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Thursday, November 23, 2017

Why Are Alberta's Energy Sector Wages So High?

Alberta has the highest average weekly wages in Canada.  The Oil and Gas employees make twice what average industrial wages are in other sectors.  Here is a link to an ATB top line analysis on these facts.

The last 3 years in the energy sector has relied on a "new normal" mantra about commodity prices being "lower for longer." The more enlightened and revised sector mantra now is "lower forever."  Sure there are those who still believe that oil prices will rebound because "they always have."

Those who believe that the rebound is just around the corner are not adapting to the new reality and trying to hold on waiting for the rebound.  Even if they did rebound, the consequences would be for us to revert back to old wasteful, extravagant expectations, poor and unsafe work conditions and disastrously poor productivity results.

Oil trading at $100+ hide a lot of sins and left the energy sector and its supply chains in construction, manufacturing and logistics with well founded reputation as expensive, poor quality, questionable reliability, rigid attitudes, dangerous safety records and noncompetitive from an international investment perspective.

The dramatic drop ion oil prices from $100+ to around $50 forced cost cutting and recalibrating the commercial relationships between energy customers and suppliers all the way through the system.  Lots of companies with band balance sheets and mediocre management have gone under...as they should in a free market economy.

There were also serious layoffs in the oil sands energy sector developers and operators as new projects were deferred, delayed and abandoned.  This was particularly in the higher paying professional ranks and repeated in very well paid contractors conventional energy service providers.

While supply and services cost have come down throughout the full range of energy sector operators, the much higher than average wages of sector workers has not come down.  New initiatives are underway in progressive companies for improved productivity, adopting innovations and automation, expanding workforce skills and competencies and many more process improvements.

According to the ATB analysis, this seems to mean energy sector wages are staying high, perhaps because of the productivity improvements and innovations, not as many workers are needed any more.  This is a difficult and harsh reality for many previously highly paid but laid-off wage earners.  These less agile, less adaptive, less skilled, and now, a less required part of the emerging workforce, that the KenneyCons propaganda is courting for support.  They are doing this by political messaging and manipulation by blaming their plight on the current government instead of working to help them adapt to the new normal of lower forever.

If these unemployed energy sector workers are waiting for prices to bounce back and presuming they will go back to the same old wasteful unproductive workplace culture of the past, they are likely to to be very disappointed.  Concurrently they may find very little sympathy from other wage earners  in comparable industrial sector jobs who have had flat and stagnant wages for years.  They have not benefited from the booms of the past, and in fact has suffered from them in many ways.

And this doesn't even come close to dealing with the even more severe income gap between the energy sector haves in Alberta and the working poor or struggling middle-class in the rest of the economy who are the have-nots.