Half-Century of Stagnation: Labor Productivity in Ontario’s Gold Mining Industry

Abstract

This paper explores labor productivity in Ontario’s gold mining industry from 1920 to 1970. The gold produced by a worker is nearly identical in 1920 and 1970, suggesting that the industry experiences no productivity gains over this period. Further, labor productivity in the intervening years was nearly 30% lower than these values, raising concerns about the ability of the industry to remain profitable given a fixed gold price. We look at over 180 different Ontario gold mines comprising nearly the entire industry to determine whether workers become less efficient over time, or whether other factors, such as entry and exit into the industry, declining ore quality, or changes in capital stock, are the primary drivers of this stagnation. This analysis considers the impact of events, such as a sudden 70% rise in the price of gold in 1934, World War II, and the post-war subsidization of the industry on productivity within the industry.

Keywords:

• Productivity
• gold mining
• Ontario

JEL CLASSIFICATION:

• D22
• D24
• L72
• N52
• Q3

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 See Times (1933).

2 See Skogstad (2021) for a detailed description of the gold mining subsidy.

3 Huynh and Petrunia (2016) and Petrunia (2007) find that there is a long-term dynamic development process following a firm’s entry.

4 Grade refers to the amount of gold present in a ton of ore.

5 In 1951, the formula was given by the following:

$S=0.5(C-22)$ (2)

where S is the subsidy per ounce, and C is the actual average operating cost per ounce of gold. For example, a mine producing 20,000 ounces of gold, of which half is eligible for the subsidy, at an average cost of $28 per ounce receives a total subsidy of $30,000.

6 Knox (1955).

7 Kerekes (2011) provides a STATA program to implement the method on our data. Shannon and Moazzami (2014) and Shannon and Moazzami (2015) apply the method to estimate structural breaks in unemployment rates for OECD countries and Canadian provinces, respectively.

8 Aydin and Tilton (2000) and Garcia, Knights, and Tilton (2001).