitude that the cats weren't all that bad. They passed good laws, well, let's just say that they were good laws if you were a cat! Eventually, as time went on, things became so difficult for the mice that they had no choice but to vote out the black cats and vote in the white cats. The white cats promised change and change came. Things got even better for the white cats and even worse for the mice. As time and elections passed, the poor, little mice voted time and time again, replacing white cats with black cats and then black cats with white cats ad nauseum. Finally, the mice came to the realization that their problem wasn't the colour of the cat, the problem was that they were governed by cats who had only cat interests at heart. Suddenly, like the conversion on the road to Damascus, the mice had an idea! They realized that they needed to elect a government made up of mice. A government that was composed of cats of any colour was never going to look out for the interests of the mouse population.

Welcome to our world!

In Canada (and for that matter, the United States with their two party Democrat and Republican system), we have a similar political situation to Tommy Douglas' Mouseland. We have been governed by a succession of Conservative (Progressive or by any other moniker) and Liberal governments for the past 143 years.  A total of 40 general elections have been held since Confederation; 16 of those elections were won by the Conservatives and 23 elections were won by the Liberals.  In 1917, the Unionist Party, a coalition (that most dreaded of words!) of former Conservatives and former Liberals won the only election in Canadian history not taken by one of the two major political parties.  The appearance of the grassroots driven Reform Party on the nation's political scene as official opposition in the 1997 election appeared to be a welcome breath of fresh air, unfortunately, Reform policy was driven by Western Canadian alienation and far to the right agenda that simply were not palatable to the rest of Canada.  In order to make inroads into Central Canada (Ontario to be specific) where the Reformers needed seats to form a majority government, the Reform Party abandoned its grassroots-based, anti-Ottawa establishment agenda and merged with the remains of the Progressive Conservative Party and ended up becoming a right-leaning sellout to the political mainstream. 

While the Liberals and the Conservatives repeatedly campaign on platforms that stress their differences, in fact, it is readily apparent that the differences are superficial at best.  Each party seems to adopt whatever policies the other party has proposed as a means to gain votes and retain power.  By emphasizing these superficial differences in policy, they seek to divide and conquer Canada.  One need look no further than the comments sections found in online major Canadian newspapers (i.e. the National Post (leans right) and the Globe and Mail (leans left)) to see how successful Canada's politicians have been at dividing the country to their personal advantage.  The vitriol that is posted is, quite amazingly, quite often hate-filled and partisan to an extreme (for example, the word "libtard" seems to appear frequently).  What is rather frightening is that so many Canadians have been duped into thinking that those who lead Canada's current crop of nationwide political parties actually care what the sweaty, unwashed masses think or what they want.  As voters, we should be asking ourselves, "When was the last time that I tried to contact my MP, one of the Opposition Leaders or the Prime Minister about any given issue that was important to me?".  If you were fortunate enough to actually get a response, even from your own MP, my guess is that it was an automated email response, the "cyberpoliticians" answer to a form letter that only addressed your concerns in a superficial way.  As well, what I find particularly galling is that politicians treat Canadians as though they haven't the intelligence to know what is good for them.  Perhaps George Orwell was decades ahead of his time when he wrote about the sweaty masses of the proles who were only interested in the lottery and other superficial matters and didn't have any intellectual ability to deal with matters of "The Party".

When I started this blog just over one year ago, I named it "Viable Opposition" because the concept of a better and more representative political system is something that has been on my mind for many years.  As a social liberal (I believe in the need for a social safety net for the legitimately needy in our society) and a fiscal conservative (I believe in responsible government spending and balanced fiscal policies), I have found that there is no current political party that reflects my preferences and, from discussions with many people, I know that there are many politically alienated Canadians out there.  One need look no further than the voter turnout records for the past 8 elections to see that the percentage of Canadians that vote in a Federal election has dropped from 75 percent to just under 59 percent.  Voters are feeling increasingly disenfranchised and disengaged from the political process because they realize that no matter who they vote for, they are just voting for another "cat".   As the electorate, we can only choose cats, there are no other viable options.

Canadian history has shown that grassroots driven, third party alternatives are viable and are necessary to balance political power in a two party state. We need look no further than the rise of the CCF/NDP in Saskatchewan during the 1930's and 1940's. We have another great example in Alberta with the recent rise of the Wildrose Alliance Party under Danielle Smith where grassroots dissatisfaction with Premier Ed Stelmach has led to the birth of a new and viable alternative.  Admittedly, both of these examples of political rebirth are at the provincial level, but there is no reason that centrists shouldn't have a federally-based political choice of their own that, in some way, doesn't involve the re-election of cats.

