Auto Service World
Feature   February 1, 2001   by Jim Anderton

Recession? Forget it. It’s disposable income that counts.

"Two consecutive quarters of negative growth." The media economists use that statement as the standard definition of recession, and point to auto industry job losses and dot-com failures as proof of t...

“Two consecutive quarters of negative growth.” The media economists use that statement as the standard definition of recession, and point to auto industry job losses and dot-com failures as proof of the dreaded R-word. Are we in a recession? In my opinion, the correct answer is “who cares?” The reasons why we should simply forget about what the media calls a recession are many, but they’re all based on the simple household economics that everybody understands, everybody except politicians, that is. Our industry requires stable growth in car ownership to stay healthy, but a decade of declining disposable incomes in Canada has left less and less money available to the average Canadian to purchase and operate vehicles. The old myth that that’s good for the industry because it keeps older vehicles on the road is just that, a myth. The working poor are not good customers to the service industry for the same reason that they’re not in the new car market: money. Major repairs simply don’t happen, and trick financing schemes simply delay the inevitable. An increasing number of Canadians are forced to choose between putting a roof over their heads and owning a car or light truck, and the result may be a new class of Canadian family that lives with one car, or none. This is not a voluntary choice for most Canadian families: automobiles created large-scale home ownership by allowing Canadians to live in lower-cost suburbs and commute to urban jobs. Owning a car is simply a necessary part of that lifestyle. Lock Canadians into a rental/condo/urban lifestyle, and the car quickly becomes unaffordable. Add mandatory I/M like Drive Clean here in Ontario, and watch for even more of the working poor to lose their vehicles. And once a family gets used to one less car in the family, low real incomes will keep them from re-entering the market, especially if home and job are realigned to reduce the commute. This is a serious issue that is being ignored by a media that seems to think that the stock market and the Canadian economy are one and the same. The real index that matters is net household income, and despite a decade of so-called boom times, too many Canadians are forced to spend too much of their weakened disposable income on simply surviving. You can’t blame them. You can blame politicians and markets for blindly accepting a Canada where all the economic activity is concentrated in half a dozen urban centres with no affordable housing and declining real incomes. With many Canadians spending 50% or more of their net paycheque on housing, the automotive industry, including the aftermarket, will face an uphill battle. If market economics can’t generate a society where working Canadians can afford to drive, then government needs to step in and make it happen. Whether it’s reduced taxation, or low-income housing, or lower made-in-Canada fuel pricing, the importance of the industry to the economy should suggest that keeping Canadians on the road is a very good idea, especially now that new technologies are greatly reducing the environmental impact of the automobile. And why do politicians not care? Maybe it’s because the decision-makers ride in the back seat on their way to work.