E
Ed007Toronto
Guest
The oil boom isn't entirely bad for Ontario.
www.theglobeandmail.com/s...a%27s+boom
Why Alberta's boom is too hot for some
Oil patch hiring leaves shortages
PATRICK BRETHOUR
CALGARY -- Ray English has been getting odd looks at Truck World in Toronto, where the rest of the trucking industry is wondering just why Raydan Manufacturing Inc. would flee the hottest economy in Canada.
"Why are you leaving Alberta? Are you nuts?" Mr. English said, replicating the incredulous tone of the questions being put to him at the national truck show.
His response: Labour costs in Alberta are soaring beyond reach for his truck parts company, forcing him to acquire an Ontario company to finally execute a long-hoped for expansion. "We've got to do something to get a labour force," he said.
The rising tide of Alberta's economy has created an undertow for non-energy businesses, which have had to endure the strains of superheated growth without the massive revenues of an oil producer. "As a manufacturing company, it's been miserable," Mr. English said.
The province's dominant energy sector is struggling with the same problem, although it is one largely of its own creation. Husky Energy Inc. president and chief executive officer John Lau warned last week of the spread of the labour shortage, saying that his Calgary-based company is now looking outside of the country to build a massive bitumen upgrader because there are not enough workers locally.
What is a difficulty for big oil companies has become an insurmountable barrier for smaller businesses, threatening to increase Alberta's already heavy dependence on its energy sector.
That threat has now become reality at Raydan Manufacturing. The company, based in Nisku on the outskirts of Edmonton, makes truck suspensions that are used in the oil patch, but four-fifths of its sales are elsewhere, including exports to the United States.
For two years, Mr. English has seen a labour crunch grow into a crisis and now a catastrophe; it is essentially impossible to hire any workers -- never mind the skilled tradespeople that Raydan needs in its assembly facilities south of Edmonton.
First, the mechanics disappeared. Then welders were in short supply, drawn north every time an oil sands project started up construction. Mr. English had to begin paying top rates for those workers, but he soon discovered he was able to recruit only more junior and less skilled apprentices at that comparatively higher pay. Recruiting administrative staff became such a chore that Raydan had to use hiring agencies, paying out up to $10,000 for each new worker.
But the labour shortage problem turned critical for Raydan after it launched an expansion in Nisku, and found that it took nearly a year to find the 30 workers it needed. "We wanted to increase the size of our facility, but we couldn't find the people," he said. A second phase of the expansion seemed out of reach.
Mr. English soon was having to pay close to double the hourly wages of his competitors in Ontario -- not surprising when the McDonald's fast-food restaurant in nearby Leduc is hiring workers at $9.50 an hour, substantially higher than Alberta's hourly minimum wage of $7.
So when the opportunity came to buy a company in Ontario, and access its 50 employees (close to doubling Raydan's work force), Mr. English lunged at the opportunity. The $6-million acquisition closed at the start of the month, and the expanded facility that would be impossible to staff in Alberta will be built in Breslau, Ont., instead.
Mr. English said he nearly laughed out loud after the managers of the newly acquired plant said they, too, suffered from a labour shortage. The punchline: He found an inch-thick file of job applications, an impossibility in Alberta, where the rate of unemployment is half what economists see as a natural level for joblessness.
For Mr. English, the necessity of expanding to Ontario to escape his home province's labour shortage is something that he accepts, but does not relish. "I would have grown in Alberta first," he says.
But the labour shortage could be a help to the provincial economy as a whole, at least in the near term, said economist Todd Hirsch at the Canada West Foundation, a Calgary-based think tank. With higher growth, the already-strained infrastructure of the province could rupture, he said. But there is a real concern that the energy sector could overwhelm the rest of the Alberta economy, leaving it ill prepared to weather a downturn in commodity prices. "There is going to be a day of reckoning."
www.theglobeandmail.com/s...a%27s+boom
Why Alberta's boom is too hot for some
Oil patch hiring leaves shortages
PATRICK BRETHOUR
CALGARY -- Ray English has been getting odd looks at Truck World in Toronto, where the rest of the trucking industry is wondering just why Raydan Manufacturing Inc. would flee the hottest economy in Canada.
"Why are you leaving Alberta? Are you nuts?" Mr. English said, replicating the incredulous tone of the questions being put to him at the national truck show.
His response: Labour costs in Alberta are soaring beyond reach for his truck parts company, forcing him to acquire an Ontario company to finally execute a long-hoped for expansion. "We've got to do something to get a labour force," he said.
The rising tide of Alberta's economy has created an undertow for non-energy businesses, which have had to endure the strains of superheated growth without the massive revenues of an oil producer. "As a manufacturing company, it's been miserable," Mr. English said.
The province's dominant energy sector is struggling with the same problem, although it is one largely of its own creation. Husky Energy Inc. president and chief executive officer John Lau warned last week of the spread of the labour shortage, saying that his Calgary-based company is now looking outside of the country to build a massive bitumen upgrader because there are not enough workers locally.
What is a difficulty for big oil companies has become an insurmountable barrier for smaller businesses, threatening to increase Alberta's already heavy dependence on its energy sector.
That threat has now become reality at Raydan Manufacturing. The company, based in Nisku on the outskirts of Edmonton, makes truck suspensions that are used in the oil patch, but four-fifths of its sales are elsewhere, including exports to the United States.
For two years, Mr. English has seen a labour crunch grow into a crisis and now a catastrophe; it is essentially impossible to hire any workers -- never mind the skilled tradespeople that Raydan needs in its assembly facilities south of Edmonton.
First, the mechanics disappeared. Then welders were in short supply, drawn north every time an oil sands project started up construction. Mr. English had to begin paying top rates for those workers, but he soon discovered he was able to recruit only more junior and less skilled apprentices at that comparatively higher pay. Recruiting administrative staff became such a chore that Raydan had to use hiring agencies, paying out up to $10,000 for each new worker.
But the labour shortage problem turned critical for Raydan after it launched an expansion in Nisku, and found that it took nearly a year to find the 30 workers it needed. "We wanted to increase the size of our facility, but we couldn't find the people," he said. A second phase of the expansion seemed out of reach.
Mr. English soon was having to pay close to double the hourly wages of his competitors in Ontario -- not surprising when the McDonald's fast-food restaurant in nearby Leduc is hiring workers at $9.50 an hour, substantially higher than Alberta's hourly minimum wage of $7.
So when the opportunity came to buy a company in Ontario, and access its 50 employees (close to doubling Raydan's work force), Mr. English lunged at the opportunity. The $6-million acquisition closed at the start of the month, and the expanded facility that would be impossible to staff in Alberta will be built in Breslau, Ont., instead.
Mr. English said he nearly laughed out loud after the managers of the newly acquired plant said they, too, suffered from a labour shortage. The punchline: He found an inch-thick file of job applications, an impossibility in Alberta, where the rate of unemployment is half what economists see as a natural level for joblessness.
For Mr. English, the necessity of expanding to Ontario to escape his home province's labour shortage is something that he accepts, but does not relish. "I would have grown in Alberta first," he says.
But the labour shortage could be a help to the provincial economy as a whole, at least in the near term, said economist Todd Hirsch at the Canada West Foundation, a Calgary-based think tank. With higher growth, the already-strained infrastructure of the province could rupture, he said. But there is a real concern that the energy sector could overwhelm the rest of the Alberta economy, leaving it ill prepared to weather a downturn in commodity prices. "There is going to be a day of reckoning."