Note to publishing: I have manually changed this affiliation to: Mr. Iain Macdonald (Managing Director, Centre for Advanced Wood Processing, University of British Columbia, and Chair, Wood Manufacturing Council). Please ensure the changes are reflected in the French. Thanks!Thank you very much.
My name is Iain Macdonald. Today I am speaking as chair of the Wood Manufacturing Council. I am also the managing director of the Centre for Advanced Wood Processing at the University of British Columbia.
The Wood Manufacturing Council is the national human resources sector council for the secondary wood products manufacturing industry, with a mandate to plan, develop, and implement human resources strategies that support the long-term growth and competitiveness of the sector. We work with companies, employees, the education system, industry associations, and government to research and respond to the changing needs of the industry as well as to develop strategic plans to address key issues such as shortages of skilled workers and the need for national standards for worker competencies.
I'll focus my remarks today on the secondary manufacturing subsector of the forest industry; that is, companies that make value-added products such as furniture, doors, windows, architectural millwork, cabinets, and engineered building components.
Canada's value-added wood products are known for their quality and are exported widely. Total direct employment in the sector in 2013 was approximately 90,000 people, with 41% of those in the wood furniture and 23% in the cabinet subsector. Employment has declined over the past decade, particularly since the U.S. housing crisis, prior to which it had been growing.
Three provinces—Ontario, Quebec, and B.C.—account for a large share of the employment and the output. Much of the industry is located in or close to urban areas. The sector benefits both from new construction and from renovation. It has been impacted significantly, as we said, by the U.S. economic downturn. The overall value of the industry in the value-added sector was $17 billion in 2006, and despite the recession, remained at $17 billion in 2010, even with the loss of approximately half of our export sales. Canadian companies were successful at finding domestic customers to make up for that loss. Employment itself decreased by 20%, but productivity improved.
A major reason for promoting value-added wood products is the opportunity to derive more jobs and GDP from each tree harvested. A study carried out in 2000 found that Canada created just $123 U.S. per cubic metre of wood harvested, compared with $290 for the U.S. and more than $600 for Japan and Germany.
The secondary wood products sector is faced with a number of challenges. Ninety-seven per cent of the industry is made up of small and medium-sized enterprises with fewer than 100 employees. SMEs bring specific challenges, such as a lack of formal management skills, difficulty in accessing capital for investment in technology, poor economies of scale in production, and difficulty in releasing key employees from the production floor for training. The sector tends to be less technology-intensive than is the case for some of our competitors, resulting in productivity and efficiency gaps.
The sector has challenges in finding and retaining employees particularly at the entry level due to competition from the oil, gas, and automotive sectors and perceptions of the industry as offering unattractive career prospects to young people. Some elements of the sector, particularly wooden furniture, have suffered harsh competition from offshore imports, predominantly from China but now shifting to Cambodia and Vietnam. Finally, secondary manufacturers have difficulty obtaining lumber inputs from Canadian mills due to their focus on volume rather than value-based production and distribution.
The Wood Manufacturing Council has attempted to address these challenges in various ways, based on detailed labour market studies and close consultation with manufacturers. We've created a management skills training program designed to equip participants with skills and knowledge to move into management and supervisory roles within the industry. Our aim is also to help entrepreneurs who have established and grown businesses based on their technical knowledge to learn about and implement formal management systems in order to be able to delegate responsibility within their companies and focus on business growth.
Expanding the reach of recruiting and retention efforts to equity groups has been identified as a promising means to address skill shortages. WMC offers the wood employee readiness curriculum, which is a program that provides technical and essential skills training to individuals from equity groups interested in entry-level positions. Recruitment is from first nations, Inuit, Métis, new immigrants, women, and persons with disabilities. We've carried out programs from coast to coast with highly positive employment results. We're currently undertaking an initiative supported by Status of Women Canada to advance women's successful participation in the sector through the piloting of a mentorship system.
Higher education is also playing a significant role in addressing sectoral challenges. UBC's wood products processing bachelor's degree program is North America's largest program specializing in training management-track personnel for the wood products sector, and enrolment is currently at an all-time high. Our graduates are in high demand, and 94% of them find long-term careers within the sector. Average salaries among our alumni are second only to the faculty of medicine.
Our centre works closely with industry on new product development, manufacturing improvement, and technology transfer, and we see tremendous opportunity for a resurgence in the value-added sector in coming years for a number of reasons.
Offshore imports have become far less competitive. Typical wages have increased in China from $65 a month in 2000 to over $500 a month today. Industrial energy costs, previously subsidized, are no longer so. State-owned enterprises are now required to repay public loans, previously not the case as long as they were creating employment. Job creation is no longer the main driver for industrial investment. The 2008 Lacey Act revision in the United States requiring importers to prove that wood used is from legally harvested sources has also raised material and administrative costs for importers and is serving to persuade some of them to focus instead on Chinese and other Asian markets. Finally, concerns over the health aspects of finishes and adhesives used in some imported products continue to be of concern to North American consumers.
We now have a climate in which Canadian value-added wood products can compete for a larger share of the North American market if well-designed, efficiently manufactured, and adeptly marketed. In addition, looking to the construction sector, we see tremendous opportunities for our manufacturers due to recent building code changes, as the previous witness pointed out. Canada has the chance to develop a leadership position in structural engineered building products and systems that can go into structures such as schools, hospitals, industrial and institutional buildings, and tall wood buildings, such as the 16-storey student dorm scheduled to start construction next year at UBC. If we fail to do so, however, more mature players from Europe will be only too happy to service this emerging market.
To help Canadian companies fully exploit these opportunities, we will need to continue to invest in the sector by supporting industrial innovation in product development, manufacturing, and business processes, as well as in human resources and skills development. We suggest that the sector council model, which supported many highly effective human resource councils such as the WMC, be revisited, and we propose that there's a need for an umbrella organization that can provide a unified voice for secondary manufacturers throughout the country.
We must ramp up R and D efforts that are closely aligned to the needs and opportunities of industry, and provide avenues for innovative and energetic Canadian companies to attain and deploy the technology and training to be globally competitive. It's great to see the first to market with a new product or technology finding government support, but to build a globally competitive industry we need many viable producers of each product type. We must encourage and support enhanced partnerships and synergies along the supply chain and encourage primary manufacturers to move up the value chain, leveraging their economies of scale and access to capital to compete against the highly competitive products being produced in Europe and elsewhere.
Thank you for the opportunity to address the committee.