Montreal Sees Jobs, Status Drain Away

Separatist movement may sour future in what once was Canada's biggest city

When young George Kis arrived in Montreal with his parents from Budapest, Hungary, in 1957, the 15-year-old quickly found work in a downtown factory that assembled ballpoint pens.

Nearly four decades later, Mr. Kis runs his own factory making leather coats and hats in a building on Montreal's north shore. It has been a good business.

But now Montreal's economy is sputtering. So much so that even Kis, who says he loves the city, worries he might have to move his factory out of Montreal - and out of Quebec if the province separates from Canada.

"I don't want to move - but I have to be in a position that I can [move the factory] if I need to," he says. "We have a very nice life here, far better than Toronto. Because of the lack of economic activity here, there are no traffic jams."

But the lack of Montreal traffic jams is a big problem for Lucien Bouchard, the new separatist premier of Quebec. Unlike predecessor Jacques Parizeau, whose focus was on beefing up the rural economy, Mr. Bouchard sees a bustling Montreal as key to convincing Quebeckers to vote for independence. Last October Quebeckers voted narrowly to remain in Canada, shaking investor confidence.

Mission of money

On Monday, Bouchard travels to New York to try to reassure financiers and investment houses that Quebec bonds are still a sound investment and that his four-year plan will eliminate Quebec's 1995-96 $3.9 billion (Canadian; US$2.9 billion) deficit by 2000.

To achieve that goal, however, he must crank up Quebec's big motor, Montreal, which produces half Quebec's economic output and the bulk of provincial tax revenues. That means somehow reversing the drain of businesses, jobs, and people out of the city.

In the last three months of 1995, Quebec overall created 1.2 percent more jobs than in the same period a year earlier. But on the island of Montreal, the hub of the greater metropolitan area, the number of jobs fell 6.4 percent and unemployment rose.

Montreal Mayor Pierre Bourque says the city is in a "renaissance phase." Indeed, Montreal has been growing jobs in finance, insurance, real estate, and business services. But the largest category, manufacturing, has fallen 16 percent since 1989.

"Right now Montreal is hollowing at its core," says Marcel Cote, an economist who heads Secor Inc., a consulting firm here. "Montreal, like other northeastern cities, has converted well to the new high-tech economy. But it isn't really growing its business-center activities."

He cites a high vacancy rate for commercial real estate - more than 20 percent in some office towers - and the departures of CP Rail, KLM Royal Dutch Airlines, discount retailer Zeller's, and other big companies that were long headquartered here. These and others have shifted their head offices to Toronto, Calgary, or Vancouver.

Such high-profile snubbing from the corporate sector has put separatists on the defensive. Losing head offices, they argue, is of little consequence to the larger economy. But Mr. Cote disagrees. He says head offices are generators for jobs in consulting, accounting, law, and advertising.

Many businesses might have moved out of Quebec anyway, but a great many businesspeople here blame the bad economy squarely on the political uncertainty from decades of pushing for Quebec independence.

From 1975 (a year before the separatist Parti Quebecois first took power) to 1993, the number of jobs in Montreal grew just 12 percent. Toronto saw jobs grow 32 percent, Calgary 69 percent, and Vancouver 52 percent during that same period.

Long-term decline

"Montreal is declining," says Ghislain Dufour of the Conseil du Patronat, Quebec's most powerful business lobby. "But that's not just this year's phenomenon, it's been this way for 15 or 20 years."

Toronto has long been a Montreal rival. But Montreal easily surpassed it as the most economically and culturally important city in Canada - at least until the end of the 1960s. Montreal's preeminence began fading around the time of Expo '67, when nationalism began to rise along with the self-empowerment of French-speaking Quebeckers known as the "Quiet Revolution."

In the late 1960s per capita income in Montreal was about the same as Toronto's. Today it is about 85 percent of Toronto's. Montreal was Canada's largest city. But today greater Toronto has more than 4.2 million people, compared with about 3.3 million for greater Montreal. And the island core shrank last year.

"People ask why this has happened," says Peter Trent, mayor of Westmount, the affluent heart of Montreal's English-speaking community. "It began after the first language laws, to promote the French language by requiring it in schools and business, came into effect in the early 1970s. The big exodus occurred between 1976 and 1980, although there is a continuing dribble of individuals and businesses" out of Quebec.

For a long time George Lakis wondered whether he, too, would "dribble" out of Montreal into another Canadian city in search of meaningful employment. But the son of Greek immigrants, who today drives a taxi 12 hours a day, says he is staying.

Despite misgivings about Quebec's political future, Mr. Lakis is renovating a building that will soon open as a 12-bedroom hotel - an entrepreneurial leap of faith that defies his fears that one day Quebec will leave Canada.

"If it takes 15 to 20 years to turn Quebec's economy around - that's a lifetime," Lakis says. "Who has that kind of time? I've thought about leaving, but I think it's better to stick with territory I know well."

Despite the woes of traditional manufacturing, a growing number of high-tech businesses are being wooed to Montreal. A recent Price Waterhouse study found 60 high-tech investments under way or planned on the island of Montreal, worth about $3 billion.

Still, Ontario garnered three times the foreign investment that Quebec did in 1995, adjusting for the size difference between the provinces, the federal government says.

Thomas Hecht, chairman of IBEX Technologies, a 40-person bio-pharmaceutical company, is unequivocal when asked if his company would consider moving out if Quebec became independent. "Absolutely not. We've had wonderful support from the Canadian and Quebec government."

But then he mentions the company's recent trouble recruiting young American scientists because, once they marry and have children, they would by law have to put their children in French schools. "We haven't figured out how to deal with the problem yet," he says.

Another businessman with a Canadian transportation company, who asked not to be named, puts it this way: "It's all very fine for people to say, 'Montreal is cosmopolitan city, working in two languages. But the fact is that if you don't make it possible for people to work in their own language, they will go elsewhere. If that happens, Montreal will become a small, charming provincial town - charming but no future."

Similarly, coatmaker Kis says he will probably stay in Montreal unless authorities crack down so hard with language laws that it becomes impossible to do business. "If they ... made my life impossible, I would leave."

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