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Hinterland decline, resource rents, and resource wages: A critique of the theory of an Intrusive Rentier Syndrome

Déclin de l’arrière-pays, rentes de ressources et salaires de ressources : une critique de la théorie du syndrome du rentier encombrant
Declinación del interior del país, rentas de recursos y salario de recursos: una critica de la teoria del síndrome del rentista que molesta
David Leadbeater

Résumés

La « théorie du rentier encombrant » a été développée récemment au Canada afin de rendre compte du déclin à long terme des communautés de l’arrière-pays et des régions qui dépendent de l’exploitation minière et d’autres industries primaires. Selon cette théorie, les travailleurs syndiqués issus des communautés de petite ou moyenne taille peuplant ces régions riches en ressources, en mines de taille importante et autres industries à forte intensité de capital, seraient en mesure de capter une partie de la rente associée à ces ressources et ainsi d’établir une norme de salaires élevés. Cette norme de salaires élevés représenterait un obstacle majeur à l’entrepreneuriat et à la diversification. Nous proposons un examen critique de cette théorie s’attachant notamment à déconstruire les liens établis entre les profits tirés des ressources, les rentes des ressources et les salaires des communautés, le rôle de la demande locale et la question du faible niveau d’éducation. L’analyse est centrée sur les communautés minières de roche dure, avec une attention particulière portée au Nord de l’Ontario, la plus grande région d’extraction de métaux au Canada. Cette critique de la théorie du syndrome du rentier encombrant propose une vision alternative de l’économie politique de l’« ajustement » du marché du travail dans les régions de l’arrière-pays, basée sur le concept de réserve de travailleurs·euses développé par Marx.

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Introduction

  • 1 See, for example, Marchand, Dubé & Breau, 2020; Breau, 2014, 2015; Polèse, 2013; Savoie, 1992; Ande (...)

1Long-term decline in employment and population in resource-export dependent regions has become a renewed matter of attention in higher-income countries. In Canada, the recent decades of decline have been pronounced in regions centred on forestry, fishing, and, in focus here, mining. Explanations of such regional disparities and policy responses to this decline have long been contested.1 In the present neoliberal era, a marked shift has occurred away from structuralist and Keynesian approaches towards micro-level neoclassical approaches and issues of local “adjustment” to market forces. The theory of an Intrusive Rentier Syndrome (syndrome du rentier encombrant in French) is one such approach that combines neoclassical theories of wages and resource rent into an anti-labour approach to hinterland community development. A critical analysis of the theory is instructive for those concerned about economic development and community conditions in resource hinterlands.

2The theory of an Intrusive Rentier Syndrome emerged in the early 2000s in Canada as an attempt to explain the lack of growth – decline – in employment and population in hinterland communities and regions dependent on mining, forestry, and primary manufacturing (which includes smelting and refining). The theory claims that, in the region’s small or medium-sized communities with a large mine and other capital-intensive industries, unionized workers are able to gain a portion of resource rents and set a high-wage norm in the communities; the high-wage norm is a major obstacle to entrepreneurship and diversification of the area’s export base and, hence, regional development.

  • 2 See, for instance, Carbert, 2020; Gritsenko & Efimova, 2020; Bélanger, 2017; Kelsey, Partridge & Wh (...)

3The Syndrome theory has found its way into a variety of regional policy discussions.2 Despite major weaknesses, the theory raises important issues in understanding the political economy of hinterland decline, particularly the role of resource wages and resource rents. There is much at stake for economic development policy in resource regions, especially given continuing decline in many hinterland communities, rising metropolitan-hinterland disparities and political antagonisms, and the strongly negative implications of the Syndrome approach for resource workers and resource communities. For instance, the Syndrome theory proponents have advocated for phasing out high-wage mining and resource jobs, in effect, for a type of low-wage strategy and de-industrialization.

4A contribution of the present analysis is its focus on conditions of industry decline in hinterland resource regions and its implications for understanding labour market “adjustment” and resource community conditions. Out of the critique of the Intrusive Rentier Syndrome is proposed an alternative political economy of labour market conditions in hinterland regions, one based on Marx’s labour reserve concept. The analysis is centred on hardrock mining communities with special attention to Northern Ontario, the largest metal mining region in Canada.

5The next section discusses the origins and evolution of the theory of an Intrusive Rentier Syndrome. The third section provides a concrete context of mining communities and key elements of the political economy of the major mining hinterland of Northern Ontario. The fourth section addresses the Syndrome theory’s view of resource wages and resource rents. This is followed by sections on the relation of resource wages to community wages, the treating of local demand, and the issue of low education. Drawing on these discussions, the eighth section offers an alternative political economy of labour “adjustment” in current resource hinterland conditions. The concluding section summarizes the argument noting the problem of metropolitan bias in approaches to hinterland community conditions.

1. Origins and evolution of the theory of an Intrusive Rentier Syndrome

6The theory of a “Syndrome of the Intrusive Rentier” was first elaborated by Montreal-based economic geographers Mario Polèse and Richard Shearmur (2002), in an international research project initiated and funded by the Canadian federal government over concerns about the economic decline in some regions of Quebec and the Atlantic provinces. At its inception, the theory was focused on single-industry resource communities in “peripheral” areas which the theory characterized as “high wage-cost locations.” These small or medium-sized communities were portrayed as having a large mine or other capital-intensive industry with unionized workers who were able to gain resource rents and set a high-wage norm in their communities. The high-wage norm was viewed as a major obstacle to entrepreneurship and the diversification of the area’s export base, hence, to regional development (Polèse & Shearmur, 2002, p. xxv).

  • 3 In a later publication, Polèse (2009, p. 20) reports uncritically the instance of an interview he a (...)

7Though not the only obstacle to regional development, the theory’s proponents claimed the Intrusive Rentier Syndrome can be “devastating on local entrepreneurs seeking to diversify into other (wage sensitive) sectors, acting as a major impendent [sic] to the creation of a diversified export base.” However, the study provided little evidence about high wages or wage structures, productivity, employment, or resource rents. Apparently, the idea of “high wages” as a major obstacle came from unidentified interviews and focus groups: “It should be emphasised that we are reporting information conveyed to us during focus groups and local visits and that, whilst this information is, on the whole, compatible with a more theoretical economic analysis [...] it has not been derived that way” (ibid., p. 135). Elsewhere it is stated that the Syndrome “was brought to our attention repeatedly by entrepreneurs in the regions affected: it refers to cases where a large employer bids up salary and benefit expectations to the detriment of local entrepreneurship” (ibid., p. 140). Yet there are not even case studies.3 Not surprisingly, the Appendix of persons consulted for the research shows a notable lack of labour leaders or researchers from the miners’ unions or other groups being attacked for their “high wages”.

  • 4 In addition to the Syndrome, the proponents identified transportation costs, urban agglomeration ec (...)

8In one meagre effort to provide evidence, the study identified eleven “peripheral” regions in Quebec and the Atlantic provinces and rated each according to the level of impact of four obstacles to regional economic development.4 This was a subjective rating about which the authors state, “these scores necessarily entail an element of personal judgment and intuition” (ibid., p. 190). From this exercise, the major mining and smelting regions of Saguenay-Lac-Saint-Jean and Côte-Nord were rated the worst of the regions for the Intrusive Rentier Syndrome. Then later, again without evidence, it was pronounced that neither of these regions “ha[s] been very successful in diversifying their industrial base. The intrusive rentier syndrome is probably the primary culprit” (ibid., p. 198). The study contained no clear discussion of what would be “very successful” versus “successful” or “unsuccessful,” let alone the nature and extent of diversification.

  • 5 Polèse & Shearmur (2002, p. 135). As will be noted later, there is no discussion of monopoly or fir (...)