It is time for the mice to take charge of "Mouseland".  It's time for a new viable opposition party in Canada.  Meanwhile, please don’t let those “in charge” divide Canada and Canadians for their own devious purposes.

References:

These links will take you to the history and written versions of Tommy Douglas's "Mouseland" speech as well as an audio file of the speech. I would urge you to read or listen to this amazing speech.

Mouseland Speech - Text Version

Mouseland Speech - Audio Version

The De-unionization of America

I stumbled on this interesting Economic News Release "Union Members Summary" from the Bureau of Labor Statistics released in January 2011 as part of my research for another posting.  In this report, the BLS looks at the status of union membership for 2010 and compares current rates of unionization to past rates as well as examining the rate of unionization among different sectors of workers.  Not only is the topic of personal interest, I thought that the topic of unionization was particularly pertinent given the recent actions in Wyoming and Ohio.

In 2010, the percentage of American workers who were members of a union dropped to 11.9 percent from 12.3 percent a year earlier.  Raw numbers show that the number of workers that belonged to unions dropped by 612,000 over the year to 14.7 million.  This is down substantially from 17.7 million union workers in 1983, the first year for which comparable data are available and considering the growth in the workforce, the statistics for unions look even worse.  In the previous year, the number of union members fell 771,000; much of the decline was due to the loss of hundreds of thousands of jobs in both the manufacturing and construction industries due to the Great Recession.

Here is a graph showing the decline in the percentage of unionized workforce over the past 10 years:

Here's a graph showing the rise in the number (in thousands) of employed Americans over the past 10 years (including the decline during the recession of 2008 - 2009):

Note that in 2001, there were as few as 136,047,000 individuals in the American workforce.  This rose to a peak of 146,584,000 in November of 2007.

Here is a table from the Population Reference Bureau showing the growing number of workers in the American workforce over the past 60 years:

In the United States, the unionization rate rose markedly in the period between the beginning of the Great Depression in 1929 and the advent of the Second World War in 1939.  In 1928, 9.9 percent of non-agricultural workers in the United States were unionized.  This rose to 20.7 percent in 1939, peaked at 31.4 percent in 1947 and dropped to 26.4 percent by 1975.  This is in sharp contrast to many European countries where union memberships have either grown or remained steady at levels that are far higher.  Here is a chart showing the penetration of unions into the workforce of other nations from 1880 to 1985:

The decline in unionization in the United States really took hold in the 1970s for several reasons.  Rising unemployment during 1970s economic stagflation, increased international competition and movement of jobs to the less unionized southern states and rural areas of America undermined the ability of unions to negotiate on behalf of workers.  By the 1990s, unionization rates had fallen to the level where unions had little impact on either the working conditions or wages of American workers.  Here is a graph showing the changes in the rate of unionization for two sectors of the U.S. economy as well as the entire workforce from 1930 to 2003:

Note how the 2010 unionization rate of 11.9 percent is comparable to the level back in the mid-1930s.

Back to the BLS statistics.  The union membership rate for public sector workers is far higher than the membership rate for those employed in the private sector.  The rate for public sector workers is 36.2 percent compared to a paltry 6.9 percent for private sector workers.  Within the public sector, local government workers led with a 42.3 percent membership rate; this includes occupations such as firemen, police, teachers etcetera.  Overall, among occupational groups, education, training and librarians had the highest unionization rate at 34.1 percent.  Of the total of 14.7 million unionized labourers in the United States, 7.6 million public sector workers were union members.  In the private sector, the lowest unionization rates occurred in agriculture (1.6 percent) and financial activities (2.0 percent).  Again, of the total of 14.7 million union members, only 7.1 million of those working in the private sector belonged to a union.  When comparing the number of private sector union members to those in the public sector, keep in mind that there are five times more workers in the private sector than in the public sector.

Union membership was slightly more pervasive for men (12.6 percent of the workforce) than for women (11.1 percent of the workforce).  This rate has narrowed markedly since 1983 when there was a 10 percentage point difference between the two genders.  By age, union membership was highest among workers that were between the ages of 55 and 64 years of age with 15.7 percent of these workers being union members and was lowest among those who were between the ages of 16 and 24 at 4.3 percent.

