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Crisis in Labrador West: boom, bust, repeat

By: Jon Parsons and Arn Keeling | June 1, 2015

Economic downturn in mining activity is devastating the communities of Labrador City and Wabush.

A new apartment building in Labrador City sits empty. The building on Booth Ave. was a project backed by mining companies who were desperate to find accommodations for workers during the 2009 expansion of operations. Today, as the industry is in downturn, there is no demand in the housing market for the apartments. Photo by Arn Keeling.

A brand new apartment building on Booth Avenue in Labrador City sits empty, not a single resident in any of the modern units.

The apartment complex was rebuilt after it was gutted by fire in 2012, at a time when the community faced a housing crunch and desperately needed new accommodations for the many workers and their families moving to Labrador West as the local mining industry boomed. Today, the empty building speaks to the abrupt reversal of fortunes for the community of 10,000 people as it endures the hardships of an economic downturn due to the whims of global iron ore markets.

On the surface, the neighbouring communities of Labrador City and Wabush look prosperous: new homes, new vehicles, a new college campus, major retail outlets and restaurant franchises, as well as an array of new and expanded recreational facilities such as a popular skateboard park. But the outward appearance of prosperity masks the stark realities of a region experiencing an unprecedented economic bust, something that becomes apparent from the many ‘for sale’ signs on residential properties.

As a mineral-dependent region, Labrador West has seen ups and downs before. But a recent visit to the communities and discussions with local residents and officials underscored the speed and worrying depth of this current crisis.

Hit by a collapse in global iron prices, the Wabush mine, previously operated by Cliffs Natural Resources, is entirely closed down, while the Labrador City mine, operated by Rio Tinto-IOC, is in slowdown and has been laying off workers. Food bank visits have surged, and in recent days there have been demonstrations by workers in Labrador West against the layoffs. Cliffs Natural Resources recently announced it will discontinue health and life insurance benefits for Wabush Mines retirees as of June 1.

Labour turmoil

Jason Penney, president of United Steelworkers local 6285, representing workers at Wabush Mines, says the mine’s closure was sudden and that the union was mostly in the dark about what was coming.

“February 12, 2014, we got a call to go into a meeting there about 1 o’clock,” says Penney. “When we went in smoke was coming out the stack, and we were in there for a half hour … When we left it was gone.

Rio Tinto’s IOC mine in Labrador City, still operational and one of Canada’s greatest iron mines. But prices have been slipping and the company has been laying off workers. Photo by Arn Keeling.

Rio Tinto’s IOC mine in Labrador City, still operational and one of Canada’s greatest iron mines. But prices have been slipping and the company has been laying off workers. Photo by Arn Keeling.

“People showed up for work, for their shift that night, and were hauled into a meeting in the lunchroom. They showed up with their lunch cans to go to work, and they were told that they didn’t have a job anymore. Go home. So it was quite a shock. We knew that there was troubles, and we expected something to happen, but we really didn’t expect anything of that magnitude. We probably expected another massive layoff or a scale-back of the operation. It was quite abrupt.”

Roughly 500 workers lost their jobs with the closure of the Wabush Mines, while hundreds more are set to be laid off from the Labrador City mine. Many of these workers and their families have found themselves in a dire economic situation, having taken out mortgages on homes in a red hot market and now seeing the value of those properties plummet.

“A lot of our membership, probably 60 per cent or greater, I’d say, had five years seniority or less,” says Penney. “They had no choice but to come in here and purchase a home. At the time there was a housing crunch, to say the least, and to rent anything here, a regular small three-bedroom bungalow was being rented out for $3,000 and $4,000 a month. The only people who could afford to pay those kind of rents were the companies that were bringing in the fly in–fly out workers. If you wanted to actually live here and work in the mine full time, you had no option but to choose to purchase a house, and at the time they were $300,000 to $400,000, and even up to around $500,000. So a lot of people bought those homes and now, with the uncertainty and the two mines in the area closing, there’s nothing selling.”

Now, with the downturn of the mining industry in Labrador West, instead of fly in-fly out workers coming to Labrador West, local workers are themselves seeking fly in-fly out jobs elsewhere.

Social turmoil

Noreen Careen, co-chair of the Labrador West Housing and Homelessness Coalition, suggests that this cycle of boom and bust is familiar to locals.

“I moved here in 1974. So I’ve been here for 40 plus years. My husband was a miner. He worked at the mines and retired from the mines. So we’ve kind of been on the roller coaster and seen an example of it all,” says Careen.