9In terms of reporting and analyzing the experience of entrepreneurs, the analysis of barriers to success was narrowed to only two elements, distance from markets (suppliers and clients) and “workforce limitations”.5 For the latter, limits to local growth are imposed by the workforce “due to lack of qualified workers and to various institutional and cultural factors.” According to Polèse and Shearmur, a problem of local recruitment of qualified workers occurs not at the start-up of the firm but once it seeks to expand. At this point, the entrepreneur is faced with local workforce limitations and “accepts to limit the size of his/her company to the size compatible with the available workforce.” (ibid., p. 138) The study moved quickly past the obvious issue of “labour shortages” in the midst of the high unemployment in hinterland areas: “This is due to the higher propensity to migrate of the most qualified workers: despite the high unemployment rates, it is not the most qualified who are unemployed.” (ibid., p. 138)

10While initially it was asserted as a fact that the most qualified workers already have a local job or have moved, it turned out that the picture is more complex: “Our discussions with local actors revealed that labour shortages were not always only confined to qualified workers. In some regions, entrepreneurs are unable to recruit or keep low-skilled labour.” (ibid., p. 138) Three “institutional and cultural factors” are reported as explanations for this situation. The first is “a lack of entrepreneurial spirit” in which seeing “few examples of small start up companies deters many workers from applying for jobs that are perceived risky or low wage.” The second is the presence of the large corporations with higher wages and more stable employment: “the expectations of the local workforce in terms of salaries, benefits and stability are set by the large employer... In such a context, the salaries and benefits which an entrepreneur can offer are uncompetitive.” The third factor is the existence of unemployment insurance, especially as it affects fishing communities and disincentivizes off-season and year-round work.

11Such comments about workers in hinterland areas are typical of right-wing business narratives of hinterland conditions and the non-conforming character of workers to business ambitions. Rather than examine in depth specific elements of the business narrative, the proponents shifted the argument towards their view of the geography of income: that income declines from large metropolitan centres (over 1 million population like Montreal) to central and peripheral cities of various sizes to rural areas (ibid., Table 7.2). The stylized picture presented is one in which average earned income declines from the large metropolitan centres (index = 1) to the smallest peripheral cities (10-25,000 population) with an index in 1996 of 0.86 and peripheral rural areas of 0.72, except that outside the large metropolitan centres the smaller cities have even lower relative community incomes. For example, in 1996, the smallest central cities (10-25,000) had an index of 0.80, implying average earned wages 6 percentage points below the smallest peripheral cities.

12Given their view of the geography of incomes, Polèse and Shearmur were led to argue that entrepreneurs in mining and other resource towns face an “added hurdle” to the Intrusive Rentier Syndrome: “...they must not only try to meet the high salary and benefit expectations of local workers, but they must also compete with the lower wage and more flexible workforce available to competitors in more central regions.” (ibid., p. 141)

13So fixed is the belief in the declining centre-to-periphery relation of incomes that the Intrusive Rentier Syndrome is generalized to all “peripheral” communities: any case with a large employer paying high wages, including public employers. This generalization of the theory is advanced, without defining or measuring resource or other rents, into a more general critique of high hinterland wages, union power, and working-class culture. Throughout it all, despite remarkably weak theory and evidence, the key anti-labour implication of the Syndrome is pressed forward – lower wages, especially for miners and other resource workers.

14In terms of policy, Polèse and Shearmur first rule out interventions for restructuring or refinancing plants, or subsidizing unprofitable plants. For them, the root of the problem as reiterated in a variety of ways is that “the community must somehow offer a cost advantage to offset the additional costs of distance if it hopes to create employment in new sectors” (ibid., p. 199). This leads to a policy supporting the phasing out of high wages to end the Intrusive Rentier Syndrome – a conscious low-wage strategy and phasing out of the heavy industry. The challenge for them is one of transition, “to create conditions that will allow other sectors to develop while the large plants are still in operation” (ibid., p. 198). Such a solution requires a change in the “mindset of the community, particularly that of the labour unions representing plant workers.” Polèse and Shearmur urge that the unions support technological change and productivity increases knowing it will likely mean fewer jobs (without any demonstration that their employment or their community will survive). Nonetheless, such an approach might not go far enough to full high-wage elimination: “This is, admittedly, only a partial solution since the (high) wage effect remains, even if its impact is reduced as the number of workers in high-wage plants falls.”

15From its anti-union roots, the theory of an Intrusive Rentier Syndrome was extended beyond resource communities and resource rents in “peripheral” regions to auto, steel, and other manufacturing industries, to “Rustbelt” regions, and to major cities from Buffalo to Manchester. While the theory continued to include resource rents, the concept of rent and rentier was extended to include any unearned or unproduced income (Polèse, 2010, p. 14) and any heavy industry and the unions.

16In this form, the decisive aspect of the Syndrome becomes the large scale of the plant and the union – their absolute size as well as their size relative to the community economy in which they are “intrusive.” The term “intrusive” in ordinary discourse suggests something unwelcome, disturbing, or stifling in the pre-existing local community economy, though the Syndrome theory did not make clear how an “intrusive” rentier is more than simply being a big resource rentier or even any resource rentier. In a 2013 update of the 2002 study, the Syndrome proponents identified three intrusions by the large plants and large unions: “they: a) drive up local wages; b) undermine the competitiveness of other sectors; c) create a mindset which is not necessarily conducive to business start-ups and innovation” (Desjardins, Polèse & Shearmur, 2013, p. 17). However, after making such claims, the 2013 update admitted their evidence is weak, noting that: “Such ‘local’ factors are almost impossible to measure and, as such, difficult to model. Much of the evidence is admittedly impressionistic” (id.).

Further, the Syndrome leaves a long-term legacy effect. Mario Polèse argued that heavy industry and unions create a “work culture” that is resistant to technology and socially inflexible:

The explanation is as much sociological as economic. Every industry or occupation...produces its own culture, work ethic, pattern of industrial relations, and outlook [...] where one industry is dominant, its culture will become the local norm with either a positive or a negative effect [...]. The outcome is a local work culture in which perceptions are in large part moulded by the practices (and past histories) of large firms and labour unions, producing a mindset that does not necessarily facilitate change. (Polèse, 2010, p. 13-14)

17If this were not enough, other consequences are added to the already heavy toll of the Syndrome: environmental destruction, urban ugliness, being located in colder climates, and ethnic and racial “division” (ibid., p. 14-15). Politically too, large plants and large unions are seen to lead to “social militancy” and “left-wing parties (socialist or communist), with little sympathy for big businesses, hardly a recipe for attracting outside investors.” Apparently, there is little that is negative and can befall hinterland communities that is not a consequence of the Intrusive Rentier Syndrome – while exculpating capitalist rulers or structures:

Summing up, the mix of these assorted ingredients – social, climatic, industrial, visual, and political – has in all too many instances produced a particularly toxic cocktail, difficult to unscramble. Each city is, of course, a unique case. However, the fact that so many Rustbelt, Midland and other old manufacturing cities are still underperforming, half a century after coal and steel began their decline, suggests that the legacy left by their industrial past runs very deep. (ibid., p. 15)

  • 6 Polèse (2009, p. 22). Other examples were the “traditional” European coal and steel centres of the (...)

Analytically, Polèse characterized the large coal mining and steel industry areas as “negative clusters” and described as an especially harsh example the Borinage district in Belgium.6

  • 7 Desjardins, Polèse & Shearmur, 2013, p. 20: “It is difficult to precisely factor in all the element (...)

18In their 2013 update, the Syndrome proponents continued to assert that a negative industrial legacy “can linger on,” yet with remarkably little evidence.7 Despite this lack, the Intrusive Rentier Syndrome theory was not phased out, as it proposed for miners and others in hinterland communities. Instead, the 2013 update reframed the Syndrome as a regional form of the Dutch disease (Desjardins, Polèse & Shearmur, 2013, chap. 4). However, it is far from clear (even if one accepts the Dutch disease theory) that the Dutch disease view of resource industry prices and wages “crowding out” manufacturing industries and exports actually applies to the conditions of the hinterland resource communities in question. A further sign of the Syndrome theory’s overreach and dénouement came in a more serious empirical study by Dubé and Polèse (2015) (to be discussed later) which showed little evidence of either the Dutch disease effects or a widespread Intrusive Rentier Syndrome.