Looking at workers’ earnings, those who belonged to a union had median weekly earnings of $917 compared to $717 for those not represented by unions.  Here is a chart showing the median weekly earnings of full-time wage and salary workers, both union and non-union, by occupation comparing 2009 to 2010:

It is interesting to note that the wages for certain occupations vary only slightly based on union membership whereas for others, for example construction, there is nearly a $400 weekly premium for being a union member.  Other studies, in particular the Cornell University publication "Union Membership Trends in the United States" have noted that the wage premium for union members is generally greater for less-skilled, less-educated occupations and that premiums have been falling from 21 to 23 percent in the 1970s to 14 percent by the years 2000 - 2001.

Union membership varies widely by state.  In 2010, the largest number of union members reside in California with 2.4 million union members and New York with 2.0 million union members.  Nearly half of the total 14.7 million members in the United States live in six states; California, New York, Illinois, Pennsylvania, Ohio and New Jersey.  Despite the fact that Texas has 1.9 million more wage and salary employees than New York, it had about one-quarter of the number of union members.  

One industry that has been particularly hard-hit by the decline in unionization is the automotive industry.    The former bastions of the United Auto Workers (UAW) have seen their heartland decimated by plant closings between 1999 and 2009; Michigan's motor vehicle and parts manufacturing declined by 72 percent, Ohio's declined by 58 percent, Indiana's by 48 percent and the overall nation saw a drop motor vehicle industrial activity of 50 percent.

Theories regarding the impact of unionization and de-unionization of the United States are almost as numerous as economists.  Some studies show that the wage premium causes lower profitability for employers and that this can result in lowered capital investment.  This is particularly critical during economic downturns when profits are under pressure and there is a large pool of unemployed workers to choose from when replacing workers.  Effects of unionization on productivity is also not conclusive; some studies conclude that productivity is higher in certain industries where unionization is pervasive and others conclude that restrictive work rules negatively impact the ability of management to reassign employees or implement new technologies.  During the Great Recession, it appears that one of the most highly unionized occupations was the hardest hit by layoffs.  The construction industry accounts for more than 10 percent of union members in the private sector, yet, it saw a drop in union membership from 14.5 percent in 2009 to 13.1 percent in 2010, particularly hard-hit was the non-residential construction sector.  Is it possible that the job cuts (and resulting drop in union membership) were deeper than they would ordinarily have been because of the union wage premium?

It is interesting to observe the massive changes in the American workforce over the past three decades.  Not only has the impact of unions diminished, hand-in-hand with weakened unions we see that real median wages have increased only marginally over the same time period.  With the jobless "recovery" after the Great Recession, it will be interesting to see how long it takes before America's unions regain their power, most particularly in the private sector.  With looming cost-cutting measures anticipated as part of deficit reduction, the negative effect on government employment at all levels may result in unions never recovering to the glory days of the 1950s and 1960s.

Shell's World of Energy - A Zone of Extraordinary Opportunity or Misery?

Now that seemingly endless increases in the price of oil are starting to make 2011 look like 2008 all over again, the mainstream media is covering the oil market on page one rather than somewhere back near the obituaries and the personals.  One story in particular caught my attention.

In early March 2011, the Telegraph carried a news item quoting the Chief Executive of Royal Dutch Shell Peter Voser who stated that the lack of investment by the oil industry over the past two to three years will be a big driver of higher oil prices.  Here's a quote:

"We may face a situation at one stage where supply cannot meet demand.  That's where OPEC spare capacity will help but we have to replace significant barrels because of natural decline over time."

Mr. Voser goes on to state that he has confidence that OPEC can supply the market with the 1 million barrels of oil per day that have been lost to the world's market due to the uprising in Libya.

"I think as OPEC has highlighted there is enough spare capacity to actually replace the shortage of oil out of Libya and it will over time balance itself again....once the Middle East calms down, the oil price will be in the area where it is determined by supply and demand."

These are most interesting words from the CEO of Europe's largest oil company.  They are particularly interesting when taken into context with Shell's "Signals & Signposts - Shell Energy Scenarios to 2050" publication released in mid-February 2011.

In this publication, Shell outlines energy scenarios that address the challenges facing the world both from an energy and a financial standpoint over the next four decades.  In particular, Shell examines how the Great Recession of 2008 - 2009 affected the world's energy markets now and in future decades.

