Economy Not Booming in Sault Ste. Marie

Economy Not Booming in Sault Ste. Marie

THERE'S A QUASI-JOKE, more telling than funny, making the rounds among unattached young women in SAULT STE. MARIE. Over the past decade, this working-class city in northern Ontario, pop. 74,500 and dropping, has suffered waves of layoffs at its long-time principal employer, ALGOMA STEEL INC. The Sault is bleeding young people, who leave to find work in the more diversified markets to the south. "It's really bad for single women," recounts 32-year-old Cecilia Fernandez over lunch. "You don't even care if a guy is nice, or comes from a good family. The first question is, 'Do you have benefits?' If they say yes, then it's 'OK! Maybe we can have a relationship!'"

It's a sorry state of affairs when someone like Fernandez quips that a real catch is a fellow who can pick up the dentist's tab. Typical of many Saulites her age, Fernandez left 14 years ago to study environmental engineering at the University of Guelph. She thought she'd never be back. After completing an undergraduate degree, she took a job as coordinator at a not-for-profit association, the Ontario Environment Network, for several years before returning to school to complete a master's degree. But last September, Fernandez left Guelph to return to her hometown to care for her mother, now 79 and ailing with Alzheimer's. Fernandez had landed a part-time job as a sessional instructor at Algoma University College in Sault Ste. Marie, and she figured she'd find additional contract employment to round out her income. It's been sketchier than she imagined. There's been a little work, but during the winter term the university didn't offer the course Fernandez teaches. To make ends meet, she's been using up her savings. "I haven't made so little money in my life as I have since I moved back here, even when I was a student," Fernandez says.

Through the Liberal years, Canada's economy has seen tremendous growth, hitting one healthy plateau after another. Inflation is under control, interest rates have fallen to lows not seen for more than a generation, and robust employment levels continue to outperform expectations. The GDP, the biggest measure of the country's economic prowess, grew from 1993 to 2003 by 68 per cent, to $1.2 trillion. As part of the trend to a more global economy, both Canadian exports and foreign investment in Canada have more than doubled. One of the most important factors affecting the country's fortunes has been the government's finances: after clawing the way out of a budgetary nightmare, Paul Martin, a.k.a. Slayer of the Deficit, produced surpluses for six consecutive years (averaging $8.7 billion), with the next two, tabled in 2003 and 2004 by John Manley and Ralph Goodale respectively, also expected to be in the black.

For the residents of Sault Ste. Marie, where the steel mill's smokestacks dominate the skyline, the booming Canadian economy is a bit of an insult. In the early '90s, incomes took a nose-dive in the Sault, and took more than a decade to recover. In 1991, the town's average family income was $54,124, before it dropped by thousands of dollars. It took 11 years to regain its earlier level - almost (in 2002, in constant dollars, the average family income was $54,000).

Advances in technology have made it possible for Algoma Steel to cut costs while maintaining its level of production - and heated international competition (read, globalization) has made that essential. The company, which emerged in 2002 from bankruptcy protection for the second time in 10 years, has hammered back its labour force to 3,000 from 6,000 at the beginning of the 1990s. (In a previous era, in the early '80s, the steel company employed 12,000.) In 1993, when Algoma Steel was at the height of its troubles, the Sault's unemployment rate came close to hitting 20 per cent.

While still above the provincial and national levels, joblessness in the Sault is now down to nine per cent, in large part the outcome of another global trend. As Algoma Steel has shed jobs, the town has managed to attract call centres, a development viewed by many as a mixed blessing. There's a stigma attached to the business, admits Bruce Strapp, CEO of the Sault Ste. Marie Economic Development Corp. and one of the people responsible for attracting the centres to the city. "We had a real debate around that sector," he says. The jobs are low-paying, workers are closely monitored, and the businesses can easily pull up stakes and move away. Plus, it's about people who "bug you at home, wanting to sell you a product," says Strapp.