2. Some characteristics of mining communities in Northern Ontario

19The central theme of the Intrusive Rentier Syndrome theory is that miner and mining community wage levels are high for their “peripheral” location and this is a consequence of resource rents. To provide a clearer context for the discussion of hinterland mining communities, the following outlines central characteristics of the political economy of Northern Ontario, particularly related to the labour market and resource rent.

  • 8 The mining data here refer only to extraction activities (whether underground or open pit) and mill (...)

20To illustrate key aspects of current mining community conditions, four tables are attached. Tables 1 and 2 show 11 mining communities as well as three First Nations (reserves) living in proximity to mining operations. These are the main mining communities in Northern Ontario and they show the variety of the communities. The mining communities are arrayed by distance from Toronto, the main metropolis in Ontario and a world centre of mining finance.8 The communities vary by size and the maturity of mining activity; they include all larger mining communities, and most but not all smaller places. For instance, Sudbury is long-established and one of the largest nickel mining centres in the world. Timmins, also long-established, was a major centre of gold mining and now copper. By contrast, Red Lake is a small and comparatively recent gold mining community, more characteristic of a boomtown. There are also two communities – once major mining areas –, where local mines have been closed but mining employment is still significant such as by travel to outside mines: Elliot Lake, once the uranium mining capital of the world, and Cobalt, once a leading silver mining centre.

  • 9 For present purposes, Northern Ontario is defined as Statistics Canada’s Northeast and Northwest Ec (...)

21Northern Ontario as a whole is a massive geographical area of about 800,000 km2, an area larger than metropolitan France and the UK combined (Leadbeater, 2018).9 While about 88 percent of the land of the province of Ontario, Northern Ontario has a population of about 780,000, or only 5.8 percent of the province’s population. Northern Ontario developed through a process of mass settler colonization mostly by Anglophone Canadians from Southern Ontario and, later, European immigrants, and by Francophone Canadians mostly from Quebec. The population includes about 128,000 Indigenous people. It also includes a Franco-Ontarian national minority of about 120,000 with rights to education and public services in French. Northern Ontario is considered a mature mining region, currently the largest source in Canada for gold, cobalt, nickel, and the platinum group metals. In 2020, Northern Ontario had 31 mine operations of which 21 were predominantly gold, 9 base metals, 1 for iron, and one for platinum group metals (OMA, 2020).

22First, mining both arose out of and was a significant motivation for Euro-Canadian colonial expansion and settlement. Most mining communities in Northern Ontario date from after the 1880s, in the wake of railroad expansion and after metropolitan centres, particularly Toronto and Montreal, had been established. Settler colonization forced the dispossession of Indigenous lands and concentration of Indigenous peoples into small “Indian Reserves” of less than 1 percent of Northern Ontario’s land (Leadbeater et al., 2020). So the labour conditions are founded on a history of labour segregation by Indigenous and settler status. The marked segregation affecting Indigenous communities is well-known. It is evident in data for the Atikamekshing Anishnawbek First Nation (Whitefish Lake 6, Indian Reserve) and Serpent River First Nation. However, the normal markers can change in certain situations as suggested in the data for Matachewan First Nation. More generally, the colonization process is crucial to understanding how capitalist society has been reproduced and extended territorially, including its property system, class relations, wage structures, and internal segregations such as by gender.

23Second, most mining and transportation has been large-scale, involving some of the largest mining and railway corporations in the world. While some mining communities were established in conditions where production was initially small-scale, most often in Northern Ontario communities have begun with or were soon dominated by one or two large absentee-owned corporations – outside ownership and control and “company towns” characterized development. This characteristic condition of ownership and market structure – monopoly/monopsony power – has important implications for understanding hinterland communities, from the structure of the labour force and labour relations, to town planning and housing conditions, to the evolution of local small business, to local culture and political power, to the larger development question of the disposition of the region’s economic surplus.

24Third, the reproduction and geographical extension of regional labour market structures were dominated by metropolitan labour conditions and wage hierarchies, though hinterland class conflicts also shaped and at times brought change to state policies particularly in industrial relations and health and safety. Metropolitan dominated political-economic structures included reproducing labour market relations. These structures in mining had pronounced segregation by gender, particularly overwhelmingly male employment in its extractive, smelter, refinery, and transportation activities. During the initial settlement decades, most miners were white males from Southern Ontario cities and their surrounding small towns and rural areas, as well as from Quebec and directly from immigration. As industry scale increased, mining communities were established with class and patriarchal family and community conditions, in which local generations of workers were maintained and raised. In mining, the labour supply became more specialized, centred in existing mining communities, later often unionized, and networked across hinterland areas in terms of information and recruiting. Over decades, industry and occupational wage structures in mining and other industries were established and became relatively stable. Despite decades of change in the size and distribution of the mining community populations, miners, particularly metal (or hardrock) miners, were persistently at or near the top of the industrial wage structure for males, at least since the 1930s (for example, Statistics Canada, 1983, E86).

25Fourth, crucial to the post-1970s conditions of mining communities has been the long-term decline of employment in mining, a result of increased productivity through technological and managerial change and the globalization of investment and production. While mines were continually opening and closing, mining employment overall continued to decline. A new historical situation has arisen of absolute employment and population decline in which Northern Ontario became a hinterland labour reserve (Leadbeater, 2018). In Tables 1 and 2, in comparison with Ontario and Toronto, one sees for Northeast and Northwest Ontario and mining communities overall lower employment rates (Northern Ontario at 53.6 percent vs Ontario at 59.9 percent), higher unemployment rates (9.3 percent vs 7.4 percent), lower full-year, full-time employment (49.4 percent vs 52.8 percent), and lower average employment income levels ($41,881 vs $47,369). However, there also exist a few communities with more favourable labour conditions: like Red Lake with higher employment and income levels than Ontario or even Toronto, while Timmins is closer to Ontario levels. Similar employment declines also affected forestry and railroad transportation and their hinterland communities.

  • 10 To analyze defining features of community specialization and dependency is beyond the present discu (...)

26Fifth, the role of the state has increased and particularly its importance for stabilizing employment and production conditions. Historically, the state has played a major role in colonial (and neocolonial) expansion, such as through treaties, policing, surveying, land and mineral rights regulation, transportation, municipal law, public health, and education. However, in the recent decades, the state role has increased to the point where public employment has become the leading employment sector for many hinterland communities. In earlier periods, mine closings could turn mining communities into ghost towns, whereas today public employment in health care, education, and local government has acted to stabilize many communities against more rapid even terminal decline. This has also meant that hinterland communities became disproportionately subject to neoliberal anti-public sector policies. The share of mining employment in mining towns today is less than is sometimes understood,10 while the public sector employment is generally more important. Table 3 shows mining employment shares continue to be higher in Northern Ontario but also that public sector employment, especially health care, is both higher than the level for Ontario and Toronto (though not Ottawa, Canada’s capital) and higher generally than mining employment.

3. Why “high”?

27The flaws of the theory of an Intrusive Rentier Syndrome begin with its views of hinterland wage determination and resource rents. These are framed by neoclassical theory, though not necessarily in a consistent way particularly in addressing market power. To clarify the issues, I focus first on the question: What suggests the wages of mine workers are “high”? Initially the Syndrome proponents held that miner wages are high relative to miner productivity, though it is also argued that the wages are high relative to metropolitan wages, and that they are high relative to education.

  • 11 Research on mining productivity is well aware of region-specific geological and other factors in pr (...)

