How not to run a business or is it? Turns out that Canadian business is cash rich but still increasingly in debt. That debt is in loans for investment in more short term ways to make cash.
Canadian business has failed to invest in technological upgrades to improve its productivity, instead relying on cheap labour to improve its productivity.
And this despite the tax breaks they got from their friends in government. And despite the subsidies,corporate welfare, they get federally and provincially on top of that.Canadian businesses hold about $372-billion in deposits, which represent about 12 per cent of their assets, compared with 8 per cent in 2002, said Earl Sweet, assistant chief economist with Bank of Montreal. During the past three years, business deposits have increased at an average annual rate of 15 per cent, which is twice the historical average, according to the bank. "With cash flow growing substantially faster than operating requirements, businesses have deployed excess funds to fixed-term deposits in order to improve overall profitability," he said.
The surplus cash has increased the importance of cash management strategies, according to the bank. Small and medium-size businesses with surplus cash tend to invest in short-term debt, variable rate guaranteed investment certificates and escalating rate GICs with terms up to three years, said Julie Sheen, vice-president and head of BMO term investments.
Although corporate debt issuance during 2006 increased to $36.5-billion, up from $22-billion during the same period a year ago, the growth has largely resulted from debt issued by banks and other financial institutions, the asset-backed securities market and foreign issuers of Canadian debt
And despite their efforts to create tax free havens like Income Trusts for all that capital. Capital that continues to circulate as money instead of being invested in company assests (variable capital); labour and technology.
Wayne Hanley, National Director, United Food and Commercial Workers
Lower paying jobs:
"My concern there is that a lot of these jobs are at the lower end of the pay scale as it relates to manufacturing jobs that we're losing. Becoming a society of service workers that work in banks and financial institutions, my concern is that one day we're going to have an economy based on the exchange of money between Canadians and we're not going to see manufacturing, building and exporting."
The dollar:
"I don't think we've felt the full impact of the 90-cent dollar as it relates to manufacturing jobs. I think it's going to get worse. I think manufacturing jobs are being affected by the global market, products being produced elsewhere in the world at significantly less costs."
The corporate bosses still gripe about wages and benefits for workers, while taking home record breaking salaries and benefits, unsure of what to do with all that wealth.
Role of company boards is piece of puzzle as scandal over stock options widensPut CEOs' pay in escrow, former SEC head urges
Sale by Chairman of the Board (CNW, 06-09-06)
But failure to invest that cash in wages and benefits is what is creating the current labour shortage.
Like housing it's a sellers market for labour.
Prosperity's hidden tollProductivity sags as jobs go begging in red-hot marke
The Jobs Everywhere phenomenon is creating a curious scenario, especially in the McJob sector. The work ethic in this sector appears to be collapsing, particularly among 16- to 20-year-olds, says Todd Hirsch, a labour market-shortage expert for the Canada West Foundation.
"They don't think it's necessary to show up on time, or at all," says Hirsch. "They know they can walk across the mall and get another job, and maybe be paid more." Anecdotes abound as to how younger, part-time employees understand they're holding all the cards.
Recently, a local Kentucky Fried Chicken restaurant was closed indefinitely because it couldn't find enough staff to operate, posting a sign on its door saying: "Due to unavailable staff, we are unable to open doors at this time."
With four or five job offers available to young people, the feeling is: "I don't really need to work that hard," says Hirsch.
He points to the catering industry, which experiences a slow season from January to March, when most low-skilled workers are usually laid off. Instead, they are being paid $10 to $12 an hour to do pretty much nothing but be around for the start of the high season in May.
If it sounds desperate, that's because it is.
And like housing, labour is an investment, which is productive but does not immediately translate into $$$ like investments in the stock market which is what income trusts and other business stratgems are all about.
Despite real growth in productivity in our manufacturing sector thanks to just in time production methods, multi-tasking, longer shifts, forced overtime production all due to job cuts and the resulting speed up on the job.
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Our current Minister of Industry insists on the need to drive wages down by announcing the need to create further free trade deals abroad which opens the door for more outsourcing of base manufacturing.
president, CAW Local 222, Oshawa, Ont. -- Perhaps International Trade Minister David Emerson can help the 15,000 members of Canadian Auto Workers Local 222 in Oshawa, Ont., reconcile two stories in yesterday's Report on Business.
The first (GM Plant Wins Laurels, No Promises) reports that the Oshawa No. 2 car assembly plant has once again won the J. D. Power award for the highest-quality output in the Western Hemisphere. Yet, General Motors wants to close the plant. Why? Because a one-way flood of offshore imports is destroying the market share of GM and other North American producers, leaving them with too much capacity.
Which brings us to the second story, where Mr. Emerson commits to accelerating free-trade talks with South Korea and other offshore markets (Canada Lags In Global Trade Race: Emerson). He writes off opposition from the auto industry and other crucial export sectors as special interests, and promises to help them become globally competitive. But the numbers prove it: We are already super-competitive. Yet, even with the best quality and productivity, our jobs will continue to disappear so long as countries such as Korea are allowed to treat trade as a one-way street: Korea bought only 400 Canadian vehicles last year, versus 130,000 Korean vehicles sold in Canada. Their products compete directly with what we build in Oshawa.
At the very moment when we are pulling out all the stops to save Canadian auto jobs, our own trade minister wants to give Korea's burgeoning auto exports to Canada an extra boost. This is a betrayal of Canada's economic interests.
Ironically what is dragging down our productivity is not the manufacturing sector it's in the banking and financial services sector. Which is NOT unionized.
So wages and benefits are not the problem here. Its again investment in technology and labour that is lacking as the banks take huge hits on criminal activity like the Enron Scandal.
Fix the financials: Productivity growth of Canadian financial services seriously lags manufacturingAgain the Chamber of Commerce and other voices of business demand more handouts for business while business rolls in the dollars. Productivity gains in Canada have been made at the expense of workers, not through tax cuts to business, or state subsidies.
Against that lacklustre backdrop, data released yesterday offer a few surprises, including an unpleasant one from the financial services sector. Manufacturing's productivity growth since 2004 has exceeded the overall economy's performance by a remarkable quarterly average of three percentage points. However, the broad financial services sector has underperformed the economy by more than one percentage point over the same period -- a huge difference in the productivity measurement world. And the gap is not transient. Labour productivity in manufacturing has grown by 25% since 1997, while the gain was only 10% for financial services.
Job cuts make productivity a harder sellStudy says losses are necessary to keep manufacturers competitive
The failure here is for business to invest in technology to compliment labour, rather they are hoarding their profits to make more money. That is unproductive use of capital.
Job cuts of course is the easy way out in the short term, in the long term Canada's productivity crisis is the failure of capitalists to invest their capital in their businesses. And Income Trusts are not their businesses.
Remember those who say that business should run the state well I think they already do by this track record. Producing surpluses for their shareholders but failing to invest in infracstructure of the company. Producing surpluses for taxpayers but failing to invest in infrastructure and social services.
Also See: Boom and Bust
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