But in 1993, when Algoma was in the throes of downsizing and rapidly cutting jobs, almost 9,000 people in the Sault were on welfare or collecting employment insurance. Soon after, the city launched a targeted campaign, and as Strapp says, "struck gold" when RMH Teleservices, Inc., a Pennsylvania-based company that operates call centres in the U.S., Canada, India and the Philippines, set up shop in 1999. Three other companies, two U.S.-based and one Canadian, followed suit. "The call centres really knocked the welfare and unemployment rolls down," Strapp says. Strapp, who wears a diamond stud in his left earlobe and a gold wedding band with four tiny diamonds implanted into it, is a relentlessly optimistic man. He predicts that by the end of 2004, call centres in the Sault will employ 3,000 people, with an annual payroll of $60 million.

Compare that number to Algoma Steel's labour costs, and you begin to understand the economic impact on the community. Last year, for the same number of employees, Algoma paid roughly $250 million for labour, including pension benefits, or more than four times the amount of money put into the pockets of employees by call centres. While the call centres have breached much of the employment gap created by Algoma Steel's downsizing, they come nowhere near the steel mill in terms of creating wealth in the city.

On a rainy evening a couple of weeks ago, much of Stephen Simon's family gathered for dinner. Simon, 50, has five adult offspring: two from his first marriage and now, with his wife Ida, three stepkids. His home, a two-storey frame house, is designed for family. Simon bought the house from his father in 1995, after his first marriage ended. Three sofas hug the walls in the front room, along with a couple of well-used La-Z-Boys. Photos of his kids and grandkids are lined up on top of the TV cabinet. In the kitchen is a table large enough to seat a dozen people. Over ribs, roast chicken and wine, the family compared the experience of the current generation entering the workforce with that of Simon's generation.

As a young man, Simon had a host of options. In 1974, when he was 20 and a graduate of an electrical technology diploma course, he had a job offer from Bell Canada at $7,600 a year, and a choice of six apprenticeships, with a starting salary of $11,000 a year, at Algoma Steel. (He'd been accepted by three universities, too, but because he'd been refused a student loan - he was told his father, an Algoma Steel machinist, made too much money - he took the trades route.) Simon chose an apprenticeship in instrumentation, launching an uninterrupted 30-year run as an Algoma Steel tradesman. He says he'll retire in five years.

The experience of Simon's son and namesake, Stephen Jr., 23, stands in sharp contrast. He graduated from high school a half a semester early. He claims the reason he did well was not innate talent; rather, when he was 15, he broke both legs in a snowmobile accident, and he could do little more than spend his time studying in the library. Since then, he's earned two diplomas, one in aviation machining and another in police foundations. Neither diploma turned into a job. He's toiled at his uncle's bakery and as a security officer for a private firm, and was a member of the volunteer fire department.

Today, for $10 an hour, he works the phones at RMH. Simon's job is to provide technical help to callers in the U.S. who are having trouble with their MSN dial-up Internet connection. "It's not my idea of fun to sit in an office tower receiving calls from irate Americans - the only reason I'm doing this job is to pay my bills," says Simon, whose student loans added up to $10,000. "This job really has no impact on my future."

Simon isn't looking for sympathy. "To whine about the past is as pointless as trying to keep the sun from coming up," he says. He expects his future lies outside the Sault. He's exploring options in Alberta's oil patch and in southern Ontario; there's also a possibility he may work for a friend who's starting up a logging company. "I'd pretty much move anywhere just to get a career. My options are really not in the Sault."

Cecilia Fernandez says all of her high school friends have left the Sault. She's not certain how long she'll be staying herself. Ironically, she says, she was never encouraged to stay. Her parents, who emigrated from Malaysia when Cecilia was six years old, "always thought there were better opportunities elsewhere, like Ottawa or Toronto," she says. "That's why they came to Canada, so I could have a better life than they did." For now, she says, she wants to remain because of her mother. But it's a problem, she adds, because she doesn't know how long she can last. She has contract work until July, although she's fairly confident the university will offer her course next September.

The course she teaches is economic and social development in northern Ontario communities. She says a little industry has grown up around attracting jobs to Sault Ste. Marie, and indeed, countless studies and reports about the city's woes have been prepared over the years. She's laughing at the irony, both professional and personal. "I teach part-time. And, I look for work in my spare time." With benefits, preferably.

Maclean's June 21, 2004