28At the outset, it needs note that the issue of productivity is crucial to the Syndrome theory and its application. Yet the theory’s proponents provide no direct evidence nor serious discussion on miner productivity. The difficulty in providing direct and community-specific measures of productivity is understandable, given that productivity and revenue data are largely proprietary at the level of the individual mine or mining corporation. The mining industry also has particular complexities associated with the measurement of productivity. Measures of labour productivity related to the tonnes of ore or mineral extracted per hour are affected not only by labour intensity but also by ore grade and other geological factors like the type and depth of the mine, as well as distances, transportation costs, and of course, varying resource prices; all of these affect differential resource rents.11 Further, the issue of miner productivity and costs are regularly a subject tested in collective bargaining and a review of industrial conditions could have illuminated the high level of productivity of modern mining operations.

29Overall, though, there is little reason to suppose miner labour productivity over recent decades has been below miner wages. Modern corporate mining operations are highly technically productive in extraction, and relevant measures of labour productivity at the industry level are generally above economy averages in most recent decades (Smith, 2004; Bradley & Sharpe, 2009). Such high technical and labour productivity should not be conflated with high levels of environmental destructiveness or “dirtiness”.

  • 12 However, for the Intrusive Rentier Syndrome argument it should be sufficient that a “high” wage is (...)

30Unfortunately, the lack of mine- and community-specific productivity evidence allows resource rents to be brought into the analysis, on the belief that if wages are (perceived to be) high it must not be from productivity but from resource rents. However, even if one assumes that mining corporations get resource rents (a revenue surplus above production costs and average profits), it does not follow that the miners or the miners’ unions are able to bargain a portion of those rents over and above the productivity-level wage.12

31What level of resource rents (if any) actually exist in the particular mine or mines at issue is an empirical question. But the Syndrome proponents do not provide evidence on production costs and revenues that might help assess whether certain mines or all mines receive resource rents. Nor is there clarity about factors determining classical or differential resource rent, let alone more radical views on possible absolute or monopoly resource rents. In terms of differential rents, mines and other resource extraction activities are conditioned not only by distance from markets and the next stages in value-added production, but also by the quality of the ore body, including metallurgical issues as they affect smelting and refining processes. Mines of different sizes and ages will vary in their resource rents, and some will be at the margin with zero differential rents and others with positive (or inframarginal) rents. In neither a classical, neoclassical nor Marxist approach do resource rents necessarily exist simply because any given mine carries on production or is large in local scale.

32Without evidence on productivity or resource rents, how then do Syndrome proponents come to view miner wages as “high”? Apart from unverified claims in interviews with entrepreneurs, it appears to be asserted on the basis that miners’ wages are higher than the average incomes in metropolitan centres (like Montreal or Toronto). It is also implied that miners wages are high relative to their education, or at least that their “work culture” does not value education, and high relative to the generally lower levels of education in communities that are smaller in size (Polèse & Shearmur, 2002, p. 41-42). However, the former depends on the theory that metropolitan centres have higher incomes because those centres have higher productivity; hence, without independent measures of productivity it would be a self-fulfilling circularity to accept that miner productivity must be low relative to their wages. Similarly, the view that miner wages are high relative to education depends on a human capital concept where wages reflect education (and experience) through an increased productivity that education brings; however, unless there is productivity evidence the theory might not hold in the case of miners.

33Another major problem is that proponents of the Intrusive Rentier Syndrome simply take for granted that miners’ unions or miners have effective market power – but why not the mining corporations? Typical mining communities have a single large mining corporation or perhaps two. This suggests, even in the mainstream view, the possible existence of monopsony power. Given monopsony, it is plausible to argue that the wages of miners are actually lower than what would occur in conditions of competition (meaning without firm concentration in the given community or regional labour market). In such conditions of monopsony, the standard neoclassical theory recognizes that a union can both raise the wages and increase employment to competitive level (see, for example, Benjamin et al., 2012, p. 202-206). Now if a union does exist and faces a monopsonistic employer, this would constitute a bilateral monopoly, which leads to indeterminate outcomes: that is, wages and employment could be higher or lower than at the competitive levels. So even mainstream theory suggests no clear position on the effect of the presence of a union in the mining community – not the anti-labour position asserted in the Syndrome theory.

34Further, it should not be assumed that unions are invariably successful in their collective bargaining or that wages are untested by market conditions. Research has suggested that the power of unions in general including mining unions has been weakened significantly since the 1970s, including by technological change, by globalization, and by rising unemployment and deteriorating employment rates. Currently, fewer than half of mining workers are unionized. In Northern Ontario the change was reflected in protracted strategic strikes that were provoked by corporations and threatened the very existence of the miners’ unions as effective forces for miners’ interests (Leadbeater, 2008a; Peters, 2010). Syndrome proponents also make the claim that mining is characteristically highly capital intensive relative to other industries so that somehow the mining unions are able to extract higher wages. In fact, capital intensity does not mean necessarily weakened or lax bargaining. The relationship is more complex and the history of strikes and industrial relations in the mining industry suggest conditions that are far more contested by class struggle and tested by productivity and capitalist market conditions.

  • 13 For discussions on “rent-seeking” in neoclassical economics, see, for example, Colander (1984) and (...)

35To this point, I have been discussing resource rents or a “ground rent” in classical terms. As is well-known, mainstream neoclassical economics has revised the concept of rent away from its traditional basis in land and resources (and landlordism) and, in recent decades, concepts of rent and rent-seeking have been shifted to support conservative criticism of governmental regulation and redistributive measures.13 Nonetheless, the concept of rent has never been fully detached from concerns about productivity and its measurement, even if rent-seeking is redefined as any exercise of power self-interestedly to gain something not earned productively or, it is sometimes said, through redistribution of an existing amount of production without increasing it.

4. Miner wages, quasi-rents, and community wages

36A next question in analyzing hinterland community conditions is on the relation of miner wages to community wages. Again, the context here is one of overall declining employment in mining. For the Intrusive Rentier Syndrome theory, “high” miner wages cause high average wages or a high-wage norm, though this is far from obvious.

37The relation of miner and community wages has two aspects. First, there is an accounting or arithmetical aspect in which having a larger or smaller percentage of miners in any community raises the average of all wages. This can happen without change in the level of non-miner wages. Second, and more significant for discussing any high-wage effect, there is a behavioral aspect in which high miner wages could increase non-miner wages in the local labour market such as through competitive pressures: in mainstream terms, there is an external or spill-over effect into the community. From the Syndrome perspective, this is a negative externality, though from an aggregate demand or Keynesian perspective it could be positive. For Syndrome proponents, even if miner wages reflected their productivity, the upward pressure on non-miner wages would still exist. Hence, it is key to address the mechanism of the upward pressure, particularly the idea of a competitive effect or demand squeeze in raising average wages.

38Using a framework of basic demand and supply conditions, one can suppose two general models. First is of a closed local economy where the mining community is isolated or closed to an external labour supply. Here an increase in demand for miners given a constrained supply of labour would lead to a rise in wages for the miners. Factors such as the existence and type of collective agreements, monopsony power, and market transparency might affect the pace of change but the bargaining power of miners would increase, as would that of other workers. Other industries would be squeezed in competition for workers and these demand pressures would lead to upward pressure on the wages in non-mining industries too. If there were pre-existing unemployment, unemployed workers would be called back and workers not in the labour force would be drawn into the economy, including with possible improved provision for training. Both the employment rate and labour force participation would increase. Labour shortage could arise and even lead to weakening discriminatory barriers in employment such as by gender or by Indigenous or national status. In this model, the increase in demand could be limited physically such as by the size and quality of the available resource or could be choked off by loss of profitability due to wage or other cost increases relative to prices.