The publication notes that the key driver for the world's economy and energy markets lies in world population growth.  As the populations of developing, non-OECD nations (think China and India who together make up about 43 percent of the world's total population) escape poverty, their demands for both energy and goods is increasing rapidly on both an individual and on a countrywide basis.  This is most likely going to lead to tensions in the world's energy supply systems.  Shell projects that the underlying global demand for energy could triple between the years 2000 and 2050 if the economies of developing nations follow energy use intensities that conform to historical patterns.  Shell also projects that technological innovation could reduce the demand for energy through greater efficiency by about 20 percent over the 50 year period and that rates of growth for the supply of energy could boost energy production by about 50 percent.  The projected difference between the somewhat diminished growth in demand and the increased growth in supply still leaves the world's energy market with a supply gap of around 400 EJ per year or about the size of the world's entire energy industry in the year 2000.  Shell terms this the "Zone of Uncertainty" or the "Zone of Extraordinary Opportunity or Extraordinary Misery".  To me, it sounds like the making of yet another Mad Max movie.

Here is Shell's graphic showing the Zone of Uncertainty:

The first issue facing the world's energy industry is volatility in the world's financial system.  Massive sovereign debt loads amongst western nations and concurrent rapid economic expansion amongst developing nations has put the world's fiscal situation on a tightrope.  This has led to the occurrence of both inflationary pressures and deflationary pressures at the same time, a rare phenomenon which makes central bank fiscal policy difficult and has increased volatility in the world's financial markets.  This has impacted credit to businesses which is having an impact on consumer spending and ultimately on GDP growth rates.  In 2008 - 2009, it was that fiscal uncertainty that led to a completely unexpected collapse in energy prices and a significant drop in the world's oil demand.  This uncertainty also led to a complete drying up of the world's corporate credit market making it very difficult for corporations to raise capital and expand their operations around the world.

On the demand side of the ledger, the contrast between the economies of the world's OECD nations and the world's developing non-OECD nations can also be seen in their current and projected energy use.  Demand for energy by the mature economies of the OECD nations is projected to dip by 2030 whereas demand by non-OECD nations is expected to nearly triple in that same time frame as their economies mature and they pass through their energy-intensive phase of development as shown here:

On the supply side, Shell projects that non-OPEC supply will likely decline over the coming years, but that new discoveries may offset natural production declines in mature fields.  Here is a graph showing the projected world oil supply picture to 2015:

In maturing non-OPEC fields, the use of new and expensive technologies to increase field productivity could come into play if prices stay high for prolonged periods of time.  Nonetheless, a given field can only produce for so long before production declines to non-economic levels.  Shell holds out great hope that Iraq will become a key player in supplying oil to fill the world's declining production profile.  Shell states that partnerships between national and multinational oil companies could double Iraq's output to between 5 to 6 million BOPD over the next decade and they state that Iraq claims that it can do even better, with Iraq forecasting that they could produce as much as 10 to 12 million BOPD.  While the thought is nice, the target has proven to be an illusion since the invasion in March 2003 in light of the ongoing sectarian violence and political instability in the country.  The report states that the key to price volatility will be OPEC's ability to bring its spare capacity online as prices ramp up to eliminate the perception of market supply - demand tightness.  Again. the thought is nice but, from this report by the United States Department of State shows, it appears that the Saudi's ability to act as the world's swing producer may be limited.

  

In closing, let's take a look at two of the world's largest new(ish) discoveries in Brazil's offshore.  The first, Tupi, the world's largest new oil discovery since 2000, is located 160 miles offshore in 6600 feet of water.  To put that water depth into context, the infamous BP Macondo field in the Gulf of Mexico was in 5023 feet of water.  Here is a map showing the location of the Tupi field:

The Tupi field is expected to produce between 5 and 8 billion barrels of oil and the overall cost to bring the field to commercial production ranges between $50 and $100 billion; the initial exploration well alone is estimated to have cost over $240 million!  A second discovery located in the same geologic basin 50 miles from Tupi, the Carioca/SugarLoaf discovery, could contain even more oil with rumoured recoverable oil reserves of up to 30 billion unconfirmed barrels.  Now, let's look at Tupi in terms of the world's daily oil consumption.  Conservatively assuming the entire world consumes 80 million barrels of oil per day, if the Tupi field were the only producing oil field on earth, it would have a production life of only 100 days.  From this you can see that to maintain production and consumption balance in the world's oil markets takes both huge amounts of capital investment during the highly risky exploration phase and even larger amounts of capital during the somewhat less risky development and production phases, in large part because the environments where "elephants" are still awaiting discovery are very hostile.  If the Great Recession Part 2 where to rear its ugly and unwelcome head, raising capital to develop a $100 billion oil field could become very complicated.

As Shell states, we are facing a "zone of extraordinary opportunity or misery".  Only time will tell us what path the world will take.