Canada: Whither Goest Thou?

A section in John Mauldin’s weekly eletter, Thoughts From the Front Lines, caught our attention. In particular he showed this chart:

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The point here is that manufacturing costs (mostly labour) in Canada are 15% higher than in the US. This means that Canada needs the Loonie at 0.87 to be cost equal. To persuade manufacturing to move north however we need a marginal advantage which might be on the order of 5-10%. This is what unions want of course because the competitive advantage is not achieved by labour cost adjustment and market reform but by currency market adjustment. The real issue to become competitive is to reduce the labour costs. This can be achieved by introducing technology such as robotics or by reducing wage and benefit costs. Unions will fight either approach. Failure to make the adjustments means a continued loss of manufacturing jobs with a corresponding decrease in the collective standard of living. This will continue until living standards have declined to the point where the labour market will adjust internally to a point of competitive advantage again. Of course if this decline is happening broadly in the developed economies, the adjustment may take a long time and become severe. Can you say third world country?