39However, most mining communities in Canada and many other areas are not like this model. To begin, miners and their families have been to a substantial degree mobile, so an increased demand in the mines can be met by an in-migration from other locales or regions. In this sense, the single-industry mining community is more accurately seen as an open local economy. Further, industry demand for mining labour has been stagnant or declining long-term since the 1970s. In a realistic model, a local increase in demand for miners can be met by in-migration, so the increase in labour demand does not necessarily involve an increase in wages in the mining sector or in other industries in mining communities. Mining companies retain a degree of monopsony power, while union power is constrained by an economy-wide labour supply and overall declining demand, but also by the mobility of capital. In practice, lower than average employment rates and higher unemployment are common in mining communities, so even without in-migration a local increase in demand can be met through hiring and training within the pool of local unemployed, partially employed, or trainable persons in the (non-labour force) population. But one does not need to assume a local pool of available persons as long as there is the possibility of in-migration of unemployed, partially employed, or trainable persons from elsewhere.

40Of course, miners are not always available nearby to recruit and the supply is affected by cyclical as well as the long-term trend, so local variations can occur, such as with opening of new mines and movement of larger numbers of workers to those areas. The neoclassical view might characterize above-average miner pay in such conditions as (temporary) quasi-rents to attract miners. Indeed, the neoclassical Law and Economics literature has elaborated this perceived employment relation into a theory of “appropriable quasi-rent” (Klein, Crawford & Alchian, 1978). However, this is a distorted picture of actual conditions, especially when such increases are usually in the face of overall declining industry employment. Further, such increases are not generally temporary; the position of hardrock miner wages in the wage hierarchy has been relatively stable over recent decades. Of course, higher wages due to cost conditions such as for travel to new or more distant locations are not quasi-rents. Depending on the specific conditions, corporations might also deal with overcoming travel costs with travel or moving expenses or other means supplemental to the wage. It is common today for miners to commute considerable distances from their homes and families, and a common industry practice for isolated mine sites has become “fly-in mining” where mining corporations and governments have on-going mining operations without establishing any permanent mining communities.

  • 14 Leadbeater, 1998, 2008b, 2014, 2018.

41In general, however, there exists large numbers of non-employed (unemployed and non-labour force persons) and partially employed persons in most hinterland areas. In Canada, this pool exists as a result of the long-term decline in demand for labour in mining coupled with generally lower levels of employment and higher levels of unemployment in hinterland regions like Northern Ontario.14 This can be comprehended in the framework of a Marxist labour reserve approach, though institutionalist approaches could also recognize a role for mass persisting unemployment.

  • 15 For a discussion of the resource curse literature and Dutch disease, see Berry (2014). The Dutch di (...)

42In regard to “crowding out,” the flaws in the Intrusive Rentier Syndrome theory are not remedied by treating the Syndrome as a regional form of the Dutch disease.15 By crowding-out is usually meant a mechanism in which massive investment in the resource industry causes a transfer of labour and capital out of competing domestic manufacturing industries, leading to type of de-industrialization. The problem in the present hinterland case is that the industry is in overall employment decline, and there exists significant regional labour mobility coupled with a large pool of unemployed and partially employed labour that mitigate if not eliminate crowding-out effects, except possibly in early-stage boom conditions. Further, there has not been evidence of a major long-term shortfall in training or education that blocks inter-industry labour transfers to the extent suggested by the Dutch disease.

  • 16 The Dubé & Polèse study examined 135 urban areas in Canada (81 percent of all employment) in terms (...)
  • 17 The study excluded the historically significant agriculture industry and farm communities, and the (...)
  • 18 While high wages coupled with slow growth were found “almost exclusively” in resource-specialized c (...)
  • 19 Dubé and Polèse (2015, p. 43) explained this was due to lack of data on establishment size and busi (...)

43Indeed, a later empirical study by Dubé and Polèse (2015) took up the question of whether the Dutch disease applies to such local economies.16 Not only did the evidence undermine the Dutch disease application, the study’s findings were substantially contrary to claims of the Intrusive Rentier Syndrome itself.17 First, the idea of some inherent tie between high wages and low growth was not supported: “The high-wage/slow growth couple is not a generalisable attribute of resource-dependent communities”.18 Second, on the more specific issue of upward pressure on average community wages, the study found that initial resource specialization did not exert a “durable upward pressure of wages” (ibid., p. 50). Indeed, the study found community wages were not inflexible downwards – “Communities are not frozen in a syndrome of sticky wages” – and noted the severest case of Elliot Lake (ibid., p. 52). Fourth, the evidence on any crowding-out effect in communities for non-resource manufacturing employment was weak – “no significant coefficients for any period” (ibid., p. 46). Further, it recognized the role of mobility in concluding that if high wages are a condition for attracting labour to distant communities, “crowding out cannot be invoked as an explanation for slower growth” (ibid., p. 55). Fifth, the study was unable to provide evidence of the Intrusive Rentier Syndrome effect on entrepreneurship.19 Insofar as the Dutch disease theory has theoretical weight, its conditions are not comparable to those of typical hinterland mining communities.

In short, unlike the Intrusive Rentier Syndrome theory, there is no automatic economic link between high mine (or other) wages and non-mine (or other non-high) wages. Local labour markets are affected particularly by conditions of both mobility and labour surplus.

5. Local wages and local demand

  • 20 The line between basic and non-basic industries (in export-base theory) can be useful analytically, (...)

44Another question in analyzing hinterland community decline is the role of local demand, including miner wages and the increased importance of public and other local services in resource communities. For decades, the well-known economic base model has been used as a primary means to comprehend the role of demand – primary exports (basic) and local services (non-basic) – in community economic development. This has been commonly formulated in Keynesian terms with a multiplier analysis, though one can exam the industry linkages in input-output terms or through the terms of forward, backward, and final-demand linkages. By contrast, the negative preoccupation of the Intrusive Rentier Syndrome with high wages of miners or other resource workers has as its counterpart a dismissive treatment of the role of local aggregate demand in community development. Yet for community development, local aggregate demand is not only crucial for non-basic employment but also for production of locally available and community-specific services, including cultural activities, hence, important in community well-being.20

45The Syndrome proponents do mention in passing a possible positive impact of high wages on local demand: “...high wages can have two opposing effects, again making it difficult to model a simple statistical relationship. On the one hand, high wages generate local demand and attract talent and human capital; on the other, they can act as obstacles to diversification and growth; that is, if the wages paid are above what “normal” market conditions would warrant” (Desjardins, Polèse & Shearmur, 2013, p. 17). But the two effects are positioned as being opposed to each other, allegedly difficult to measure, and there is no serious examination on how relatively higher levels of local demand might impact the non-basic sector in particular mining communities. The absence of such an inquiry preempts exploring any positive community effects from miner wages.

46The lack of attention to local demand is also apparent in the lack of attention to the employment-reducing impacts of productivity increases, and how the gains from such productivity increases have been shared (or not). Indeed, one of the oddest aspects of the evolution of the Intrusive Rentier Syndrome theory is how it treats local GDP and effectively dismisses the importance of productivity.

  • 21 “At the very best this is a circuitous way of measuring local GDP, and is prone to serious errors i (...)

47First, the proponents argue it is not possible to have non-circular measures of local GDP because current measures of GDP are based on local employment but use national or provincial (average) measures of productivity.21 Indeed, the estimates of GDP and productivity are especially problematic in treating public and some private services where they are tied not simply to employment but also to income. However, it is not at all obvious why market-based production is not measurable, and such GDP data are in practice built up from geographically specific establishment and administrative data.

  • 22 Polèse was ready to dismiss outright even standard techniques that might permit Keynesian or demand (...)

