Monday, June 13, 2011

Impact of the CPC strike on the Canadian Economy

As noted in an earlier post, mail volume at Canada Post is down 50%.   The decline in demand has affected employment levels all across Canada.  National Association of Major Mail Users President Kathleen Rowe last Thursday stated that the strike has resulted in the layoff of at least 15,000 Canadians.   This is on top of the reduction in employment at Canada Post as it switches to three day delivery in urban areas for the duration of the strike.

The Jobs Impact of Canada Post and the Postal Market and the Strike's Impact

Canada Post is the core of an industry that likely employs between 500,000 and one million Canadians.   As in the United States, Canada Post represents only a small portion of these jobs.   If the mail market in Canada is similar to the United States then jobs generated by the industry are associated with one of the following:
  • production and delivery of mail and the delivery of business-to-consumer parcels;
  • internal operations at companies that use mail as part of their business but are not in the business of producing or delivery mail or delivering B-2-C parcels; and
  • sales of goods or services associated with mail advertising.
Well over 40% of all postal market jobs in Canada most likely come from sales of goods and services advertised by mail, if one assumes that the impact of advertising mail is similar in Canada and the United States.  To the extent alternative advertising modes are less effective, advertisers will be selling fewer products and providing fewer services, thereby reducing employment in the advertiser's businesses.  The impact of the reduction on mail volume on jobs associated with sales of goods or services is unknown but is likely to be noticeable to the firms affected.

To the extent that the Canadian Postal Strike is switching customers from mail bill presentment and payment to electronic alternatives as well as switching customers from using the mail to handle transactions or business or government are switching their payments to electronic or other alternatives, then there will be a loss of jobs in the private sector above and beyond what Ms Rowe reported.  These job losses are permanent as electronic transactions are less labor intensive than paper ones and it is rare that once a person switches to electronic delivery that they switch back.

The 15,000 job losses that Ms. Rowe notes seems relatively low even if they only come from firms that produce mail.    A 50% reduction in mail volume should cut printing runs, paper purchases, ink purchases, etc by nearly that much depending upon what types of mail is eliminated, and the limited opportunities of mailers to use alternative means of delivery.   I would expect that losses in jobs in the mail production supply chain could double or triple her estimate if mail volumes continue at 50% of pre-strike levels for an extended period.

The GDP Impact of Canada Post and the Postal Market and the Strike's Impact

In the United States, the mail market generates over 7% of GDP.  With Canadian GDP in 2010 at $1,232 billion (Canadian dollars), a similar impact would be 86.4 billion Canadian dollars.   Over three quarters of this impact is in the sale of goods and services advertised by mail or delivered to consumers.    The remainder is associated with the production of mail or delivery of consumer parcels.   (The economic impact of mail operations within a company that does not print or distribute mail as a primary business is unknown)

A decline in demand due to the strike affects the Canadian economy in three ways.  First, less effective advertising should have a negative impact on economic activity in those businesses that use mail advertising.  Declines in demand in mail production reduces industrial production and sales in those industries affected.  Finally, loss in jobs and hours among employees in either mail production or among mail advertisers affects sales at firms that depend on these employees as customers.  This affects businesses in every community including national chains like Tim Horton's and the Bay, to local merchants and service providers including dry cleaners, dentists, optometrists and opticians.

The Economic Impact of the Strike and the Press

In most news reporting, reporters have focused on the impact on consumers, the recipients of mail.   The \Canada Post strike will have little economic impact on consumers unless they work for a firm that produces or distributes mail or their employer depends on mail advertising to generate sales or in the case of non-profits, contributions.  It is not surprising that consumers see little impact of the strike.

What the press has missed is the business impact.    This impact is substantial as the National Association of Major Mailers points out even before Canada Post cuts back delivery days.    It may be worth the time and effort of Canadian business journalists to take the time to look at the impact of the mail strike on businesses if they want to understand the real impact of the Canada Post strike on Canada and its economy.

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