Indeed, industrial cycles in the region are nothing new. A ride up the Quebec North Shore & Labrador rail line to Schefferville, Que. illustrates that nicely. Once the centre of the booming iron ore region, the mine-dependent town collapsed in 1983 after then-IOC President Brian Mulroney abruptly announced the closure of the mine. Labrador West, too, suffered during that crisis, but avoided the near ghost-town fate of Schefferville, Buchans, and so many other Canadian mining towns in the 1980s.

Even with the region’s past experience, Careen points out that the current economic downturn is unique in many ways.

“For the first time ever, the one thing that happened was one of our mines actually closed,” she said.

A house for sale by its owner in Wabush. Instability in the real estate market in the twin-towns of Labrador City and Wabush is adding to the trouble for laid off workers. Photo by Jon Parsons.

A house for sale by its owner in Wabush. Instability in the real estate market in the twin-towns of Labrador City and Wabush is adding to the trouble for laid off workers. Photo by Jon Parsons.

“The things that I’m hearing and the people that I’m working with, over the last few months — I have moms and I have families, and especially single moms, who were working at Wabush Mines and invested into buying a new home, which was something they could hardly ever dream of. I worked with a couple of them just last month, and now they don’t have jobs, so consequently their home is in receivership or they’re going to lose their home.”

Careen, who is also director of the Labrador West Women’s Centre, says there are many social problems that come with the recent economic bust.

“We’re finding a lot of stressors on family life. We’re finding domestic violence increase. When families are trying to deal with big issues like this, it can be very difficult.”

As with the example of the real estate crisis at both the top and the bottom of the economic cycle of the community, Careen points out there were also social problems during the good times as well.

“When our mines announced a major expansion [in 2009], we started talking about the need to look at the impacts that this was going to have on our community. Because when you’re moving to major economic restructuring, such as our community did, you need to make sure that you’re set up for it. You need to make sure you have a plan. I’m not really sure we were positioned that way. When the expansion and the boom started to take place, it started to take place very fast. … That brought an influx of the hyped up nightlife, the club life. So we were seeing an increase in crime, in drug use.”

Community turmoil

Now that the high times are over, families and the region as a whole are scrambling to deal with the bust. Colin Vardy, Mayor of Wabush, says the municipality is also having to make difficult decisions in recent months, but has received some support from the provincial government to ease the pain, according to a formula by which the government support decreases each year.

“When Wabush Mines closed we lost in excess of $2 million in grants. So the province came on with a program for us, which gives us 90 per cent [of the lost $2 million grant] in the first year, 60 per cent in the second year, and 30 percent in the third year.

“We’re actually making cuts on a day-to-day basis,” Vardy continues. “I personally want to do this with minimal job loss.

“We have employees here who have made a commitment to us and they’ve bought houses in our community, and they have mortgages same as everybody else. My personal goal is to get through this without having to send anybody home.”

 It’s a cyclic environment up here and without a doubt there will be another boom and there will be another bust. — Wabush Mayor Colin Vardy

Vardy says he has also seen a great deal of upheaval in the community.

“You hear of a lot of people up and leaving, a lot of people doing fly-in fly-out who have young children. My neighbour, he works 21 in then seven out. He works 21 nights straight. He doesn’t get to see his daughter. I don’t know how he does it. That’s beyond me.”

Indeed, some have expressed concern that shutdowns and layoffs were part of a trend of restructuring employment towards longer shifts and commute labour, which is harder on family life.

Vardy also notes the repetitive economic cycle of the mining industry and how the municipality is trying to cope with such rapid shifts and turmoil.

“It’s a cyclic environment up here and without a doubt there will be another boom and there will be another bust,” he says.

Speaking to the possibility of a return to economic prosperity, Vardy says, “I really think the next boom we’re in a much better situation to deal with.”

In spite of such optimism, it remains uncertain when—or if—Wabush Mines will reopen. Talks between Cliffs and MFC Industrial over the sale of the mine have stalled, and global iron prices remain mired due to softening demand and a global supply glut. For workers and businesses in Labrador West, whose livelihoods depend on the mines, what remains is a pervasive sense of uncertainty around their immediate future, and that of their communities.

Arn Keeling is a professor in the Geography Department at Memorial University. Jon Parsons is a PhD student in English at Memorial University. This article is a result of the authors’ recent visit to Labrador West as part of a UArctic Extractive Industries research excursion, which included a panel discussion with community leaders, representatives of mining companies, organized labour, and local politicians. The authors wish to acknowledge the support of the UArctic network and to thank the kind people of Labrador West for their hospitality and candor. Interviews transcribed by Erika Steeves.

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