48Second, the proponents argue that, even if local GDP could be measured, it would be “to some extent irrelevant” because it is not necessarily attributed to the locale of the production (Desjardins, Polèse & Shearmur, 2013, p. 48-49). Indeed, the proponents go so far in dismissing the role of local demand and local GDP that they end with doubting whether high incomes have importance and with suggesting employment can be separated from incomes, as though jobs can exist without income (ibid., p. 49): “Furthermore, even if salaries are important, communities survive principally because there are local jobs: indeed, high income regions tend to lose population to low income regions if there are more opportunities in these lower income regions.” The disconnection between local incomes and local demand is a major failure of the Syndrome theory, an issue that deserved to be addressed seriously, whether through an export-base model or some other framework.22

49The issue of local economic contribution, including in GDP and productivity, is far from irrelevant. In practice, it is a fundamental issue implicated in major policy struggles about hinterland conditions that are distributionally consequential (ownership issues, taxation, public sector service levels, “adjustment” policies, transfers, etc). It also plays a role in most economic explanations of hinterland decline, especially ones critical of metropolitanism (Leadbeater, 2014). It is even crucial to the Syndrome theory itself which suggests that resource rents are retained locally. From the standpoint of hinterland mining communities, such a cavalier dismissing of GDP and productivity issues adds to misconceptions of mining communities as low productivity and undermines discussions of structurally oriented policies redistributive to hinterland communities.

6. Decline and education

50Another key question in the analysis on resource community decline is on the role of low education. The Syndrome proponents argue that high mine rents and wages contributed to decline through low education: first, high miner wages acted as a disincentive to higher educational attainment and, second, lower educational levels in mining communities acted as a barrier to entrepreneurship and diversification. The Dubé & Polèse (2015) study discussed above, though undermining key elements of the Syndrome theory, continued uncritically the theory’s association of resource community decline with low education. Using the BA degree as indication of educational attainment, the study maintained that common to all the communities is “the combination of above-average wages and below-average educational attainment” (ibid., p. 52).

51There are several problems in such a high-wage/low-education association. To begin, the Syndrome proponents are actually claiming a causal direction from high wages to low education, in particular, that for young male workers the high-wage mine jobs are an alternative and disincentive to more education. A simplistic association of high wages with low overall achievement levels in hinterland communities – without regard particularly to gender, Indigenous or national background, or proximity issues of hinterland communities – fails to deal with long-known factors in educational achievement (for example, Card, 1995). A more sophisticated study would examine determinants of educational attainment in hinterland communities including well-known regional economic and class determinants. From the observed data it is simply not possible to say much about the motivation of younger or mature persons from hinterland communities in terms of their educational achievement. Further, mobility is ignored: many young as well as mature persons leave their communities for lack of educational opportunities or employment opportunities – or both.

52As noted, the Syndrome proponents hold to a human capital theory. Such an approach privileges formal educational credentials relative to measures of skill or productivity more suitable for occupations in heavy industry. Unfortunately, the view that miners have low education or human capital (as also seen for many workers in “blue” or “pink” collar jobs) can be larded with half-truths and class prejudice, for instance, that mine work is “unskilled” or filled by those with physical but not brain power. But we know that what defines skill in mining in particular is not only historical custom but also directly the result of conflicting class interest, management strategy, and union bargaining (Clement, 1981). Mining corporations have a class interest in a low assessment of the skill levels of miners and their productivity.

53To the second aspect of the high-wage/low-education association, low education as a barrier to growth in mining communities, the Syndrome’s proponents appear to believe uncritically the doctrine that supply creates its own demand or, in the present context, a more educated labour supply in mining communities would create its own demand. But this is by no means clear. The effects of training programs for mining communities following mass layoffs in mining have been examined in the case of Elliot Lake, Ontario during the layoffs and closures of the 1990s (Leadbeater & Suschnigg, 1997). A major longitudinal research study showed that training programs had limited take-up and, for those who did, limited re-employment benefits, particularly in conditions of high unemployment. Education and training can have personal and social benefits but there is little evidence from hinterland regions that they are a major factor in hinterland employment. As one Elliot Lake participant commented that “It’s jobs that is the engine of recovery – training tags along” (ibid., p. 15).

7. An alternative approach to hinterland labour “adjustment”

Given the several problems of the Syndrome theory, how then can one explain hinterland labour patterns in the context of overall industry decline, particularly the high wages/declining population situation considered by the theory as “a priori an incompatible combination” (Dubé & Polèse, 2015, p. 51)? I propose a form of labour reserve analysis in the hinterland context.

  • 23 See Marx & Engels (1887, chap. 25). The latent form can be viewed as underemployment, while the flo (...)

54In Marx’s classic analysis of the labour reserve, hinterland areas were largely agricultural and the labour reserve was largely “latent”.23 By contrast, growing capitalist manufacturing in urban centres created and reproduced largely “floating” and “stagnant” forms of the reserve. Decline in capitalist industries tends to shift the reserve more towards its stagnant form, the form most directly associated with severe poverty and economic dependency. In this approach, there exists no tendency to full employment, but to a persisting and more broadly defined mass of unemployment that is shaped in type, depth, and geography by particular conditions of accumulation.

55For mining communities, the process of accumulation is led by a location-specific demand for mining and related labour, whether short-term for immediate production requirements or long-term for development for future extraction. Recruitment and hiring is based on the varying technical requirements of each mining operation. Depending on community conditions, the labour demand is met locally or by in-migration. In some communities, the mines have provisions for rehiring laid-off mine workers through terms of a collective agreement but most hiring is done directly by the corporations and their personnel officials. Some local colleges or training programs have graduates available. The labour supply is mobile in varying degrees, from young single persons without dependents, to “prime-age” persons with families who might commute or move, to those less able to move due to care-giving obligations or an employed partner unable to relocate. Health liabilities and a variety of discriminations (ageism, racism, sexism, ableism, union association) also play their role. The key point in Marx’s analysis is that the capitalist demand tends to be prospective (Marx, 1969 [1862-1863], p. 217), for instance, hiring the younger or more able-bodied over the older or disabled workers. In mining communities one often sees significant numbers of less employed older workers and high levels of injured workers, hence, a larger stagnant reserve.

56In terms of wages, most hiring for non-managerial jobs is under pre-existing provisions or a collective agreement where the wage and other terms are subject to limited or no individual bargaining. Wage differentiation exists according to the variety of mine jobs, typically by levels of skill and responsibility, and some have “bonus” features for higher production. In mainstream terms, particularly in the context of overall stagnant or declining labour demand, the process is more akin to quantity adjustment than price adjustment. However, it is not a quantity equilibrium: in most times there are local or outside workers with mining experience who do not get hired or whose hiring is delayed. Overall, since the 1970s in Northern Ontario, the pool of unemployed and partially unemployed, especially younger unemployed persons has risen, as has the employment to population ratio has declined (Leadbeater et al., 2020). This labour reserve pool varies in size across communities. In some conditions, such as after closures, local numbers are much higher and it exerts a greater downward pressure on local wages and conditions.

57Depressed and declining community demand conditions have greater impacts in some industries and by gender. Generally, workers in more skilled and higher paid jobs are less subject to local conditions, due to not only less competition locally but also less competition elsewhere. As well, workers in these occupations and industries often have wage norms supported directly or indirectly by multi-year collective agreements. Low-paid workers typically in less skilled occupations face more local and outside competition and are less supported by unions or contractual floors on wages. At the lowest level, often the only protection is government minimum wage regulation. Consequently, relative to communities with average demand conditions, for communities with depressed demand conditions the gap between higher paid and lower paid employment tends to be larger and especially by gender.

58To illustrate, Table 4 disaggregates full-year, full-time labour earnings by gender and selected industries for two contrasting mining communities where data are available, Timmins and Elliot Lake. One can see mining is higher paid in Toronto (due to head office activities) for both males and females and the gender gap is greater than for Timmins or for Ontario. Public administration earnings in Ontario and Toronto are also generally higher than average for males and more so for females but with a gender gap at around 85 percent. By comparison, in Timmins, earnings are lower for males and much lower for females with a gap of 80 percent. Elliot Lake has higher earnings for males but much less for females, for a gap of 76 percent. Overall, public sector employment has a major portion of aggregate earnings. In Elliot Lake, health care provided about 32 percent of total earnings and 47 percent of female earnings. In terms of industries more subject to local market conditions such as the lowest paid industry, accommodation and food services, both Timmins and Elliot Lake compared to Toronto and Ontario had lower earnings for males and much lower for females, especially in Elliot Lake.

  • 24 Beaudry, Green and Sand showed that “the spillover effects are pervasive, persistent, and large. In (...)

59The general result of depressed and declining hinterland conditions – low employment and high unemployment weighing on the conditions or some workers more than others – is predictable. If employment prospects are better elsewhere, more mobile persons will leave. This will occur even as some (miner) wages remain high and the destination communities have lower average wages. If employment prospects elsewhere are worse or stagnant, there will be less out-migration until demand conditions elsewhere improve. Hence, the size of the hinterland reserve increases even further above average economy-wide unemployment, and this adds downward pressure on local non-mining wages, which can also increase local inequality. This unemployment has a greater effect on some jobs more than others, such as between workers with and without unions. Due to local reduced demand and increased job competition, the loss of mining or other high wage jobs has significant spillover effects. Beaudry, Green and Sand (2012) estimated such average wage-effects of high-wage employment loss in US cities over 1970-2007.24 Of pertinence here, the study used standard search and bargaining effects and showed that “national-level forces are quantitatively important for understanding city-level outcomes” (2012, p. 1098).

  • 25 Marchand (2015, p. 733) defined the energy extraction sector as oil, natural gas, and coal extracti (...)

60In contrast, in conditions of a local boom, mine workers who are unemployed or in lower paid employment might be re-hired and there will be upward pressure on community wages as a whole, including in low-wage employment. This upward pressure will be limited by general demand conditions in mining and by in-migration from outside the community. But the local boom conditions can lead to increased average wages and more persons above low-income cut-offs (or absolute poverty lines), though there might also be increased relative inequality. The latter can be expected if the boom conditions are economy-wide such as observed by Marchand for the energy (oil, gas, and coal) boom in Western Canada during the 1990s and 2000s.25

61The approach here to the labour adjustment process does not require the existence of resource rents in any or all hinterland communities. But it does require a full comprehension of unemployment as well as economy-wide labour demand conditions and the role of class power in industry and occupational wage structures including the role of job segregation due to continuing colonial and patriarchal conditions. So do “high” miner wages have a positive effect on hinterland community wages? The answer is yes in some conditions, but not necessarily, and particularly in conditions of long-term declining labour demand.

62All of this operates within the balance of labour-capital power. Beyond narrowly viewed labour demand and supply conditions and competitive pressures, the miners and their unions have a collective power which when used politically in solidarity with other groups of workers can and has altered community conditions, including wages. Approaches like that of the Intrusive Rentier Syndrome exclude or distort this political backdrop of past and present class struggles in which miners and their unions play a leading role, and not always alone, in the general improvement of hinterland community conditions.

63Two other aspects of the conditions of hinterland mining communities have been distorted by the Syndrome perspective. The first is the condition of small business. As noted, the Syndrome proponents provide no empirical evidence of their main notion that high miners’ wages stifle entrepreneurship and avoid serious discussion of local aggregate demand and its relation to local wage levels and demand in the non-basic sector. Nor is there even a clear definition and measure of entrepreneurship or small business. However, the condition of community self-employment and small business activity, in particular, is still an important question deserving research. There is evidence that some hinterland areas, such as mining communities, have generally lower levels of self-employment (Table 1), though this is affected by industry structure, such as by limited agriculture and farming in hardrock mining areas. More important, the Syndrome’s proponents fail to address the consequences of monopoly concentration across industries affecting hinterland communities, which include banking, fuel supply, electric utilities, telecommunications, fast food franchises, supermarket chains, convenience stores, hotels, and mass media. There exists research and advocacy that challenges monopoly concentration and its role affecting community small business development (for example, Mitchell, 2016). Monopolistic conditions adverse to local small business are more advanced in hinterland communities, yet the Intrusive Rentier Syndrome does not address the issue, indeed, the word “monopoly” does not appear in either the proponents’ initial 2002 study or the 2013 update.

  • 26 “One could argue that ... the public administration sector represents the backbone of Canada’s nort (...)

64Another aspect deserving greater attention is the major importance of the public sector. Public sector employment, defined at least by Education Services, Health and Social Services, and Public Administration, now commonly has the largest employment share in hinterland mining and other resource communities, and it is larger than the economy average (Table 3). This does not mean that the standards of provision for public services are higher. Rather the standards of provision are usually lower and more precarious. Nonetheless, the Syndrome proponents suggest that the strength of such services lies in their stability not community needs, and they point to the higher wages of the public sector employees as an obstacle to development.26 Unfortunately, the Syndrome theory seems unable to address even mainstream economic arguments such as “market failure” and the role in development of community needs and public provision.

Conclusion

65This critical examination of the Intrusive Rentier Syndrome theory began in a discussion of its evolution from a focus on hinterland resource communities in Quebec and Atlantic Canada to its extension to manufacturing communities, “Rustbelt” regions, and major cities. The analysis that followed focused particularly on mining communities, and was illustrated with the conditions of hardrock mining communities in Northern Ontario. Examining the theory is important not only for those living in hinterland communities concerned about neoliberal policies affecting hinterland regions but also for those interested in neoclassical wage and rent theory and their use in explaining the evolving conditions of resource workers and resource communities. Such theories are consequential, for instance, the Syndrome proponents have argued for a policy of phasing out high-wage mining and resource jobs.

66The Intrusive Rentier Syndrome theory maintains that the wages of miners (and other resource workers) are “high” and this stifles growth in other industries, particularly basic (export-oriented) industries, in hinterland communities. The wages are able to be high because mines get resource rents and miners’ unions can exercise their power to secure a portion of the rents. The present analysis has shown several flaws of the theory, particularly in treating miner wages and rents without adequately treating productivity or market power, the truncated view of the relation of miner wages to community wages, the inadequate treatment of local demand, and problems of the claimed high-wage/low-education association. Further, the proponents provide no direct evidence on productivity or resource rents. This lack is significant because, even if the mining industry gains resource rents, the rents do not necessarily exist for individual extractive activities at the margin.

67For Syndrome proponents, resource rent-enabled high wages are a major factor in resource community decline and lack of diversification. It follows that the wages of miners, other resource workers, public sector workers, and the community as a whole must be lower to call forth the labour demand that their theory predicts. Even if some communities are observed to have low wages and no growth or out-migration, the theory has a rescue claim: that there are long-lasting legacy effects from the “work culture” of large-scale heavy industry and their unions.

68So fixed is the Syndrome theory on “high” hinterland wages that the proponents believe in an apparent incompatibility between high-wages and declining population from hinterland communities. This turns out not to be so contradictory, as least outside a neoclassical perspective. As an alternative approach to labour “adjustment” in hinterland conditions, I propose an approach based on Marx’s labour reserve analysis. It turns out there is no contradiction if one recognizes notably the central role of persisting unemployment, partial quantity adjustment relative to price adjustment, cross-regional wage structures, varying degrees of labour mobility, and competing external employment conditions.

69With its flawed theoretical and empirical elements, why should the Intrusive Rentier Syndrome theory persist in its attack on miners and some other hinterland workers? This is not an idle question for those who live in hinterland mining communities or smaller communities with heavy industries. I see the Intrusive Rentier Syndrome conception as another example of metropolitanism in theoretical work (Leadbeater, 2014). There is an evident class element about the wages of some targeted workers, with little empirical knowledge of their productivity or labour conditions or resource rents. The animus against “high” miner or resource wages could as well be turned against high incomes in the metropolitan centres. So also could resource rents be examined for their impact in metropolitan centres. One sees that the Intrusive Rentier Syndrome is a theory that does not challenge more difficult distributional questions of colonial and capitalist structures and instead focuses blame on miners and resource workers for the decline of hinterland resource communities. What one sees in the Intrusive Rentier Sydrome Theory is metropolitanism: a perspective reflecting class together with a superiority of place, particularly “central” or metropolitan place.

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Notes

1 See, for example, Marchand, Dubé & Breau, 2020; Breau, 2014, 2015; Polèse, 2013; Savoie, 1992; Anderson, 1988; Bradfield, 1988; Melvin, 1987; Coffee & Polèse, 1987.

2 See, for instance, Carbert, 2020; Gritsenko & Efimova, 2020; Bélanger, 2017; Kelsey, Partridge & White, 2016; World Bank, 2015; Warkentin, 2012; Gaudreault, 2011; Desjardins, 2005.

3 In a later publication, Polèse (2009, p. 20) reports uncritically the instance of an interview he and Shearmur had with one of “several budding entrepreneurs” in the Saguenay region.

4 In addition to the Syndrome, the proponents identified transportation costs, urban agglomeration economies, and provincial size and border effects (Polèse & Shearmur, 2002, chap. 10).

5 Polèse & Shearmur (2002, p. 135). As will be noted later, there is no discussion of monopoly or firm concentration, or analysis of market structures.

6 Polèse (2009, p. 22). Other examples were the “traditional” European coal and steel centres of the Ruhr, the Midlands, south Wales, Lorraine, Nord-Pas-de-Calais, the Borinage, Asturias, and Saxony, “which became strongholds of socialist and sometimes communist parties.”

7 Desjardins, Polèse & Shearmur, 2013, p. 20: “It is difficult to precisely factor in all the elements that explain inter-city (or inter-regional) wage differences. It is as difficult to rigorously prove that wages in some Ontario labour markets are above what pure productivity indicators would allow as it is to prove that those in certain Quebec markets are below. However, the data suggests that the possibility cannot be excluded.”

8 The mining data here refer only to extraction activities (whether underground or open pit) and milling. Smelting and refining are deemed primary manufacturing. Sudbury is the only community in the list still with substantial smelting and refining operations. The decline of smelting and refining activities is a major issue for separate discussion (Dufour, 2014). Blind River with its uranium refinery is the only other Northern Ontario community with a refinery.

9 For present purposes, Northern Ontario is defined as Statistics Canada’s Northeast and Northwest Economic Regions and the data used here are from the 2016 Census of Canada.

10 To analyze defining features of community specialization and dependency is beyond the present discussion. The tables here suggest a minimum employment share of 5 percent for the region and larger mining communities. Some past studies have used a threshold criterion for mining or resource communities as high as 30 percent for employment or incomes (Leadbeater, 1998). This has become less useful since the decline in mining employment even as a large degree of mining-export dependency remains. Also, once-producing mining towns often have residents who stay but travel for work in other communities or for maintenance or related work.

11 Research on mining productivity is well aware of region-specific geological and other factors in productivity, including resource depletion (Humphreys, 2019; Topp et al., 2008). This also gives mining productivity discussions a dimension tied to legitimate concerns about environmental conditions and resource consumption.

12 However, for the Intrusive Rentier Syndrome argument it should be sufficient that a “high” wage is paid, not necessarily that it is paid as a consequence of union power. Such is the anti-labour orientation of the theory’s proponents that apparently only unions would push wages above their believed productivity levels. In fact, a branch of mainstream economic theory – in efficiency wage theory (see, for instance, Benjamin et al., 2012, p. 292-298) – recognizes that firms might pay higher than prevailing or competitive wages for such purposes as achieving higher worker productivity, lower worker turnover, and reduced recruiting and training costs. In this case, the miners could received resource rents but not through the exercise of their union or collective power.

13 For discussions on “rent-seeking” in neoclassical economics, see, for example, Colander (1984) and Medema (1991).

14 Leadbeater, 1998, 2008b, 2014, 2018.

15 For a discussion of the resource curse literature and Dutch disease, see Berry (2014). The Dutch disease argument, more often associated with the oil and natural gas industries, usually has two elements. The first is an exchange-rate effect in which resource exports cause an overvalued national currency that disadvantages manufacturing exports and production. The second is a labour market crowding-out effect which is more relevant to the present discussion.

16 The Dubé & Polèse study examined 135 urban areas in Canada (81 percent of all employment) in terms primarily of growth in population and employment and college education in relation to the communities’ initial levels of resource specialization (defined by employment share in extraction and primary manufacturing).

17 The study excluded the historically significant agriculture industry and farm communities, and the fishing industry and fishing communities, as well as communities under 10,000 population, hence, smaller mining and forestry communities.

18 While high wages coupled with slow growth were found “almost exclusively” in resource-specialized communities, “most resource communities are not high-wage/slow growth communities” (Dubé & Polèse, 2015, p. 52).

19 Dubé and Polèse (2015, p. 43) explained this was due to lack of data on establishment size and business start-ups at and between the census dates.

20 The line between basic and non-basic industries (in export-base theory) can be useful analytically, but discussions of long-term community economic development also need to recognize that the categories can be more fluid over time, such as where a local restaurant, music venue, professional service, or production facility at one time serving the local market attracts increasing numbers of outside customers and shifts to an export/basic role. A larger quantity and higher quality of local non-basic economic activities can improve well-being in the community as well as providing for transitions into the basic sector.

21 “At the very best this is a circuitous way of measuring local GDP, and is prone to serious errors if, as is generally recognised by economic geographers and location theorists, one of the key differences between regions is their different local productivity levels” (ibid., p. 48).

22 Polèse was ready to dismiss outright even standard techniques that might permit Keynesian or demand-oriented analyses of community conditions. On multiplier analysis, he asserts: “The multiplier results will tell the analyst in what industry employment (or income) is generated in the economy, but not where” (Polèse, 2013, p. 233). The technique Polèse writes off is one of the few available today for smaller communities to examine the magnitudes of shorter-term impacts of local closures or downsizings. As with any simplification, the technique depends on data quality and explicit conditions, but such work on the direction and magnitudes of employment change in mining and other hinterland communities can contribute to greater awareness of their economic conditions.

23 See Marx & Engels (1887, chap. 25). The latent form can be viewed as underemployment, while the floating form is closest to frictional unemployment and the stagnant form can be approximated as structural unemployment.

24 Beaudry, Green and Sand showed that “the spillover effects are pervasive, persistent, and large. In particular, at the city level we find that having jobs more concentrated in high-paying industries has an effect of the average wage with the city that is 2.5-4 times larger than that implied by the common composition adjustment accounting approach.” (2012, p. 1099) This suggests even more severe wage consequences for hinterland communities from the Syndrome proponents’ policy to phase out high-wage jobs.

25 Marchand (2015, p. 733) defined the energy extraction sector as oil, natural gas, and coal extraction and their support activities: “The boom effects were larger for total earnings and wages and salaries than for total income and were also larger for localities with a greater dependence on energy extraction earnings. Low income poverty drastically decreased due to the boom-induced gains in the bottom of distribution, while relative poverty slightly increased, as the bottom on the distribution did not grow fast enough to catch up with those further up the distribution.” See also Marchand & Weber (2017) and Bartik (1996).

26 “One could argue that ... the public administration sector represents the backbone of Canada’s northern economy. This does have implications. First – and it may explain its relative strength –the sector does not react to market conditions as other sectors do. This has the advantage of – generally – yielding more stable employment. On the other hand, the sector may play the role of “an intrusive rentier”... and stifle small business development.” (Desjardins, Polèse & Shearmur, 2013, p. 122)

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David Leadbeater, « Hinterland decline, resource rents, and resource wages: A critique of the theory of an Intrusive Rentier Syndrome »Revue de la régulation [En ligne], 31 | 2nd semestre / Autumn 2021 | décembre 2021, mis en ligne le 17 janvier 2022, consulté le 19 mai 2022. URL : http://journals.openedition.org/regulation/20637 ; DOI : https://doi.org/10.4000/regulation.20637

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David Leadbeater

Adjunct Professor, Department of Economics, Laurentian University, Sudbury, Ontario, Canada P3E 2C6; dleadbeater@laurentian.ca

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